Managing Finance– Setting and Acheiving Budgets

SUBJECT: MANAGING FINANCE – SETTING AND ACHIEVING BUDGETS Question 1 Advantages of budgets Advantages of budgets Within the context of the quotation “Fail to plan, is a plan to fail”, by looking at the advantages of a budget we would be able to see how this is very true. There are number of reasons why it is useful for the company to produce budgets. The advantages of budgets, which are often mentioned in accounting literature, are as …

…heavy rain and resultant road closures, guest numbers were down in January, but for the other five months, the numbers of tourists were greater than anticipated due to a brilliant wildflower display and the filling of lakes. The actual guest numbers was 12,000 for the six months. VARIUOS REPORT EXPENSES ACTUAL BUDGET VARIANCE VARIANCE % Lease Payments $3,000 $3,000 NIL NIL Wages $70,000 $55,000 ($15,000) 27.27% Administration Expenses $8,000 $8,750 $750 8.57% Power & Lighting $12,000 $8,125 ($3,875) 47.69% Depreciation on Equipment $15,000 $15,000 NIL NIL Interest on Loan $4,800 $4,800 NIL NIL Cleaning Expenses $24,000 $25,000 $1,000 4.00% TOTAL $136,800 $119,675 ($17125) 14.31%