Exercise 16
Monitoring Budget Performance
As a manager of a community welfare program, one of the tasks that you are responsible for is to monitor actual income and expenditure against the what was planned (the budget) on a monthly basis.
The standard procedure is to calculate variances in both dollar terms and percent terms. By looking at each item of either income or expenditure and calculating the variance, you will be able to find out where there are significant differences between actual and budget.
Your task is to calculate the variance in dollar terms (column D) and in percent terms (column E) for each row including the sub-totals and totals.
The answer each of the questions below.
Youth-in-Crisis Inc. |
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| A | B | C | D | E |
| Budget for three months to 31 Mar 10 |
Actual 31 Mar 10 |
Variance $ |
Variance % |
|
| Income | ||||
| Govt Grant | 10,000 | 12,000 | ||
| Sponsorship | 2,000 | 3,900 | ||
| Client Fees | 3,000 | 2,400 | ||
| Donations | 600 | 1,000 | ||
| Profits from Trading | 4,600 | 3,200 | ||
| Other Income | 2,400 | 500 | ||
| Total | 22,500 | 23,000 | ||
| Expenditure | ||||
| Bank Charges | 80 | 200 | ||
| Catering | 1,600 | 1,000 | ||
| Management Committee | 600 | 200 | ||
| Equipment Leasing | 4,000 | 2,000 | ||
| Photocopying & Printing | 250 | 250 | ||
| Postage | 560 | 400 | ||
| Rent | 1,500 | 1,500 | ||
| Repairs & Renewals | 660 | 400 | ||
| Salaries | 12,500 | 11,500 | ||
| Computer & Internet | 800 | 1,200 | ||
| Telephone | 600 | 650 | ||
| Travel | 420 | 1,200 | ||
| Total | 23,570 | 20,500 | ||
| Surplus/(Deficit) | (1,070) | 2,500 | ||
Questions
1. What is the purpose of calculating the variance?
2. As a manager, what should you do after you have calculated the variance column(s)? Describe how you would interpret the figures after all calculations have been made.