Budgeting and reporting - Essay Example

With such dominance in prices and number of consultations it is a disappointment that the firm has lower net income than the competitor. The advisory scheme is underutilized by the clients of the firm. On average they use around 75% of all prepaid consultations, which is not an advantage for the firm. The firm would prefer to have clients use all 100% and pay extra hours with regular fees. However, it has to be balanced with the satisfaction of the clients that might be happy to prepay current levels.

Overall the firm looks more inefficient in managing costs compared to the competitor. Appendix 2 also reveals that the competitor attracts more new enquiries and gives more consultations to new clients. This is a sign of strong growth (Chadwick, 1997), combined with the number of complaints it indicates that the competitor is better at attracting and retaining new clients, which might provide substantial future advantage in the business development. The worrying number is the number of successful claims for negligent advice.

Each successful claim undermines the reputation of the firm and projects a negative image to prospective and existing clients. It can be a big driver for clients to switch to the competitor in the future as it is a strong indicator of the service quality. The decision of the production director to source cheaper material and to use lower grade labour is reflected in the variance analysis. Material price increased, however, the material usage gace adverse effect due to increased wastage. Overall, the material variance is negative 5100-7500=-2400$, which signals that the benefit of using cheaper material with higher waste is questionable.

The same goes for the lower grade labour, which improved labour rate and worsened labour efficiency. It shows that number of hours spent by the lower grade labour is higher than