With consideration to the pet company studied in part one of the previous research, this part two of the very research will evaluate the company Peyton Approved the previous budget. The budget analysis will be primarily based on the viability of the budgeting process previously implemented and suggest the potential adjustments that can be made, in response to the developments in marketing and resource availability.
Peyton Approved is an established organization, with regards to the budgeting process, there are significant steps that have to be undertaken when conducting the business process. This is mainly because established manufacturing organizations have varieties of activities. Therefore, it is imperative to evaluate all the considerable variables, to ensure that all the factors needed for the smooth transition of the company to the next quarter are availed. The first step in the budgeting process is to determine the flow of information. Considering the fact that this is a manufacturing business, the most amicable method of collecting data is bottom-up (Matsumura, 2014) . Data for the much-needed equipment raw materials and suppliers that will facilitate the expected is determined the forward to the top management. In this method, the departmental heads are the primary decision makers of what is needed on the production lines. At the management level, the data collected is confirmed if they are in line with the strategic goals of the firm. The subsequent steps such as the organization’s historical production and sells background trends and market projections will dictate the level of variance created in the budget.
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With regards to the first quarter budget and future projections of the pet supplies market, Peyton Approved has agreed on a 10% variance on the budgeted cost of raw materials and production budget. This is in regards to the potential market growth that is fore seen. The organization conducted market research and concluded that there is a growing demand for family pets. As a result, local stores are planning to increase their stocks for pet supplies in order to meet the growing demand pet supplies. Also, contributing to significant growth in the variance is the general drop in the value of raw materials used to process some of the pet suppliers. This is a considerable opportunity for the company to reap the benefits of low-cost, low materials.
The main changes that Peyton Approved as a company should take regarding the positive developments in the variance analysis, it should focus on increasing its production per unit time (Matsumura, 2014) . This is possible when the company increases some capital production equipment needed to increase the production volume and increase staffs as well to ensure that the increased volume of production is smoothly produced and supplied efficiently and effectively. For the budgeting perspective, it is important for the company to channel more resources strategic budgeting and production budgeting because these are the two avenues mostly affected by the expansion potentials.
In the case of favorable variances in the budgeting, there a huge gap that presents opportunities for unethical practices within the organization. In bridging the ethical gap, a significant number of ethical constraints have to be employed. The two most important ethical considerations are of integrity and objectivity. This is to say that, the production department and the sales have to be accountable for the surplus budget that was implemented. This essentially means that the management has to keep track of the product developments, it is possible if the responsible staffs possess integrity of the highest order (Matsumura, 2014) . On the other hand, objectivity will enable the management to be consciously aware of the development and seal the gaps of for bonuses that they have not worked for.
Some of the main factors to be considered before deciding on making in-house products or buying from third party companies. Essentially every aspect of production boils down to the costs, of the most important is how much the Peyton needs or uses the product. If the product is a core component of the products they sell, then it is most economical for the company to make plans for in-house production. With regards to the expansion plans, it will be logical for the organization to reap the benefits associated with economies of scale and as well as in-house production that will be cheaper in the long run. Another significant consideration is the availability of the capital production equipment and how much it will cost the organization to own one. If the ownership price is too high for the equipment, when employed to return their acquisition capital in due time, then the business is better off purchasing from the third party (Matsumura, 2014) . The main ethical considerations that would play is in the integrity of the management; it is definitive that production will increase significantly if the core products are made in-house, therefore to prevent employees from getting greedy, integrity constraints are implemented. The general impact of making products in-house will increase the flexibility of the business to make pet supplies in the end significantly increasing sufficiency and effectiveness.
The most relevant nonfinancial performance measurements that the organization will need are customer satisfaction, new product adoption rate, and market share. The most significant factor about the measurements is that they enable the organization to establish its position in the form of development, product quality, and market positioning. Considering the fact that the organization is considering expansion, these metrics will facilitate the growth process. Customer certification is important because I will evaluate the market responsiveness to the pet supplies products as well as establish recommendations to improve on the products, the process is, however, expensive because it has to be conducted on a regular basis (Gunasekaran, 2015) . Market share, on the other hand, is relevant to the shareholders of the organization and the management; it facilitates strategic decision making, the only disadvantage to the process is that it is based on pure hypothesis therefore low levels of accuracy.
In conclusion, variance analysis is instrumental for the prospect of a firm like Peyton Approved. They give the full prospects of both the market responsiveness and the potentials of the organization. A careful evaluation of all the factoring elements of an organization may lead to a favorable variance.
References
Gunasekaran, A. I. (2015). Performance measures and metrics in outsourcing decisions: A review of research and applications. International Journal of Production Economics, 161 , 153-166.
Matsumura, E. M.-N. (2014). Horngren's Financial & Managerial Accounting. New York: Pearson Education Limited.
