This revised table is the budget performance statement which explains about the budget allocated to the different department should be either increase or decrease to meet the requirement. (Innes, F. Mitchell, 1990) As we figure out that the revised budget is approximately meeting the requirement of the manufacturing company and reducing the pressure of the management whose task was to show the performance report to the family on the next meeting.If it is discovered that Estimated Revenues are overestimated or a particular source of anticipated revenue will not be collected, the budget should be “contracted” to recognize the fact that revenue will not meet expectations and spending should be reduced accordingly. In this situation, the original amount of the affected Estimated Revenue account should be decreased, and one or more expenditure accounts should also be decreased. Again, the net effect on the Total Budget will be zero because both Estimated Revenues and Estimated Expenditures are being decreased by the same amount.
It has been reported to the manager that for the last two years the company has diversified the products and services and it also explains that the overhead expenses also get increase in comparison to the last 2 years. (Vincent K Chong, 1996)
The manager then did the comparable analysis of the actual budget, flexed budget and the original budget and the variances by which it differs form the target. For that the manager used the budgetary performance analysis system and told to the family of the manufacturing company as if this amount was that much then the company may achieve the target but if it is same as before then there are chances not to meet the target. (AlnoorBhimani et al, 2008)
To reduce the workload the manager of the company hired a person who is management account specialist and will take care of the account and will represent the correct performance report to the family. To that point these functions had been performed by members of senior management with assistance from the financial accountant, (whose main areas of responsibility had been financial reporting, debtor control, payments and tax planning).(Lokman Miaet al, 2001)
Thu now the family will get the company’s performance report and accordingly will plan to increase the profitability and enhance the services or customer relations.