LuxeCandles (LC) launched a scented candle range. The original budget was based on sales of 10000 units, but actual sales were 12000 units. LC's finance manager wants to compare actual performance with a revised budget based on the actual output level.

Table 1: Original budget assumptions and actual figures

Harbour Hearth (HH) is a family-owned bakery business with eight city outlets, a central kitchen and an online cake-ordering service. The central kitchen supplies bread and pastries to all outlets and does not sell directly to customers. Each outlet has different rent, staffing costs and customer demand. The online cake-ordering service has separate sales revenue, ingredients, delivery and marketing costs.

HH's managing director wants to introduce a new budgeting system. Under the proposal, each outlet and the online cake-ordering service would be treated as separate profit centres, while the central kitchen, maintenance team and staff training department would be treated as cost centres. Outlet managers would become budget holders and their bonuses would partly depend on meeting budgeted profit targets. Some managers support the proposal because they believe it will improve accountability. Others argue that it may create conflict between outlets and reduce cooperation with the central kitchen.

Harbour Roasters (HR) imports, roasts and sells coffee beans. HR has three retail cafes, an online subscription service and a central training kitchen that develops new recipes and trains baristas. The finance director wants to reorganize the budgeting system. Each retail cafe and the online subscription service would become a separate profit centre. The central training kitchen would remain a cost centre.

Table 1: Budgeted and actual figures for the last quarter

The online manager argues that the new system will motivate managers because their centre's profit will be clear. The operations director is concerned that the profit centre managers may cut training time and shared quality initiatives to improve their own short-term reported profits.

ReLoop Home (RH) manufactures refillable household cleaning products. Customers buy online subscriptions and receive reusable bottles and refill pouches every month. RH's operations director prepared a six-month budget based on rapid sales growth after positive social media coverage. The budget included expected subscription revenue, packaging costs, delivery costs, marketing expenditure, factory wages and rent.

Actual results have been mixed. Subscription revenue was lower than budgeted in the first two months, then increased sharply after an influencer campaign. Packaging costs were higher than expected because RH switched to a more sustainable supplier. Delivery costs were also higher because many customers live in rural areas. Factory wages exceeded the budget because overtime was needed to meet the later increase in orders. The finance director wants managers to use variance analysis before deciding whether to invest in a second production line. The marketing director argues that the original budget is already outdated and that RH should rely more on market opportunities than on budget targets.

TrailQuest (TQ) organizes outdoor education trips for schools. It has three regional offices and a small head office. Each regional office plans trips, hires instructors and arranges transport and accommodation. Head office sets annual budgets for each region and monitors variances every quarter.

TQ's northern region has reported an adverse profit variance for two consecutive quarters. Revenue was below budget because several schools cancelled trips after bad weather warnings. Instructor wages were above budget because TQ hired extra qualified staff to improve safety. Transport costs were above budget due to fuel price increases. However, customer satisfaction scores for the northern region increased, and no safety incidents were reported. The finance manager recommends cutting instructor training and reducing the northern region's marketing budget to improve next year's figures. The operations manager recommends revising the budgeting process so that regional managers help set budgets and major external changes are considered when reviewing variances.

ClearWave Kayaks (CWK) manufactures lightweight kayaks for leisure customers. CWK prepared an annual budget before a new competitor entered the market and before the price of recycled plastic increased. Table 1 shows the original budgeted and actual results for the first six months. The managing director is deciding whether to continue using the original budget for management control, or to revise the budget for the second half of the year.

Table 1: Original budget and actual results for the first six months

The sales director believes the adverse sales revenue variance means the marketing budget should be increased further. The operations manager argues that the original budget is now unrealistic and should not be used to judge managers' performance.

MediMove (MM) provides non-emergency patient transport for private hospitals. MM currently prepares one annual budget for the whole business. The finance manager proposes a new quarterly budgeting system. Each regional depot would become a cost centre for driver wages, vehicle maintenance and fuel. The new home-care transport service would become a separate profit centre because it charges patients directly.

Table 1: Forecast budget for next quarter under the proposed system

The operations director supports the proposal because rising fuel costs and vehicle breakdowns have been difficult to control. Some depot managers oppose it, arguing that separate budgets will increase pressure and that fuel costs are mainly affected by patient locations, not by managers' decisions.

ReThread Works (RTW)

Read the resources and answer the questions that follow.

