For example, Fernetti Conductor has a specific budget for advertising, purchasing, sales production and cash budget. Then, each budget should be compiled into a master budget for the operations of the entire company. The consequences of telling the president of gross miscalculation are as follows; 1) The sales budget predicts the number of units a company expects to sell. Therefore, by inform the President that sales projection is overstated; he can correct his statement by telling the audience the new target units that shoul be produced by the company. 2) The sales budget calculates how much the company will spend to produce the required number of units.
Suppose one of GP Manufacturing’s executives typically uses the payback as a primary capital budgeting decision tool and wants some payback information. a. What is the project’s payback period? Projected payback period = 4.28 (cell B73) b. What is the rationale behind the use of payback as a project evaluation tool?
This figure definitely could be different for different customers. 4. Suppose one of GP Manufacturing’s executives typically uses the payback as a primary capital budgeting decision tool and wants some payback information. a. What is the project’s payback period?
Operating Budgets Paper Arin Lawson February 23, 2015 SEC/370 “A budget tells us what we can't afford, but it doesn't keep us from buying it” William Feather Operating budgeting helps to establish and achieve the costs and revenue to run your business. When having a budget plan it helps you follow a plan to control your day to day income for your business. There are two poplar budgeting strategy’s that are used by many companies; Incremental budgeting and Zero-based budgeting. There are also pros and cons to these budgeting strategies. Incremental budgeting is when you take last year’s budget and add more or less to it depending on what you’re looking to do with your budget for the year.
Manage budgets and financial plans Assessment 2 A budget is an itemised forecast of an individual's or company’s and expenses expected for some period in the future. With a budget an individual is able to carefully look at how much money they are taking in during a given period, and figure out the best way to divide it among a variety of categories. When making a personal budget, an individual will typically designate the appropriate amount of money to fixed expenses such as rent, car payments, or utility bills, and then make an estimation for how much money they will spend in other categories, such as groceries, clothing, or entertainment by keeping track of where one's money goes, one may be less likely to overspend, and more likely to meet their financial goals. 1. You have the responsibility of disseminating the information to your team members.
Judgement Case 9-1 – Inventory costs; lower of cost or market; retail inventory method Requirement 1 Theoretically, Hudson should account for the warehousing costs related to its wholesale inventories as a part of inventory. All of the necessary costs associated with preparing, and in this case storing, items for sale are to be included in inventory. The key here is that the warehousing cost is related to a particular set of items and for that reason it is important to account for the warehousing cost with the inventory in order to satisfy the matching principle. The matching principle “requires that revenues and any related expenses be recognized together in the same period” (The matching principle). By following the matching principle all of the costs associated with a particular product, not just its wholesale price, is expensed when the item is sold.
1. Provide the definitions of throughput, inventory and operational expense given in The Goal. How do they compare with the traditional definitions? Do you find them useful, and why? Throughput is the rate at which the system generates money through sales while inventory is all the money that the system has invested in purchasing things which it intends to sell.
How can a flexible budget be used as a control? (Points : 15) The primary use of a flexible budget is to measure performance by comparing actual costs for a given output with the budgeted costs for the same level of output. A flexible budget is the opposite of a static budget. Flexible budget allows for variability in business and allows for unexpected changes. It distinguishes between fixed and variable costs in this way the budget can be adjusted automatically to a particular activity.
Capital Budgeting Measurement Criteria U05a1 Carla Hagood 1. Describe the Net Present Value (NPV) method for determining a capital budgeting project's desirability. What is the acceptance benchmark when using NPV? The NPV determines the monetary increase that can be expected from an investment. It will tell if the return will be above or below the needed amount to complete a project.
Since debt and equity levels are closely related there is an analysis called the “DuPont model” that systematically breaks ROE into components so that each can be evaluated. ROE = NI x EBT x EBIT x Sales x Total assets EBT EBIT Sales Total assets Common equity EBT = earnings before taxes. The first ratio measures the proportion of earnings before tax that is kept by the company. EBIT = earnings before interest and taxes. The second ratio measures the effect of interest; it indicates the proportion of earnings before interest and tax that is retained after paying interest.