10.10: Putting It Together- Cost Variance Analysis
So in Module 9 we prepared the budgets for Hupana Running Company. In Module 10, we put those budgets to work, as Mary, our production manager and Ben, our purchasing manager worked through a variety of issues and challenges to maintain profitability.
So, as you may now see, the budget is the first step of a very important process. Without using experience and analysis, the budget is just a piece of paper. What we do with that piece of paper, and how we use it to improve our company is the goal.
How can we make that happen?
- Finding the best raw materials at the best price (even if it is higher than budgeted, but reduces production time).
- Hiring great people and training them well. Keeping them involved in the processes of budgeting and analyzing. They know what they do and how they do it!
- Maintaining the equipment to limit downtime.
- Using the budget as a living tool, that we can use to evaluate the health and profitability of our company!
So how important is analyzing costs, processes and systems?