Budgeting and Variance, Case Study Example

Budget Notes

For the following three months in the summer, Mike decided to increase the price of a cup of lemonade from $.50 to $.75. He had to increase the prices to cover the increase of supplies (3%). Because of the increase in price and expenses, the customers declined by 3% as well, which meant his salaries and wages declined. Taking into account the decline in the third month, we based the budget on the percentage of the variance in which we estimate that more customers would be credit. In accounting for the drop in the third month, he went on the budget from August of last year, to plan for the decrease in customers, and overall supplies needed.

What Mike can do, is of course grow his own lemons, or buy his supplies in bulk. In that way he can save on expenses. As well as market for more customers, in that way he can raise his net revenue, and decrease his losses.