Richard Santos
Trident University
ACC 501
MARCH 2017 FT EXTENSION
Module 4 Case
Analaysis of T&P Fashions

Richard Santos, CFO
3452 Lake Lynda Drive, Suite 363
Orlando, FL 32817

Memo to: Division Manager
From: CFO Richard Santos
Date: May 2017

Subject: Budgeting, Variance Analysis, and Performance Evaluations

Analysis of Variances
Variance in Cost of Goods Sold
T&P Fashion had forecasted sales of $1,400,000 for the year, while actual sales were $1,325,000. The cost of products sold was forecasted to be $740,000 on sales of $1,400,000 though the real cost of merchandise went up by $50,000 and ended up being $790,000. This produced a two pronged effect, as sales declined while the cost of goods sold rose. The …show more content…
This favorable variance yielded a positive result. A favorable variance tells us the company efficiently utilizes its personnel. Simply put, shop assistants have worked more efficiently than expected, and this is a good thing. The shop assistants should be rewarded somehow. There are no deficiencies in the area of shop assistants that need to be addressed at this time.

Variance in Rent Rent expenditures showed an unfavorable variance. Forecasted rents were $54,450 versus actual rents of $58,200. This is an unfavorable variance in the amount of $3,750. One possible reason for this variance is could be that rent could have unexpectedly gone up, or simply that the forecast did not take into account crossing over into a new lease period year. In the whole grand scheme of things, it is a pretty small amount and not a cause for alarm.
Variation in Utilities The utilities analysis resulted in a positive variance, as the actual expenditures on utilities were less than the forecasted amount. $34,800 was forecasted, while only $31,000 was spent. This tells us that utilities were utilized effectively, and that utilities were budgeted for properly. Like rent, utilities were not a tremendous line item in the budget, but a positive variance speaks to their effective …show more content…
The company budget refers to a forecast of revenues and expenses for a set period time, usually a year. A good use of budgets if to establish historical records and analyze past budgets with the purpose of determining projected versus actual results. Budgets can be static or they can be flexible. Static budgets remain the same regardless of changes in actual performance. A static budget is more permanent in nature; once a static budget is set it cannot be changed. . A flexible budget, just as the name implies, is a budget that can be adjusted in accordance with changes in performance and increases or decreases in levels of revenue, expenses, and