Task 1
The assignment mainly focuses on depicting the relevant tools, which are used by organisation in conducting budgets and variances. The preparation of budget mainly allows the organisation to conduct its operations smoothly. The use of budget variance is mainly conducted to understand the effective of the prepared budget on operations of the company. The relevant cost budgeting techniques are mainly used in the assignment for deriving the accurate budget for the company.
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The persons are mainly chosen from the company, where they hold the position of finance manager, production manager, and sales executive. These individuals will mainly allow the company to gather relevant information for drafting accurate budget.
|
Income
|
Quantity
|
Prices
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|
Amount
|
Quantity
|
Amount
|
Quantity
|
Amount
|
|
Fridge
|
12
|
1600
|
19,200
|
8
|
12,800
|
16
|
25,600
|
|
Freezers
|
15
|
800
|
12,000
|
10
|
8,000
|
15
|
12,000
|
|
Microwaves
|
13
|
470
|
6,110
|
6
|
2,820
|
6
|
2,820
|
|
Range hoods
|
11
|
190
|
2,090
|
15
|
2,850
|
8
|
1,520
|
|
Ovens
|
6
|
2100
|
12,600
|
5
|
10,500
|
8
|
16,800
|
|
Cook tops
|
16
|
560
|
8,960
|
18
|
10,080
|
14
|
7,840
|
|
Dishwashers
|
18
|
990
|
17,820
|
18
|
17,820
|
14
|
13,860
|
|
Vacuums
|
22
|
390
|
8,580
|
26
|
10,140
|
29
|
11,310
|
|
Coffee makers
|
14
|
600
|
8,400
|
18
|
10,800
|
26
|
15,600
|
|
Toasters
|
25
|
99
|
2,475
|
13
|
1,287
|
19
|
1,881
|
|
Irons
|
5
|
156
|
780
|
7
|
1,092
|
9
|
1,404
|
|
Mixers
|
16
|
89
|
1,424
|
11
|
979
|
16
|
1,424
|
|
Deep fryers
|
13
|
99
|
1,287
|
9
|
891
|
13
|
1,287
|
|
Portable ACs
|
4
|
350
|
1,400
|
6
|
2,100
|
8
|
2,800
|
|
Hair driers
|
0
|
35
|
–
|
2
|
70
|
1
|
35
|
|
Irons
|
14
|
45
|
630
|
16
|
720
|
21
|
945
|
|
Scale sets
|
14
|
24
|
336
|
18
|
432
|
22
|
528
|
|
Kettles
|
13
|
78
|
1,014
|
14
|
1,092
|
19
|
1,482
|
|
Small bins
|
15
|
40
|
600
|
14
|
560
|
31
|
1,240
|
|
Large bins
|
7
|
60
|
420
|
17
|
1,020
|
16
|
960
|
|
Wine coolers
|
9
|
299
|
2,691
|
10
|
2,990
|
16
|
4,784
|
|
Washing machines
|
5
|
340
|
1,700
|
10
|
3,400
|
15
|
5,100
|
|
Dryers
|
4
|
330
|
1,320
|
4
|
1,320
|
8
|
2,640
|
The above table mainly represent the relevant income that is generated from October till December. The relevant income from sales of production are adequately calculated for drafting the budget for 2015. These identified values in budget directly allow the company to form an adequate budget to support its future activities.
|
Expenses
|
Amount to Oct
|
Oct
|
Nov
|
Dec
|
2014
|
|
Phone services
|
780
|
65
|
65
|
65
|
975
|
|
Electricity
|
1,590
|
133
|
133
|
133
|
1,988
|
|
Gas
|
600
|
50
|
50
|
50
|
750
|
|
Water
|
550
|
46
|
46
|
46
|
687
|
|
Insurance
|
1,300
|
108
|
108
|
108
|
1,625
|
|
Payroll
|
465,000
|
38,750
|
38,750
|
38,750
|
581,250
|
|
Cleaning
|
850
|
71
|
71
|
71
|
1,062
|
|
Finance cost
|
1,650
|
138
|
138
|
138
|
2,063
|
|
Advertising
|
560
|
47
|
47
|
47
|
700
|
|
Rent
|
25,000
|
2,083
|
2,083
|
2,083
|
31,250
|
|
Petrol
|
560
|
47
|
47
|
47
|
700
|
|
Accounts fees
|
370
|
31
|
31
|
31
|
462
|
|
Maintenance fee
|
1,405
|
117
|
117
|
117
|
1,756
|
|
Bank fees
|
210
|
18
|
18
|
18
|
263
|
|
Office supplies
|
600
|
50
|
50
|
50
|
750
|
|
Total expenses
|
501,025
|
41,752
|
41,752
|
41,752
|
626,281
|
From the above table relevant expense conducted during October, November and December can be identified. This relevant detection of expense mainly helps in drafting the overall budget for 2015, which is needed by the company.
