Like the direction says, just choose one of the three options and answer it plea

Question

Like the direction says, just choose one of the three options and answer it please. Thank you

Budgets: You may choose to answer option A, B, or C; please indicate your choice in the subject line.

In addition, please respond in a professional manner to another student. As part of your learning process, please read the posts of previous students. It is important that you take a position in your answer, do not agree or re-post information from another student. Each post needs to be unique, similar posts do not warrant full credit. Always include your sources. I am not asking for opinions.

Option A: Conduct a web search using the word "Budgeting". You should find a variety of websites with information in preparing a personal budget. Please provide YOUR plan to develop a personal budget.

Option B: Roo Manufacturing has hired a new controller, Dan Elfman. During his first week on the new job, Dan was asked to establish a budget for operating expenses in 2016. Since Dan was not yet familiar with the operations of Roo Mfg., he decided to use the prior year's expenses as a benchmark for the next year's budget. Dan then added 4.3% to the expenses; this percentage was based off inflation as measured by the consumer price index. Comment on the effectiveness of Dan's budgeting strategy.

Option C: Conduct a web search for the topic 'saving for your retirement'. Similar to budgeting, you should find a variety of websites with information concerning how to save for retirement. Please provide three strategies to develop YOUR plan for retirement.

Explanation / Answer

Option B

Q1: What are an operating budget and operating expense budget?

Solution: An operating budget is a statement which shows estimated operating income and expenses of a business in a current financial year. The operating budget is the base to forecast the expected net income of the company in the future and moreover, this budget will demonstrate the operational efficiency of the business in terms of increasing operating income and controlling operating cost.

Operating expenses budget is the part of operating budget which demonstrates the estimated operating cost which is likely to be incurred by the company in next month or quarter or year etc. Operating expenses are those expenses which are incurred in a normal course of business like payroll, rent, rates and taxes, insurance and marketing etc.

Q2: Comment on the effectiveness of Dan Elfman budgeting strategy.

Solution: The operating expenses budget is not quite effective. No doubt the Dan has taken past data into consideration to set a base as well as added 4.3% inflation effect but it is not sufficient to make a correct technical estimate of operating expenses in near future i.e. monthly, quarterly and yearly etc. Some of the other parameters which must be taken into consideration are given below:-

(1) Availability of raw material

(2) Availability of labor

(3) Company's strategy in near future i.e. expansion or retrenchment

(4) Expectations of employees in terms of hike in basic pay. Commission and bonus etc.

(5) Unexpected increase in rent expenses

(6) Increase in insurance premium

(7) Increase in tax rates etc.

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