ACC 202: Final Project Part II Budget Analysis Submission Lauren Rooney Southern New Hampshire University Opening a business is a process that revolves entirely around a budgeting process; the decision to “make or buy” and many other non-financial performance measurements. A budget can help managers make day to day decisions for the business, while also planning for the future. The budget allows for a business to compare their performances from the past to their current production, and where to go from that point. The differences between the company’s performance and the budget are the variances. The management team can use the budget variances in the decision-making process to “make or buy” additional products. While also deciding to …show more content…
If there was a reduction in labor cost or a potential increase in revenue this would cause a positive variance. In a similar vein, a negative variance could occur if the labor cost had gone up or the revue for the business has decreased. Analyzing variances allows a business a means of comparison investigation during an accounting period (Nobles, Mattison and Matsumura 2014). This allows for the business to learn from their negative variances and correct them in the future. For Payton Approved these are their variances for this …show more content…
There are a serious of questions that the business should ask itself. Is the component something the company can manufacture? If it is manufactured in house will the quality be the same if it is purchased from a different company? If we add the component production to the house will other production of products suffer? There are a lot questions that need to be answered before a company can decide to make or buy. Most of these questions will be answered during the analysis process that will be conducted. How would the make or buy situation be impacted if the cost was fixed? If the fixed cost were to change, we would need to factor in the costs to make the component, along with the costs associated with the purchase cost associated with the outsourced production of the component (Nobles, Mattison and Matsumura 2014). Situationally should the company spend $75,000 for the product or component to be made to save $30,000 in production costs? Similarly, to budgeting the decision to make or buy can also come with ethical issues. Any unethical decisions made could not only hurt third party vendors, but also the customers who shop from Payton Approved. Those unethical decisions could negatively impact the company board and company stakeholders. The quick gain is never worth risking the reputation of the