From the overall valuation of the budget table relevant budget surplus is mainly identified, as the expenses of the organisation. This detection of the budget surplus mainly indicates that relevant profits will be made by the company in next fiscal year.
|
2015 Jan
|
|
Income
|
Quantity
|
Prices
|
Amount
|
|
Operating income
|
|
|
|
|
Fridge
|
31
|
1728.00
|
53,568.00
|
|
Freezers
|
34
|
864.00
|
29,376.00
|
|
Microwaves
|
21
|
507.60
|
10,659.60
|
|
Range hoods
|
29
|
205.20
|
5,950.80
|
|
Ovens
|
16
|
2268.00
|
36,288.00
|
|
Cook tops
|
41
|
604.80
|
24,796.80
|
|
Dishwashers
|
43
|
1069.20
|
45,975.60
|
|
Vacuums
|
65
|
421.20
|
27,378.00
|
|
Coffee makers
|
49
|
648.00
|
31,752.00
|
|
Toasters
|
48
|
106.92
|
5,132.16
|
|
Irons
|
18
|
168.48
|
3,032.64
|
|
Mixers
|
37
|
96.12
|
3,556.44
|
|
Deep fryers
|
30
|
106.92
|
3,207.60
|
|
Portable ACs
|
15
|
378.00
|
5,670.00
|
|
Hair driers
|
3
|
37.80
|
113.40
|
|
Irons
|
43
|
48.60
|
2,089.80
|
|
Scale sets
|
46
|
25.92
|
1,192.32
|
|
Kettles
|
39
|
84.24
|
3,285.36
|
|
Small bins
|
51
|
43.20
|
2,203.20
|
|
Large bins
|
34
|
64.80
|
2,203.20
|
|
Wine coolers
|
30
|
322.92
|
9,687.60
|
|
Washing machines
|
26
|
367.20
|
9,547.20
|
|
Dryers
|
14
|
356.40
|
4,989.60
|
The above table mainly represents the overall sales forecast for the 2015 for all the products, which is been sold by the organisation. The sales forecast is mainly based on all the relevant assumption presented in appendix 5, which could help in generating the revenue for the organisation. The decline demand and increment in selling price is also accommodated in the forecast, as it might help in depicting the relevant profits of the organisation.
|
2015 Jan
|
|
Income
|
Quantity
|
Prices
|
Amount
|
|
Expenses
|
|
|
|
|
Fridge
|
31
|
840.00
|
26,040.00
|
|
Freezers
|
34
|
262.50
|
8,925.00
|
|
Microwaves
|
21
|
157.50
|
3,307.50
|
|
Range hoods
|
29
|
84.00
|
2,436.00
|
|
Ovens
|
16
|
945.00
|
15,120.00
|
|
Cook tops
|
41
|
210.00
|
8,610.00
|
|
Dishwashers
|
43
|
472.50
|
20,317.50
|
|
Vacuums
|
65
|
136.50
|
8,872.50
|
|
Coffee makers
|
49
|
262.50
|
12,862.50
|
|
Toasters
|
48
|
36.75
|
1,764.00
|
|
Irons
|
18
|
81.90
|
1,474.20
|
|
Mixers
|
37
|
47.25
|
1,748.25
|
|
Deep fryers
|
30
|
47.25
|
1,417.50
|
|
Portable ACs
|
15
|
189.00
|
2,835.00
|
|
Hair driers
|
3
|
9.45
|
28.35
|
|
Irons
|
43
|
19.95
|
857.85
|
|
Scale sets
|
46
|
12.60
|
579.60
|
|
Kettles
|
39
|
35.70
|
1,392.30
|
|
Small bins
|
51
|
13.65
|
696.15
|
|
Large bins
|
34
|
23.10
|
785.40
|
|
Wine coolers
|
30
|
136.50
|
4,095.00
|
|
Washing machines
|
26
|
231.00
|
6,006.00
|
|
Dryers
|
14
|
220.50
|
3,087.00
|
The relevant expense budget is mainly depicted in the above table, which might be useful in next fiscal year. The expense budget has all the relevant adjusted of the demanded products that will be sold in the next fiscal year. The expenses budget also allows the company to gauge into the inventory that is needed for smoothly selling process in the next fiscal year.
|
Particulars
|
Budget 2015
|
|
Total sales
|
1,286,621.28
|
|
Total cost
|
533,030.40
|
|
Total expenses
|
579,281.21
|
|
Profit
|
174,309.67
|
The relevant profit estimation of 2015 can be identified from the above table, which is relevantly about $174,309.67. This profit level is mainly achieved after adjusting the relevant sales price, quantity and other expenses of the organisation.
