ppts provide complete analysis of the case

1. THE RESOURCE
GROUP
Variance Analysis: Decision Making
Presented by: Sher Muhammad

2. REVENUE
Revenues are favorable when seen in aggregate and are higher than expected
revenues by 32,100.
Below is the revenue variances for both IT and BPO per consultant and per
hour.

3. Revenue Analysis contd.
• The revenue in aggregate is favorable because the units hour invoiced for the
BPO in actual are more than budgeted hours.
• Revenue for IT is favorable when observed as per hour and per consultant,
which also contributes to overall revenue being positive/favorable.
• Invoicing rate variance is unfavorable indicating the low invoicing price,
which the company ought to focus.

4. Cost/ Expenses
• Operating expenses are apparently lower than budgeted which is good for
the company.
• Profits of the company are lower despite having as a whole favorable
revenue thus indicating inefficient management of expenses.
• Pure consultant is unfavorable when combined.
• Pure consultant cost price and consultant expense rate variance both are
showing over-expensed for IT but are favorable for BPO services.

5. Cost analysis contd.
• Both per hour and per consultant costs are favorable for BPO not for IT.

6. Interpretation: BPO services
• IT is observed that the company is unable to realize budgeted revenue from
BPO services. There are two possibilities for that.
I. First, the company has set low charges/price for BPO services.
II. Second, it has overestimated the budgeted price for it.
• Company has been able to reduce the cost for BPO by Rs.1.9 which is
positive aspect for it.
• Cost per consultant is also reduced by Rs. 3609.
• So, we say company has least to bother about reducing cost when it comes to
BPO.

7. Interpretation: IT Services
• Company has realized more than expected revenues from IT services. Revenue
exceeding the budgeted by Rs. 3.7 per hour and by Rs.2560 per consultant
employed.
• However the costs are significantly higher than budgeted. Per hour costs is higher
by Rs.5.5 while per consultant has increased by Rs.3316. There is one of two
reasons for this.
1. First, The consultants are over employed which results in increased costs and
time going idle as consultants are more than required.
2. Second, the company has conservatively estimated the number of consultants
which are actually less than required. Resulting in high costs.

8. Recommendations
• For BPO services
 One possibility is that company should increase the prices for BPO services so as
to match the budgeted price and prevent the losses.
Other is, the company should have flexible budget so that periodic changes may be
made given the conditions and demand from the market.
• For IT services
 One solution is to reduce the number of consultants up to the required level only
so as to reduce the costs and avoid idle time.
Other is, company must observe and keep revising the budgets according to market
demands and work required. Thus follow flexible budget for smooth functioning.

9. Thank You