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The article discusses budgeting and includes a sales budget, purchase budget, income statement, and cash budget. It also covers the evaluation of the production manager's performance and a flexible budget performance report. Additionally, it provides a budgeted income statement and cash budget for Desklib, an online library for study material with solved assignments.

Running head: BUDGETING
BUDGETING
Name of the Student
Name of the University
Author Note

1BUDGETING
Table of Contents
Acttivity 1........................................................................................................................................3
Task 1...........................................................................................................................................3
Task 2...........................................................................................................................................4
Task 3...........................................................................................................................................5
Task 4...........................................................................................................................................9
Task 5.........................................................................................................................................10
Task 6.........................................................................................................................................12
Activity 2.......................................................................................................................................14
Cash Budget...............................................................................................................................14
Acitivity 3......................................................................................................................................17
Budgeted Income statement.......................................................................................................17
Cash budget...............................................................................................................................20
Budgeted Balance Sheet as on June, 2015.................................................................................22
Activity 4.......................................................................................................................................26
Answer to Question 1................................................................................................................26
Answer to Question 2................................................................................................................27
Answer to Question 3................................................................................................................29
Answer to Question 4................................................................................................................31
References......................................................................................................................................33

2BUDGETING

3BUDGETING
Activity 1
Task 1
Sales Budget
Selling
Units
Selling
Price Total
Sydney 740
$
260.00
$
192,400.00
Melbourn
e 680
$
220.00
$
149,600.00
Brisbane 620
$
200.00
$
124,000.00
Gold
Coast 710
$
190.00
$
134,900.00
Adelaide 550
$
180.00
$
99,000.00
Perth 420
$
170.00
$
71,400.00

4BUDGETING
Total
sales 3720
$
771,300.00
Sales Budget
Selling Units Selling Price Total
Sydney 740 260 =B3*C3
Melbourne 680 220 =B4*C4
Brisbane 620 200 =B5*C5
Gold Coast 710 190 =B6*C6
Adelaide 550 180 =B7*C7
Perth 420 170 =B8*C8
Total sales =SUM(B3:B8) =SUM(D3:D8)
Task 2
Purchase Budget
Purchases Units Purchases Price of each unit Total Purchase
October 6643 28 186000
November 10893 28 305000

5BUDGETING
December 2232 28 62500
Total 19768 84 553500
Purchase Budget
Purchases Units Purchases Price of each unit Total Purchase
October =D13/C13 28 =B7
November =D14/C14 28 =C7
December =D15/C15 28 =D7
Total =SUM(B13:B15) =SUM(C13:C15) =SUM(D13:D15)
Task 3
Particulars Amount
Proposed Sales
$
95,000.00
Fixed Expenses
Manager`s salary $

6BUDGETING
6,000.00
Depreciation of vehicles
$
1,000.00
Depreciation of fixtures and fittings
$
1,500.00
Stationery
$
1,100.00
Rent
$
1,000.00
Interest on Loan
$
2,500.00
General Expenses
$
800.00
Variable Expenses
Advertising
$
2,500.00
Commission
$
1,900.00

7BUDGETING
Cartage
$
950.00
Discount allowed
$
2,375.00
Total
$
21,625.00
Particulars Amount
Proposed Sales 95000
Fixed Expenses
Manager`s salary 6000
Depreciation of vehicles 1000
Depreciation of fixtures and fittings 1500
Stationery 1100
Rent 1000
Interest on Loan 2500
General Expenses 800

8BUDGETING
Variable Expenses
Advertising =600+(B2*0.02)
Commission =0.02*B2
Cartage =0.01*B2
Discount allowed =0.025*B2
Total =SUM(B5:B17)

9BUDGETING
Task 4
Budgeted Income statement
Particulars
Amoun
t
Revenue
Sales 45000
Cost of Goods sold 6000
Gross Profit 39000
Operating Expenses
Marketing 4900
Administration expenses 2500
Finance 1200
Total 8600
Net income 30400

