HR7003 Individual Coursework Assignment Sample
Executives Summary
London Docks Café is involved in the business of providing meals to the tourists and citizens and it is situated near the local airport. The café has done the budgeting process and given the data for the actual and budgeted figures. The application of the budgeting process and its benefits to the firm would be explained in the assignment. The variances viz. revenue and spending has been calculated so as to ascertain the measures to be taken by the café for the maximization of the profits of the company. Profitability and sustainability are being defined and it has been explained that how the café would ensure to achieve both the mandates. The assignment has dealt in the detailed understanding of the costing concepts which would lead to maximization of the profits and hence increasing the sales.
a. Meaning of Budgeting
Budgeting is considered to be the most important part in any business firm. Budgeting is an integral part of planning in which the management visualizes the mission as to be undertaken by the company. It helps the management to identify the goals to be achieved. The preparation of budget is done with the help of the data being provided of the past performance and present scenario. It helps in identifying the variation which is being occurred from the set parameters & hence help the management in taking proper decision. It also helps the company to utilize and allocate the available resources in the best possible way. It is mainly the preparation of detailed amount for future performance of the company and hence helps in attaining the overall objective of the company.
Objectives of budgeting process
Decision Making Process: The budgeting would give the goals in the way that it would lead all the departments to take the decision in an appropriate manner.
Attainment of Profits: The budgeting helps in attaining higher profits as it sets the planning and hence it leads to achieve that. The unnecessary expenses would be reduced and hence the profit would be maximized.
Cost Control & reduction: The budgeting would help the firm in controlling the various cost incurred by the business.
Scope of the work: The budget clearly defines the scope of the work of the business.
Benefits of budgeting process when applied on London Docks Café
In the given case, London Docks café has prepared a budget and wanted to know the benefits it can reap with its preparation and robust use;
The budget would help the management of the company in taking proper decision in a timely manner.
It helps the management of the company in the planning process which involves making the policy for the company as well as its implementation.
The spending of the company can be controlled with the help of the budgeting as well as the revenue can be increased. Overall it helps in increasing the profitability of the company.
The budget would help the management of the company in getting the goals to be achieved in figures.
The budgeting helps the company in the better utilization of the resources which includes both revenue & capital.
The functional activities of all the departments would be easily co-ordinated with the help of budgeting. (North Dakota’s budgeting process, 2014)
The budgeting would help the company in allocating the responsibility and hence it helps in overall improvement.
The budgeting would help in identifying the weakness or loopholes as well help in their improvement.
The budgeting would also help in raising the funds as and when required.
b. Report showing London Dock’s Revenue & Spending Variance for the month ended 31st December, 2020
| Particulars | Static Planning Budget | Actual Resullts | Flexible Budget | Revenue & Spending Variance | Adverse(A)/ Favourable (F) | |
| Budgeted meals quantity | (q) | 20,000.00 | 18,000.00 | 18,000.00 | ||
| Revenues (£5.00q) | 1,00,000.00 | 90,000.00 | 90,000.00 | – | ||
| Expenses: | ||||||
| Raw material (£2.50q) | 50,000.00 | 45,000.00 | 45,000.00 | – | ||
| Wages and salaries (£5 500+£0.25q) | 10,500.00 | 10,000.00 | 10,000.00 | – | ||
| Utilities (£2 500 + £0.05q) | 3,500.00 | 3,400.00 | 3,400.00 | – | ||
| Facility rent | 5,000.00 | 5,500.00 | 5,000.00 | 500.00 | A | |
| Insurance | 2,800.00 | 3,200.00 | 2,800.00 | 400.00 | A | |
| Fuel | 2,500.00 | 2,800.00 | 2,500.00 | 300.00 | A | |
| Net Operating Income | 25,700.00 | 20,100.00 | 21,300.00 |
From the above, it has been calculated as;
Revenue Variances= Nil
While,
Spending Variance= Raw material variance+ Wages & Salary Variance + Utilities Variance + Facility Rent Variance + Insurance Variance + Fuel Variance
= Nil + Nil + Nil + 500(A) + 400(A) + 300(A)
= 1200 (A)
(Lucey, 2009)
c.Area of activity on which management should have a concern
