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Finance and Accounting : Case Study: Manchester Meerkat Company - Essay Example
Finance & Accounting
Pages 10 (2510 words)
CASE STUDY: MANCHESTER MEERKAT COMPANY Name Tutor Course Date Case Study: Manchester Meerkat Company The main objectives of any business are to create profits, minimization of costs of production and stability that ensures continuation of operations. However, these objectives are faced by various challenges in the dynamic business world…
In this case, a budget is a financial preparation that covers a specific period of business operations (Berry et. al. 2006). The budget usually shows different expectations of expenditure and revenues of a business. Under normal circumstances, a large organization creates departmental budgets while small organizations create a single budget for the whole firm. The comparison between the budget estimates and the end results of all business operations gives the management a variance. There are two main causes of variances in a business’s budget. One of the main causes is spending more than the budget allows. This could be due to the fact that the management budgeted for less than required; there was mismanagement of funds or general poor planning. Secondly, there may be an unexpected emergency in a business that may cause a major drift in the use of funds from the budget (Berry et. al. 2006). Mechanical damages to a major processing asset for instance could lead to an urgent purchase of another one in order to maintain the expected level of production. As an example, the Manchester Meerkat Company (MMC) suffered a blow when floods drained the fibre filling. This caused an emergency spending that may have resulted to variance in the budget. This would cause destabilization in the budget hence a variance. ...
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