Financial Budgeting and Analysis - Desklib

Financial Budgeting and
Analysis

Table of Contents
MAIN BODY...................................................................................................................................3
Task 1: Creating a Sales Budget......................................................................................................3
Part C...........................................................................................................................................3
Part D...........................................................................................................................................3
Task 2:..............................................................................................................................................4
Part A...........................................................................................................................................4
Part B...........................................................................................................................................5
Marginal Cost Calculations..........................................................................................................6
TASK 3: The Role of Budgeting.....................................................................................................7
Role of budgeting to support management and organizational activity......................................7
Task 4: Projected Budget Forecast & Variance...............................................................................8
Part C.........................................................................................................................................10
REFERENCES................................................................................................................................1

MAIN BODY
Task 1: Creating a Sales Budget
Part C
Analysing the problems faced in preparation of budget
Budget preparation requires adequate amount of data to estimate the most accurate in
case of absence of data estimation preparation of budgets become difficult. As in the given
situation of Ztatic Trading Ltd the estimate regarding the ending inventory in each case is not
given this leads to problem in creation of budget. Further, budgets prepared needs to be revised
again and again to evolve them with the changing business environment flowing the prepared
budget without considering the changes in the business environment leads to the rigidity in
decision-making. The preparation of budget is a time-consuming process involving lots of
knowledge (Khan, 2019). Managers have the tendency to prepare budgets based on deliberately
low revenue estimates and high estimated expenses to achieve favourable variances. This gaming
with the system by the managers gives rise to serious problems in the future by encouraging
them to indulge in unethical behaviour increasing the frauds in the company (Lu, Lai and Tse,
2018.). Allocation of expenses to various departments while preparation of budget is difficult and
can cause conflicts within the different departments in the company if the expense allocation
technique is not find appropriate by the departmental managers.
Part D
Comparing and Contrasting the possible changes in costs and the impact on the business’
budget
Budget shows the estimated values that the management expects to see in the future but
the actual figures always varies from the budgeted ones. Change in the budgeted figures happens
due to changes in the fixed and variable costs (Salim and Negara, 2018). The changes in the fixed
and variable overheads results in generation of actual profits different from the estimated profit
reflected by the budget. For example, the budget show fixed factory rent as £200,000 per annum.
But the actual rent increased by the 5% during the year. Thus, the profit in budget will differ by
£10,000 then the actual profit. The actual profit for the year will be less by £10,000. Similarly, if
the budgeted advertising expenses were £120000 for the year. But the firm decides to spend
£20,000 more on social media marketing, the result will reflect in the profit amount being less by

£20,000. Also, the spending will result in high sales turnover increasing the actual profit amount
in comparison to the budgeted.
Task 2:
Break even Analysis
Selling Price
£275
Units FC VC TC TR P/L
0 122,410 0 122,410 0 -122,410.00
50 122,410 3,250 125,660 13,750 -111,910.00
100 122,410 6,500 128,910 27,500 -101,410.00
150 122,410 9,750 132,160 41,250 -90,910.00
200 122,410 13,000 135,410 55,000 -80,410.00
250 122,410 16,250 138,660 68,750 -69,910.00
300 122,410 19,500 141,910 82,500 -59,410.00
350 122,410 22,750 145,160 96,250 -48,910.00
400 122,410 26,000 148,410 110,000 -38,410.00
450 122,410 29,250 151,660 123,750 -27,910.00
500 122,410 32,500 154,910 137,500 -17,410.00
550 122,410 35,750 158,160 151,250 -6,910.00
600 122,410 39,000 161,410 165,000 3,590.00
650 122,410 42,250 164,660 178,750 14,090.00
700 122,410 45,500 167,910 192,500 24,590.00
Marginal Cost
Part A
Analysing the use of marginal costinHayes, A. S., 2019g as a management technique