...Investment analysis Contents 1. Be able to apply cost concepts to the decision-making process 2 2. Be able to apply forecasting techniques to obtain information for decision making 4 3. Be able to participate in the budgetary process of an organization 5 4. Be able to recommend cost reduction and management processes for an organization 7 5. Be able to use financial appraisal techniques to make strategic investment decisions for an organization 8 6. Be able to interpret financial statements for planning and decision making 10 References 12 1. Be able to apply cost concepts to the decision-making process 1.1 explain the importance of costs in the pricing strategy of an organisation The pricing strategy becomes the major element in marketing mix of Dell Computers as it is related to product positioning. When there is a planning for new product launch pricing strategy is important and it requires general sequence of stages involved during pricing the new product. The different steps are as follows: (Daft, 2011) * Developing marketing strategy – helps the company to develop marketing strategy based on market analysis, market segmentation and positioning * Marketing Mix decisions – Defining a product, distribution and its promotional tactics * Estimation of demand curve – Estimating the demand and understand how it varies from quantity wit price * Cost Calculation – Calculation of fixed cost and variable cost associated with product development * Knowledge...
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...budget is a rigid tool and therefore be discarded in practice”. Should the traditional budgetary model be abandoned as suggested above? Introduction What is budget and budgeting? Budget is a financial plan, which is tailored individually for each entity covering specific future period of time and which enables to determine manager’s targets and to predict the consequence of that specific financial period (Langfield-Smith, et al., 2006). Budgeting has been recognized as one of the most significant concepts used for planning and controlling organizations performance since the early 20th century. As a process, budgeting comprises of a set of activities and procedures that undertake the development of a budget. Budgets are used by corporations to serve various operational and functional purposes that include facilitating in planning process, predicting future development, simplifying communication, allocating resources, motivating employees and controlling operations. The process is effectively completed through the evaluation of performance indicators and incentives (Weber & Linder, 2005). Consequently, organizations recognized budgets as a key element in management control systems (Libby & Lindsay, 2007). Background and definition From the 18th to 20th century, traditional budgeting has set a range of common goals and institutions. It can be defined as “an annual, incremental, conducted on a cash basis in the form of line items which serves a purpose of...
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...Executive Summary The following case study report is for Carson Manor, a Winston based non-profit organization that provides nursing care service for senior citizens. The report will identify key issues that may impact Carson Manor’s day-to-day operation on the basis of budgeting, cost control and cost measurement. The key issues will be analyzed against Carson Manor’s objective to outsource a solution provider to conduct a review of their current situation. This report will evaluate three bidders based on total cost of study, potential savings, possible implementation, experience and references. A recommendation is stated at the end of the report, which comprises the possible solutions to the key issues and some actions need to be taken after selecting one of the three bidders. This report would recommend that Clarke-Hamilton Ltd. would be an optimal consultant for Carson Manor given their highest expected savings, suitable implementation of a patient classification system, excessive experience and positive feedbacks from users. Background Description Carson Manor was a not-for-profit institution that provides nursing care services for aged people. It was founded in city of Winston 30 years ago and currently became a medium sized institution with a bed capacity of 470 and a total of 235 employees. Carson Manor administrator is responsible for overseeing day-to-day operations and serving as an information conduit to Mr. Henry Davis, the director of social services. Mr...
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...budgets”. Basically budgeting is the process of planning to spend money. With budgeting it would be easier to prioritize our spending and focusing our money. I agree with the statement because based on the research conducted it says that budgeting can ensure that we will always have enough money for the things that we need. In one of the website that I found stated that budgeting is only balancing the income and expenses. There would be problems if the expenses and the income is not balance, such as your expenses will be bigger than your income and it would bring a big impact for the savings. Since budgeting is very important, we wont be easily got broke. However the budgeting plan will work out if only you follow the spending plan. It would be very useless if u don’t follow the spending plan that you make to manage your money. All the people that can earn their money by themselves will use budgeting so that they can prevent from excessive spending. Budgeting will also gives you information which things you should prioritize, like food and house living costs first. Don’t you think it is good if you can keep your finance on track ? Don’t you think it is really useful if you have emergency saving money? So budgeting is a planning and controlling tool, in businesses the masters of budget has to know how to use revenue and expenses and also they have to look back to the past to analysis the income and the outcome. With that the masters can plan the budgeting for the present time...
