M3
In this assignment I will be analysing the reasons why costs need to be controlled to budget by giving examples and producing two different tables which will show the importance of managing variable cost for the company to be profitable and efficiency.
A budget is a target for costs or revenue that a company or department aims to reach over a given period. All successful businesses set budgets to make sure that they are able to control their costs by making decisions appropriately and timely. We know that the reason to control budgeting is to protect profit margins and achieve objectives such as if the company targets to increase growth level and increase profit levels in a given period of time. Therefore it is very important for every organisation to control their budget and monitor it successfully.
When we look at the company’s costs the fixed cost is £7,500 and unit price is £5. For instance if this company doesn’t control and increase their variable cost, they will have problems to achieve their targets.
Number of units | Fixed cost | Variable cost | Total cost | Sales revenue | Profit/Loss |
(U) | (FC) | (VC) | (TC) | (SR) | (P/L) |
|   |   | (TC= FC + VC) | (SR = U*TC) | (P/L = SR-TC) |
0 |   £ 7,500.00 | 0 |   £7,500.00 |   £                                 -   | -£                       7,500.00 |
250.00 |   £     7,500.00 |   £   1,750.00 |   £   9,250.00 |   £                                 2,500.00 | -£                     6,750.00 |
500.00 |   £     7,500.00 |   £   3,500.00 |   £11,000.00 |   £                                 5,000.00 | -£                     6,000.00 |
750.00 |   £     7,500.00 |   £   5,250.00 |   £12,750.00 |   £                                 7,500.00 | -£                     5,250.00 |
1000.00 |   £     7,500.00 |   £   7,000.00 |   £14,500.00 |   £                               10,000.00 | -£                     4,500.00 |
1250.00 |   £     7,500.00 |   £   8,750.00 |   £16,250.00 |   £...