Management accounting - Essay Example

The economy is subject to market forces and that means that factors affecting the nation such as inflation can cause the changes. An economy may turn out to be favorable or unfavorable. That means that there may be a lot of money in circulation and that will make the customers to purchase more of the product. The other aspect of the economy that will cause a variance is the standard of living. If the standard of living among people improves, that will imply that the customers will be able to purchase more of the product and that will make the actual results to be better than the budgeted.

In our case, the actual profit was less than the budgeted that implies that the economy could have worked against the sales. The economy can also cause an increase in the cost of raw materials. In our case, the raw materials turned out to be more expensive than the budgeted expenses. That indicates that the economy worked against the budget of the company. In the future, the company should consider inflation and its impact when formulating the budget. The trends in the economy should also be observed to ensure that all matters affecting the economy are considered. 2. Advertising- Advertising involves making known the products of a company to its target and potential clients.

That means that the aim of carrying out an advertisement is to increase the sales volume of a product. Advertising will increase the sales volume if it turns out to be as productive as expected. A company should invest in advertising to ensure that it reaps the benefits that are associated with advertising. In our case, the profits of the company turned out to be less than the budgeted profit. That means that the advertising efforts were not as productive as expected. That can also imply that the company did not carry out adverting.

This is because the sales volume was less than the budgeted sales volume. In the future, the company should formulate a strong advertising campaign. The advertising will