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...There are several approaches that may be used to develop the budget. Managers typically prefer an approach known as participative budgeting. Discuss this form of budgeting and identify its advantages and disadvantages. Ans. Also called bottom-up budgeting or self-imposed budgets, where the initial flow of budget data moves from lower levels of responsibility to higher levels of responsibility. Each person with responsibility for cost control will prepare his or her own budget estimates and submit them to the next higher level of management. These estimates are reviewed and consolidated as they move upward in the organization. Budget estimates prepared by lower-level managers should be scrutinized by higher levels of management. Without such a review, participative budgets may be too loose and allow much "budgetary slack." The result will be inefficiency and waste.. Advantages: 1. Individuals at all level of the organization are recognized as members of the team whose review and judgments are valued by top management. 2. Increase feeling of unit-level ownership in the budget 3. Leads to greater support for the budgetand a greater understanding of goals 4. Greater accuracy of budget estimates. Budget estimates prepared by front line managers can be more accurate and reliable than estimates prepared by top managers who are removed from day to day activities and who have less intimate knowledge of markets and operating conditions...
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...businesses where one of the business operates in a static market place and another one business operates in a very dynamic environment. Traditional approach of budgeting and budgetary control is still widely used by most companies throughout the world despite of limitations but In current very fast innovative modern environment, traditional budgeting approach is not only budgeting model there are some effective alternatives budgeting models that business are using to fulfill the modern requirements of company’s strategy such as: activity based budgeting, zero based budgeting and beyond budgeting approaches. I describe each of budgeting method that how can such models help the modern company more efficiently with their budgeting and budgetary control. The second part of this paper describes how a working capital cycle plays an important role in a manufacturing business and how each of cycle can be improved individually such as inventory, trade debtors, trade creditors and cash to achieve optimal profit for the company. Budget and Budgeting “A budget is a plan which is expressed in financial and or more general quantitative terms that extends forward for a period into the future.’’ (Gowthorpe, 2003. p 457.) A budget was first introduced in the 1920s as a financial tool to manage costs and cash flows of any large industrial organisation. It was stated from the (Johnson, 1996) that the companies began to use budgets during the 1960s to dictate what...
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...St. Johns MBA 621 Financial and Managerial Accounting Assignment 2: “Budgeting” Students Name: Md. Bazlul Karim Students ID: R1404D113105 Contents Introduction: 3 Question-1 3 Budgeting: 3 Strategic Planning: 3 Differences among Long Range Planning, Strategic Planning and Budgeting 4 Is Budgeted performance better than past performance as a basis for judging actual results? 4 The benefits of budgeting: 4 Is budgeting an unnecessary burden for day to day problems? 4 Sales forecasting: 5 Spreadsheets as an aid in the application of sensitivity analysis: 5 Question-2 6 Comments about budget: 6 1. Sales Budget: 7 2. Cash Budget: 7 3. Debtors Budget: 8 4. Creditors Budget: 8 5. Production Cost Budget: 9 6. Raw Materials and finished goods Budget: 9 7. Profit and Loss Account Budget 10 8. Balance Sheet Budget 10 Conclusion: 11 References: 13 Introduction: Budgeting is a process that is necessary not only for planning but also for controlling. It plays a major role in the management of any organization. Basically, budgeting is the key point of planning. And without budget, controlling of an organization is not possible. This assignment is emphasized different important tools regarding budgeting. And lastly a budget is given. Question-1 Budgeting: Budgeting is a process that is necessary not only for planning but also for controlling. Basically budgeting is an expression with quantitative numbers that can be said as a proposed...
