Final answer:
Shawn is analyzing a budget variance, which compares the budgeted amounts to actual spending to determine if his company is staying on budget. This analysis can reveal a budget deficit or surplus and is crucial for tracking financial health and adjusting future budgets accordingly.
Step-by-step explanation:
Shawn is analyzing a budget variance, which refers to the difference between the budgeted amount and the actual amount spent by his company. This variance can either indicate a budget deficit, where the spending exceeds the budget, or a budget surplus, where spending is less than the budgeted amount.
An analysis of budget variance is essential for a company to stay on track with its financial goals and to make informed decisions about future budgeting and spending practices.
An effective budget helps track the flow of money, identifying where funds are coming from (revenue or taxes) and where they are going (expenses or spending). For a company to maintain financial health, it's necessary to regularly compare the budgeted figures to the actual expenditures.
This comparison can reveal whether the company is operating within its means or if there are areas where it needs to curb spending to prevent a deficit from growing.
It's critical for any company to perform these budget comparisons in a timely manner, usually at the end of a fiscal year, which typically starts on October 1 and ends on September 30 of the following year.
Chart analysis, such as Chart (a) and Chart (b), can show the potential results when there is a fluctuation in the budget surplus or deficit, helping decision-makers to comprehend the financial trajectory and to adjust strategies as needed.