Case Questions Danshui Plant

5. Fixed costs can be discretionary or committed. Using your judgment based on the discussion in the case, identify which costs are likely to be discretionary. Assuming that management is able to decrease discretionary fixed costs by 10%, what would be the impact on Bridgestone’s break-even point revenues?

|2.2 Explain the purpose of using estimations when developing a budget and ways of doing so |Question 2 Page 3 |

Case II is a continuation of Case I. In this case you will convert the line-item budget developed in Case I into a functional budget. Then you will employ further information to create a flexible budget. Refer to the Case I Solution for data.

Prepare a flexible budget for 180,000 iPhone 4’s and calculate flexible budget variances using actual costs for August.

In the Cost of Goods Sold area, the variance is $2,000. Here, they should rethink their strategy in their budget. They should make sure that their budget is enough to cover the actual expense of their products and have more budget in the next order.

The school budget is static as it assumes fixed costs for the expenses. A static budget is generally used as a projection tool for estimating business expenses within a given period of time. Discrepancies resulting from the fluctuating cost of commodities or initial budgeting errors appear on a static budget as static budget variance. When accounting for the end of a budget cycle's actual expenses, the static budget variance needs to be combined with the actual initial static budget in order to achieve accurate financial reporting. For simplicity, it can help to think of a static budget as a projection budget.

With reference to the Flexible Budget Section attached in Annex X, Flexible-Budget Variance for Revenues was identified to be a favourable variance of $50,400 due to the fact that there was an increase of 216 participants on top of the budgeted 1800 participants and also an additional increased in course fee of $25 on top of the budgeted $350(selling price per unit). This

With a client base that cuts across many of our country’s largest sectors, we have expanded an understanding of what works, and what doesn’t within various industries. From job costing and approvals in the construction sector, to 24 hour support within the logistics space, we know and understand that your organization is unique, and our entire team is committed to creating simplified solutions that avoid the temptation of using cookie cutter templates that worked for someone else years ago. With the help of Cynergy, we are able to maintain an accurate inventory of all the network elements in your organization including server, wiring panels, laptops, cell phones and others. Also, using us it is possible to estimate future network costs by building the telecom budget and cost centers in advance. Another advantage of the telecom expense management is that it enables us to identify the issues in the security infrastructure, thereby optimizing the existing network infrastructure. According to Amily Buston blog, the increasing adoption of Bring Your Own Device (BYOD) is one of the major factors impacting the growth of telecom expense management market. Majority of the employees today are taking the advantage of mobile phones and other portable devices in keeping themselves connected with the corporate network. This is also encouraged

Flexible budgets separate the fixed and variable costs, which then allows for budgets to be set automatically to an activity level. Thus, variances between actual costs and budgeted costs are set for volume fluctuations before differences due to price and quantity factors are computed. At first, flexible budgets are used to accurately measure performance because they compare actual costs for a given output with the budgeted costs for the same level of output. The bad thing of a flexible budget is that, by not allowing the manager to insert set figures, it is also difficult to estimate. Instead of looking at an estimate of what to expect financially, the manager is left looking at a range of estimates. Excellent Year Ltd should adopt fixed budgets when its demand is

One disadvantages of the static budget is its inflexibility. It cannot be changed to take advantage of changes in expenses or revenue as the year proceeds. With a static budget, management will be unable to cope with the impact of changes during the financial year.

Most companies start off their accounting periods with a static budget. A static budget is the projected cost of activity before the period begins. Another word for the static budget is the “original” budget. The flexible budget is used as a performance tool. The flexible budget adjusts the static budget to reflect actual activity. The flexible budget essentially asks the question, “If I knew at the beginning of the period what the cost of

4. The budget may then be broken down further so that each manager has a budget and therefore some spending power.

9. The budget period 10. Budget cycle of a manufacturing firm 11. Steps in developing a master budget 12. Comprehensive budget illustrated 13. Flexible budgeting 14.

An “Incremental budget” is a “budget prepared using the previous year’s budget as a basis with incremental amounts added for the new one. These adjustments will be due to pay rises, inflation or changes in business activity. Its advantage is that it is a system relatively simple to operate, easy to understand, stable and change is gradual. The disadvantage is that it does not consider the changes in the economic environment. Also, it does not incentive the development of new ideas and cost reduction”.

Budget is not just about tracking your revenues, sales and costs it about to setting up your financial goals and how to achieve them efficiently.