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...D3-Evaluate the problems Adam & Josh may have from unmonitored costs and budgets. In this assignment I will talk about why costs and budgets need to be controlled and the advantages and disadvantages of controlling costs and budgets. I will also explain what can happen to a business if costs and budgets are unmonitored. Importance of costs and budgets controlling: It is very important for an organisation to control its costs so that it can manage its financial resources effectively. The reason organisation needs to control their costs properly would be that it would end up saving money on expenses and increase its revenue. This will help the company to increase its revenues and this would allow the company to invest more money if required. For example, the business should control its costs so that it saves money and by having the right amount of stock the business can then have the full benefits of selling those stocks and receiving cash which could be used for other areas of the business. In a business organisation, a budget represents an estimate of future costs and budgets. Budgets may be divided into two basic classes: Capital Budgets and Operating Budgets. Capital budgets are directed towards proposed expenditures for new projects and often require special financing the operating budgets are directed towards achieving short term operational goals of the organisation, for instance, production or profit goals in a business firm. its crucial for a business to control...
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...an organisational plan stated in financial terms. The purpose of budgeting is to provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. Also it enables the actual financial operation of the business to be measured against the forecast. COST The management of costs is a very important aspect of managing financial resources. If costs are not managed effectively, it can lead to profit being damaged and Tesco potentially unable to pay its expenses. Keeping within a budget, increasing income in order to cope with change and making sure that working capital is available and money set aside for emergencies is all part of the balancing exercise. Cost managed to budget There are two types of costs: Fixed costs are cost, which does not change regardless of the number of goods that are produced by, or services are offered at Tesco. These costs include rent, insurance, salaries. Whether Tesco makes 100 or 10,000 products, these costs must be paid. Variable costs are costs that change according to output of Tesco. These costs change directly according to how many products are made; for example, if Tesco is producing a product it will have varying requirements for amounts of material and machinery it will need, this will vary depending on how many products Tesco will produce. Cost Control methods Tesco has to encounter difficulties, which are...
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...be delayed and might not reach the budgeted target. The manufacturing costs will certainly increase as depreciation cost of the new machine will be included in the manufacturing costs. Therefore, it raises the total costs of the production line. Moreover, the application of the new machine will also lead to a different cost allocation approach to Fabrication and Assembly department. In fact, based on Sino “Product and department estimates”, we assume that Fabrication will use machine hours as cost driver whereas Assembly department use direct labor hours. Hence, this will increase the accuracy of cost allocated to each product type, which will be useful for later pricing process. About sustainability issues, for long term, Sino can gain more competitive advantages by its accuracy on cost controlling and pricing; the productivity will also be increased due to the use of machine and technology. 2) Compare, contrast single overhead rate and multiple overhead rate Generally, using either single or multiple overhead rates both results in the same amount of yearly manufacturing overhead. Moreover, both single and multiple overhead rates are based on normal costing method, which uses budgeted manufacturing overhead to calculate the predetermined rates. Finally, these two traditional approaches can also lead to cost distortion if non-volume costs are account for a large proportion of the total manufacturing cost. However, the main difference between these two allocation methods...
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...Abstract Financial planning and budgeting has become a powerful tool of any company’s financial management. Planning and budgeting is an issue that should be solved in a complex. Therefore, this final English research paper highlights three main approaches absorbed: theoretical, practical, and analytical. Theoretical knowledge cannot be applied to practice without clear understanding of business, a feeling about the actual circumstances. Practical knowledge cannot be applied to professional tasks without analytical approach. This skills and approaches are presented and proven in this research. Having faced planning and budgeting process of middle-sized company, it has been noted that some issues of this important activity absence clarity, confidence, and flexibility. In order to optimize planning and budgeting process a thorough examination has been prepared in this research paper. The Company where experience has taken place is Levi’s XX that stands for Levi’s Vintage Clothing. Therefore, the industry examined is apparel, and as a market is taken the whole Globe. Table of Contents Abstract 2 Introduction 4 • The purpose of the study 4 • The main conceptual problem 5 Methodology 6 1. Essence and role of financial planning and budgeting 7 1.1 Planning and budgeting role in company’s structure 7 1.2 Purpose of budgeting 7 2. Company profile, industry and market description 10 2.1 Levi’s XX story 10 2.2 Company’s structure 10 3. Principles and objectives...
