Question

Is this case question asking to compare new and old operating budgets?

Answer 1

New Opearating Budget :-

Opearating budjet shows revenues and expenses for a particular future period usually next year or next quarter. It is presented in income statement format. Usually management goes through the process and prepare the opearating budget for the period.Opearating budget consists of High Level summary schedule,schedule and assumptions. Assumptions are the exectation on which budget is based.

1. Opearating budget shows the following components it starts with revenue and then show expense of each type.

2.Such as variable costs which are variable with sales such as cost of material, Labour and Direct expenses associated with production.

3. Fixed cost such as monthly rent on office space which is no ware connected with the volume of prodution which are remain fixed irrespective of prodution.

4.Budget also include Opearting expenses , non cash expenses, such as intrest on business loans and Depriciation.

5. Assumptions on basis of which budget is prepared based in the trends in the industry.

6. used for estimating future profits and expenses.

Old Opearating Budget:-

Opearating budjet shows revenues and expenses for a particular current period usually current year or current quarter. It is presented in income statement format. Usually management goes through the process and prepare the opearating budjet for the period in the previous period.Opearating budget consists of High Level summary schedule,schedule and assumptions. Assumptions are the exectation on which budget is based.

1. Opearating budget shows the following components it starts with revenue and then show expense of each type.

2.Such as variable costs which are variable with sales such as cost of material, Labour and Direct expenses associated with production during the current prodution schedule.

3. Fixed cost such as monthly rent on office space which is no ware connected with the volume of prodution which are remain fixed irrespective of prodution which enable comparision with actual amount of expenses and take corrective action if anything goes wrong with it.

4.Opearting Budget also include Opearting expenses , non cash expenses, such as intrest on business loans and Depriciation. which enable us to determine cashflows needed at particular point of time and taking steps to ensure availability of same.

5. Assumptions on basis of which budget is prepared based in the trends in the industry. which enable us to comparision of actual figures with estimated and taking corrective action.

6. used for Comparing budgeted amounts with actual profits and expenses.