A budget is a comprehensive plan given in a quantitative term that directs where resources will be acquired and spent in a given period. It is a financial document which operates on income and expense basis. This document depends on the balancing of the monthly or yearly income and expenses. In this case, plan is used as the controller of what is going to happen while budget assess the performance of the required project. The meaning of setting a budget is to provide direction, improves efficiency, control finances and assign responsibilities to evaluate the business plans. Budgets are used by managers as s benchmark to measure up to the results of the definite operation.

Budgetary areas that raise concern in the budget planning

There were budgetary areas that raised an alarm in the budget planning of the Competition Bikes, Inc. one of the leading area was the forecasting of the transaction budget. The year 9 sale projection set at 3510. There a big is the difference in units of year 8 compared to year 7 with a decrease of 15% levels. Keeping in mind the current economic imbalance, the projected sales reading 3510 do not call for any support. This cannot happen because the professional rider’s sponsorship is at decline and is expected to undergo the same situation for another three years. These steps do not make sense at all and continuation of the support without the clear discussions and understanding on the way forward to increase sponsorship will no doubt lead to decline market (William et al, 1975
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The budget does not reflect the quarterly breakdown as proposed earlier on the master plan. The management does not take keen consideration on the purchase of the seasonal activity materials. This is a failure to meet the requirements of a biking competition which is an outdoor sport taking place throughout the year. The company should consider proper supply on the seasonal trends to balance the high levels during spring and lower during the fall. Better accurate forecasting can be accomplished by having the figures separated quarterly.
Evaluate the flexible Budget and its Variances. The alteration among static & flexible budget depends on the output level. Static budget focuses on the initial budget level output signal while the flexible budget is made up of the sum or value of budgeted revenues based on actual output level throughout budgeting. It is not conceivable to know the definite output level pending the budget time period is over. A flexible budget permits managers to distinguish between budgeted amounts and actual results. This difference is grounded on issues such as differences in the output level, selling price, fixed and variable costs. There are three main stages of developing a flexible budget. These include the recognition of real output, creating a flexible budget of revenues based on the actual number of days off and selling prices, and a flexible budget expenditures based on projected fixed costs, the actual level of output, and budgeted variable costs. Regulatory costs helps in management, budget decisions and pricing strategies (William, Bruns & Waterhouse, 1975).
Evaluating flexible budget along with variance A flexible budget gives room for a diversity of levels of doings. As these doings increases, the values in the flexible budget go up. There are numerous variances in the flexible budget designed for CB for year 9. These variances consist of:
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The value of the net sale variance which is $-164450.00 is critical because it stands for the difference between predicted sales and the actual sales for the year 9. The direct material variance figure of $-71828.00 is approving for the reason that it stands for a decline in the price of direct materials used for the duration. The value of the direct labor variance which is $-33000.00 is good because it stands for a decline in the estimated cost of direct labor 3 used for the period. The variation of manufacturing overhead and variable selling fixed cost are good because they stand for a drop in the value of the line items for the duration. The advertising expense and the transportation expense which are $2838.00 and $2269.00 respectively are unfit because they signify acceleration in those values during the time. The research and development variance which is $-3577.00 is fit because it signifies a cost decline in this line item for the period. The last value of the variance of operating income which is $-45820.00 is unfit since it stands for a decrease of operating income for the period (Lester et al, 2007). The budget remains constant with the fixed cost. The best answer one can give for the reason of this change is the increased in volume of the projected sales. Thus the variable cost is affected positively simply because the company has a room to adjust and lower their expenses. The company can do so during the times of low demand so as to reduce their material and labor expenses in efforts to maintain the cash.
Corrective actions that can improve variance For a constructive variance inside the net sales area, Competition Bikes must make a strategic marketing strategy to embellish their production and boost sales. Increase in sales results to an increment in operating income. The improvement along fit variances in all aspects will provide the CB with much better figures. The company should adjust its master budget to quarters other than annual budget. This move when taken by the company would give it room for the management to easily adjust its expenses on the real sales revenue. Therefore, I am much concern with the actual expenses, quarter sales and the revenues realized. It will be easy for the company to deal with sales projection annually compared to the six months short period. When the company realizes its growth in sales, it will be easier for it to increase production and request for more raw materials. On the other hand, the short period sales projection would allow the company to initiate any thread in sales decrease and be able to prevent accumulation of outdated parts to prevent avoidable sales operating expense in advertising.
Control Concept deviations and variances Control with disabilities involves providing less attention to areas operating as expected, and pay more attention to those areas that do not work as expected. Managers can only be determined by analyzing the areas of insufficient variation. A large dispersion is an indication that the area is closed in accordance with the predictions. Managers can get information about the budget amounts from detailed engineering studies and past amount. Dispersions considered beneficial if it leads to an increase in operating income due to the planned amount and is denoted by F which is adverse deviation leads to a decrease in operating income on the budget.
How the concept of management by exception could apply to variances. Management by exception is a strategy whereby managers concentrate on issues that are relevant to their own field of management and the other issues are left out to the other managers. This concept can be useful to the budgetary variances in respect to the marketing strategies. The exception can best be shown by the 4% yearly increase in the value expenditure. Management by exception can determine the profit decrease or dramatic sales depending on the analysis report. Such information should be within the senior management for easy corrective action.

Reference

Green, P. E., & Tull, D. S. (1966). Research for marketing decisions. Englewood Cliffs, N.J: Prentice-Hall.

Horngren, C. T., Foster, G., & Datar, S. M. (2006). Cost accounting: A managerial emphasis. Upper Saddle River, NJ: Pearson Prentice-Hall.

Lester, A., & Lester, A. (2007). Project management, planning and control: Managing engineering, construction and manufacturing projects to PMI, APM and BSI standards. Amsterdam: Elsevier/Butterworth-Heinemann.

Snow, C. C. & Hambrick, D. C. (1980), Measuring Organizational Strategies: Some Theoretical and Methodological Problems, Academy of Management Review, pp. 527-538.

William, J. Bruns, Jr. & John, H. Waterhouse (1975), “Budgetary Control and Organization Structure “, Journal of Accounting Research, Vol. 13, issue 2, pp. 177-203.