A budget is the quantitative expression of the financial plan during a period of time. As in this report Carter production has made following budget in order to know about the sales or production of the company. In this, report will provide deeper insight about the several; types of budgeting system.
PARTICULARS
July
August
September
October
Opening cash balance (A)
20000000
21875000
69744500
113433500
Add: cash receipts from debtors (B)
6225000
46687500
9337500
4482000
33615000
6723000
3361500
25211250
2988000
Total Inflows= A+B
26225000
73044500
116058500
148355750
Less: Cash Expenses ( C)
Direct Material
1312500
8531250
3281250
270000
1755000
675000
94500
614250
36000
total payment to creditors
8801250
5130750
1325250
Direct Labor
3750000
2700000
2025000
1800000
Overhead Cost
600000
Total Outflows
4350000
3300000
2625000
2400000
Cash Surplus/ Deficit
145955750
Cash budget are the expected cash inflow or outflow of the business during the particular period of time (Budget and Mandatory, 2016). In above table of Cash budget, budgets of four months are given from July to October. As it is clearly shown that total inflows of the Carters Production are increasing as from July to August there is total increment of 46819500.From August to September there is increment of 61438650.From September to October there is increment of 136749900.As in these four months there is regularly increasing in cash flows of the Carter Production. As by moving toward the direct labor cost there is decreasing trend in direct labor cost, from July to August there is total decreasing of 105000.From August to September there is decreasing of 675000.From September to October there is decreasing of 225000.
As there is permanent decreasing trend in direct cost. Move on to the total outflows of the company. There is continuously decreasing trend is figure out in total outflow, from July to August there is total decreasing of 105000.From August to September there is decreasing of 675000.From September to October there is increment of 225000.As total outflows varies with the cost of direct labor. From overall analysis it shown that in the all months there is excess of inflow over outflow, it is beneficial for company as it is the symbol of growth and increase in sales. By seeing the cash budget manager can predict about the sales and growth of the company.
MATERIAL A
MATERIAL B
MATERIAL C
MATERIAL D
Material required per unit
5
3
1
2
Cost of material per unit
10.5
7
1.5
units
250000
180000
135000
120000
Total cost of material required
13125000
945000
360000
Material budget shows the purchase of material which is purchased by the company during the year for the purpose of production (Barbour, 2016).As above table shows that how much material is requires to produce the 1 unit of a watch. For producing the 1 unit of watch company needs the 5 unit of material A, 3 units of material B,1 unit of material C and 2 units of material D After combining all the units of material company gets 1 watch. Material A is a superior material as the cost of this material is high among all the material and cost of material D is very less among all. Where material D cost 1.5 per unit material a cost 10.5 per unit. This budget shows us the how much material a company required to produce a unit of watch.
Labor hour
0.5
Labor per hour
30
Total cost of Labor
Labor budget is used to calculate the hours of human power required to produce the desired level of production. Total cost of labor is derived by the multiplying the labor hour with labor per hour and units they have to produce. As during the period of four months it is noticed that total cost of labor is declining due to the declining in the production of units. As production is declining from 250000 to 180000 that is 70000 units in month of August, and from August to September units are declined to 135000 from 180000 that is 45000 units and from September to November units have declined to 120000 from 135000 that is 15000 units. It shows that either company has less selling or company has stock of watches so company has decreased the production. Labor budget is make to know the production and how much labor is required in production level. By seeing this manager appoint or terminate employees.
A) Life cycle assessment approach id done to assign the cost to each product and to calculate the environmental activities rates.
Activity
Cost drivers
Cost drivers Unit cost
Total activity
Total Indirect Cost
Purchase orders
No. of purchase orders
9100000
Product packaging
No. of product packages packed
220000
1150000
1740870
Energy usage
No. of batches run
40000
1230000
295935
Toxins Released
No. pf test runs
200000
1000000
1820000
3856805
Bluetooth Speaker
21000000
110000
2008696
20000
341463
No. pftest runs
50000
1050000
3400160
As per the above calculation it is clear that manufacturing of Karoke machines is more harmful for the environment as compared to the manufacturing of Bluetooth speaker. As 2, 00,000 kg of toxins is released while manufacturing the 91, 00,000 units of karoke machines, and 50,000 kg of toxins is released while manufacturing the 21,000,000 units of Bluetooth. Karoke machines are releasing more toxins which is damaging the environment more. For releasing the toxin company has to pay the fines.
Life cycle assessment approach is also known as life cycle analysis, It is related to accessing the environmental impact when production takes place in an industry. This approach include all the stages of production, extraction of raw material, manufacturing, repair and maintenance or recycling (Wong, 2016).
As in the above case life cycle assessment approach is used at every stages of production to see at which stage it is providing harm or damage to the environment. Proper analysis will be done from the raw material to the final disposal of product. And company will determine at what stage of production it is releasing the toxin which is damaging the environment. As in above table it is clearly stated that by producing the Karoke machines company is releasing more toxin. As production of 91,00,000 units of machines is releasing the 2,00,000 kg of toxin and in manufacturing the 21,000,000 units of Bluetooth 50,000 kg of toxin is released.
Particulars
Operating capacity
Production capacity
10000000/300000*100
10000000-9100000
3%
90000
Current operating capacity means that ratio between the output gained from business or input incurred to run the business. In this operating capacity will be calculated on the bases of sales and production capacity of company.
Current operating efficiency=Production capacity of company/sales made by company
=10,000,000/300,000*100
= 3%
Production capacity means that how much units can be produces by company in an year by using current resources. This is 91%
As Carters ltd is engaged in manufacturing of Karaoke machines than it is beneficial for it to manufactured according to the order. As in this case company will have less closing balance.
Contribution margin is the difference between the company sales and its variable expenses expressed in term of percentage.
William Distributors
Other purchaser
Sales price per unit
35
40
less: variable cost
-6
Contribution margin per unit
29
34
All amount in $.
In case of William carters as it has given special order so there should be bargaining between the prices is held. As William carters are purchasing that machine for $35 lower than the market price. And contribution made by Carters in more in selling the machines to other purchaser rather than to William carters.
As from above table it is clear that contribution will be more in selling the machines to the other customer instead of William Distributors. In case of William distributors company has operating cost of $8700000 and in case of other purchaser it is $10200000.So in case of William Distributors, company has a loss of $1500000.
From above it is concluded that budgets are important part for manufacturing industry.BY preparing Budget Company can predict its sales and production capacity.
Books and Journals
Barbour, B. X., 2016. Big Budget Productions with Limited Release: Video Retention Issues with Body-Worn Cameras. Fordham L. Rev.85. p.1725.
Budget, P. N. and Mandatory, I., 2016. Pediatric Glioblastoma Model Suggests Treatments. Cell Stem Cell.18.pp.189-202
Hope, J., 2016. Address budget shortfalls with technology, creativity, grant funding. Campus Security Report.13(1).pp.3-3.
Wong, C., 2016. Budget reform in China: Progress and prospects in the Xi Jinping era. OECD Journal on Budgeting.15(3).p.1B.
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