Task 2:
• Prepare are variance analysis between and budgeted and actual figures.
A budget variance is an accounting tool that explains the difference of the baseline amount of revenue or expense from the actual figures. The budget variance can be favorable if the revenue is higher or the expenditure is lower than the budgeted amount. There are some rare cases where the assets are over the liabilities or vice versa.
The company has a favorable turnover with increase in sale price and enhancing the marketing strategies which has improved the turnover of the accounting year. Due to adverse variance in the purchase and expense budget the company ran out of funds which they were unable to cover up the variance cost. It also shows that the management
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Positive figures show excess and the deficit of it vice versa. The most important tool to be taken seriously is the breakeven point where the company must maintain equilibrium. However, if we notice the total profit from this year and previous task data most of the figures are left untouched which should be utilized to increase the productivity level. The company has a favorable turnover which shows that it has the ability of acquiring its market share. The variance has an adverse effect due to a change in price of raw material, labor cost and factory overheads.
• What was the discrepancy? Is the discrepancy positive or negative?
The discrepancy can be well judged if understood and analyzed systematically through the entity budget cost. The major discrepancy of the company was that it unable to achieve the purchase budget because there was a rapid increase in price of raw material. The company has gone through a major adverse variance may be because the management incapability o controlling the cost effective leading to a raise in labor cost.
Positive or negative discrepancies
In financial management discrepancies are referred to as the difference between the actual and expected