10BUDGETING
Budgeted Income statement
Particulars Amount
Revenue
Sales 45000
Cost of Goods sold =8000+7000-9000
Gross Profit =B4-B5
Operating Expenses
Marketing 4900
Administration expenses 2500
Finance 1200
Total =SUM(B10:B12)
Net income =B7-B13
Task 5
July August
Septembe

11BUDGETING
r
Opening
Inventory
Units 48
Total 720 900 810
Production 4380 5490 7200
Units 292 366 480
Per unit price
Sales 6000 7200 9000
units 400 480 600
per unit 15 15 15
July
August
September
Opening Inventory
Units 48
Total =0.1*C17 =0.1*D17 =0.1*E17
Production =B17- =C17- =D17-

12BUDGETING
(B13+C13) (C13+D13) (D13+E13)
Units =B14/15 =C14/15 =D14/15
Per unit price
Sales 6000 7200 9000
units =B17/B19 =C17/C19 =D17/D19
per unit 15 15 15
Task 6
Flexible Budget
BUDGET MODEL
PARAMETERS:
Selling price per unit, P $15
Variable costs per unit, V N/A
Fixed costs, F $63,000
FLEXIBLE BUDGET
Flexible

13BUDGETING
When prepared: (After 19X2)
Units sold, x 180000
Sales Revenue, Px $2,700,000
Variable Costs,Vx $54,000
Contribution Margin $2,646,000
Fixed Costs,F $63,000
Operating Income $2,583,000
FLEXIBLE BUDGET PERFORMANCE REPORT
Actual Flexible Variance
When prepared:
Units sold, x 195000 180000 15000
Sales Revenue $2,925,000 $2,700,000
$225,00
0
Variable Costs $57,000 $54,000 $3,000
Contribution Margin $2,868,000 $2,646,000
$222,00
0
Fixed Costs $62,500 $63,000 ($500)

14BUDGETING
Operating Income $2,805,500 $2,583,000
$222,50
0
Flexible Budget
BUDGET MODEL PARAMETERS:
Selling price per unit, P 15
Variable costs per unit, V N/A
Fixed costs, F 63000
FLEXIBLE BUDGET
Flexible
When prepared: (After 19X2)
Units sold, x 180000
Sales Revenue, Px =C11*C5
Variable Costs,Vx 54000
Contribution Margin =C12-C13
Fixed Costs,F 63000
Operating Income =C14-C15
FLEXIBLE BUDGET PERFORMANCE REPORT
Actual Flexible Variance
When prepared:
Units sold, x 195000 180000 =C21-D21
Sales Revenue =C21*C5 =C12 =C22-D22
Variable Costs 57000 =C13 =C23-D23
Contribution Margin =C22-C23 =C14 =C24-D24
Fixed Costs 62500 =C15 =C25-D25
Operating Income =C24-C25 =C16 =C26-D26
Performance report for the quarter
The company has been performing well as per the given performance budget. This can be
stated because the operating income of the company for the given quarter has come out well.
The fixed cost of the firm has been restricted, and this has resulted in a high performance
by the given firm.
Evaluation of the production manager’s performance for the quarter
The manager, as per the given report has been successful in performing well. He has
made efforts to control the fixed cost and for this reason the operating profit has come out well.

