Project Y
, and tho total ectual spending was oxacly es budgeted. – The ectual spending on project
was 60
over ils original budget, whll project
only used 80%
of the planned budget. Question Arrange the percentages of Project Y
and Project X
with the budget and actual spending (in 000s)
The Correct Answer and Explanation is:
Answer:
Let’s assume the planned budget for each project is 100,000 (in 000s) for easier comparison.
- Project Y:
- Actual spending was 60% over its original budget.
- So, actual spending = 100,000 + (60% of 100,000) = 160,000 (in 000s).
- Percentage of actual spending = 160% of the budget.
- Project X:
- Only used 80% of the planned budget.
- So, actual spending = 80% of 100,000 = 80,000 (in 000s).
- Percentage of actual spending = 80% of the budget.
Arranged by actual spending compared to the budget:
- Project Y: 160%
- Project X: 80%
Explanation
In analyzing project expenditures, comparing actual spending against the planned budget provides crucial insight into fiscal management. This question presents two projects, X and Y, each with different relationships to their budgets.
To make a meaningful comparison, we assume a common baseline planned budget of 100,000 units (in 000s) for both projects. Project Y exceeded its budget by 60%. This means its actual spending was 160% of the budget, calculated as 100% of the original budget plus an additional 60%. Mathematically, this is:
100,000 + (60% of 100,000) = 100,000 + 60,000 = 160,000
Percentage of budget used: 160%
On the other hand, Project X utilized only 80% of its allocated budget. This indicates underutilization, which may reflect either cost efficiency or underperformance, depending on context. Its actual spending is:
80% of 100,000 = 80,000
Percentage of budget used: 80%
Arranging these figures in terms of percentage used:
- Project Y: 160%
- Project X: 80%
This clearly shows that Project Y significantly overspent, while Project X underspent. Such comparisons are vital in project management and financial planning, enabling organizations to identify which initiatives are at risk of cost overruns or which may have failed to fully execute their plans. While under-budgeting may seem positive, it could also signal resource underuse. In contrast, overspending demands scrutiny for potential inefficiencies or unexpected scope increases.
