Question

Create a budget that includes critical cost implications

Answer 1

A budget is a detailed plan that outlines where you’ll spend your money for a specified period. A budget will help us to understand, 1. forecast incoming earning (all expected earning/income), 2. Plant where to spend the revenue (All expected expenses) and 3. To find out the difference between plan and reality.

While making budget, all expected incomes, all possible expenses that may come in the business activity including taxes should be forecasted after thorough study and consultation within business departments. Then combine it to the data sheet. Actual data column in the budget will help to understand the changes happening and will help to rectify and take the correct the business decisions accordingly.

A sample budget with cost implication is outlined below:

THis budget is made on a monthly basis for a year and actual data column for comparison.

XYZ Company
Budget for the perioed from 1st April,2019 to 31st March,2020
Head	April,19	May	June	July	Aug	Sept	Oct	Nov	Dec	Jan,20	Feb,20	March,20	Total Budget (A)	Total-Actual (B)	Diff ( A-B)
Operating Income
Sales - Product A	7500	7500	7500	8000	9000	8950	9300	9650	10000	10350	10700	11050	109500	100000	9500
Sales - Product B	20000	21000	20000	25000	25000	25000	25000	28000	26500	28000	28000	28000	299500	25800	273700
Sales - product C	7500	7500	7500	8000	9000	8950	9300	9650	10000	10350	10700	11050	109500	110000	-500
Total Operating Income (A)	35000	36000	35000	41000	43000	42900	43600	47300	46500	48700	49400	50100	518500	235800	282700
Non Operating Income
Rent Received	10000	10000	10000	10000	10000	10000	10000	10000	10000	10000	10000	10000	120000	24000	96000
Interest Received	1750	1750	1750	1750	1750	1750	1750	1750	1750	1750	1750	1750	21000	22150	-1150
Other Income	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	24000	20000	4000
Total Non Operating Income (B)	13750	13750	13750	13750	13750	13750	13750	13750	13750	13750	13750	13750	165000	66150	98850
Net Income (A+B)	48750	49750	48750	54750	56750	56650	57350	61050	60250	62450	63150	63850	683500	301950	381550
Operating Expenses
Salary & Wages	5000	5000	5000	5000	5000	5000	5000	7000	7000	7000	7000	7000	70000	75000	-5000
Accounting and Legal	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	24000	20000	4000
Advertising	5000	0	0	5000	0	0	5000	0	0	5000	0	5000	25000	25000	0
Depreciation	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	12000	11000	1000
Insurance	750	750	750	750	750	750	750	750	750	750	750	750	9000	7500	1500
Interest to bank and others	1250	1250	1250	1250	1250	1250	1250	1250	1250	1250	1250	1250	15000	12500	2500
Maintenance & Repair	1450	1450	1450	1450	1450	1450	1650	1650	1650	1650	1650	1650	18600	21000	-2400
Rent	4000	4000	4000	4000	4000	4000	4000	4000	4000	4000	4000	4000	48000	48000	0
Telephone & Internet	250	250	250	250	250	250	250	250	250	250	250	250	3000	2500	500
Electricity and water	650	650	650	650	650	650	650	650	650	650	650	650	7800	8650	-850
Raw Materials (60% of sales)	21000	21600	21000	24600	25800	25740	26160	28380	27900	29220	29640	30060	311100	145000	166100
Others	2500	2500	2500	2500	2500	2500	2500	2500	2500	2500	2500	2500	30000	20000	10000
Total Operating Expenses (C )	44850	40450	39850	48450	44650	44590	50210	49430	48950	55270	50690	56110	573500	396150	177350
Non Recurring Expenses
Furniture, Equipments, Tools	7500					10000					10000		27500	25000	2500
Others	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	12000	8000	4000
Total Non Recuring Expenses (D )	8500	1000	1000	1000	1000	11000	1000	1000	1000	1000	11000	1000	39500	33000	6500
Total Expenses (C+D)	53350	41450	40850	49450	45650	55590	51210	50430	49950	56270	61690	57110	79000	66000	13000
Taxes	1200	1200	1200	1200	1200	1200	1200	1200	1200	1200	1200	1200	14400	15000	-600
Net Income After Tax	-5800	7100	6700	4100	9900	-140	4940	9420	9100	4980	260	5540	14400	15000	-600