Report on Accounting and Financial Management: Budgeting Analysis

This report provides a comprehensive overview of accounting and financial management principles, focusing on budgeting techniques. It analyzes labor budgets, overhead allocation rates, and the budgeted cost for jobs, including the average job cost. The report also examines revenue budgets, considering both gross and net revenue, and assesses operating income under different scenarios. The analysis highlights the importance of budgeting in decision-making and future planning for production and manufacturing companies. Desklib offers similar solved assignments and resources to aid students.

Running head: ACCOUNTING AND FINANCIAL MANAGEMENT
Accounting and financial management
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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

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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
divided through understanding the different requirement of different segments and
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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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 has been concluded from above that for any production and manufacturing
company budgeting has been the way to recognize the profit and cost required for
accomplishing a work or to produce a unit. Hence, budgeting plays important role in decision
making and future planning.

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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
financial statement analysis: Implications for macro forecasting and stock
valuation. The Accounting Review, 89(2), 669-694.
Mirgorodskaya, E. O., Andreeva, L. Y., Sugarova, I. V., & Sichev, R. A. (2017). Balanced
budget system: organizational and financial tools. European Research
Studies, 20(3B), 300.
Subramani, T., Sruthi, P. S., & Kavitha, M. (2014). Causes of cost overrun in
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.