Financial report Essay Example


The variance analysis of the restaurant 219 for week 48 show that the performance of the restaurant did not match what was expected in that week. The most probable cause of the unfavorable variance could be the reduction in the demand for the most profitable dish within the menu. I therefore recommend:

  • The marketing strategy of the company is improved. Specifically towards increasing the demand for the steak & chips dish, which is considered the most profitable dish in the menu.

  • The reduction in demand could be as an effect of cheaper alternative or a reduction in the quality offered by the restaurant. It would therefore be beneficial for the company to improve on the quality and set a competitive price.

  • Low sales quantity could also be brought about by an inefficient workforce. In this regard, restaurant 219 would improve if the staff is given more incentive; say a pay rise or rewards to the best staff member in order to improve their efficiencies.

  • In order to improve the overall performance of all the dishes regardless of their respective profit margin it is recommended that the marketing and sales efforts be increased. This could be through a discount on any of the means therefore increasing the sales volume.

  • The sales volumes can also be improved by introduction of other new dishes in the menu, based on market research and demand patterns of the customers.

The static budget variance shows that the variation in the amount sold was favorable to the restaurant: there were more dishes sold within the week than was budgeted for. However the revenue was lower than expected therefore resulting in unfavorable profit margins.

financial report

financial report 1

The sales volumes variance analysis show that there was a favorable sales volume variance showing that the standard profit was higher than the planned profits. However a further analysis into the sales mix variance shows unfavorable results. The unfavorable results reveal that the less profitable products were sold in higher quantities than the highly profitable dishes. For restaurant 219, the highest profitable dish is the steak & chicken with a contribution margin of £ 5.08 which underperformed recording a sale variance of -£ 1,219.20.

financial report 2

There was however an increase in demand of the lower profitable dishes such as the fish fingers. The sales quantity variance was also unfavorable to the restaurant operations. The adverse sales quantity variance could have been as a result of the reduction in the demand of the restaurant’s dishes. This is evidence in the quantity sold that were lower than the budgeted amount for the period. Therefore the sales team will have to increase the sales of the more profitable dish: the steak and chips.

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