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Jet2 Task2

In: Business and Management

Submitted By gonsan
Words 1670
Pages 7
Discuss budgetary items that raise concern in the budget planning A master budget is the central planning tool for a company; it should include the following areas: * Direct Labor Budget * Direct/Raw Materials Budget * Finished Goods Budget * Manufacturing Overhead Budget * Production Budget * Sales Budget * Selling and Administrative Expense Budget Competition Bikes’ budget is subdivided into smaller budgets. The objective of the master budget is to provide a forecast based on sales projections for the next budget period (quarter, semester or a year). The master budget should meet the company goals.
After analyzing the master budget for Competition Bikes we found a few areas of concern: The first one was a disregard of previous years’ trends. When year eight was analyzed we discovered changes in the economy which negatively impacted the company because of a decrease in sponsorships affecting the company’s sales. Competition Bikes should have taken a more conservative approach and set the budget at the same level of sales of year eight or have a more conservative increase on sales projections at no more than 1.5%, to reduce the risk of creating over sales and as a consequence to trigger a ripple effect of over-budgeting the operational and production budgets.
Another area of concern is that utilities expenses were double recorded, once under “utilities” and another under “utilities and services”. In the same area of utilities we identified another mistake because they were accounted as a fix amount. Utilities should be a variable amount since they fluctuate based in production needs
One last area of concern is that the “Accounts Receivable Collection” time, has not been reduced, and it was one of the areas of improvement we recommended during the analysis of the six, seven and eight periods.
Evaluate the flexible budget and...

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Jet2 Task2

...RJET2 Task 2 Budgeting for any company can be a challenge especially when the economy does not change in the companies favor. For Competition Bikes, Inc. (CB) budgeting is an area that is both of great need and seriously lacking. The company is setting high goals to make up for the 15% loss of revenue from year 8 over the next three years. What the company needs to look at is whether or not their goals versus reality are a possibility and not make their budget too high or too low. Budgeting is a science and yet a gamble all at the same time. If the company has a strong budget that is flexible and realistic the company can expect to see great success in the future. A1: Concerns CB currently is setting a goal of selling 3510 bikes in year 9. During year 8 the company only sold 3400, year 7 was 4000, and year 6 was 3000. By establishing a goal for units sold the company is able to make a budget based on those numbers. The first concern with the budget is the goal of increasing sales by 110 bikes during year 9. While the company may be trying to push its sales to make up for the previous years deficits, they also need to look at what is still happening with the economy. Typically it takes more than a year for the economy to turn around and such a high goal, if not met, could ruin the budget for a second year in a row. CB needs to make a high goal to push its sales personnel to sell more, however with the economy still being down, the goal needs to be more realistic, as......

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