Sign In
Not register? Register Now!
Essay Available:
Pages:
4 pages/≈1100 words
Sources:
4 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Coursework
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 25.27
Topic:

T&P Fashion Shops - Budgeting, Variance Analysis, and Performance Evaluation

Coursework Instructions:

Module 4 - Case
BUDGETING, VARIANCE ANALYSIS, AND PERFORMANCE EVALUATIONS
Assignment Overview
T&P Fashion Shops
T&P Fashion Shops is a new chain that operates 10 stores in major malls throughout the United States. Each store manager is responsible for preparing a flexible budget for the store. T&P headquarters accumulates and analyzes the information for each store and in the aggregate.
Below is the forecast (budgeted income statement) for the Houston store showing the breakdown of fixed and variable expenses in columns two through four. The last column shows the actual results.
TABLE IS IN THE WORD DOCUMENT- TO MAKE IT EASIER TO READ
T&P Fashions - Houston Store
Breakdown of Expenses (Forecast) Actual Results
Forecast Fixed Variable Totals (Compute fixed and variable portion based on forecast data)
Revenues $1,520,000 $1,360,000
Cost of Sales 790,000 790,000 760,000
Gross Profit 730,000 $600,000
Management 182,000 154,700 27,300 182,000
Shop assistants 258,000 154,800 103,200 242,000
Rent 19,640 15,000 4,640 22,000
Utilities 34,800 34,800 31,000
Misc. expenses 24,500 12,250 12,250 29,000
Total expenses $518,940 506,000
Net income $211,060 $94,000
Additional Information
-Variable expenses are based on revenues and we assume that the percentage remains constant for flexible budgeting purposes.
-Fixed costs are all within the relevant range.
-Other expenses are all specific to this store. Headquarters pay for marketing and corporate overhead expenses.
Case Assignment
Required:
Computations (use Excel)
1) Prepare a flexible budget and show variances for the year that passed. Indicate whether the flexible budget variances are favorable or unfavorable.
2) Headquarters are contemplating charging each store a 5% marketing expense based on sales. How will that affect the operating profit of the store and the money available for managerial bonuses based on actual results for the past year? Summarize the information in a table.
Memo (use Word)
Write a 4- or 5-paragraph memo to the division manager explaining the flexible budget variances; how to interpret the information and what action, if any to take. Comment on the 5% marketing proposal too. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.
Short Essay (use Word)
Start with an introduction and end with a summary or conclusion. Use headings.
-Discuss how to interpret static and flexible budget variances.
-What are the benefits of variance analysis? How can such analysis be detrimental rather than beneficial to the organization?
Assignment Expectations
Each submission should include two files: (1) An Excel file and (2) a Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.

Coursework Sample Content Preview:

T&P Fashion Shops - Houston Store Budgeting, Variance Analysis, and Performance Evaluation
Student Name
University
Course
Professor Name
Date
T&P Fashion Shops - Houston Store Budgeting, Variance Analysis, and Performance Evaluation
Memorandum
Date: May 18, 2023
To: The T&P Fashion Shops – Houston Division’s Manager
From: The Budget Accountant
Subject: Interpreting the Flexible Budget Variances
A flexible budget is essential in your division since it empowers you to manage changes in costs and revenues. According to Zamfir et al. (2021), this budget helps managers adjust their spending behaviour throughout a firm’s financial period. For instance, your store made lesser incomes than expected in the flexible budget, leading to unfavourable profits’ variances. Therefore, you should decrease your division’s spending to help in increasing profits.
Explaining the Flexible Budget Variances
According to the flexible budget, your store expected the cost of sales and management expenses to be $706,842 and $179,126, respectively, but the actuals were $760,000 and $182,000, respectively. Furthermore, your division expected rent and miscellaneous expenses to be $19,152 and $23,211, respectively, but the actuals were $22,000 and $29,000, respectively. Also, the actual total expenditure was $506,000, not $503,425, as expected in the flexible budget. These are unfavourable variances since the actual costs were more than were expected in the flexible budget.
On the other hand, your store expected shop assistants’ costs and utilities to be $247,137 and $34,800, respectively, but the actuals were $242,000 and $31,000, respectively. These are favourable variances since the costs were lower than your store expected, in the flexible budget. Sari and Nasution (2019) posit that variance is the difference between the planned and actual company’s financial results. Conversely, the actual gross profit and net income were $600,000 and $94,000, and their expected figures in the flexible budget were $653,158 and $149,733. The actuals are lesser than those expected in the flexible budget; hence both profits’ variances are unfavourable.
How to Interpret the Flexible Budget Variances
Accountants usually update flexible budgets for the actual quantity of goods that a firm sells and not what it budgeted. However, variances arise due to the difference between actual and budgeted expenses and revenues per unit. According to Sari and Nasution (2019), lower actual costs and higher actual revenues result in favourable variances, while higher actual expenditures and lower actual sales lead to unfavourable variances.
The actions that management should take against a flexible budget variance is to adjust the budget. For unfavourable expense variances, the managers may increase the flexible budget’s costs to cater for future expenditure increments due to inflation or fluctuating market prices. For favourable variances, the management may maintain the budget as it is or lower flexible budget costs.
How Charging Houston Store a 5% Marketing Expense Based on Sales will Affect the Operating Profit of the Store and the Money Available for Managerial Bonuses Based ...
Updated on
Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:
Order

👀 Other Visitors are Viewing These APA Coursework Samples: