BUDGETING AND VARIANCE ANALYSIS OF

WALMART

REPORT SUBMITTED BY:

DIVANSHI MAHESHWARI -U089
HARSHA ZANJAGE- T015
LACHHIKA SHUKLA- T054
MEHA PARMAR- T034
MANYA GUPTA- T029

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 INDEX

CONTENTS PAGE NO.

CONTRIBUTION TABLE 3
INTRODUCTION OF WALMART 4
COMPANY PROFILE 5

FINANCIAL STATEMENT 6

CASH BUDGET 7-16

FLEXIBLE BUDGET 17-21

LABOUR VARIANCE 22-25

CONCLUSION 26

REFERENCES 27
 CONTRIBUTION TABLE

INTRODUCTION OF COMPANY, HARSHA

COMPANY PROFILE &
INTRODUCTION OF ALL 3
TOPICS
CASH BUDGET QUESTION & MEHA
SOLUTION
FLEXIBLE BUDGET QUESTION DIVANSHI
& SOLUTION
LABOUR BUDGET QUESTION & LACCHIKA
SOLUTION
ANALYSIS OF ALL 3 TOPICS MANYA
CONCLUSION & FINANCIAL
STATEMENT
ASSUMPTIONS FOR EVERYONE
QUESTIONS, COMPILATION OF
REPORT & C

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 INTRODUCTION OF WALMART

Walmart is the worlds largest American multinational retail

corporations which was founded by Mr. Sam Walton in 1962.It has its
headquarters in Bentonville, Arkansas, USA. The CEO of Walmart is Mr.
Dough Mcmillon. It operates a chain of hypermarkets, discount
department stores, and grocery store. It also owns and operates Sam's
Club retail warehouses. Walmart offers a variety of products, from
groceries to electronics, and has a significant online presence.
Walmart has been expanding its online presence, offering a wide range
of products through its website and mobile app. They also own and
operate Walmart Marketplace, where third-party sellers can list their
products. Walmart Inc. encompasses several divisions, including
Walmart U.S., Walmart International, and Sam's Club. Walmart is
involved in various corporate social responsibility initiatives, including
sustainability efforts and charitable contributions.

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 COMPANY PROFILE
Walmart was founded by Sam Walton in 1962 in Rogers, Arkansas,
USA. The headquarters are situated in Bentonville, Arkansas, USA.
Walmart’s CEO is Doug Mcmillion (since 2014). It operates through
different business segments including:
1) Walmart U.S.- This segment consists of the company’s core retail
operations in the United States, including Walmart Supercenters,
Walmart Discount Stores and Walmart Neighbourhood Markets.
2) Walmart International- This segment encompasses Walmart’s
operations in various countries outside the US. Walmart operates
retail stores and e-commerce websites in several countries.
3) Sam’s club- Sam’s Club is a membership based warehouse club chain
owned by Walmart. It offers bulk products, groceries and other goods
to its members.
4) Walmart E-commerce- This segment focuses on Walmart’s online
retail operations, which include Walmart.com and various other e-
commerce platforms. Walmart is one of the world’s largest and most
influential retail corporations. It is known for its “Everyday Low Prices”
strategy which aims to offer customers low prices on a wide range of
products. Walmart is a publicly traded company with shares traded on
the New York Stock Exchange under the ticket symbol “WMT”.
Walmart also has a significant global presence, with operations in
numerous countries. It has a strong presence in North America,
Central America, South America, Asia and Africa. It is one of the largest
companies in the world in terms of revenue and employment and it
also has been recognised for its sustainability efforts and initiatives
aimed at reducing its environmental footprints. Walmart has faced
various controversies and criticisms over the years, including concerns
about labour practices, employee wages and its impact on small
businesses.

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 FINANCIAL STATEMENT

 Earnings results for the second quarter and six months ended
July 31, 2023
 Second quarter, the company reported sales was USD 160,280
million

Revenue USD 161,632 million

Net income USD 7,891 million
Gross margin TTM 24.2%
Operating margin TTM 4.11%
Net Profit margin TTM 2.23%
Return on Investment TTM 11.71%
Total Revenue 161,632
Gross Profit 39,782
Operating Income 7,316
Net Income 7,891
Quick Ratio MRQ 0.22%
Current Ratio MRQ 0.83%
LT Debt to Equity MRQ 48.85%
Total Debt to Equity MRQ 84.04%
Total Assets 255,121
Total Liabilities 169,562
Total Equity 85,500
Cash Flow/Share TTM 14.04
Revenue/Share TTM 234.25
Operating Cash Flow 13.67%
Cash From Operating Activities 13,568
Cash From Investing Activities -5,049
Cash From Financing Activities -5,249
Net Change in Cash 3,263