Evaluation
|
Operating cash flow
|
2015
|
|
Beginning balance
|
245,000.00
|
|
Sources of cash
|
|
|
Net income
|
174,309.67
|
|
Receivables
|
43,601.00
|
|
Total
|
462,910.67
|
|
Cash used
|
|
|
Payables
|
5,976.00
|
|
Others
|
1,000.00
|
|
Total
|
6,976.00
|
|
Surplus/deficit
|
455,934.67
|
The relevant estimation of cash flow of the organisation is also conducted in the above treble, which might help in depicting the cash balance of the company in next fiscal year. This estimation could allow the company to understand the relevant cash inflow and outflow that will be conducted in the next fiscal year.
|
Progress of the Budget
|
The progress of the budgeted has been conducted adequately where all the relevant adjustments are made in sales price, quantity and expenses in payroll of the organisation.
|
|
Aspect of important document
|
The major aspect of the documents is to prepare an adequate budget, which could allow the company to conduct smooth operations in the next fiscal year. The use of balance sheet, income statement and cash flow statement is essential for the organisation to relevantly gather adequate capital to support its future activities.
|
|
Assessment of the budget
|
From the relevant budget has surplus amount, which indicates that after expenses the company will be able to make relevant profits in the next fiscal year. More, the expenses, income and cost of goods are also estimated in the budget, which could allow the company to conduct business operations in future.
|
|
Contingency plan
|
Relevant contingency plan is mainly prepared, which will affect marketing, operations and finance of the organisation to support the budget. Developing, distribution channels, quality of the property, and acquisition of more fund could be conducted as a contingency plan for the budget.
|
|
Recommendation
|
The contingency plan and budget the organisation could adequately conduct operations in 2015.
|
|
Particulars
|
Budget 2015
|
Actual 2015
|
|
Total sales
|
1,286,621.28
|
1,366,000.00
|
|
Total cost
|
533,030.40
|
643,000.00
|
|
Total expenses
|
579,281.21
|
186,000.00
|
|
Profit
|
174,309.67
|
537,000.00
|
The actual and budget figure in the above table are relevantly different, which increases the chance of budget variance. However, from the evaluation sales have relevant improved, which provides the organisation with excess income. However, the total cost pf good have increased, while the total expenses has declined, which has helped in increasing actual profits of the organisation.
The budget preparation is mainly conducted to derive he relevant value of cash flow, cost and revenue, which might affect profitability of the company. The future cash flows can only have positive variance if the relevant expenses of the organisation are higher than estimated. The control of future cash flows needs to be controlled for reducing the relevant variance in the budget. This relevant increment in expense could also lead to cost increment and create higher variance for the budget. This might hamper productivity of the company due to lack of funds. Furthermore, any kind of variance in revenue could directly affect capability of the company to generate the anticipated profits. Hence, relevant measures need to be taken by the management to reduce variance in the budget.
The use budget directly allows the organisation to detect strength and weakness of the operations. In addition, the cost budget directly helps in detecting the problems in operations of the management. The use of budget allows the organisation to detect recommendation for future operations, which could help in improving their profitability.
From the overall evaluation of the budget and actual value the companies faced to achieve purchase cost of the products, which is been sold. This increment in cost has mainly forced the organisation to reduce the profits from operations. However, the increase sales value and reduced expense cost has boosted profits of the organisation and generate higher profits than anticipated.
|
Particulars
|
Analysis
|
Variance %
|
|
Total sales
|
Favourable
|
5.81%
|
|
Total cost
|
Unfavourable
|
17.10%
|
|
Total expenses
|
Favourable
|
-211.44%
|
|
Profit
|
Favourable
|
67.54%
|
The table mainly represents the overall variance percentage and analysis, where it is detected to be favourable or unfavourable. From the evaluation it is estimated that total cost is mainly unfavourable in nature resulting in an increment in 17.10% cost of goods. Other variances have positive affect on financial stability of the organisation.
Projected Financial Statements
The budget variance report mainly depicts the overall difference between actual and budgeted figures. The relevant variance analysis is mainly conducted in such report, which could allow the company to gauge into the incremental expenses or revenues of the organisation.
The feasibility report directly indicates the relevant improvements, which needs to be conducted by the organisation. The sales, expenses and profits of the organisation is relevantly adequate and does not need improvement, However, the cost of goods purchased by the organisation needs to be controlled, as it has increased adequately. Hence the company needs to search for more suppliers who are willing to supply the product at low cost with adequate quality.
The major discrepancy was mainly conducted in the expenses, which drastically declined in 2015 by 211.44%. Moreover, the sales and cost of goods also showed discrepancy of 5.81% and 17.10% respectively. Lastly, the profits of the organisation also showed discrepancy of 67.54% due to the reduce expenses incurred during 2015.
