Britt is a financial services adviser.Her budget for the financial year ended 31 December 20X2 estimated sales of 150 insurance policies and pension plans at an average commission of £430.Following a review of commissions by one of the major financial services companies, her actual average commission per deal fell to £395.She actually sold 143 policies and plans in the year. Travel expenses were budgeted at £5500 and general administrative expenses at £4820.Britt spent slightly less than budget on travel expenses, saving 6% of the budget amount.Administrative expenses, however, exceeded budget by 4%.By how much did Britt's actual net profit for the year fall short of budget net profit (to the nearest £)?

Question

Quizplus · Accepted Answer

First, we need to calculate the budgeted and actual revenue:

Budgeted revenue = 150 policies x £430/policy = £64,500
Actual revenue = 143 policies x £395/policy = £56,485

Next, we need to calculate the budgeted and actual expenses:

Budgeted expenses = £5500 + £4820 = £10,320
Actual expenses = (£5500 x 0.94) + (£4820 x 1.04) = £10,290

Finally, we can calculate the net profit for the year:

Budgeted net profit = Budgeted revenue - Budgeted expenses = £64,500 - £10,320 = £54,180
Actual net profit = Actual revenue - Actual expenses = £56,485 - £10,290 = £46,195

The shortfall in net profit from budget to actual is:

£54,180 - £46,195 ≈ £7,878

Therefore, the answer is C) £7,878

Britt Is a Financial Services Adviser