Real Worlds 9.4 and 9.5 both suggest that the figures that appear in budgets often do not
Question:
Real Worlds 9.4 and 9.5 both suggest that the figures that appear in budgets often do not actually occur. Does this pose a problem in trying to control the various aspects of the business through variance analysis?
Real Worlds 9.4
The survey of senior finance staff of North American businesses, mentioned in Real World9.3, asked them to compare the revenues that actually occurred with the revenues that were budgeted (prior to the start of the year) for 2007. Figure9.5 shows the results.
We can see that only 66 per cent of revenue budgets were accurate within 10 per cent.
The survey indicated that budgets for expenses were generally more accurate, with 74 per cent being accurate within 10 percent.
Real Worlds 9.5
Infrastructure projects are notorious for their costs running over budget, often to an alarming extent. One that did not was the Queensferry Crossing, a 1.7 mile road bridge over the river Forth close to Edinburgh. The bridge, which was opened in August 2017, cost £1.35 billion, £245 million less than the budgeted cost. The bridge was Scotland’s largest infrastructure project for many years. It took six years to complete, with 15,000 people worked on it clocking up 18 million hours of work.
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Accounting And Finance For Non-Specialists
ISBN: 9781292244013
11th Edition
Authors: Eddie McLaney, Peter Atrill