D2 Evaluation
There are many positive and negative variances that can affect the holiday
industry. One negative variance that can affect the industry is the when the
sales revenue is less than the budgeted one. This means that the business
made less revenue than they had planned to. This could be due to a decrease
in selling price or a decrease in the quantity of sales, or it could be due to both.
This could have had happened because of a low demand, or increased
competition.
“Revenue variance results from the differences between budgeted and actual
selling prices, volumes or a combination of the two.” This affects the holiday
industry because it reduces the amount of profit that they had planned to
make. The businesses create the budget to ensure that they are making
enough revenue to cover the costs and expenses, but making a lower amount
would meant that the businesses may struggle to cover these expenses, and
they need to increase the budgeted amount of sales in the next month or
period so that they can make enough to cover the previous month or a certain
periods expenses. They could also struggle to pay for the resources needed to
provide holiday services, such as staff, transportation costs etc. This could lead
to unsatisfied customers.
Many management decisions and or actions could be made from this variance.
First and foremost a letzgo holiday has to identify why the sales and or sales
revenue was lower than expected. For example, in the second quarter, the
business has made lower sales than expected; they made 2,960,000, when the
budgeted amount was 3,600,000, that is lower by 640,000.if it was due to a
decrease in selling price than the they could take an action to increase it. This
would allow the letzgo holidays to make more money from all the holidays
they offer; however, people do not want to pay too much, so the business
could get fewer customers.
This could then again lead to the business making a less amount due to low
sales. The business has to ensure that they increase the price but not too
much, just enough to still get customers. If it has to do with business making
fewer sales, then they could try and increase sales such as by promoting the
services. The business has made 3700 sales in the second quarter, when they
had planned to make 4500. This could get them more customers leading to
increase in revenue. However, promoting and advertising more could lead to
an increase in amount of expenses.
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