Accounting for Managers Assignment
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Added on 2020-04-07
Accounting for Managers Assignment
Added on 2020-04-07
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ACCOUNTING FOR MANAGERS
Answer 1:a.Financial budget is made in order to evaluate the costs incurred of a year at thebeginning of the period. This is prepared to observe the difference between the actualand estimated data and thus may be used by the management for making decisions.Budgets may be classified into two categories: Fixed and flexible budget. Fixedbudget is formulated on the basis of output of the business. Even the output isforecasted and thus it may be different from the estimated value. Because of thisreason flexible budget is made in comparison to fixed budget. The flexible budget isprepared after analysing all the items available in the income statement on the basis ofthe actual profit (Bruner, Eades and Schill, 2017).The following tables show the use of fixed and flexible budget:Statement showing fixed budget.ParticularsBudget amount for each unitStatic budget Actual budgetVariance5000 units8000 unitsRevenue30150000200000-50000Variable cost:Material 126000078000-18000Labour 84000070000-30000Overhead52500042000-17000Total25125000190000-65000Contribution5250001000015000Fixed cost:Manufacturing50000450005000Marketing2500026000-1000Total-50000-6100011000Statement showing flexible budget.ParticularsBudget amount for eachunitFlexiblebudgetActualbudgetVariance8000 units8000 unitsRevenue30240000270000-30000Variable cost:Material 1296000125000-29000Labour 86400070000-6000Overhead54000042000-2000Total25200000237000-37000Contribution540000330007000Fixed cost:Manufacturin500003000020000
gMarketing25000200005000Total profit-35000-17000-18000The budgeted costs are prepared on the basis of the number of units produced so thatthe company may check it afterwards in order to identify the variations and it’s thereason (Clarke and Clarke, 1990).Thus it is found that flexible budget is more preferable because it helps to calculateprofit more accurately after observing all the costs incurred.b.The cash budget is made by every firm so as to ascertain the source of the cashgeneration and also to know where the money is being invested. The biggest motiveof a firm is to make products and sell them so it is important to make productionbudget and sales budget (Fairhurst, 2015).1.Sales budget: It is made by the firm so as to ascertain the estimate of the sales fora short period of time. It is prepared for a short period of time because it is havinga volatile nature. The main income of a firm is generated by sales and thus it isnecessary to find the information relating to the cash inflow which may be used toprepare the budget. 2.Production budget: In order to generate income it is necessary for a firm tomanufacture goods. It is also important that the firm should know about theadequate quantity it needs to produce. So it is necessary to prepare a productionbudget as there is outflow of the cash.c.The two most important feature of a cash cycle are the operating cycle and workingcapital. The operating cycle starts when the purchase of raw materials is done andends with the payment of the finished goods which means that the entire cycles showsthe conversion of resource to cash.Working capital ratio may be acknowledged as the ratio between the current assetsand the current liabilities of a firm. There are several types of working capital:d.I totally disagree with the statement because like private firms there are many othersuch individuals like investors, creditors, government officials, public, etc who mayuse the information for making economic decisions (Galbraith, Downey and Kates,2002). The government organisations are not just entitled to look after generatingprofit but they are also given the responsibility of satisfying wants of people andeconomic development of the country, and thus the information is consideredimportant for the shareholders too.
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