Addressing Budget Variances

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

Variance identified:	How it was identified:	Investigated yes/no and why:	Action(s) taken to address variation
Labour efficiency	By 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 cost	By calculating overhead cost expenditure once a week	Yes, it was investigated because this condition was leading to reduction of available money for performing budget-related activities	Draft of overhead list was refreshed and further arrangements for extra financing was carried out (Lau, 2015, p.17)
Sale price	By carrying out benchmark analysis	Yes, it was investigated because it led to reduction of revenue generation	Market analysis of similar products were carried out to decide upon ideal price
Net profit	By calculating each type of income and expenditure	Yes, it was investigated because it was threatening profit generation	Weekly updating of financial statement was made mandatory
Staff cost	By reviewing salary structure of staffs	No, it was not investigated because this condition is not of much concern and can be solved easily	Work pressure of staff was reduced and job description was revised. Needless job positions were abolished (Andrijasevic and Sacchetto, 2017, p.62)