Snappy Drinks PLC: Budgeting Approaches, Cost Management and Analysis

This report examines budgeting practices for Snappy Drinks PLC, an international energy drink manufacturer with a diverse product line. It explores the purposes of budgeting, including forecasting income and expenditure, decision-making, and performance monitoring, alongside the processes the company should follow, such as cash flow, master, operating, and financial budgets. The report then delves into traditional budgeting approaches, including incremental budgeting, and assesses their suitability across different business departments. Furthermore, it evaluates alternative budgeting methods like zero-based, rolling, and activity-based budgeting, explaining how each aims to improve on traditional methods and enhance cost management. The analysis considers how these methods, or a combination thereof, could be more effectively applied to Snappy Drinks PLC to optimize financial planning and resource allocation. The report concludes by highlighting the benefits of these different budget methods.

Snappy drinks plc

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 purposes of preparing a budget; what processes the company needs to follow....................1
P2 Demonstrate the application of traditional budgeting approaches to plan future cost
management for this specific business. .......................................................................................3
P3 traditional budgetary system is appropriate to all or any parts of the business......................4
TASK 2............................................................................................................................................4
P4 Alternative budget methods: rolling budgets, zero based budgets and activity based
budgets. Explain how each method attempts to improve on the traditional approach ...............4
P5 these methods and elements of budgeting could be performed more effectively using an
alternative method .......................................................................................................................5
P6 Analyzing whether one of these methods (or a combination) would be more appropriate to
the company. ...............................................................................................................................7
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Budgeting is the process of creating and preparing the plan according to required money.
This is the financial plan which define the different statements such as financial statements, cash
flow statements, profit and loss statements etc. these statements is helps to company for forecast
the budget for future growth. For better understanding the budget, Taken the Snappy drink plc it
is the international manufacturer of energy drinks. They produce 60 different products. The main
aim of company it's that they launch the new product of health led drink by the use of different
ingredients and flavors such as different fruit flavor, and provide low sugar drinks to improve the
quality of product. The report will provide the outline about the different budgeting purpose also
describe the needs of process and how the budget process provided help to develop the business
model. The report will further explain the different budgeting approaches that help to mange the
cost of the Snappy drink plc. Also, report will describe the traditional budgetary system that this
is appropriate or not to all or any parts of the business. The report will describe that company use
the different budget method dot improving the traditional method. Further report will describe
that methods would be more suitable or not to the company (Wildavsky, 2017).
TASK 1
P1 purposes of preparing a budget; what processes the company needs to follow
Purpose of preparing a budget
Forecast of income and expenditure
Budgeting is the important part of every organization. This provide the help to making
the better plan and process (Bogsnes, 2016). The Snappy drink plc owners and managers need of
budget in order to identify and predict whether a new product will make profit or not. The main
purpose of budgeting is that its provide the best model to identify the strategy that how the
business might run and perform good or not, also budgeting is provided the different strategies,
plans which helps to implementing in the business. For launch the new product in the market it
its needed to Create the business plan, the manager of the company make sure that they use the
best plan to launch the new product in the market they construct a Business Plan, also forecast
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the profit and loss statement for identify the income and expenditure and generate the
profitability.
Budgeting is the tool for decision making
Budgeting is the best tool for making the good decision. The main purpose of the
budgeting is that described the financial statement of the company for making the best decision.
For example Snappy drink plc will manage the responsibility they control their expenditure.
When they launch their new product so they create the budget of advertising and also make the
plan that how much money they expend in their advertising (Miller, 2018).
Monitoring performance of business
The purpose of budgeting is to manage performance of the company by forecasting the
different statements such as financial statements, cash flow statements. These statements hep ti
identify the performance of the company (Gallani, Krishnan, , Marinich,. and Shields, 2019).
Process company need to be follow
Cash flow budget
Cash flow budget is the helps to Snappy drink plc for managing the cash according to the
definite time period. The budget is described the activities of cash when the cash comes in and
go out in the business. So company need to follow this process of budget in their business to
manage their cash
Master budget
Snappy drink plc can use this budget for forecast the complete image of the financial
activity. A master budget helps to design the individual budget of the company. So company
need to follow this budget that helps to track and manage all the resources of the business also
describe all financial activity of the company (Tosun, and Bağdadioğlu, 2016).
