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You just closed the first half of the year for a mid-sized defense manufacturing business, and leadership wants to understand why the original annual plan no longer reflects likely year-end results. You are preparing materials for a monthly review and need to explain the difference between a budget and a forecast using current-year actuals and updated assumptions. Assume the budget was approved before the year started and will not be reset for performance evaluation, while the forecast should reflect the most current expected outcome. You only have revenue and operating expense data for this exercise.
| Metric | Amount |
|---|---|
| Original full-year revenue budget | $1,200,000,000 |
| Original full-year operating expense budget | $1,020,000,000 |
| H1 actual revenue | $560,000,000 |
| H1 actual operating expense | $500,000,000 |
| Updated H2 revenue forecast | $590,000,000 |
| Updated H2 operating expense forecast | $535,000,000 |
How would you explain the difference between a budget and a forecast using these numbers, and what does the updated full-year outlook imply versus the original plan?
