Budgeting: Costs and Budget Budgeted Income Essay

Submitted By Marshal-Dhanova
Words: 794
Pages: 4

Static budgets are planned ahead of time based upon the owner's best educated guess about future actual activity. Static budgets are usually broken out into smaller reporting periods such as months and quarters. A big disadvantage for new businesses is the lack of actual data upon which to build a budget. If actual data differ significantly from the static budget, there's no way to change the budget or to determine if the costs to produce the revenue were properly control. On the other hand Flexible budgets is a more sophisticated method because the new business owner can make changes to the budget in the middle of the reporting period Flexible budgets require knowing in advance which costs are fixed or variable, and how expenses are affected by changes in revenue. Q2
The company budget is the management team's road map to profitability. Several elements within any budget help departmental managers control company finance and have an impact on the company bottom line. Budget helps financial management make the important decisions that can impact how funds are used and how decisions are made. Budget also show forecast of the cash flow. It provide the information regarding estimate money needed to buy the raw material or production as well as it also show the revenue of the business before the end of financial year.

Fixed cost: It is the cost that remains the same for the period of time regardless of the level of sale activity. For example if the rent is paid for the warehouse no matter how much quantity is produced, rent will remain the same

Variable cost: This cost depends upon the level of activity for their incurrence. Variable cost increases as activity increases and vice versa. For example if the production increases the cost of electricity will also increase Q4.
Goal setting and budgeting is more effective when employees participate in the process. this statement is true. The development of the master budget involves all segments of business, and representative from each organization. Employees provide valuable knowledge about all aspect of the business, including sale, production, materials purchase, and marketing. They provide the best possible information relevant to their areas and help in gathering information. Employees also collect data for the research and give new ideas for the betterment of the business

Company should consider following factors before instituting a management incentive bonus remuneration plan:
Level of motivation required
Profit achieved
Possibility in achievement of goal
Working environment and circumstances



Working hours in next year=


Charge rate increased to by 10% 200*91+0.10



The budgets most likely to be prepared by a simple manufacturing operation are:
Production budget – manufacturing business
Purchases budget
Direct labour budget
Factory overhead budget
Cost of production (manufacturing) budget
Expenses budget
Comprehensive manufacturing budget example
Cost of goods sold budget
Budgeted income statement
Case Study
I would make more frequent contacts and providing better service to my client to increase my sales because in this way I can deal with my client first hand and it will help in increment of my efficiency of my work and my promote my product. In this way my sales will increase and my goodwill will increase in both my client and my boss.


Dept. 1
Dept. 2
Production (unit)
Variable overhead ($ per unit)
Fixed cost $
Total variable cost ($)
Total overhead budget ($)


Hours per unit
Hourly rate
Direct labour budget


July August
Total sales revenue
Cost of good sale