Operating budget
Operating budget helps to identify the income and expenditure of the company. So
Snappy drink plc can use the process of budget to identify the profit and loss of the company.
An operating budget is described the annual budget of the company . Operating budget is helps
to identify the cost of the company. This budget is analyses the different cost such as salary,
production cost, training cost, advertising cost, manufacturing cost etc. these all cost is described
in the budget. It also includes the total value of resources required in the business. This helps to
identify the different cost of the company.
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Financial budget
Financial budget helps to identify different strategy of the company for managing cash,
income, expenses, assets, liabilities etc. this provides bid picture of the company. So Snappy
drink plc can use this process in their business. Financial budget helps to identify the cash flow
of the company which means that helps to assess the assets and liabilities of the company. A
financial budget the process of budgeting is forecast the incomes and expenses of the business on
a long-term and short-term basis (Tosun, and Bağdadioğlu, 2016). So financial budget is helps
to measure the financial activity of the company.
How the budget process itself can help development of the business model
Budget process provide the help to the Snappy drink plc for mange their resources.
Snappy drinks plc use the variety of budgets in their business to estimate and measure their
expenses and incomes. Also, develops the different strategies for managing their expenditures
and revenues.
P2 Demonstrate the application of traditional budgeting approaches to plan future cost
management for this specific business.
Traditional budgeting approaches
Snappy drink plc can use the traditional budgeting approach in their business. It is the
method of manage and make the budget on the basis of last year's budget. Current financial
year's budget will construct by making some changes to previous year's budget(Shah, 2018).
Incremental budgeting approach
An incremental budget approach is helps to preparing of budget by use the previous
period of data also use the actual performance of the company on the basis of incremental
amounts, so that is added in the new budget for the specific time period. This budgets are simple
to operate and easy to understand. In this budget the budget is cannot change rapidly, only
changes for the needed. So Snappy drink plc make this budget for according to the different
changes in the business.
Traditional budgeting approach
Snappy drink plc can use the traditional budgeting approach in their business. To identify
the expenses and incomes.
Example
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Incomes Budget Actual Differences
Operating revenue 2500000 2450000 50000
Non operating revenue 15000 17000 2000
Total revenue 2515000 2467000 52000
Expenses
Advertising 500000 600000 100000
Office supplies 1000 2000 1000
wages 20000 20000 0
Repairs and
maintenance
15000 10000 5000
Total expenses 536000 632000 106000
Net profit 1979000 1835000 144000
P3 traditional budgetary system is appropriate to all or any parts of the business
Traditional budgetary approach is appropriate all department of business. Because this
approach is helpful to identify the actual income and expenses of the company by comparing the
previous budget of income and expenses. So Snappy drink plc should use this approach in all
departments of the business in order to provides a financial framework of the business that
makes it easier to manage all the activities with stability.
TASK 2
P4 Alternative budget methods: rolling budgets, zero based budgets and activity based budgets.
Explain how each method attempts to improve on the traditional approach
Zero based budgeting approaches
Zero based budgeting is the process of budgeting in which all expenditure and income
must be describe and evaluate in each new financial period. The method of zero based approach
is beginning from zero based. So this budget help to identify the cost of each period which
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means budget is helps to manage the cost-effectively. So Snappy drink plc can use this budget
for analyzed cost of production in each financial year. Also, this budget helps to analyses the
comparison between each budget is lower and higher in the each financial period. So this method
is improved the traditional approach, Because this approach is starting to the zero base This
approach helps to identify the wastage and eliminates wastage. This method also increases
motivation among staffs because it gives more responsibility in the decision-making.
Rolling budget approaches
A rolling budget approach is the new budgeting approach that improve the traditional
approach. Rolling budget approach is regularly updated with the traditional budget. Thus, the
rolling budget method have advantage is that they can provide the quick response to
opportunities that increase in the market (Kaye Frances J. Kaye and 2016.). For example, the
Snappy drink plc manager may learn through this method that other competitors has interested
for purchasing the company, so company focus to improve their profitability that is helpful for
improving the growth in the future. By use this method company always improve their
profitability with forecast the budget.
