Question

In: Accounting

1.- List and explain 3 Essentials of effective budgeting for a company. Explain the importance of...

1.- List and explain 3 Essentials of effective budgeting for a company. Explain the importance of effective budgeting (100 to 200 words)

2.- Explain how to compute a production budget. What inventory account is being budgeted using the production budget? Provide an example of a production budget. (50 - 100 words)

Solutions

Expert Solution

1. Essential of effective Budgeting for a company:-

a) Forecasting:- Business forecast is the base of budgets.When most profitable combinations of forecasts are selected, they become budgets.

b) Availability of Standard Information:- It is essential that sufficient and proper relevent data should be made available to each department or a company.

c) Good Reporting System:- An effective budgeting for a company requires the presence of good feedback system. In the budget period , only actual performance should not recorded, but it present a variation of actual performance with the budgeted performance.

Importance of effective Budgeting:-

Budgeting is the process of creating a plan to spend your money.Budgeting is important because it helps to control spending, track expenses, and save more money. Also, budgeting can help you make better financial decisions, prepare for emergencies and stay focused on your long-term financial goals.

a) Budgeting estimates revenue, plans expenditure and restricts any spending that is not part of the plan

b) Budgeting ensures that money is allocated to those things that support the strategic objectives of the business

2. Production budget= Budgeted ssles unit + Closing stock of finished goods - Opening stock of finished goods.

The finished goods inventory account is being budgeted using the production budget.

Example of the Production Budget:-

Suppose a company sales 12000 units @ 100 p.u.

The position of inventories are as under:

Opening Finished goods is 400 units

Closing Finished Goods is 200 units

Solve:- Production Budget

(i) Sales units 12000

(ii) Add:- Closing Finished Goods in units 200

(iii) Less:- Opening Finished goods in units 400

Production units = 11800 units

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

1) Explain the importance of budgeting as a managerial tool in government organizations. 2) Explain the...

1) Explain the importance of budgeting as a managerial tool in government organizations. 2) Explain the main public expenditures and the rules guiding these disbursements.

1. List and explain the primary objectives of effective internal control.

1. List and explain the primary objectives of effective internal control. 2. Compare management versus auditor resposabilities related to internal control.

Review question? What is a budget? Benefits of budgeting? 3 barriers to effective budgeting? Four primary...

Review question? What is a budget? Benefits of budgeting? 3 barriers to effective budgeting? Four primary component of master budgeting? What is an operating budgeting? What is a capital use budgeting? Starting point of a budgeting process What data sources do manager rely on to create sales budget? What is an operating expense budget? Exercise and problem 5. Shatz Fine Clothiers expects to make inventory purchases in the first quarter of 20X5 as follows: January February March $50,000 60,000 70,000...

Briefly explain the importance of the capital budgeting. Then, explain the pitfalls (if any) of capital...

Briefly explain the importance of the capital budgeting. Then, explain the pitfalls (if any) of capital budgeting and describe how each pitfall influences the decision to accept or reject an investment. Support your post with specific references to each type of capital budgeting: net present value, internal rate of return, and payback.

Continuing as a consultant explain to your the importance of budgeting and variance analysis to their...

Continuing as a consultant explain to your the importance of budgeting and variance analysis to their organization. Limit you discussion to : (a) Master budget (b) Static and Flexible budget (c) Variances - Price variance and Efficiency variance

Importance of performance based budgeting and public budgeting

1. An effective supply chain system is of critical importance, especially to a manufacturing company operating...

1. An effective supply chain system is of critical importance, especially to a manufacturing company operating in a highly competitive and trend-setting industry. Discuss Nike’s inventory management. 2. What is the importance of integrating new systems with legacy systems and processes in the organization for their effective functioning? 3. What benefits did the company expect to achieve by implementing a new supply chain system? and What are the risks involved in taking up projects of considerable magnitude without establishing effective...