CASH BUDGET
It is a financial tool that helps businesses and individuals to forecast
their cash inflows and outflows for a specific period of time (monthly
or quarterly basis). Cash budget is basically used to make sure that

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there is enough cash available to cover all the expenses and to plan for
future financial needs. To create a cash budget, you would need the
following information-
1) list all the cash inflows like sales, revenue, loans and even
investments (if any)
2) Estimate the timings and amount of this info
3) list all cash outflows like purchases, other expenses, loan
repayments, etc. and estimate the timings along with the amounts for
this also.
4) calculate the net cash flow for each period of time (deducting
outflow from inflow).
5) Determine the ending cash balance by adding beginning cash
balance with the net cash flow.
Cash budget helps individuals and businesses to manage their
finances, investment plans and debt repayments, etc. It operates a
chain of hypermarkets, discount department stores, and grocery store.
It also owns and operates Sam's Club retail warehouses. Walmart
offers a variety of products, from groceries to electronics, and has a
significant online presence. Walmart has been expanding its online
presence, offering a wide range of products through its website and
mobile app. They also own and operate Walmart Marketplace, where
third-party sellers can list their products. Walmart Inc. encompasses
several divisions, including Walmart U.S., Walmart International, and
Sam's Club. Walmart is involved in various corporate social
responsibility initiatives, including sustainability efforts and charitable
contributions.

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 ANALYSIS OF CASH BUDGET

The cash budget is a key management accounting tool that allows a

company to plan and control its cash flows over specific time periods.
Here's an analysis of the cash budget:
1. Receipts:
Opening Cash: The budget starts with an opening cash balance,
which is the cash on hand at the beginning of each period. This
opening balance serves as the starting point for the cash budget.
Receipts from Revenue (Working Note-1): Cash receipts from
revenue are calculated based on the assumption that a portion of net
income or revenue will be collected in the current month (40%) and
the remaining portion in the next month (60%). This reflects the
timing of accounts receivable collection. It ensures that the budget
accounts for the cash generated by sales.
Capital Receipts: This represents any cash received from capital
sources, which could include investments or loans.
Issuance (Retirement) of Debt, Net: Cash flows related to debt
issuance and retirement are considered. This accounts for the cash
impact of borrowing or repaying debt.

2. Payments:
Cash Taxes Paid: Cash payments for taxes are accounted for, which
includes tax obligations for the specified periods.

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Cash Interest Paid: This reflects the cash outflow for interest
payments on debt.

Deferred Taxes (Working Note-2): Cash payments for deferred taxes

are calculated, considering a portion paid in the same month (50%)
and the remaining portion in the next month (50%).
Capital Expenditure: Cash outflows for capital expenditures represent
investments in assets. These payments are crucial for maintaining or
expanding the company's operations.
Other Capital Expenditure: Additional capital expenditures are
included, although they are not specified in detail in the budget.
Financing Cash Flow Items: This category includes various financing-
related cash flows, which may include activities such as equity
issuances, share buybacks, or other financing transactions.
Total Cash Dividends Paid: This reflects the total cash dividends paid
to shareholders.
Issuance (Retirement) of Stock, Net: Cash flows related to stock
issuances or retirements are considered, reflecting the impact of
equity transactions.
Issuance (Retirement) of Debt, Net: Cash flows related to debt
issuances or retirements are also considered, accounting for changes
in the company's debt position.

3. Balance (A - B):
This is the most critical part of the cash budget. It shows the
projected cash balance at the end of each period. If the balance is

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positive, it indicates a cash surplus, while a negative balance suggests
a cash deficit.

4. Assumptions:
The budget relies on several key assumptions, including that net
income is equal to revenue for each period, all income is positive,
and deferred taxes are positive for each period. These assumptions
form the basis for the budget calculations.

5. Use in Management Accounting:

The cash budget is a critical tool for management accounting as it
provides a forward-looking view of a company's cash position. It
helps management plan for necessary cash reserves, make informed
decisions about investments and financing, and ensure the company
can meet its financial obligations, including taxes, interest, and
dividend payments.
It allows for the assessment of cash flow fluctuations and helps
identify periods of potential cash shortages or surpluses, enabling
proactive management decisions.
The budget can also be used for performance evaluation, comparing
actual cash flows to the budgeted amounts, and investigating any
discrepancies.
In summary, the cash budget is a vital management accounting tool
that aids in cash flow planning, control, and decision-making,
ensuring that a company's financial operations are managed
effectively and that it can meet its financial obligations and strategic
objectives.

