Revenue and Spending Variances from Comparing the Flexible Budget to the Actual Results
IN BUSINESS: STATE OF THE UNION SPEECH HURTS CORPORATE JET INDUSTRY
In December 2008, Detroit auto executives flew private corporate jets to Washington D.C. to plead for billions of taxpayer dollars to save their companies. The public outcry was loud and clear: How could companies on the verge of bankruptcy afford to transport their executives in private corporate jets? One month later President Obama’s State of the Union speech included criticism of CEOs who “disappear on a private jet.”
The impact of these events on the corporate jet manufacturing industry was swift and severe.Dassault Aviation had 27 more order cancellations than new orders in the first quarter of 2009.Cessna Aircraft had 92 first-quarter order cancellations and laid off 42% of its workforce. Approximately 3,100 jets flooded the resale market compared to 1,800 jets for resale in the first quarter of the prior year. The CEO of Cessna and the president of Gulfstream Aerospace went to the White House in May 2009 to seek an end to the rhetoric that was destroying their sales.
These facts illustrate how an activity variance can be affected by uncontrollable events. The actual first-quarter sales at these companies were substantially lower than their budgeted sales due to reasons that they could not foresee or control.
Source: Carol Matlack, “Public Flak Grounds P