In the above report, it has been seen that the budget has been given for 20000 units while the actual meals is 18000 only. Hence the flexible budget has been prepared taking into consideration the actual meals produced which is 18000 meals. The variances have been calculated and it has been seen that the company is having nil revenue variance which means that the company is selling the meals at the same rate as budgeted. Even though, it has been budgeted that 20000 meals would be sold by the café but the café could sell only 18000 meals. So, in the meals sold the café is not doing up to the mark and should increase the advertisement about the café so as to increase the sales. The café can also ensure in maintaining the quality of the meals so as to enhance the sales. And even take away services are to be started so as to increase the sales of the meals. The spending variance is 1200 (Adverse) which means that the actual expenses are more than as budgeted. It can be seen that the spending variance is more due to the fixed overhead viz. facility rent, insurance and fuel. The management has to take measures to reduce those expenses. A proper department has been given the responsibility to take care of the above said expenses. The raw material has been procured at the same rate as budgeted as well as the labor. Steps can be taken to control the cost and get the procurement at a lesser price. Hence, the management should have concern on increasing the sales volume and controlling the fixed overhead. (Batty, 2002)
d.Profitability and Sustainability
Profitability is defined as the firm’s ability to use the available resources in the best possible way so that the revenue generated from the business would be more than the expenses incurred. Profitability is the main motive of any organization whether its small size firm or big size. The objective of any business firm is to achieve the profits. This is a checklist to know how well the company is doing the business. The credibility of the company increases after seeing the financials of the organization mainly the profit earned.
Sustainability means continuing the business without having a wrong impact or effecting on the environment or the society as a whole. When the business firm does not do the business in the sustainable way then it will lead to degradation of the environment and social injustice. The sustainability helps in achieving the success in the business in the long term. The term sustainability has a due importance in the business environment. Thus, when the business firm concentrates on the sustainability, it would indirectly lead to maximization of the profit of the business. (Thiele, 2016)
Measures London Docks Café should adopt to ensure the attainment of both mandates
It has been well understood from the above meaning of profitability and sustainability that they play a vital role in any business. Having profits in the business is a challenging task but at the same sustaining in this competitive environment is really tough and hence London Docks café should adopt few measures for achieving the above mandates which are as follows;
London Dock Café belongs to food industry and hence the contribution of the business towards the environment contributes a major part. The café should undergo the activities and degrade the waste in such manner so that it will not lead to pollution in the environment and hence protect society at large. It can also help the animals by feeding them the waste and hence helps in the protection of the environment as well as survival of the animal. When the café would take such sustainable initiatives, it will lead to achieve the profit in the better way. Sustainability and Profitability are two different terms but if the café would follow practices to achieve both, it will lead to much higher profits. The café would get the sustainable development and would be able to achieve the goals and objectives of the business. The profitability of the business can be enhanced by reducing the expenses. Suggestive measures to be taken to control the cost and enhance the sale of meals so as to achieve the profits. When the café follows the sustainability practices then the customer would get attracted and it would automatically lead to higher profits. Hence, it can be clearly seen that profitability and sustainability co-exist. (Keillor and Wilkinson, 2011)
References
Batty, J., 2002. Standard costing. Midhurst: Technical Book Publishers.
Keillor, B. and Wilkinson, T., 2011. International business in the 21st century. Santa Barbara, Calif.: Praeger.
Lucey, T., 2009. Costing. Australia: South-Western Cengage Learning.
- North Dakota’s budgeting process. [Bismarck, N.D.]: North Dakota Legislative Council.
Thiele, L., 2016. Sustainability. Cambridge: Polity.
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