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 FLEXIBLE BUDGET

A flexible budget is a financial strategy that evolves and adapts to

activity or situation changes. A flexible budget, as opposed to a static
one, is made to account for fluctuations in revenue and expenses
that may arise under various circumstances. A static budget, on the
other hand, does not vary regardless of circumstances. The main
ideas behind flexible budgets are as follows:

Changing Activity Levels: Flexible budgets are especially helpful when

your company's or finances are prone to change. They enable you to
visualize your financial situation at various levels of activity or sales.

Adjustable Income and Expenses: In a flexible budget, both your

income and your expenses are subject to vary depending on how
well you do. Your income forecasts in the flexible budget, for
instance, can increase if your sales improve.

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The following is the information of the expense budget of Walmart
company for the 3 months ending 31 March 2023: -
PARTICULAR $ (IN MILLIONS)
MATERIAL $10000

LABOUR $8800

SELLING EXPENSES $1790

ADMINISTRATION $1150
EXPENSES
ADVERTISING $1100
EXPENSES
SUNDRY EXPENSES $350

RENT AND TAXES $576

DEPRICIATION $2736

ASSUMPTIONS
1) Direct Material :- $10000 million
2) Sundry expenses:- $350 million

PREPARE A FLEXIBLE BUDGET FOR 50% AND 70% CAPAPCITY WITH THE
FOLLOWING CONDITIONS GIVEN BELOW: -
ADJUSTMENT
1) SELLING EXPENSE IS 10% FIXED.
2) ADMINISTATION EXPENSE IS 20% IS VARIABLE.
3) ADVERTISING EXPENSE IS 25% VARIABLE.
4) VARAIBEL SELLING EXPENSE WILL DECREASE BY 5% IN CASE OF 50%
CAPACITY.
5) MATERIAL PRICE WILL INCREASE IN THE CASE OF 50% CAPACITY BY
5% AND 10% IN THE CASE OF 70% CAPACITY.
6) VARIABLE ADMINISTRATION EXPENSES DECREASES BY 15% IN CASE
OF 70% CAPACITY

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SOLUTION: -

IN MILLIONS

PARTICULAR 50% 70% 100%

VARIABLE COST
DIRECT MATERIAL 5250 7700 10000
LABOUR 4400 6160 8800
TOTAL 9650 13860 18800
SEMI-VARIABLE COST

SELLING EXPENSE
FIXED (10%) 179 179 179
VARIABLE 765 1128 1611

ADMINISTARATION
EXPENSE
FIXED (80%) 920 920 920
VARIABLE 115 137 230

ADVERTISMENT
EXPENSE
FIXED 835 935 935
VARIABLE (25%) 138 193 165
TOTAL 2952 3392 3940

FIXED COST
RENT AND TAXES 576 576 576
DEPRICIATION 2736 2736 2736
SUNDRY EXPENSES 350 350 350
TOTAL 3662 3662 3662
TOTAL OF FLEXIBLE 16264 20914 26402

WORKING NOTES: -
1) DIRECT MATERIAL

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 50% CAPACITY = $1000*50/100= 5000
INCREASE BY 5% SO = 5000*105%= 5250
70% CAPAPCITY= 10000*70/100= 7000
INCREASE BY 10% SO = 7000*110%= 7700

2) LABOUR
50% CAPACITY= 8800*50/100= 4400
70% CAPACITY= 8800*70/100= 6160

3) VARAIABLE SELLING EXPENSE

50% CAPAPCITY= 1790*50/100= 895*90/100= 805
DECREASES BY 5% S0= 805*95/100= 765
70% CAPAPCITY = 1790*70/100=1235*90/100= 1128

4) VARIABLE ADMINSITRATION EXPENSE

50% CAPACITY= 1150*50/100= 575*20/100=115
70% CAPACITY= 1150*70/100=805*20/100=161
DECREASE BY 15% = 161*85/100= 137

5) VARAIBLE ADVERTISING EXPENSE

50% CAPACITY= 1100*50/100= 550*25/100= 138
70% CAPACITY= 1100*70/100= 770*25/100=193

6) FIXED SELLING EXPENSED

1790*10/100= 179
( FIXED EXPENSES REAMINS SAME AT EACH TIME )

7) FIXED ADMINISTRATION EXPENSE

1150*80/100=920

8) FIXED ADVERTISING EXPENSE

1100*75/100=835

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 ANALYSIS OF FLEXIBLE BUDGET

