Addressing Budget Variances

pages Pages: 4word Words: 890

Question :

Task 5 – Identify and address variances to

the budget

Use relevant methods to identify and monitor the causes of variances to your budget. At

least two favourable or adverse variances arising from the operation of the budget must

be identified. Then:

• decide whether to investigate variances using relevant criteria

• demonstrate that appropriate action has been taken to address each variance

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Answer :

Task 5: Identifying and addressing variances to budget

Variance identified:How it was identified:Investigated yes/no and why:Action(s) taken to address variation
Labour efficiencyBy supervising work of labour on a daily basis No, it was not investigated because drop in labour efficiency is a   common occurrence Labours were given oral warning. They were informed that their salary   might be deducted if they further fail to maintain efficiency
Overhead costBy calculating overhead cost expenditure once a weekYes, it was investigated because this condition was leading to   reduction of available money for performing budget-related activitiesDraft of overhead list was refreshed and further arrangements for   extra financing was carried out (Lau, 2015, p.17)
Sale priceBy carrying out benchmark analysisYes, it was investigated because it led to reduction of revenue   generationMarket analysis of similar products were carried out to decide upon   ideal price
Net profitBy calculating each type of income and expenditureYes, it was investigated because it was threatening profit generationWeekly updating of financial statement was made mandatory
Staff costBy reviewing salary structure of staffsNo, it was not investigated because this condition is not of much   concern and can be solved easilyWork pressure of staff was reduced and job description was revised.   Needless job positions were abolished (Andrijasevic and Sacchetto, 2017,   p.62)