FNSACC412 Prepare Operational Budgets

You are the bookkeeper for Brad's Vegan Ice Creamery. The business has had a bumper year in terms of sales volumes, but there are concerns about the fall in profits. Bradley Stanton, the owner of Brad's Vegan Ice Creamery, has called a meeting with you (the bookkeeper) and the Melinda (sales manager) to discuss the results of operations for the year.

In your meeting, you'll discuss:

-The information below

-Milestones and performance indicators

-The variances in the budget, and what they mean

-Brad and Melinda's views and opinions on the budget information

-Plans to manage the budget for the coming year

Sales volumes:Budget750,000 litres;Actual795,000 litres

Profit & Loss. Budget ($000) Actual ($000) Variance ($000)

• Sales $12,000 $14,310 $2,310Favourable
• less COGS $6750 $8,586 $1,836Unfavourable
• Gross profit $5,250. $5,724 474Favourable
• Less operating expenses:

Wages & commission. 1,800 1,940 140Unfavourable

• Rent 800 800 0
• Advertising $650 890 240Unfavourable
• Insurance 240 240 0
• Other 100 230 130 Unfavourable
• Total expenses $3,590 $4,100 510Unfavourable
• NetProfit 1,660 1,624 36Unfavourable

Budget meeting

MY question :-

Explain how your idea would have an impact on profits.

Suggest some budget process and review milestones to implement your idea. For example, you'll target reducing COGS by a small percentage each quarter to achieve a total 10% reduction for the year. You'll plan to do the calculations and review each month to make sure you are on track to hit your quarterly milestone targets.

Ask Brad and Melinda what they think of the idea.