Financial Accounting for BabycakesBaby cakes is facing problem of overspending then the budgeted following may be the one reason of that problem.

Published: 2019-10-24 06:30:00
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Baby cakes have assumed its daily consumption will be around 750 pieces and has made accordingly that production quantity. Note Baby cakes do not maintain more than two days inventory in its bakery. Moreover, Bay cakes have made the particular standard for the raw material used for its production and for that raw material certain supplier are fixed. but due to some unavoidable condition Baby cakes unable to get its raw material from its regular supplier for one week so Baby cakes needs to buy its required raw material a from the other supplier before its inventory finished CITATION Bro16 \l 1033 (Brown, Fisher, G, Peffer, & Sprinkle, 2016). The cost of the raw material purchased from the new supplier is the more than the old supplier. But there is no other way except purchase the raw material from the new supplier which ultimately increases the cost of the production of the cakes, cookies, etc. of the Baby cakes. Baby cakes has not adjusted the selling price according to the increased raw material cost and unfavourable variance arrives and spending become more than the budgeted amount CITATION Cas16 \l 1033 (Cassidy, 2016).

It is recommended to the Baby cakes towards the get rid of the overspending as compared with the estimated amount; Baby cakes shall use flexible budget which can be adjusted according to the various level of sales demand and cost of the raw materials and also Baby cakes needs to maintain optimum inventory so that it will never face any such problem in future.

ConclusionBudgeting is the quantitative plan for the particular period. Budgeting is useful for every individual as well as for every company to do effective future planning. The budgeting comprises of static budget and flexible budget. A static budget is constant throughout the budgeting period but the flexible budget is flexible can be adjusted according to the production level. The flexible budget is more preferred than static budget comparing both of these two budgets. Therefore, the Baby cakes should follow the flexible budget.

AppendicesTable 1: Estimated Sales Budget of Cupcakes in fourth quarter of 2016

References

BIBLIOGRAPHY Brown, J., Fisher, G, J., Peffer, S. A., & Sprinkle, G. (2016). THe Effect of Budget Framming and budget Setting process in Managerial Reporting. Management Accounting System, 108-152.

Cassidy, A. (2016). A practical guide to information systems strategic planning. CRC press.

Chua, W. F., Lowe, T., & Puxty, T. (2015). Critical Perspectives in Management Control. London: Palgrave Macmillan.

Mukhopadhya, S. K. (2015). Production Control and Planning. New Delhi: PHI Learning Pvt. Ltd.

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