Purchase Solution

Budget Variance Analysis

Not what you're looking for?

Ask Custom Question

Imagine that for the second quarter in a row, profits are down at Waterfall division. Division Management budgeted $250,000 in profits for the 2nd quarter but actual results were only $197,000 in profits. The division management insists that the budgets were developed realistically but admits sales were down. The division has been under pressure to improve profitability. Corporate Management has asked you to identify the primary cause of the shortfall â?" revenue or costs?
Address the following as you develop your answer to Corporate.

1. How will you approach your analysis of the situation?
2. What variance analysis and / or trends would be helpful to evaluate?
â?¢ What are three possible situations that could be the cause for the shortfall in profits?
3. What actions would you recommend for these three possible situations?
4. What recommendations would you make to management to improve the budget process for next year?

Purchase this Solution

Solution Summary

Budget variance analysis is examined for the second quarter row and profits.

Solution Preview

Dear student,

Imagine that for the second quarter in a row, profits are down at Waterfall division. Division Management budgeted $250,000 in profits for the 2nd quarter but actual results were only $197,000 in profits. The division management insists that the budgets were developed realistically but admits sales were down. The division has been under pressure to improve profitability. Corporate Management has asked you to identify the primary cause of the shortfall â?" revenue or costs?
Address the following as you develop your answer to Corporate.

1. How will you approach your analysis of the situation?
The budgeted profit of the Company is $250000 while the actual profit is $197000. The unfavorable variance in the profit should be analysed by finding out the reasons for the variance and the persons who are responsible for the unfavorable variance and what are the steps that need to be taken to improve the profitability. Also the analysis should be made whether realistic budget/standard has been set and whether there is any need for correcting the standard.

2. ...

Purchase this Solution


Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.