REC, Inc. and seatle coffee products Essay Example | Topics and Well Written Essays - 2000 words

REC, Inc. and seatle coffee products - Essay ExampleOn the basis of the previous results the partnership prepares projected income statement for the next story period in order to estimate the likely outcome of its operations and sales. This also helps the company to determine variances observed in the actual financial results of the company. The companys expectations from its business for the complete year 2004 are given as budgeted income statement in Exhibit 2 which indicate that the company expects a periodic bonny increase of $60,000 (Profit Before Taxes $720,000/12). These projections are based on the expected number of sales of equivalent units for the year 2004 i.e. the company estimated sale of 10,000 equivalent units which implies an average monthly sale of 830 or 840 units.Based on the comparison between the actual financial results of REC, Inc. and its budgeted income statement it could be ascertained that the companys profit results for the month January 2004 have fe lt short by $78,000. This has been against the expectation of the companys management as the business followed the trend that it has experienced in the hold up few years related to the market conditions and business wheel. The variation in the actual financial results from the budgeted income statement can be evaluated by examining every division of the actual income statement and comparing it to the budgeted figures for these elements.One of the limitations of the above presented budgeted financials on a monthly basis is that it does not take into account the changes in the business cycle and market conditions which may occur during the financial period. For example, sales of the business could be affected due to the seasonal downturn in a particular month. Therefore, reveal analysis would have been possible if the company was preparing budgeted income statement on a monthly basis.The table above indicates that the