15BUDGETING
Activity 2
Cash Budget
Jan Feb March
Beginning Cash Balance 7400 13749 18394
Add: Budgeted Receipt(previous
months) 85344 65680 65220
Total cash available for use 92744 79429 83614
Less: Cash disbursements
Purchases 52080 38280 37620
Advertisement 500 500 500
Salaries 8000 8640 8640
Rent 3740 3740 3740
Interest on Mortgage 475 475 475
General expenses 2400 2400 2400
Drawings 7000 7000 7000
GST 4800
Total Expenses 78995 61035 60375

16BUDGETING
Budgeted Ending cash balance 13749 18394 23239
Jan Feb March
Beginning Cash
Balance
7400 =B19 =C19
Add: Budgeted
Receipt(previous
months)
=((G5*0.4)*0.2)+
((G6*0.4)*0.3)+
((H7*0.4)*0.47)+
(H7*0.6)
=((G6*0.4)*0.2)+
((H7*0.4)*0.3)+
((H8*0.6))+
((H8*0.4)*0.47)
=((H7*0.4)*0.2)+
((H8*0.4*0.3))+
(H9*0.6)+
((H9*0.4)*0.47)
Total cash available
for use
=SUM(B4,B3) =SUM(C4,C3) =SUM(D4,D3)
Less: Cash
disbursements
Purchases =(I6*0.2)+(I7*0.78) =(I7*0.2)+(I8*0.78) =(I8*0.2)+(I9*0.78)
Advertisement 500 =B8 =C8
Salaries 8000 =1.08*B9 =C9
Rent 3740 =B10 =C10
Interest on Mortgage 475 =B11 =C11
General expenses 2400 =B12 =C12
Drawings 7000 7000 =C13
GST 4800

17BUDGETING
Total Expenses =SUM(B7:B14) =SUM(C7:C14) =SUM(D7:D14)
Budgeted Ending cash
balance
=B5-B15 =C5-C15 =D5-D15
Activity 3
Budgeted Income statement
Budgeted Income statement
Particulars Amount
Revenue
Sales
$
420,000.00
Cost of Goods sold
$
296,000.00
Gross Profit
$
124,000.00

18BUDGETING
Operating Expenses
Depreciation
$
1,600.00
Loan repayment
$
6,000.00
Cash expenses
$
1,200.00
Advertising
$
17,200.00
Office expenses
$
7,600.00
Rates and taxes
$
3,800.00
Bank charges
$
300.00
Commission on sales
$
4,900.00

19BUDGETING
Motor vehicle
expenses
$
9,600.00
Salaries and wages
$
34,600.00
Pete private
$
31,200.00
Total
$
118,000.00
Net income
$
6,000.00
Budgeted Income statement
Particulars Amount
Revenue
Sales =30000*14
Cost of Goods sold =2400+295600-2000
Gross Profit =B4-B5

20BUDGETING
Operating Expenses
Depreciation =0.2*8000
Loan repayment =500*12
Cash expenses 1200
Advertising 17200
Office expenses 7600
Rates and taxes 3800
Bank charges 300
Commission on sales 4900
Motor vehicle expenses 9600
Salaries and wages 34600
Pete private =600*52
Total =SUM(B10:B20)
Net income =B7-B21

21BUDGETING
Cash budget
2015
Beginning Cash Balance -4400
Add: Budgeted Receipt 420000
Total cash available for use 415600
Less: Cash disbursements
Purchases 296000
Depreciation 1600
Loan repayment 6000
Cash expenses 1200
Advertising 17200
Office expenses 7600
Rates and taxes 3800
Bank charges 300
Commission on sales 4900
Motor vehicle expenses 9600
Salaries and wages 34600

22BUDGETING
Pete private 31200
Total cash required 414000
Budgeted Ending cash balance 1600
2015
Beginning Cash Balance -4400
Add: Budgeted Receipt 420000
Total cash available for use =SUM(B3,B2)
Less: Cash disbursements
Purchases 296000
Depreciation =0.2*8000
Loan repayment =500*12
Cash expenses 1200
Advertising 17200
Office expenses 7600
Rates and taxes 3800
Bank charges 300
Commission on sales 4900
Motor vehicle expenses 9600
Salaries and wages 34600
Pete private =600*52
Total cash required =SUM(B17,B16,B15,B14,B13,B12,B11,
B10,B9,B8,B7,B6)

