Cost Centre Of Sales Branches

Another concern identified, is the utilities expense budget for utilities in Year 9 which is $150,000. This amount is identified as a fixed amount and is unrelated to actually production activities and manufacturing efficiency. Considering that production levels and activity fluctuates throughout the year, the budget for utilities should be a variable item. An example; from Year 7 to Year 8, the utilities expenses increase by $15,000 and with this detection, ways to reduce this expense should be investigate. Another concern is a duplicated line item under the Selling, General, and Administrative Budget for Utilities and Utilities and Services. Another issue for concern, Total Variable Cost was reported to be lower; however was not enough for the lack of sales combined with an increase in advertising and transportation which resulted in an overall negative result. The low Net Sales directly impacted the Contribution Margin which decreased by $49,397. Overall, these concerns indicate the need for a flexible budget with variance analysis.

The purpose of this paper is to describe the budget process, variances and the major reasons of the variance to make all the financial decisions of the firm properly. This paper would also be helpful to explain that “make” or “Buy” decisions also play a significant role to improve the efficiency of the firm. In addition, the paper would also be useful to clarify that non-financial performance measure may be unsafe for the image of the firm.

Check book system with authorization system for the release of indirect material were followed. This helps in reducing the overhead expenses. The respective team is responsible for this control. Also, the teams were given freedom to purchase indirect materials from suppliers through negotiation which help in controlling expenses. Teams got the expense report charged to their department which helps in monitoring the cost.

Budgeting is crucial in the well-being of a company especially the financial health status of a company. In fact, no professionally managed firm would fail to budget, since the budget establishes what is authorized, how to plan for purchasing contracts and hiring, and indicates how much financing is needed to support planned activity. It is routine for a company to budget for its expenses. Expense budgets act as a guideline of how much revenue a company would require keeping the activities running. It is used to set the company’s targets for a certain period.

A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.

From the aspect of cost center[1], tracking information of cost expenses would facilitate management to figure out the productivity by an unbiased measurement. In operations, company units such as the human resources department or marketing department, except sales department, are not engaging in market share or generating revenues. In contrast, these departments contribute their capabilities for internal supports and help sales department turn profits to the company. Those efforts are a part of product costs and also are a norm for performance evaluation.

This paper will describe the differences between static and flexible budgets. Budgeting is a key component of financial management in any business. The most traditional form of budget is the static budget, which is one "that incorporates values about inputs and outputs that are conceived before the period in question begins" (Investopedia, 2012). This concept will be contrasted with a flexible budget. This technique allows for the values of inputs and outputs to be changed at any point, or at multiple points, during the period in question. The company would normally make such a change whenever it is realized that the change is needed. A new price from a supplier, for example, could be reflected immediately in a flexible budget, rather than at the end of the period. This and other differences between the two types of budget will be outlined in the course of this paper. The first section will explain the relationship between fixed and variable costs in a flexible budget. The second section will discuss the differences between static and flexible budgets. The third section will explain how flexible budgets can assist with cost-volume-profit (CVP) analysis.

Based on the numbers from the budget variance, the only unfavorable aspect is that of the labor efficiency. It is clear that the labor force needs to be investigated to right this deficiency. Whether it is more proper training, which would inevitably come at a cost, or if the amount of people in a certain department is not sufficient, it is necessary to look at why there is the discrepancy. Whenever the budgeted amount is greater than the actual sale it is indicative of pricing, not enough inventory or other underlying factors such as theft etc.

Planning system weaknesses: To begin with, fundamental assumptions, such as new plants, inventory carryovers, packaging trends, etc., which are used for initial sales forecast, are entirely made by corporate headquarters. However, the divisional managers assume full responsibility for the estimates they submitted to the corporate head office. As a result, they have to make efforts to increase the overall accuracy of forecast and avoid making changes in subsequent reviews of the budget. Moreover, each product line uses the same forecasting method. It is ineffective for the company to make accurate budget since factors affecting each product line are different, such as industry trends, customer preferences and so on. Lastly, instead of plant managers, the district sale managers raise the sales budgets. However, the plant managers are held accountable for this budgeted profit number, which is connected with their performance and is not controlled by them.

There are different costs that respond to the different activities like variable costs are directly associated with the products sold. The cost behavior patterns of selling, general, administrative, and other operating expenses are determined, and these expenses are budgeted accordingly. For example, sales commissions will be a function of the forecast of either sales dollars or units. The historical pattern of some expenses will be affected by changes in strategy that management may plan for the budget period. In a participative budgeting system, the manager of each department or cost responsibility center will submit the anticipated cost of the department 's planned activities, along with descriptions of the activities and explanations of significant differences from past experience. After review by higher levels of management, and perhaps negotiation, a final budget will be established. Because of the necessity to recognize cost behavior patterns for planning and control purposes, overhead costs will be classified as variable or fixed.

“Budget” and “Budgeting” are concepts traceable to the bible days, precisely the days of Joseph in Egypt. It was reported that “nothing was given out of the treasure without a written order”. History has it that Joseph budgeted and stored grains which lasted the Egyptians throughout the seven years of famine. Budgets were first introduced in the 1920s as a tool to manage costs and cashflows in large industrial organizations. Johnson (1996) states that it was during the 1960s that companies began to use budgets to dictate what people needed to do. In the 1970s performance improvement was based on meeting financial targets rather than effectiveness companies then faced problems in the 1980s and 1990s when they were not willing to spend money on innovations inorder to stay with the rigid budgets, they were no longer concerned about how customers were being treated, only meeting sales targets became essential. Budgeting in business organizations are formally associated with the advent of industrial

This research paper is a brief discussion of budget management analysis. Budgeting is the key to financial management, and is the key to translates an organization goals or plan into money. Budgeting is a rough estimate of how much a company will need to get their work done, and provides the basis for evaluating performance, a source of motivation, coordinating business activities, a tool for management communication and instructions to employees. Without a budget an organization would be like a driver, driving blinded without instructions or any sense of direction, that’s how important a budget is to every organization and individual likewise (Clark, 2005).

This project seeks to bring out the budgeting and budgetary control practices of UT financial institution, Koforidua, and how they can make sure their budgeting practices are done in such a way as to incur minimal or less cost for the organization

First let’s consider the conditions necessary for a cost center to function. A cost center is a department or section of an organization that does not create revenue. This department can be either an operational or production unit. In a cost center the manager receives a range of specifications such as amount of input for a product and how much output is required per an amount time. Engineers and accountants provide this information along with price standards for material, labor and machine hours. It is the cost manager’s job to find the most efficient mix of the specifications to produce the

Budget is one of the major subjects that needs to be managed in any firm, there are two types of budgeting systems, which are, Top-down and Bottom-up budgeting. Furthermore, in Shatha Alzhoor store case, the firm strategy is considering the Top-down budgeting. Due to the management, they are deciding the amounts then transport it to the staff to continue the company objectives. The budget allocation will be 30% for electronic media, 60% for print media, and 10% for outdoor (billboards).