Table of Contents

• Assignment Overview

• Answer 1 Discussion

• Answer 2 Discussion

• Answer 3 Discussion

• Answer 4 Discussion

• Conclusion
Assignment Overview

• Exploring challenges of budgeting in a dynamic environment

• Assessing the effectiveness of a new budget approach

• Implication of budget variances on decision-making &

performance evaluation

• Examining the importance of aligning budgeting methods with

operational realities
• Highlight the significance of effective communication between
department heads and administrators
Answer Discussion - 1

• Salary changes were not considered

• Weather impacts were not considered
• Overtime pay was also not considered
• Change in prices of raw materials was not considered
In summary, the budget had many loopholes in it for the
reasons stated above.
Answer Discussion - 2

• Actual costs were higher than budgeted costs

• Flexible budget shows unfavorable trend in costs
• Workers had to be paid for overtime
• Increase in salary of the administrator
• Increased workload due to the weather
Answer Discussion - 3 Higher Cost of Labor

Mostly due to fluctuations in weather

and workload of labors

Greater Efficiency of Labors

Even though workload increased,

workers were efficient

Unfavorable Labor Rate

Variance, Favorable Labor
Efficiency Variance
Answer Discussion - 4
More labor hours could result in unfavorable labor
efficiency variance. This will reduce expected profit.

The management could:

• Reduce unfavorable variance by • Implement an adjustable flexible

employing skilled workers budget for sales-related activities

• Train existing and new employees • Stop relying on static budgets for
to be more efficient such activities.

• Consider internal AND external

factors when making budget
decisions
Conclusion

The administrator's approach had a few flaws that could be

rectified through the calculations done in this report. As of now,
the situation for Spruce Street Shelter seems unfavorable, but
with the right method and approach, it could be turned around.