23BUDGETING
Budgeted Ending cash balance =B4-B18
Budgeted Balance Sheet as of June, 2015
Current assets
Cash/bank 1600
Accounts receivable 6400
Raw materials
Inventory 2000
Finished goods
inventory
Total current assets 10000
Fixed assets
Land and buildings 60000
Machinery 8000
Net fixed assets 68000
Total assets 78000
Current liabilities
Accounts Payable 8000
Total current liabilities
Mortgage 40000
Less: -6000

24BUDGETING
Current assets
Cash/bank 1600
Accounts receivable 6400
Raw materials Inventory 2000
Finished goods inventory
Total current assets =SUM(B4:B7)
Fixed assets
Land and buildings 60000
Machinery 8000
Net fixed assets =SUM(B11,B12,B13)
Total assets =SUM(B15,B8)
Current liabilities
Accounts Payable 8000

25BUDGETING
Total current liabilities
Mortgage 40000
Less: -6000
Reserves and Surplus 6000
Shareholders’ equity 24000
Total equity and liabilities
=SUM(B19,B21,B23,B
24)
Activity 4
Answer to Question 1
Budgets can be described as an essential component of the organization which helps in
effective management of the various functions in an organization (Brigham et al. 2016).However
there exists certain advantages and disadvantages of the budgeting process.
The advantages of budgets are:
 The budget forms an essential aspect of the management as they help the organization to
think about the future. The given budgeting procedure with specific guidelines for the
managers helps them to divert their attention from the different mundane activities and
concentrate on the strategic obligations of the organization.

26BUDGETING
 It helps in communication and coordination. It brings together the various departments in
an organization and goes a long way in building team rapport.
 The budgets also tend to act as guidance for action.
 Budgets go a long way in evaluating the performance of the organization. It forms an
integral part of control and review in a firm and the actual performance may be
monitored against it.
 Budgets go a long way in helping to identify considerable savings and maintain overhead
costs. The company helps the organization to maintain a control system (Titman, Keown
and Martin 2017).
The disadvantages of a budget are as follows:
 Budgets are bureaucratic in nature.
 They involve time and funds. Budgeting procedure can be described as a tedious one and
therefore, it requires investment from the organization.
 The organization has to indulge in various efforts to form a budget. This effort could
instead be invested in some other productive matter (Barr 2018).
 Experts argue that if the organization has already identified the Key Volume and Activity
then why should the organization investing in the exercise of budgeting.
 The budgets are coercive and it is important for a firm to engage in good management
and motivate the workforce.
Answer to Question 2
The different kinds of budgets have been discussed as follows;
1. Plant Utilization Budget:

27BUDGETING
The plant utilization budget is prepared with respect to the working hours, convenient
units of plant facilities and other related components of the production budget. It helps in loading
on each process, costs, cost centers, dove tails other related aspects.
2. Production Cost Budget:
A prediction costs budget is a budget which is also known as a manufacturing budget and
consists of primarily materials budget, labor budget and factory overhead budget.
3. Direct Material Budget: of the
This budget consists of the cost of the direct materials purchased for the organization.
This budget assists the purchase department in preparing a schedule of their total purchases and
helps them to fix the maximum and minimum level of inventories.
4. Capital Budgeting:
Capital Budgeting can be described as the planning and development done for the
purpose of maximizing the long term profitability of the business. It lays down a plan for the
capital outlays. They are very important as it helps an organization to make effective capital
budgeting decisions. It also has an effect on the long impacts on the company`s cost structure.
5. Zero Base Budgeting:
The zero based budgeting is a budgeting process which helps the firm to prepare a new
budget for the firm from the scratch. The managers need to justify the reason behind putting each

