Whiz Calculator Company
WHY SALES BUDGET???
Sales budget is the most important budget while making the overall budget for the organization for a particular fiscal year.
It is important in the sense that how would anybody make fiscal budget for organization if he don't know about how much to sale or what are the organization's sale would be???
If you knew the sales volume or units of product you want to sale in a particular fiscal year then you will make production budget accordingly & similarly you will purchase raw material & hire labor to meet requirements.
So if you don't know how much you want to sale then how would you budget other things and how would you compare your performance at the end of fiscal year???
Introduction:-
Whiz Calculator Company is currently considering the new method of planning and controlling selling cost. The old method was unsatisfactory according to Mr. Reisman.
According to old method, selling expenses were budgeted on a fixed or appropriation basis. Each October, the accounting department sent records of actual expenses for the preceding year and for the current year - to - date, to the branch managers and to other managers who in charge of selling departments.
Looking into the preceding year’s report & by their judgment, these department heads drew up and submit estimates of the expenses for their departments for the succeeding year.
Then the estimates made by the branch managers were sent to the sales manager, who was in charge of all branch sales. He determined whether or not they were reasonable and cleared up any questionable items by correspondence.
Upon the approval by the sales manager, the estimates of branch expenses were submitted to the manager of marketing (Paula Melmad), who was in charge of all selling, promotional, and warehousing activities.
Then the manager of marketing discussed these numbers with the managers concerned, and after differences were reconciled, the estimates of all selling departments were combined into selling expense budget.
Lastly budget was submitted to the budget committee for final approval.
These budgeted figures were divided into 12 equal amounts and compared to each month actual results. (Pg No. 171)
In the new president’s point of view there were two limitations of the old method. Firstly, there was no 100% confidence in reasonableness of the estimates made by department heads. Secondly, selling conditions changed substantially after the budget was adopted, however under the old method it was impossible to modify the budgeted expenses for these changes.
As the company investment is based on the profit generated in last year’s so the budget of the project will be defined after annual report is published which define the annual revenue of this company.
Budgets are the financial requirements and consequences of plans. Budgets are made with specific goals in mind. Budgets can be used to lower living expenses, increase savings, or to save for a purpose such as: education or retirement. Budgeting is a process that involves these actions: defining goals, gathering information, forming expectations, reconciling goals and data, monitoring goals and variances, adjusting budgets, and redefining goals.
Budgets has been widely used by a lot of organizations since it was first introduced, because it can helps managers to properly plan and control the business’s resources. Successful control mechanisms as Schick believes are the essential to budgetary development (Gray, Jenkins, and Segsworth, 2002, p.11). However, recently the use of budgets to control organizations has been the subject to criticise and debate (Hansen et al., 2003 cited in Libby and Lindsay, 2010). In this era that full of unpredictable environments has make it even harder for a business to achieve the targets set in the budgets. In fact, European surveys also reported that there has been a growing dissatisfaction among organizations about their budgeting system (Neely et al.,
Birch’s division managers normally were free to buy materials or inputs from whichever supplier they wished, and even on sales within the company; so divisions were expected to meet the going market price if they wanted the business.
• Led long-term inventory productivity planning process and assisted in setting up annual goals. Developed corrective actions that improved inventory productivity areas of forecasting and material requirements planning in ERP which led to reducing forecasting errors rate from 15% to 000.6% saving more than $8 million within the 1st quarter. • Ensured integrated approach for efficient, effective performance by planning current and long-range objectives, new policies and procedures for a variety of distribution, shipping, receiving and functional operational areas, which led to cost saving from 2% to 15% within the 2nd quarter. Performs special assignments such as studies and reports on inventory discrepancies, inventory adjustments, and other factors; analyze independently and resolve difficult issues/problems. • Responsible for oversight of the program scope, resources (human, financial, contract, physical), schedule, quality, performance, requirements, risks, modeling, process improvement, customer support, training and
Comparably, an alternate prescriptive model of budgeting is the Zero Based Budgeting theory (ZBB), which offers budget techniques and suggestions. Mostly utilized in smaller organizations, ZBB is incompatible with AMB because it is hyper-analytic where efficiency and rationality are primary goals. Key decision makers determine budgetary decision packages based on the prior fiscal year’s statistics. Marginality theory proponents adopt a “means-to-ends” (Williams and Calabrese, 2013, 8) mentality, supporting control performance budgeting measures like line-item restrictions, budget reports and cost-benefit analysis. Like Goodnow, Buck and Cleveland, I am an advocate for a “complete budgetary process” that is rational and fair.
Review of historic budget variances within department can allow the administrator to determine if variances are based in inefficacy, unforeseen rises in input costs, or in declines in departmental volumes. It is important to note that there is a limit to the effectiveness of variance analysis, specifically it is important to ensure that the cost of reviewing the variance is not more than the cost of the variance itself. Vraciu (1979) would consider variance analysis the third phase of budget. This phase is not a single event, but a continual monthly process to ensure that cost controls are followed.
Whatever type of budget we create, we need to take this fact into the consideration that the budget process is a multidimensional process. There are tools which enable us to make better financial decisions such as “financial statements, assessments of risk, time value of the money, macroeconomic
The components of a comprehensive budget are the operating budget and the capital budget. The operating budget includes all our recurring incomes and expenses. This budget normally shows income from salary, interest and dividends earned and are used for short-term financial goals. Your comprehensive budget plan would include information like your monthly rent and utility expenses.
middle of paper ... ... 8. Lewis, R.J. "Activity-Based Costing for Marketing." Management Accounting, November 1991, pp. 33-38.
A change in revenues can be caused by variations in selling price, sales volume or both. Therefore, the manager should consider the effects of reduction in selling price in both relative and absolute terms to understand the future prospects of the merger. The measure of profitability as a financial measure involves considering contribution and the net profits of the organization. Contribution refers to the difference between the total sales revenue and the variable expenses incurred to produce such revenues while divisional net profit refers to contribution less any proportion of common expenses such as administration, and marketing and distribution
The newly appointed district sales manager, Larry Barr, faces the problem of allocating sales quotas among his various sales representatives. This decision will affect everyone's earnings including his own. This problem is compounded by the fact that different territories have, for a variety of reasons, different potentials. In addition, the territory that is known to be the toughest will soon require a new sales rep.
Managerial accounting has historical antecedents that stretch back to the beginning of the 1900s. Whether it was called cost accounting, or industrial accounting, or administrative accounting it is certain that concerns regarding production cost calculation, expenses’ classification and analysis, resource consumption administration, and pre and post cost calculations, have existed since the beginning of the 90s (Cardos & Cardos, 2010).
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support
The information that has for financial department will determine the budget and the planning for the organization. In establish or development for the organization, the financial information that gathers will determine the size of the company.