This report provides an overview of different types of budgets including labour budget, operating income budget, and revenue budget in the context of accounting and financial management.
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Running head: ACCOUNTING AND FINANCIAL MANAGEMENT Accounting and financial management Name of the student Name of the university Student ID Author note
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1ACCOUNTING AND FINANCIAL MANAGEMENT Table of Contents Introduction................................................................................................................................2 Labour budget............................................................................................................................2 Budgeted allocation rate for overheads......................................................................................2 Budgeted cost for all the jobs and cost of the average job.........................................................2 Revenue budget..........................................................................................................................3 Operating income.......................................................................................................................3 Conclusion..................................................................................................................................4 References..................................................................................................................................5
2ACCOUNTING AND FINANCIAL MANAGEMENT Introduction Budgeting has been the primary requirement of a company to identify future cash flow and the future expenditure. The main objective of the report is to provide idea regarding different kinds of budgets including labour budget, operating income budget and revenue budget (Mirgorodskaya et al., 2017). Labour budget Direct labour budget refers the calculation of the number of labour hour that will be needed to produce a unit. From the computation table it can be identified that total labour hours requirement is 13,750 hours and dollar amount of labour expenses is $ 247,500 (Subramani, Sruthi & Kavitha, 2014). Budgeted allocation rate for overheads The budgeted overhead allocation rate refers to the rate of allocation that is being dividedthroughunderstandingthedifferentrequirementofdifferentsegmentsand departments. This is carried out through dividing the budgeted overheads by the amount of cost drivers. Cost driver in the given scenario has been identified as total labour hours in the given case. It has been identified that the budgeted rate of allocation for variable overhead is $ 22.97 by the company (Heinle, Ross & Saouma, 2013). Budgeted cost for all the jobs and cost of the average job The budgeted cost for all jobs refers the cost of budget set by the company after including all jobs. This has been identified that the budgeted cost for all jobs for the year is
3ACCOUNTING AND FINANCIAL MANAGEMENT amounted to $ 350,875.00 whereas the cost of accomplishing an average job has been identified as $ 63.80. Revenue budget The revenue budget refers to the assumption of net revenue based on the future revenue of the budget formulation. This has been recognized that, assuming the each house treatment costs at $100, the gross revenue generation amounted to $550,000. On the other hand assuming the no change retreatment at 5% which is amounting $27,500, the net revenue recognized at $ 522,500. The net revenue identified as the final identified revenue during the budgeting period (Van walbeek, 2014). Operating income The operating income refers to the incomes that are acquired after incurring all operating expenses. The budgeted operating income identifies the income and expenses which helps in making decision in the formation of budget. This appears in the budgeted income statement. It has been recognized that the operating income has provided two
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4ACCOUNTING AND FINANCIAL MANAGEMENT scenarios, where the operating income has generated an income of amounting $109,750 and 21% operating income margin when the jobs are 5500. However, when the jobs are identified at 5300 the company would generate an operating income of $163,875 and the operating profit margin at 32.55%. Hence, it has been identified that comparing the jobs at 5500 the jobs at 5300 has generated more operating profit. The reason behind his is that with the reduction into the direct labour cost the company has maximized the operating profit and reduced the variable cost (Konchitchki & Patatoukasm, 2013). Conclusion It hasbeenconcludedfrom above thatfor anyproductionand manufacturing companybudgetinghasbeenthewaytorecognizetheprofitandcostrequiredfor accomplishing a work or to produce a unit. Hence, budgeting plays important role in decision making and future planning.
5ACCOUNTING AND FINANCIAL MANAGEMENT References Heinle, M. S., Ross, N., & Saouma, R. E. (2013). A theory of participative budgeting.The Accounting Review,89(3), 1025-1050. Konchitchki, Y., & Patatoukas, P. N. (2013). Taking the pulse of the real economy using financialstatementanalysis:Implicationsformacroforecastingandstock valuation.The Accounting Review,89(2), 669-694. Mirgorodskaya, E. O., Andreeva, L. Y., Sugarova, I. V., & Sichev, R. A. (2017). Balanced budgetsystem:organizationalandfinancialtools.EuropeanResearch Studies,20(3B), 300. Subramani,T.,Sruthi,P.S.,&Kavitha,M.(2014).Causesofcostoverrunin construction.IOSR Journal of Engineering,4(6), 1-7. Van walbeek, C. (2014). Measuring changes in the illicit cigarette market using government revenue data: the example of South Africa.Tobacco control,23(e1), e69-e74.