28BUDGETING
cost in the appropriate section (Lasher 2013). The given budget has various advantages in the
sense that it motivates the members to form cost effective ways of task performance.
6. Performance Budget:
The performance budget has been originated in USA and is based on functions, programs
and activities. It is based on a work plan which expresses the achievement of various levels of
the organization.
7. Sales Budget:
The sales budget is a functional budget which helps to forecast the sales in an
organization. It represents the total sales along with the physical quantities as well. The primary
purpose of a sales budget is to estimate the sales and developed a plan accordingly.
8. Production Budget:
A production budget consists of the total volume of production whereby the operations
has been divided by days, weeks and months (Zietlow et al. 2018). This helps the department to
estimate the correct way of identifying the production of the goods.
8. Cash Budget:
The cash budget can be described as a critical budget whereby the organization
determines what the cash requirements of the given period are.
9. Flexible Budget:

29BUDGETING
The flexible budget is asked on the concept of a fixed budget whereby certain changes
are made to the fixed budget in a manner such that the organization can inculcate its costs in the
budget.
Answer to Question 3
A master budget can be described as an amalgamation of all the lower level budgets that
a company produces with respect to its various functional areas. The master budget also
comprises of the financial statements and cash forecasting. The given budget is either prepared
on a monthly basis or a quarterly basis (Saunders 2014). The primary purpose of a master budget
is to help an organization in achieving its specific goals. Various master budgets also consist of
headcount changes which are needed to be made in order to achieve the budget goals.
The budget can be described as a central planning tool which the management makes use
of in order to determine the key activities of an organization and to judge the performance in
various centers (Finkler et al. 2016). Or the formation of a master budget, the organization
should use a participative budgeting technique.
The given budgets form a part of the master budget:
 Direct labor budget
 Direct materials budget
 Ending finished goods budget
 Manufacturing overhead budget
 Production budget
 Sales budget
 Selling and administrative expense budget

30BUDGETING
Flow Diagram
Figure 1: The master’s flow diagram (As created by the author)
Answer to Question 4
Financial risk can be described as the risk which is faced by the shareholders of a
particular organization. The various shareholders fear that they will lose out on money which
they have invested in the given organization. This happens in cases where the organization`s
cash flows are inadequate to meet the financial obligations of the firm (Brooks 2015). When any
company makes use of debt financing, the given creditors are paid first and the shareholders
become insolvent in case the firm is unable to pay to the organization. Financial risk can also be
described as the possibility where an organization defaults on its bonds and due to this the
bondholder loses out on their money.
The given measures may be undertaken to avoid uncertainties
1. Preparing a damage report.

31BUDGETING
This report may help the firm to understand the how a particular happening of an event
may cause problems to an organization and what would be the degree of impact on the firm.
2. Avoiding the emotions
A business is a rational organization and for this reason, it is very important for the firm
to realize that they cannot make business decisions based on emotions.
3. Focusing on long term objectives
The long term objectives of an organization take it towards its futures and this makes it
very important for the firm to focus on the long term well being of the organization in order to
meet its goals.
4. Clarity in communication of challenge
The communication of the challenge forms an essential aspect of the organization
5. Collaboration is the key
It is very important for a firm to collaborate in the times of the need.

32BUDGETING
References
Barr, M.J., 2018. Budgets and financial management in higher education. John Wiley & Sons.
Brigham, E.F., Ehrhardt, M.C., Nason, R.R. and Gessaroli, J., 2016. Financial Managment:
Theory And Practice, Canadian Edition. Nelson Education.
Brooks, R., 2015. Financial management: core concepts. Pearson.
Finkler, S.A., Smith, D.L., Calabrese, T.D. and Purtell, R.M., 2016. Financial management for
public, health, and not-for-profit organizations. CQ Press.
Lasher, W.R., 2013. Practical financial management. Nelson Education.
Saunders, A., 2014. Financial markets and institutions. McGraw-Hill Higher Education.
Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and
applications. Pearson.
Zietlow, J., Hankin, J.A., Seidner, A. and O'Brien, T., 2018. Financial management for nonprofit
organizations: Policies and practices. John Wiley & Sons.