Budget Questions
What was wrong with the initial budget and what effect has this had upon the financial success of
the business?
The initial budget anticipated that the business would sell 1000 iPads which would have been on
average, 20 iPads per week for 50 weeks on average. However, over the course of these 50 weeks,
the business only sold 97 iPads. These figures add up to a sale variance of £-239,295 which makes a
gross profit of £-226,041 and a net profit of £-207,996. This means there is a loss of £208k when the
business originally wanted a profit of £10k.
Not selling as much as they thought they would means that they will have to reduce wages and staff.
They also have too much stock and will have to find some way of selling it; which will probably be
selling it for a cheaper price. By also not selling as much as they thought and having bad figures
could potentially close the business as they do not have the funds to continue the company any
further.
Explain how the budget could have been used to exercise financial control over the business
In order to be aware of the issues earlier on, the budgets could be broken down into monthly and
weekly. This means that they can then see how much they are selling and adapt their business into
this in order to receive a larger profit and protect their company.
Why do costs need to be controlled to budget, analyse the reason?
Costs need to be controlled as having a budget means it will allow the company to make more
money and this will help the business to grow overall. It will also help to distribute money evenly
monthly, weekly or yearly.
Another reason that costs need to be controlled to a budget is because it helps communicate with
staff the current and future goals of the business. This would include showing them what they need
to do in order to achieve these goals. By setting goals can also improve team morale and will show
how well they are doing and what they need to do. However, by setting such high goals may
increase pressure and it could mean that team members do not want to be a part of the
organisation.
By controlling the budget can also allow the company to make more company, as they are seeing
how much money they plan on making throughout the year and set goals towards this. This would
be good as it shows the organisation is trying to keep their overall profit at an increase and it will be
easy for them to see if any mistakes or negatives have happened.
If an organisation has a budget that is strong, then it will be easier for the organisation to adapt to
change. This means that the overall profit and revenue is so predictable that if they need to make
What was wrong with the initial budget and what effect has this had upon the financial success of
the business?
The initial budget anticipated that the business would sell 1000 iPads which would have been on
average, 20 iPads per week for 50 weeks on average. However, over the course of these 50 weeks,
the business only sold 97 iPads. These figures add up to a sale variance of £-239,295 which makes a
gross profit of £-226,041 and a net profit of £-207,996. This means there is a loss of £208k when the
business originally wanted a profit of £10k.
Not selling as much as they thought they would means that they will have to reduce wages and staff.
They also have too much stock and will have to find some way of selling it; which will probably be
selling it for a cheaper price. By also not selling as much as they thought and having bad figures
could potentially close the business as they do not have the funds to continue the company any
further.
Explain how the budget could have been used to exercise financial control over the business
In order to be aware of the issues earlier on, the budgets could be broken down into monthly and
weekly. This means that they can then see how much they are selling and adapt their business into
this in order to receive a larger profit and protect their company.
Why do costs need to be controlled to budget, analyse the reason?
Costs need to be controlled as having a budget means it will allow the company to make more
money and this will help the business to grow overall. It will also help to distribute money evenly
monthly, weekly or yearly.
Another reason that costs need to be controlled to a budget is because it helps communicate with
staff the current and future goals of the business. This would include showing them what they need
to do in order to achieve these goals. By setting goals can also improve team morale and will show
how well they are doing and what they need to do. However, by setting such high goals may
increase pressure and it could mean that team members do not want to be a part of the
organisation.
By controlling the budget can also allow the company to make more company, as they are seeing
how much money they plan on making throughout the year and set goals towards this. This would
be good as it shows the organisation is trying to keep their overall profit at an increase and it will be
easy for them to see if any mistakes or negatives have happened.
If an organisation has a budget that is strong, then it will be easier for the organisation to adapt to
change. This means that the overall profit and revenue is so predictable that if they need to make