Resource 1 — Background of the social enterprise

ReThread Works (RTW) is a social enterprise founded by Amira Dlamini to reduce textile waste and provide paid work experience for unemployed young adults. RTW collects unwanted corporate uniforms and hotel bed linen, sorts the material in its workshop and produces upcycled tote bags, aprons and school sports bibs. RTW sells through an online shop and through contracts with local businesses. Any surplus is reinvested into a six-month sewing and employability training programme.

RTW has grown quickly, but its budgeting system is informal. Amira currently approves all spending. The online shop and corporate contracts generate revenue and can be treated as profit centres. The community outreach team and training programme are mainly judged by costs and social impact, so managers are considering treating them as cost centres. RTW wants to expand into two more cities without weakening its social mission.

Resource 2 — Table 1: Selected budgeted and actual figures for the last quarter

Resource 3 — Social-media information

RTW has 86 000 followers on social media. A recent post about reducing textile waste reached 410 000 views, but online shop sales fell after a platform algorithm change reduced links to RTW's website.

Resource 4 — Stakeholder quotation

A hotel purchasing manager said: “We like RTW's mission, but we need reliable delivery dates and consistent quality before signing a two-year uniform recycling contract.”

Resource 5 — Internal notes from RTW's finance volunteer

RTW has no named budget holders below Amira. Managers often describe variances after the quarter has ended, but they rarely agree actions in advance. Some training staff argue that strict cost targets could reduce the quality of support for trainees.

BrightBites Kitchens (BBK)

Read the resources and answer the questions that follow.

Resource 1 — Background of the social enterprise

BrightBites Kitchens (BBK) is a social enterprise that provides low-cost, healthy meals in areas where many families have limited access to fresh food. BBK also runs free nutrition workshops for parents and teenagers. It currently operates from one rented kitchen and sells meals through two community centres. BBK wants to launch a mobile kitchen pilot for 18 months. The pilot would sell subsidized hot lunches near schools and health clinics. Any surplus would be reinvested into free workshops.

BBK's founder, Leon Chen, has prepared budget assumptions for one month of the pilot. He has never constructed a full budget before and is unsure whether the pilot should be treated as a separate profit centre.

Resource 2 — Table 1: Monthly budget assumptions for the mobile kitchen pilot

Resource 3 — Social-media statistic

A short video showing BBK's meals being prepared received 280 000 views and 18 000 shares in one week. A donor has offered matched funding of up to USD 40000 if BBK can show a realistic budget for the pilot.

Resource 4 — Stakeholder quotation

BBK's operations manager said: “An ambitious sales budget could prove there is demand, but if meal numbers are overestimated we may run out of cash and cut the workshops that make BBK different.”

Resource 5 — Community information

School nurses support the pilot because many students currently buy unhealthy snacks at lunchtime. However, clinic staff warn that demand may be lower during school holidays.

SolarSteps Energy (SSE)

Read the resources and answer the questions that follow.

Resource 1 — Background of the social enterprise

SolarSteps Energy (SSE) is a social enterprise that installs low-cost solar lighting systems in rural communities without reliable electricity. SSE trains women from these communities as paid technicians and reinvests surpluses into maintenance visits and safety workshops. SSE operates two regional hubs, North Hub and South Hub. Each hub manager prepares a quarterly budget, but head office is unsure whether the hubs should be judged mainly as profit centres, cost centres or a combination of both financial and social targets.

SSE is considering opening a repair hub to reduce waiting times for maintenance. A foundation may provide funding, but only if SSE can demonstrate stronger budgetary control and a clear approach to investigating variances.

Resource 2 — Table 1: Selected quarterly budgeted and actual figures

Resource 3 — Procurement manager's quotation

“The local currency depreciated unexpectedly during the quarter, increasing imported battery prices by approximately 18 percent. Hub managers could not control this.”

Resource 4 — Community survey

Ninety-one percent of surveyed customers are satisfied with SSE's installations. However, the average waiting time for repairs has increased from 5 days to 13 days during the last year.

Resource 5 — Internal management discussion

The North Hub manager argues that the favourable training cost variance shows good cost control. The South Hub manager argues that the adverse revenue variance was caused by heavy flooding that prevented installations for three weeks. Head office wants budgets to motivate managers, but it does not want rivalry between hubs to reduce cooperation.