Case 4.1. Prepare A Variance Analysis
Question 1:
Prepare a variance analysis report based on the information in Exhibit 1. Would this be sufficient to explain the profit shortfall to Norton at the 8 AM meeting?
This revenue variance is positive and favorable. That means they made more than the budget. However, the variance amount of expenses was $342,060, which was unfavorable. That means they spent more than what they had budgeted for.
The perform a variance analysis report Jenkins calculated would not be sufficient in order to explain to Norton why their profit percentage is nearly half of what they budgeted. It only shows the raw numbers and not any details to why they spent more on expenses than what they budgeted. In the meeting, Jenkins has to explain details, why they …show more content…
The total revenue variance is also the difference between the actual revenue and expected revenue. Over all, it is favorable that Software Associates created more revenue. Jenkins then determined whether or not the additional revenue would cover the additional costs incurred for the excess consultants.
Question 3:
Prepare a variance analysis of expenses based on the additional information
Operating expense is broken down into two categories, actual and expected. After subtracting actual operating cost $938,560 and amount of forecasting expenses $877,300, she found that the spending variance was $61,260. This is an unfavorable outcome of the quarter and can be mostly attributable to the eight extra consultants that were hired. More planning must be taken when figuring out a budget and Software Associates must stick strictly to the budget for reasons like this. Numbers can add up
Prepare a variance analysis report based on the information in Exhibit 1. Would this be sufficient to explain the profit shortfall to Norton at the 8 AM meeting?
This revenue variance is positive and favorable. That means they made more than the budget. However, the variance amount of expenses was $342,060, which was unfavorable. That means they spent more than what they had budgeted for.
The perform a variance analysis report Jenkins calculated would not be sufficient in order to explain to Norton why their profit percentage is nearly half of what they budgeted. It only shows the raw numbers and not any details to why they spent more on expenses than what they budgeted. In the meeting, Jenkins has to explain details, why they …show more content…
The total revenue variance is also the difference between the actual revenue and expected revenue. Over all, it is favorable that Software Associates created more revenue. Jenkins then determined whether or not the additional revenue would cover the additional costs incurred for the excess consultants.
Question 3:
Prepare a variance analysis of expenses based on the additional information
Operating expense is broken down into two categories, actual and expected. After subtracting actual operating cost $938,560 and amount of forecasting expenses $877,300, she found that the spending variance was $61,260. This is an unfavorable outcome of the quarter and can be mostly attributable to the eight extra consultants that were hired. More planning must be taken when figuring out a budget and Software Associates must stick strictly to the budget for reasons like this. Numbers can add up