|Expenditure||Expenditure type||Allocation per expenditure type||Running totals per expenditure type||Notes per allocation type||Totals for whole budget|
|Wages||Direct expenditure||30%||32850||It is direct expenditure that is 30% of the total cost.|
|Stock||Direct expenditure||30%||32850||It also comes under the direct expenditure that is 30% of the budget|
|Rent||Indirect expenditure||10%||10950||Rent is a kind of the indirect expenditure that|
|Misc||Indirect expenditure||10%||10950||It represents the other expenses that are recorded under the indirect expenses. It contributes 10% in the budget.|
|Unit sales||Unit price||Units July||Units Aug||Units sep||$ July||$ Aug||$ Sep|
Decide where will not spend time – In the step, it will be decided that where company will consume time and where it will avoid the time consuming. Along with this, financial management team will also discuss the different tasks where company will company expense money (Kimmel, et al., 2010).
Strategically allocation time – Under this step, company will also prepare the strategy in order to allocate the time for the budget. In this, company provides the specific time to each activity in the budget. It is basic and core activity in the management of time to present the budget.
Setup automatic time investment – Arrangement of the time also contains setup automatic time investment. Under this step, the company develops some effective strategies that lead automatic investment in the business (Parry, 2014).
Aim for a consistently balanced time budget – The main aim of whole process is to manage and allocation of time for the budgeting process. By the help of this, the company wants to maintain a consistently balance time budget for the organisation
The budget of BD Corp cafe includes a list of the expenditure on the different activities of the company. In this, it is found that wages is one of core expenditure of for the company in the financial year. The calculation of the wages is done by the personal department of the company. Hence, this expenditure comes under the personal department.
At the same time, expenditure is rent that is management and operational expenditure (Finnerty, 2011). It is a fixed expenditure for the company that recorded for the operational expenditure. Furthermore, stock is also recognised an expenditure that it comes under the procurement expenditure.
Stock can be recorded with the name of the procurement management because in the organisation the order of the purchase is approval by procurement management. Miscellaneous expense is also analysed as another expenditure in the budget of the BD Cafe that is also recorded in the operational and management expenditure (Katchova and Enlow, 2013).
In the budgeting process of the BD Cafe, it is found that there is variance between the actual expenditure and budget of the company. In this, it is found that in the value of the stock the extent of the variance has reached at the 43.46%. On the other hand, a significant variance is also found in the context of the wages where variance value is found $1768 that is equal to 17.59%.
In the budget review process, it is identifying that variance is the part of the budgeting process. The cause of the variance depends on the increase and decrease expenditure in the financial time period. In the context of given case study, it is found that main variance in te budget can be seen as the wages (Demski, 2013).
The variance shows that actual wages of the cafe increased. The cause of the increase in the wages cost may be cafe appointed the additional part time employees. On the other hand, it is also possible that the minimum wages rate has increased during the July. In the same concern of this, it is observed that the cafe is also spent high on the stock as compared to budget. In this, it is analysed that is 17.59% more from budget. The cause of this is that cafe purchased more stock as expectation because demand or sales may by high in July.
On the basis of causes of variance, it can be recommended to BD Cafe that should establish the cost analyser team that can prepare an effective budget where percentage of variance is less. At the same time, it can also be recommended that BD cafe should also provide concern on reducing the cost such as wages (Coe, 2011).
HR Manager – It is responsible for managing the human resource activities in the organisation. Due to this, the cost of human resource such as wages and salary also depends on the efficiency of the HR Manager. Actually the cost of wages increased that is why, it can be said that there is lack of effectiveness of the HR Manager.
Operational Manager – Rent is direct expenditure that comes under operational expense of the company. In this, it is found that rent is increased as compared to budget. For the increase in the operational cost as rent the operational manager is responsible (Daly, 2011).
Procurement manager – The decision buying the stock is taken by the procurement manager. Hence, it is responsible for variance in the stock.
General Manager – In an organisation, general manager is responsible each decision and happening in the company. It takes the different small and big decisions. Therefore, for any variance in the miscellaneous, general manager is responsible.
The below table represent the comparison between actual spend against the amended allocation authorised in previous task.
On the basis of above table, it can be said that variance is present in the expenditures of July and August. In this, it is recorded that wages is pointed with the highest variance. It has increased 22.52% as the total of the last month. On the other hand, it is also found that there is also variance in the stock. In August, company purchased 8.59% more inventory as compared to July month. At the same time, no changes have be seen in the rent and Misc (Brigham & Ehrhardt, 2011).
By reviewing the variance report, it is found that wages is one of the considering aspect for the BD Cafe. It is because in this month wages of the Cafe found high. In Aug, the wages is increased by 22.52% compared to last month. It cause may be sales of the company is increasing the due to this company appointed the extra staff (Lasher, 2013).
