variance analysis

Budgeting and Actual graph

yes it does match the break even point.

calculate break even actual and budgeting

Fixed cost

(Selling price – variable cost)

Budgeting = £5050.50

£5000

£1.49 - £0.50

Actual = £12500

£5500

£0.99 - £0.55

what would happen if budgeting was done badly

Bad budgeting

If budgeting isn’t managed well then there won’t be any money being saved for the business to fall back on if there is some issues meaning that they need to go into some of their money saved for different things. Also there won’t be much money coming in to keep up with rising costs like electricity and insurance etc.… They will also have to make unnecessary cuts to maybe staff which will save them money but could mean they are short staffed which could lead to them not being could open as much meaning less time when they can earn money.

Explain the process of creating a budget C

The process of creating a budget

• Add up total costs of everything
• set reasonable sales targets that can be reached quickly
• Set reasonable profit targets
• Set spending limits
• start planning spending requirements
• finally set production targets

Different types of budgeting B

Different types of budgeting

Cost

• By budgeting cost it means that they are slowing down on things that they spend money on like finding a cheaper substitute for certain items cutting down on the cost but still getting the same amount of items and saving the extra money that they would have spent and putting it to one side.

Sales

• By managing their sales it means that they can slightly increase the cost of items meaning in more profit so their is more money to save. Also they might decide to not waist items like if things are close to their sell by date they could do them on special offer so that they can shift them quick before the sell by date meaning that they arnt making as much of a profit but at least they arnt throwing it away and getting nothing for it. 

Profit

• By managing their profit it means that like i said for sales they can increase the cost of products and increase their profit and by managing where some of that profit goes.

definition A

Budgeting

Budgeting is when a business manages their money by maybe making cuts in machinery or staff etc.. By budgeting it allows the company to save money if their is something they need to buy to new equipment that will make them more money then the two they have combined. Budgeting is basically the company creating a plan to further their business by saving money to possibly expand or to save money back.