Question

B) JJ Ltd’s actual results for 2015 are:

Sales $282 000
Variable costs 150 000
Fixed costs 108 000
Profit 24 000
JJ’s manager is happy because the business achieved budgeted profit (from part a). However, the
accountant has expressed concern as only 10,000 units were sold. Compare budget to actual and
identify whether you believe there is reason for concern.
Question 3
The following income statements show budgeted and actual data for March 2016:
Budget Actual
Sales $ 5 200 $ 5 000
Cost of sales 3 640 3 600
Wages 624 750
Advertising 52 40
Other expenses 104 110
Profit 780 500
Required:
Prepare a brief report comparing budget and actual performance.

Answer 1

It should be noted that while the company managed to control the cost of sales and advertising expenses effectively, the increase in wages and other expenses and the significant shortfall in sales have led to a substantial decrease in profit.

The company needs to investigate the reasons behind the lower sales, higher wages, and other expenses to address the variances and take corrective actions.

A comprehensive review of the budgeting process may also be necessary to ensure that future budgets are more accurate and reflective of the actual operating environment.

In conclusion, the company should closely examine the reasons for the unfavorable variances and take appropriate measures to improve performance in the areas where actual results fell short of the budgeted figures.