Case Summary
Mr. Snow was upset about a budget deficit and called the treasurer to address a $4,810 ($25,110 – $20,300) overage in meal costs, largely caused by added desserts. He emphasized that even a few hundred dollars over budget is unacceptable and requested an explanation. The issue will be reviewed at the next budget committee meeting.
Master Budget vs Flexible Budget
Based on the case, the flexible budget differs from the master budget in terms of variable and fixed costs. The flexible budget reveals higher expenditures than the master budget, resulting in a $4,180 variance. In particular, the variable costs for meals increased by $3,190, the variable costs for postage by $490, and the fixed costs for the facility by $500. These cost increases contributed to the budget deficit, thus yielding a difference between the two budgets.
Flexible Budget vs Actual Results
The case-specific actual results deviated from the flexible budget, resulting in a $1,620 variance. Adding a dessert to the menu increased variable costs, particularly the cost of meals. The actual meal results were $31,090, $1,620 more than the budgeted quantity of $29,470. It is essential to note that the budget allocation remained unchanged, indicating that the variance was predominantly attributable to the dessert’s additional cost. This shows that a cost addition can affect the overall variance between budgets despite their size.
Budget Variance Justification
The $4,180 budget difference between the flexible budget and the master budget is attributable to changes in variable and fixed costs, especially meal costs. The increase in meal costs can be attributed to the fact that there were 1,620 more attendees than initially anticipated (1,400). In addition, fluctuations in fixed facility costs affect the variance. When comparing actual results to the flexible budget, these factors have contributed to a $5,800 budget deficit.
The $1,620 difference between the flexible budget and actual results can be attributed to particular factors. Postage expenses increased from $1,470 to $1,960 due to the rise in attendance caused by President Rodney Snow’s decision to increase invitations from 3,000 to 4,000 (Huang, 2019). In addition, the need for a larger venue to facilitate the increase in attendees resulted in an additional $500 in facility costs.
Meeting the Budget
A non-profit organization must adhere to its budget for several reasons. It guarantees the effective and efficient use of resources, aligns with the organization’s objectives, and offers dependable and top-notch program services (Pollono & Pupkevičs, 2023). It guarantees long-term viability, encourages accountability and openness in financial management, strengthens confidence and reliability, and maximizes the impact by effectively allocating resources for better results. Therefore, it is crucial for the people involved to aim at achieving the organization’s revenue goals.
Sticking to the budget has many advantages in the organization mentioned above. It ensures that the grant conditions are followed, which is crucial for keeping money and fulfilling commitments. Financial stability results in increased employee morale and a positive work environment (Pollono & Pupkevičs, 2023). Cost-effectiveness is attained through resource management that maximizes organizational impact. A successful budget gives the board confidence in the organization’s operations by demonstrating the organization’s effectiveness.
Recommendations
The following two suggestions will help the aforementioned organization manage its budget. To start, performing a thorough cost analysis can help locate potential cost savings. This entails comparing pricing from various caterers and haggling for greater meal cost discounts (Pollono & Pupkevičs, 2023). Additionally, looking into alternate places that accommodate event requirements while providing competitive prices will assist in cutting facility costs. Second, it is imperative to establish a reliable system for budget oversight where the budget spreadsheet is constantly and thoroughly updated.
The following recommendations have also been made for the organization above. First and foremost, it’s crucial to communicate and coordinate in advance. This can be accomplished by setting up frequent meetings with committee members and caterers to ensure everyone is on the same page (Pollono & Pupkevičs, 2023). Taking proactive measures to address worries or prospective cost overruns enables prompt responses and prevents budgetary shocks. Second, looking for sponsorships and in-kind contributions can ease the strain on the budget.
Two recommendations for the organization are establishing a contingency fund within the budget to handle unexpected expenses and making adjustments to the event’s plan. This fund should be a specific percentage of the overall budget. Additionally, the organization should encourage all team members involved in organizing the event to be cost-conscious and prioritize efficiency (Pollono & Pupkevičs, 2023). This can be achieved through workshops or training sessions on cost-effective event planning.
References
Huang, J. W. (2019). Influence of after-sales service quality offered by E-commerce enterprises on customer repurchase intention. Academic Journal of Business & Management, 1(2), 22-36. Web.
Pollono, E., & Pupkevičs, R. (2023). Sales variance analysis: How state-of-the-art analytical tools can contribute to increased profitability. Journal of Revenue and Pricing Management, 22(1), 57-71. Web.