The negative discrepancy mainly came from rising cost and expenses incurred by the company, while the positive discrepancy came from the rising sales value. This directly reduced the number of sales, which was conducted by the company.
- Rising expenses
- Reduced sales quantity
- Increased selling price
- Rising cost of goods
- Low estimation of variable overheads
|
Particulars
|
Budget 2015
|
Actual 2015
|
Variance
|
|
Total sales
|
1,286,621.28
|
1,366,000.00
|
79,378.72
|
|
Total cost
|
533,030.40
|
643,000.00
|
109,969.60
|
|
Total expenses
|
579,281.21
|
186,000.00
|
(393,281.21)
|
|
Profit
|
174,309.67
|
537,000.00
|
362,690.33
|
The above table depicts the variance of budget and actual figure, where the major fault is identified to be in total cost, which has a positive variance. This positive variance is mainly reducing profits of the organisation by $79,378.72.
|
Particulars
|
Variance %
|
|
Total sales
|
5.81%
|
|
Total cost
|
17.10%
|
|
Total expenses
|
-211.44%
|
|
Profit
|
67.54%
|
The major difference is identified from turnover figure, purchase budget and profit budget of the organisation. The figure has relevant changed, which is depicted in above table.
The techniques of cost budgeting allow the management to measure its performance, detect the operational efficiency level and identifying course of action needed by the company. Therefore, cost budding helps in improving financial health and generate higher revenue for the company.
|
Particulars
|
Slick Pile
|
Work amjig
|
SAP Financials
|
|
Price
|
$0.01 per year
|
$38 per month
|
$45 per month
|
|
Usability
|
Business hours
|
10 users
|
Used by various industries
|
|
Features
|
Instant access
|
Free demo
|
Free demo
|
|
Compatibility with other programs
|
Cloud, SAS and Web
|
Mac, Windows, and Mobile
|
Cloud and Web
|
|
Compatibility with specialist
|
Helps in documentation, dealing and online chats
|
Helps in online and specialises in business hours
|
Critical function, core function and performance management
|
|
Answer 1.
|
Compiles the information needed for cost, revenue and profit
|
|
Answer 2.
|
Used in responsibility accounting for deriving the overall targets
|
|
Answer 3.
|
Revenue helps in sales forecast
Expenses depicts the cost incurred in particular period
Cash clarifies the inflow and outflow
Capital depicts the requirement for raising the funds
|
|
Answer 4.
|
Reviewing the income statement could depict the income and outflow requirements of the company.
|
|
Answer 5.
|
Political, social, legal, economic, taxation, technological, resource and workfare
|
|
Answer 6.
|
Investment made in respect to grow the relevant capital
|
|
Answer 7.
|
Expenses that is conducted to generate more capital
|
|
Answer 8.
|
Analyses both inflow and outflow related to cash
|
|
Answer 9.
|
This terms refers to the point, where company neither make profit nor loss
|
|
Answer 10.
|
Detection of profits after deducting cost of goods sold
|
|
Answer 11.
|
Ability of the management to under changes for reducing risk factors
|
|
Answer 12.
|
Annual financial reporting cycle is used
|
|
Answer 13.
|
Net present value and Internal rate of return
|
|
Answer 14.
|
The budget holding workforce is able to prepare their own budget
|
|
Answer 15.
|
Planning and implementation
|
|
Answer 16.
|
This states the place and time where delivery is involved.
|
|
Answer 17.
|
FCA innovates different products
CIF deal information related to freight, trade and insurance
DAF helps in frontiers and delivery
|
|
Answer 18.
|
The order regarding trade practises that needs to be followed by companies
|
|
Answer 19.
|
The convention where importance rules and regulations are formed
|
|
Answer 20.
|
Deals with trade rules between nations
|
|
Answer 21.
|
An agreement between two parties regarding trade practices
|
|
Answer 22.
|
Checks on debt and financial history of the company
|
|
Answer 23.
|
The records of income statement and balance sheet are required.
|
Conclusion:
The overall assignment mainly helps in depicting the relevant measures, which could be used by companies in smoothly continuing their activities. In addition, the use of budget, variance, and costing could allow the companies to improve their operational capability. Furthermore, the cost budget measures could allow the company to improve their profitability and generate higher return from investment.
Cömert, H., D’Avino, C., Dymski, G., Kaltenbrunner, A., Petratou, E. and Shabani, M., 2016. Too big to manage: Innovation and instability from regulated finance to the megabanking era.
Wang, N., 2014. Private finance initiative as a new way to manage public facilities: A review of literature. Facilities, 32(11/12), pp.584-605.
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