L ynplex.com, founded and owned by Josh Howarth, develops software for e-transactions including payments, document distribution and account verification. Cynplex.com, based in Glasgow, has a good proportion of the UK market for electronic funds transfer with over 10,000 business customers. Cynplex.com's software provides a range of integrated e-business solutions for businesses of any type and size. The software is designed to improve efficiency by reducing the time and expense of manual day-to-day business processes. The products include: payment solutions -- for processing transactions such as payroll and supplier payments; electronic data interchange - for streamlined communications between trading partners; collections management - for managing multiple Direct Debit and credit card transactions: e-document distribution - for fast, efficient distribution of financial documents such as purchase orders and invoices Josh has grown the business successfully since it was setup five years ago. He employs an accountant who is responsible for the financial management of the business. He uses variance analysis to monitor income, expenditure and profit. Some financial information is shown in Table 13 for Cynplex.com (a) Using this case as an example, explain what is meant by a favourable varianco. (3 marks) (6) Calculate the income, expenditure and profit variances for Cynplex.com for each year. (9 marks) (c) Why is the profit variance probably the most important of all? (4 marko) (d) Analyse the variances calculated in (c). (10 marks) (o) Josh is hoping to float the company on the stock market in order to raise finance to break into overseas markets. How might the profit variances influence this decision? (10 marks) (0) Evaluate the drawbacks to Cynplex.com of using budgets as a means of financial management. (14 marks) Table 13: Financial information for Cynplex.com Budgeted Income Budgeted expenditure Budgeted profit 2007 4,500 3,900 600 2006 3,800 3,350 450 (E000) 2005 3,200 2,800 400 Actual Income Actual expenditure Actual profit 2007 4,890 4,050 840 2006 4,010 3,400 610 2005 3,600 3,100 500 28