Budget variance analysis

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Assume that for the second quarter in row, profits are down at Waterfall division. Division Management budgeted $250,000 in profits for the second quarter but actual results were only $197,000 in profits. The division management insists that the budgets were developed realistically but admits sales were down. The division has been under pressure to improve profitability. Corporate Management has asked you to identify the primary cause of the shortfall â?" revenue or costs?
Address the following as you develop your answer to Corporate.

1. How will you approach your analysis of the situation?

2. What variance analysis and / or trends would be helpful to evaluate? What are three possible situations that could be the cause for the shortfall in profits?

3. What actions would you recommend for these three possible situations?

4. What recommendations would you make to management to improve the budget process for next year?

Reference no: EM1347763

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