Hence, it can be recommended that company should analyse the need of the employees effectively. Furthermore, it is also found that stock is also recognised as important element in budget because it increased. Its cause can happen that company purchased stock in large quantity. Hence, it can be said that BD Cafe should purchase stock in the limited or required quantity.
HR manager – Wages is increased in the August month. For this, HR manager is responsible in the organisation. It should utilisation workforce in the effective manner. The current budget is showing increasing trends in terms of wages.
Operation Manager – The responsibility of operation manager includes to review that operational cost that also includes rent. In additionally, it is found that rent is stable as the last month.
Procurement Manager – Procurement is related to purchase of the goods in the company and procurement manager is appointed to take the financial decisions. In the reference of this, it is found that cost of stock is in increasing trend. Hence, procurement manager should concern and be sure of reason of increase.
General Manager – General Manager is responsible for managing the miscellaneous expenditure. At the current time, this expenditure is stable that means there is no change in the current month.
The below table shows the comparison between the third month expenditure and updated budget allocation:
On the basis of the above comparison, it is found that there is some difference in the wages. In this, it can be seen that the financial activities of the cafe is high as compare to updated budget allocation that shows 32% variance. Furthermore, it is found that 25% variance is also presented in the reference of stock. It is because update budget allocation is also less by actual financial activity of BD cafe. At the same time, the rent and miscellaneous expenditure have also 14% variance.
These both expenditures are under the allocation of budget that means management is effective. But, on the other hand wages and stock are not under the allocation. Due to this, it can be recommended that management should concern on cost of stock and wages. For this, special cost analysis team can be established (Lasher, 2013).
In relation to this assessment, two areas namely current supplier cost and current staffing costs are reviews due to unfavourable variances. In current supplier cost, it is reviewed that there is variance of 25% in actual and allocated budget for supplier cost. It means there was ineffectiveness in the procurement planning that caused this negative variance.
Apart from this, it is also reviewed that staffing costs also showed an unfavourable variance of 32% from the allocated budget due to improper HR activities. Therefore, these two areas of concern should be considered by the company to improve overall performance. In order to improve these areas, it can be helpful for the firm to work on expenditure savings including evaluation of the staffing and roster requirements, evaluation and outlining the impact of the roaster changes on the cafe and changes in suppliers (Ásgeirsson, 2014).
By evaluating the staffing and roster requirements, the firm can identify the exact requirements of the staff on daily basis and at seasonal time. It can be helpful for the firm to save expenditures on the staffing. At the same time, it is easy to evaluate the staffing and roster requirements through employee scheduling software because individual staff members can be allocated to shifts to meet these requirements at different times and duties are then allocated to individuals for each shift through this software.
This tool may cause positive impacts in terms of elimination of payroll errors, reduction in staff costs, and improvement in labour regulation compliance and dissemination of real time information and automated alerts to take right actions (Burke and Curtois, 2014).
But at the same time, it may cause extra costs for the firm because it is typically more expensive than manual process. It may also require training that may cause training costs also. However, this change will positively impact on the staffing costs by saving staff expenditures. The cost of this software will be approx $900 but it will help the firm to reduce the staffing cost by 5% of allocated cost. So overall saving will be:
=11400*5%*12 annually – cost of software
= 570*12 annually -$900
= $5940 annually
At the same time, roster changes may have a significant impact on the proper allocation of the employees. It can be helpful for the company to make good use of talented people by knowing when to use them for which shifts. In such organization, understaffed shifts may cause substandard service to customers that may cause dissatisfaction and complaints by the customers.
By using roster plan, the firm can determine and ensure that each shift has enough employees to run the operations smoothly and efficiently. In addition, it can also be useful to keep the employees safe and healthy by reducing the chances of any incident. It also prevents disorganization and wastefulness (Castillo-Salazar et al., 2016).
However, it is also costly and requires maintenance costs along with training costs. It is available at $4 per user per month. But overall saving on using this alternative will be reduction in staffing cost by reducing the absenteeism and improving production efficiency. It will cause same saving like application of employee scheduling software.
The firm can also focus on new suppliers by evaluating them based on costs and quality and delivery time. For this, the firm can contact with new suppliers in local area and outsource from the suppliers. It can be helpful for the company to reduce the supplier cost by 20% because it will help the firm to evaluate different suppliers’ available based on criteria and select cost effective and quality suppliers. If the firm selects a supplier who provide the required materials at 20% less price than the savings on stock costs will be:
Ásgeirsson, E.I., (2014) Bridging the gap between self schedules and feasible schedules in staff scheduling. Annals of Operations Research, 218(1), pp.51-69.
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