5 YR BUDGETING FORECAST

5 yr budgeting forecast



5 yr budgeting forecast

Requirement 1: Flexible Budget

Flexible Budget for the 4 months period ended 30th September

 

 

BudgetedUnits

BudgetedSales

 

ActualUnits

ActualSales

Rooms Sold

108,00 Rooms

£ 1,080,000

124,20 Rooms

£ 1,179,900

Cost Item

BudgetedPer Unit

BudgetedUnits

BudgetedAmount

ActualPer Unit

ActualUnits

ActualAmount

Direct Labor

14.0

5,400.0

£ 75,600

15.0

5,630.4

£ 84,456

Room Amenities

0.5

10,800.0

£ 5,400

0.4

13,040.0

£ 5,216

Total Variable Costs

 

 

£ 81,000

 

 

£ 89,672

 

Total Fixed Costs

£ 241,000

£ 235,000

Total Costs

 

 

£ 322,000

 

 

£ 324,672

(The calculations are extracted from the Excel File)

Proper analysis of deviations on the background of the company's base period and the initial budget supports the company in achieving the objectives posed in front of that company. Such analysis shows, what are the strengths and what areas need improvement. Unfortunately, traditional methods are sometimes unreliable. So it is worth looking around for tools that enable dynamic assessment of the current results. Flexible budget is one of those tools that can change the approach to interpreting the results of the company.

The budget is a financial plan of the designated time horizon, which serve as reference measures occur in the future. The budget plays an important role in business management. It is a tool for analyzing and monitoring the implementation of set objectives. Companies should note that in the course of its implementation on the total deviation of the influence factors related to the size of business and the factors associated with effectiveness. In order to correctly interpret deviations, it is necessary so their separation, which will enable proper evaluation of the implementation of the budget. It may be, for example, that the company incurred higher production costs, but realize more than planned sales. Such a deviation should then be assessed positively. The above defect associated with the use of traditional budgets, we can eliminate, and in preparing the flexible budget. Flexible budget is drawn up for different sizes, and thanks to the possibility of response to changes in economic conditions of its use can greatly facilitate the interpretation of the execution. Thus, the company will be able to take effective actions that will improve financial results. This division is a fundamental principle of the budget is flexible. Furthermore, flexible budgeting, also introduces the distinction between quasi-fixed costs. In this case, must be accurately separated into fixed and variable element.

Since the flexible budget is based on the variability of costs, we can say that the original budget, which takes into account, changes in the volume of sales and production. With such budgeting company may determine the optimal level for a given cost, the real production level. It is performed on the basis of the assumptions made in the planning stage, which reduces the original budget to the level of actual business operations. This budget allows you to compare the effectiveness of sales and costs. Thus, the process looks at the parameters that form the basis of this study and in case of any changes to it shall be adjusted, and adjusted to actual conditions. Thus, the company makes changes to the side of revenues and expenses.

Requirement 2: Room Cleaning Labour Rate and Efficiency Variances

Labour rate and efficiency variance is the difference between budgeted and actual ...