Peyton Approved Budget Variance Report For the Year Ended .

ACC 202: Final Project Part I Budget Variance Report Submission Southern New Hampshire University The purpose of this paper is to explain and compare the Peyton Approved operating budget with that of the actual results. This paper also deals with the breakdown of the variance analysis. The conclusion of this paper explains the reasons of the variances whether favorable or unfavorable. In this assignment an operating budget and variance analysis were created. Before discussing the results of these two projects both will be explained as to what they are. An operating budget is “a detailed projection of all estimated income and expenses based on forecasted sales revenue during a given period (usually one year)” [ CITATION Web16 \l 1033 ]. For the Peyton Approved operating budget the projection of sales, production, manufacturing, sales, and general and administrative expense budgets were prepared. The budget was prepared for one quarter of the year based off the balanced budget sheet for June and other information given to the preparer. Once the operating budget was prepared a variance analysis was created. A variance analysis is “the difference between an expected or planned amount and an actual amount” [ CITATION Har16 \l 1033 ]. When preparing a budget variance it is considered favorable if the amount that was made (revenue) is greater than what was spent (expenses). A budget analysis is when the actual amounts are compared to the budgeted amounts. The next part of the paper consists of a breakdown of the variance analysis. Peyton Approved Budget Variance Report Actual Results Direct materials variances Cost/price variance Efficiency variance Total direct materials variance Direct labor variances Cost /price variance Efficiency variance Total direct labor variance [ CITATION Bri16 \l 1033 ] Static Budget Variance Favorable/ Unfavorable 240,250 240,250 480,500 240,250 232,500 472,450 7,750 7,750 None Unfavorable Unfavorable 495,000 528,000 1,023,000 528,000 480,000 1,008,000 33,000 48,000 15,000 Favorable Unfavorable Unfavorable Above is the budget variance report in relation to the Peyton Approved operating budget. The information in this chart indicates that Peyton Approved had an unfavorable variance for both its materials and labor budgets. The breakdown of each part of the variances is as follows. For the direct materials variance there are two factors that contribute to the total, they are the cost to price variance and the efficiency variance. In the material cost to price variance the actual budget to static budget ended up with the variance being 0, this shows that the company was efficient in managing how much was spent on materials per item made. While the company was able to have neither a favorable or unfavorable outcome for the cost to price variance, the efficiency variance ended up being unfavorable with a difference of $7,750. This means that the company went $7,750 over budget. For the total material cost variance there was an unfavorable outcome due to the fact that the company ended up spending $7,750 over the estimated budget of $472,450. Now the direct labor budget will be analyzed. In the labor cost to price variance the actual budget to static budget ended up being $33,000 under budget. This means that this was a favorable outcome for the company and that less money was spent on labor rates than was anticipated.