Accounting management help on: XYZ Company and financial budgeting report
Introduction
XYZ Company is a travel agency which located in the city and catering different type of holidays idea. At the moment, XYZ Company is expanding their operation to eco-tourism opportunities and developing more holiday type to customer.
This financial budgeting report’s relevant stakeholders are:
- General Manager – Amanda Booth
- Sales Manager – Terry White
- Department Managers
- Accountant – Vina, Ocean and me
This report depicts the variance analysis for 20AB to 20AC financial year and it shows the difference among the planned budget and the actual budget. This report indicates four financial ratios to view the financial condition of the company and details few considerable issues that prevail in the expenses of the Company. At last, recommendations have been given in order to solve the issues prevailed throughout the Company.
Gross profit
The following table shows the variance figures of revenue, purchase and gross profit:
| Budget figure | Actual figure | Variance | % and F/U | |
| Revenue – Sales | $437,000 | $418,000 | -$19,000 | -4.3% U |
| G.O.G.S – purchases | $103,500 | $146,000 | -$42,500 | -41% U |
| Gross Profit | $333,500 | $271,700 | -$61,800 | 18% U |
From the table, it is very clear that the actual amount of the revenue is less than from budgeted amount which shows the variance of 19000 and indicates that the Company is not able to increase the revenue as per the estimations. It is also viewed that actual cost of the Company is more than the budgeted one which lead to reduction in the gross profit of the Company. The actual figure of the gross profit of the Company is less than by 61800 in comparison to budgeted one which is due to incurring of more actual cost. Overall, the outcome of the gross profit is not favorable.
| Estimated | Actual | Variance | % | F/U | |
| Advertising | $8,740.00 | $16,900.00 | -$8,160.00 | -93% | U |
| Promotion | $8,000.00 | $10,000.00 | -$2,000.00 | -25% | U |
| Printing/stationery | $9,000.00 | $11,500.00 | -$2,500.00 | -27% | U |
| Insurance | $4200.00 | $4300.00 | -$100.00 | -2.3% | U |
| Telephone | $6,400.00 | $8360.00 | -$1,960.00 | -30% | U |
| Rent | $30,000.00 | $30,000.00 | 0 | 0 | F |
| Electricity | $3,500.00 | $3605.00 | -$105.00 | -3% | U |
From the table, it is clear that most of the variance results are unfavorable because of advertising, discount allowed and net profit. Firstly, it has been viewed from the table that the actual expenditure incurred on the advertising is double in comparison to the budgeted one. It becomes significant for the department of marketing to minimize the expenses on the advertising and make it same as the budgeted one. Secondly, the discount allowed shows the variance of 90% which ultimately becomes the responsibility of the Sales Department to minimize that figure and make it same as the budgeted one. The printing and stationary shows the variance of 27% whereas promotion shows the variance of 25%. It is examined that Insurance, Electricity, Bank charges, fees charges and total expenses are all unfavorable with small figure variance. On the other side some expenses are favorable like wages, salaries, rent and depreciation which show that the actual amount is similar to the budgeted amount. At last it can be said that the net profit figure is also not favorable because cost of the expenses are too much.
Significant issues and recommendations 
There are some significant issues which are found from the expense variance analysis:
- Too much expense incurred on promotion and advertising
- Purchased a new motor vehicle in cash
In order to minimize the expense on advertising and promotions, the department of the marketing must take some action in order to reduce the cost for e.g. the company should find some cheaper advertising company and make the proper evaluation before establishing any advertising (Michaely, Roni & Womack, 1999).
It has been examined that the Company has bought the new motor vehicle in cash which creates too much expense and leads to reduction in revenue and net profit. In order to minimize the figure of the expense, the Company should either not to purchase anything heavy in coming years or pay it in installment and lease the motor vehicle to minimize the cost.
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