The flexible budget is a valuable tool in management accounting that

allows a company to plan and control its expenses at different levels
of activity.
The flexible budget helps management to plan and control expenses
based on different levels of production. Here are some key
takeaways:
Variable Costs: These costs increase in direct proportion to
production. It's important for management to monitor these costs
closely and ensure they are in line with production levels.
Semi-Variable Costs: These costs have both fixed and variable
components. Fixed components remain constant, while variable
components change with production. Management should monitor
the variable components to ensure they align with production levels.
Fixed Costs: Fixed costs remain constant regardless of production
levels. These costs are relatively stable and can be easier to budget
for.
Total Budget: The total budget varies with production, allowing
management to understand the financial impact of different
production scenarios.
In summary, the flexible budget provides valuable insights for
management to make informed decisions regarding costs and
expenses at various production levels. It aids in cost control, resource
allocation, and overall financial planning.

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 LABOUR VARIANCE

The term "labor variance," also known as "labor cost variance" or

"labor efficiency variance," is used in cost accounting to describe the
difference between actual labor costs paid and projected or standard
labor costs. It assists businesses in evaluating how effectively labor
resources are being used and locating opportunities for cost- or
efficiency-saving changes.
Labor variance is made up of two main parts:
Labor Rate Variance: This variation compares actual employee pay
rates to standard or budgeted rates. It determines if you paid more or
less per hour of labor than you anticipated. The formula for the
difference in labor rates is:
(Actual Hours Worked *Actual Wage Rate )- (Actual Hours Worked
*Standard Wage Rate) = Labor Rate Variance

A positive variance indicates that you exceeded your hourly budget.

If the variance is negative, you paid less per hour than planned.

The labor efficiency variance measures the discrepancy between the

number of hours actually worked and the number of hours that
would have been required to do a particular activity or create a
particular level of output. It assists in figuring out whether labor was
employed more efficiently than anticipated. Labor Efficiency Variance
is calculated using the following equation: Labor Efficiency Variance =
(Actual Hours Worked - Standard Hours Allowed)*Standard Wage
Rate

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A positive variance indicates that you worked longer than
anticipated.
If the variance is negative, you used less hours than anticipated.
Organizations can identify the reasons for labor cost overruns or
labor cost savings by examining labor variances. For instance, a
positive labor rate variance can signify more employee pay, but a
negative labor efficiency variance might imply that staff worked faster
than expected.

These insights can help management make judgments about

changing labor methods, employee levels, or salary structures to
increase operational effectiveness and cost control.

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 Idle time (IT): 30 hrs per month
Standard hours (SH): 240 hrs per hour
Standard Rate (SR): 21$ per month
Actual hours (AH): 120 hrs per month
Actual Rate (AR): 11$ per hour
Labour cost variance = (SH*SR)-(AH*AR)
= (240*21) - (120*11)
= 5040 – 1320
= 3720 (F)

Labour Rate variance = AH(SR-AR)

= 120(21-11)
= 120*10
= 1200(F)
Labour efficiency variance = SR(SH-AH)
= 21(240-120)
= 21*120
= 2520(F)
Labour Idle Time Variance = SR*IT
= 21*30
= 630(A)

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 ANALYSIS OF LABOUR VARIANCE

The calculations relate to labor variances, which are essential in

management accounting for assessing how well a company manages
its labor resources and labor-related costs. Let's analyze these
variances:
The overall picture suggests that the company is achieving cost
savings in labor. The favorable labor cost variance, labor rate
variance, and labor efficiency variance indicate that labor costs are
under control, and productivity is improving.

However, the adverse labor idle time variance indicates that there is
room for improvement in eliminating or reducing idle time, which
can lead to cost savings.

Management should further investigate the reasons behind these

variances, consider implementing strategies to reduce idle time, and
maintain cost control measures to ensure continued favorable
variances.

It's important to note that while these variances provide valuable

insights, they should be interpreted in the context of the specific
circumstances of the company and industry norms. Further analysis
and action plans should be based on a comprehensive understanding
of the factors contributing to these variances.

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 CONCLUSION

Management accounting tools such as the flexible budget, cash

budget, and labor variances play crucial roles in helping companies
plan, control, and make informed financial decisions.
Flexible budget- helps in controlling cost and allocating resources by
providing insights into different production level.
Cash budget - manages cash flow over the period.
Labour variances- helps in assessing labour resource management .
They collectively empower the management to make strategic
financial decisions. Coming to Walmart in my opinion Walmart is doing
good but it can work on its labour efficiency and wage pay for better
results.

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 REFERENCES
1. “Walmart (WMT) Financial Summary -
Investing.com India.” Investing.com India,
in.investing.com/equities/wal-mart-stores-
financial-summary.
2. Walmart's 10-K report for fiscal year 2023

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