Activity based budget approaches
Activity-based budgeting is the part of cost accounting. Managers of Snappy drink plc
construct the budgets and prepare according to the previous production of the company. In other
words activity bases budgeting is the new method of traditional budget that define the best
management, helps to identify the costs of production activities such as the production of soft
drinks and different ingredients used to make the soft drinks its increase the cost of production.
So this budget is helps to identify the particular cost of production of the business that also help
to minimizing the cost of production.
P5 these methods and elements of budgeting could be performed more effectively using an
alternative method
Zero based budgeting approaches
Zero based budgeting is the method of budgeting in which all expenditure and income
must be describe and evaluate in each new financial period.
The process of zero based budgeting
 Set the organization objectives and goal of the company
 Identify the cost of the activity and make decision accordingly.
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 Analyzing the each departments cost and cost centers.
 Ranking the different cost and decision activities.
 Allocate the resources
 Prepare the budget according to the decisions.
 Controlling and monitoring.
Rolling budget approach
Rolling budget approaches is the best approach for the company. Company use this
budget in their business for understanding the actual results. A Snappy drink plc could use this
method for analyse the results for example, company make the budget and then review the
actual results at the end of each quarter of month and then forecast the budget according to the
review and also make for other four quarters. So this method helps to company for identify the
future growth of the company. Company must follow this rules for making the rolling budget.
 Company should Focus on the actual results
 Company prepare the Quarterly, monthly rolling budget to forecast the future
 Prepare the budget on the basis of quarterly (Kaye Frances J. Kaye and 2016.).
 Review the budget and make the better plan to increase the growth of the company.
Activity based budget approach
Activity based budget provides the helps to company for save its cost of production.
Company use this method in order to saved cost that results is reduced the production of cost like
reduce the cost of goods and service than that of competitors. It also helps the company to gain a
competitive advantage in the market.
Implement the activity budget in the company
 It helps in reducing the cost
 Activity budget working on particular activities
 Activity can be classified into value adding activity and non value adding activity
 Statement of budget is prepare according to each departments of the company.
 At the last monitoring and controlling the budget.
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P6 Analyzing whether one of these methods (or a combination) would be more appropriate to the
company.
Activity based budget method is best for the Snappy drink plc because company launch
the new product of the energy drinks with new flavor. So company will analyze the cost of
production of new product by the use of activity based approach. This approach help to measure
the cost of production. This Budget helps to reduce the operational cost of the company. Snappy
drink plc should use this method to measure the different process to reduce cost of the company.
Also, this method helps to allocation of the resources for making the new product. Its support to
company for launching the new product in the market by reduce the operational cost (Ahrens,
and Ferry, 2015.).
Zero based budget method is also best for Snappy drink plc because company use this
method for starting of each financial period. Zero-based Budgeting helps a Snappy drink plc for
allocate the resources in each departments effectively, as this method does not use the previous
data of the last year budget, instead prepare the new budget with the actual numbers that help to
company for analysing the sales and demand of product in each year that customer like the
product or not (Tosun, and Bağdadioğlu, , 2016.).
CONCLUSION
From the above study, it has been summarized that budget is the helpful for the company
because budget has forecast the future with the use of different statements such as cash flow,
Profit and loss statements, balance sheets, break even analysis etc. these all statements provide
the helps to the company for forecast the future growth of the company. The report has been
concluded about that snappy drink plc launch the new product of health led drink. The report has
been described the traditional budgetary system that this method is appropriate or not for the
company. The report has been concluded about budgeting purpose of the company. Also,
describe the needs of process of the company. And report has been concluded about the different
budget process that provided help to develop in the business. The report was described the
different budgeting approaches such as Incremental budgeting approach and traditional
budgeting approach. These approaches help to mange the cost of the Snappy drink plc. Also,
report has been described the traditional budgetary system that is suitable or not to the company.
At the last report has been described that company use the different budget method for
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improving the traditional method. Also, report was described the methods that would be more
suitable or not to the company.
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Contemporary Iraqi Studies, 10(1-2).pp.89-103.
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Sintomer, Y., Röcke, A. and Herzberg, C., 2016.Participatory Budgeting in Europe: Democracy
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Ulmer, M.W., Mattfeld, D.C. and Köster, F., 2017. Budgeting time for dynamic vehicle routing
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Online
Zero base budgeting. [Online] Available through :
<https://www.investopedia.com/terms/z/zbb.asp>
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