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Jet2 Task 2 Essay

1535 words - 7 pages

A1. Budget Concerns Competition Bikes budget has several areas of concern that need to be address. 1. Units expected to be sold for year nine is 3510. Competition Bikes is predicting that they will sell 3510 Bikes but they only sold 3400 Bikes in year eight down 15% from year seven 4000 units sold. Competitions Bikes has budget to high because the current economic down turn is showing no signs of relief for the next three years. Many of Competition Bikes customers are sponsored riders and many sponsors have pulled their funding to their rides. Competition Bikes has not presents a plan that would support their projections. Competition Bikes should lower there should lower the expected units ...view middle of the document...

First for $55474 under Facility and general operation level cost and second for 54,000 under Facilities and general operation level expense. This is a duplication that is not necessary and should be removed from one of the categories. A2. Evaluate Flex Budget A flexible budget is a budget that adjusts or flexes for changes in the volume of activity. The flexible budget is more sophisticated and useful than a static budget, which remains at one amount regardless of the volume of activity. (Averkamp, 2013) Competition Bikes Variances 1. Net Sales Standard output $5,247,450, the actual output is $5,117,385. This is an unfavorable variance of -$130,065. This variance is caused by lower sales than predicted by Competition Bikes, they were expecting 3510 units sold but they only sold 3423 more than likely due to the down turn in the economy. 2. Direct Materials standard output $2,292,028, the actual out is $2,235,219. This is a favorable variance of -$56,809. This variance is caused by the reduce raw materials used to create 3423 units instead of 3510. Competition Bikes buys raw materials as they need them so they are able to control this expense. 3. Manufacturing Overhead standard output $331,798, actual output $323,574. This is a favorable variance of -$8,224. This variance is caused by reduce production of units because of lower sales.

4. Variable Selling expenses standard output $157,424, actual output is $153,522. This is a favorable variance of -$3.902. This variance is caused by reduced sales in unit. 5. Advertising Expenses standard output $28,412, the actual output $31,461. This is an unfavorable variance of $3,049. This variance is caused by Competition Bikes trying to increase their sales to meet their prediction of 3510 units sold. 6. Transportation Out standard out $105,300, actual out is $108,297. This is an unfavorable variance of $2,997. This expense should actually be lower because sales on units are down. This expense is high because Competition Bikes has fallen below the minimum monthly orders required under their new contract with the delivery company. The delivery company charges extra when these minimums are not met. 7. Distribution network Contracted Support standard out is $50,830, actual output is $50,460. This is a favorable variance of -$370. This is a selling expense that is lower due to lower sales. 8. Administrative Salaries standard output $170,000, actual output is $171,000. This is an unfavorable variance of $1000. This increase is due to the Competition Bikes efforts to increase sales. Overtime was authorized to work on advertising campaign. 9. Executive Compensation standard output is $220,000, actual output is $218,000. This is a favorable variance of -$2000. This variance is due to an executives not taking a bonus due to lower sales. 10. Employment taxes standard output $29,835, actual output $29758. This is a favorable variance of -$77. This variance is due to an employee furlough because of low sales.

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