Budget AnalysisPreparing a Budget Assume that you are preparing a budget for you

Question

Budget AnalysisPreparing a Budget Assume that you are preparing a budget for your department or organization. Outline the steps you would take to prepare the budget, providing specific examples for each step. The following is an example of a department budget. Use this budget as a guideline and to provoke the thought process for your own budget XYZ COMPANY Budgeted Income Statement For the Year Ended December 31, 2012 Revenue (6,000 units @ $150) $ 900,000 Expenses Salaries Fringe Benefits Supplies Utilities Insurance Depreciation Other Operating Expenses 200,000 40,000 100,000 75,000 25,000 35,000 150,000 Total Operating Expenses 625,000 Operating Income $275,000

Explanation / Answer

Assume we are preparing budget for Department ABC. First step to start the budget is to set the goal. The financial goal of the department for the future period should be realistic and attainable. Suppose we have a financial goal to increase the gross sales by 15%, Next step, how you will achieve this goal. May be you have to appoint new sales representatives or announce some sales discount. Example: new sales representative is hired at monthly salary of $5000. After that, we have to estimate all the expenses for the future period. Suppose we are planning to purchase new machinery, then the depreciation expense will increase. Salaries will increase due to new sales representative. Utilities will also increase by 5%. Then the last step is to prepare the budget Current Year Budget Revenue $600,000 $690,000 Expenses: Salaries $200,000 $260,000 Utilities $30,000 $31,500 Depreciation $20,000 $30,000 Insurance $35,000 $35,000 Other operating expenses $120,000 $130,000 Total Operating Expenses $405,000 $486,500 Operating Profit $195,000 $203,500

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.