ACCT/561 wk6

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Week 6 Individual Budget Project

Attached: Excel File- included attachment

Budget Project

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General Instructions: Download the Excel file posted to the week six projects instructions and resources thread. Your responsibility is to prepare two budgets. The fixed budget is based on prior year actual data.  

The flexible budget includes several changes to the data. The changes are listed in the Excel file / Instructions Tab.

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Excel: In order to minimize errors, improve accuracy and increase efficiency use formulas in all cells. If you need assistance with Excel review the week one questions and reminders thread. Included therein are three options to help you advance your Excel skills. Two links at the bottom are titled “Formula Overview” and “Excel - Basic Math”. The third option is Excel Essential Training (week one learning activities). The tutorials will help you with formulas and spreadsheet format.

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Video: In order to gain experience and insight please review the following video. It is a simple presentation and will help everyone develop a basic understanding of flexible budgets. The video was created by a third party. There are additional videos included with the Bing search as well. 

Flexible Budget Example - https://www.bing.com/videos/search?q=flexible+budget+example&view=detail&mid=98726F764585A5D5CDA998726F764585A5D5CDA9&FORM=VIRE

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Flexible Budget Guidance: For additional information regarding flexible budgets please review the following.

What is a Flexible Budget? - https://www.accountingcoach.com/blog/flexible-budget

Based on the example, fixed expenses do not change with volume. Contrary, variable expenses change with volume. With respect to the case study the same principles apply. The only difference is that our variable expenses will change based on sales volume instead of machine hours.

Example:

Sales Volume 3,000

Feed cost per animal 3.23

Total feed cost = 3,000*3.23=9,690

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Advertisement, Bedding and Specialty Food Expense: Advertisement is a fixed expense at the 2,775 volume level (column F). As a result, Column F, Row 15 is equal to -0-. However, the expense is considered a mixed cost (fixed and variable) with the flexible budget (column H).

Bedding and specialty food does not apply to the fixed budget. As a result, Column F, Rows 17 and 18 is equal to -0-.

 

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Variance and Variance Explanation: A variance is the difference between two numbers. From a budget perspective we typically compare actual business results to our budget. Material deviations are analyzed to help us plan, in part, cash flow, revenue projections, expense levels, and to make informed business decisions. 

 

In this case we are analyzing the results of two different budgets to help us evaluate our formulas, results and to determine which budget we are going to use to evaluate 2019 actual business results. The variance is the difference between a fixed budget and a flexible budget. Calculate the variance for all items listed on the spreadsheet (i.e. sales, all variable and fixed expenses, contribution margin, net income, and the break even computation).

 

Column J: Enter the difference between budget 1 and 2.

Column L: Explain the difference.

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