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...A budget can be defined as a formulised statement of the goals and the objectives of an organization in financial terms. It states the future projection of sales, revenues and profits that give managers a clear vision of targets to achieve in a year. (Montana and Charnov, 2000) Today Budgets are used by almost all companies as its use allows the managers to establish the objectives of the business in quantitative terms which is usually for a year. Budgetary control is a system of management control in which actual income and spending are compared with planned income and spending, so that you can see if plans are being followed and if those plans need to be changed in order to make a profit. (Financial Times) The major aim of any organization is to create wealth for their shareholders for that they need to make plans and the major plan for it is budgets. Budgets are also heavily linked to the strategy as budgets plan the future of an organization they must be implemented in the strategy of the organization. “A strategy can be viewed as describing how an organization matches its own capabilities and opportunity in the market place to accomplish its overall objectives.”(Bhimani 2012) The budget of an organization shows its financial capabilities and it must be prepared according to the long term strategy of the organization. This essay will hence examine the advantages and limitations of budgetary control and its effect on performance management. Organisations in the modern day...
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...Budgeting Albert Salcido BUS 630 Managerial Accounting Professor John Kuhn August 13, 2012 Budgeting How do companies stay afloat while they are spending money and it appears that no money is coming in? Every year companies have dedicated departments that are looking at what is called a Master Budget for every part of the company. Many managers are retrieving records or historical data to help set the budget in their areas. “A budget is a quantitative plan for acquiring and using resources over a specified time period” (Noreen, 2010, p. 288). Many individuals across America have and live by an annual budget that they set for themselves each year. Budgets can be very difficult and tiresome to build each year but they have to be done. Once a budget is established by the manager or the company, it is used to compare spending that is occurring through-out the year (Noreen, 2010) Even though budgets are not always accurate, managers use budgets to help operate a company efficiently because they coordinate work operations, and they help communicate managements plans. Planning the Budget First, managers use budgets to help operate a company efficiently because they coordinate work operations. According to Noreen (2010) “Budgets are used for two distinct purposes-planning and control (Noreen, 2010). A company set goals with budget in mind and then the budgets are used to achieve these goals. The first stage of the budget is to plan for what is going to happen for the...
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...Budget For Planning and Control An integral part of the modern business enterprise, budgeting not only aids in the planning process, but it also provides an array of accounting measures that can be used to hold managers accountable for the firm's performance. By Richard Sansing A budget is a projected set of consequences of carrying out planned activity. Firms use budgets to facilitate the communication of specialized information from throughout the firm so that an internally consistent production plan can be devised. The budgeted numbers are then used to record certain transactions. Differences between budgeted and actual performance then appear in the accounting records, and can be analyzed so as to evaluate the performance of the firm. The budgeting process interacts with the operations research process in two ways. First, the budget process facilitates the transfer of both accounting and non-accounting information to those involved in operations. This information provides a basis for the formulation of the firm's production plan. Second, the budget reflects the production plan, and becomes a benchmark for subsequent performance evaluation. An analysis of deviations from the budget provides additional information that can be used when formulating the next period's production plan. The Planning Stage Feldman Toy Company makes two types of toys, regular and deluxe. Each toy requires the use of machine time in the production process. To illustrate the way the budget...
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...current issues. The financial manager has a mandate to provide real-time and accurate information. They get involved mostly in management activities of the store. Financial Managers should be able to discuss ideas and use various methods of analysis to make final recommendations on how to improve profitability and implement them. The key roles of financial managers in retail selling are in financial planning that involves monitoring and controlling performance, line management and auditing. They discuss with other members of the team on issues pertaining the organization and implementation of ideas. The key roles of financial manager are monitoring and controlling performance and auditing. In monitoring and controlling performance, the financial manager monitors all other costs, which are either direct or indirect costs. The manager makes sure the business is profitable by monitoring keenly both the direct and indirect costs. Some costs are easier to control than others are. He scrutinizes all the areas of the store to make sure unnecessary costs do not arise. As a line manager, they have the responsibilities of decision-making. Information reaches the manager from various departments by the administration office. The Financial Manager is responsible for decisions making and consultations...
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