Developing A Financial Plan Development Model

3. Explain two methods that can be used in order to identify realistic estimations when developing a budget. [2.2]

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

Project A: This project is new to your company. You do not feel confident in estimating the project costs using internal resources. There are other companies that have done this type of work. Yet you still want the most accurate estimates possible.

3. Explain two methods that can be used in order to identify realistic estimations when developing a budget. [2.2]

Planning is a function that is employed by every organization in projecting the future outcome of the firm. Successful firms achieve their goals through the use of different types of budgets. These budgets include, production budget, sales budget, labor budget and expenses budget. These budgets also show the targets that should be achieved by the firm within the budgeted time plan.

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 CanGo organization is lacking a Project Budget. The group is disorganized and unsure if the project can afford necessary equipment and resources required to complete the project. CanGo’s project team or the project manager needs to develop a project budget, including the goal of the project budget. The project manager will use this budget to help determine if the project is on track and the budget will be used by a number of personal as a guideline to fulfill project milestones. Aspects that need to be considered and included in the project budget are employee compensation, contract services such as hardware and software, equipment and supplies, and the budget should include overhead expenses. Overhead and indirect costs allow the project to absorb part of the administrative costs of the organizations daily operations. Many software options are available on the market today, such as

Budgets and Planning. To begin with, the program, like the organization, fosters an open and collaborative environment for the process to take place. In this regard, it is, therefore, impossible for any one space or environment to be able to accommodate every conceivable project or application that is “thought up”. Therefore, certain perimeters and guidelines need to be established to assess costs with the program and help determine a course of action in future planning. As we are discussing costs, we assume there is a

Staying on budget is one of the key factors that will play a significant role in ensuring the success and the completion of the project in a timely manner. In addition, budgeting will allow this project to develop a spending plan which will ensure that we do not exceed the $3,000 dollars allotted for the project. Furthermore, by having a budget plan in place, we are on the path to setting and meeting our financial goals.

By creating a budget this facility will be better prepared in knowing how much money they spend and

views of costs and the labor hours this can help create an appropriate budget and validate that the

The initial cost of the project will be the sum of the development, project administration, implementation, and financing functions. Development cost include IT system design, process planning, and feasibility analysis. Hardware upgrades, software development, infrastructure improvements are included in the implementation costs. Administration expenditures cover other costs such as training, furniture, network infrastructure, utilities, and insurance. Kudler expects to use this system for a prolonged period of time; therefore, the cost of the life cycle will need to be calculated also. Furthermore, the benefits of worker productivity gain, expenditure decrease, and employee utilization gains will also be calculated in the economic feasibility analysis. Once the initial cost of the project is determined, feasibility can be determined on the economic level. According to article, “Implementation: The operational feasibility perspective”, operational feasibility will be achieved if the following steps are followed. Step 1, managers and employee negative perceptions of change must be addressed openly. Step 2, positive factors for change must be reinforced. Step 3, the highest stress should be dealt with first. Step 4, change must start at the top of the organization. Step 5, informal and formal lines of communication should be used. All managers and workers should be involved or represented in the design.

Price: What is the cost (financial or nonfinancial) to the priority population to obtain the product and its benefits? In the budget I submitted there was a cost of $43,266 for the first year. We have sponsorships and a fundraiser but we will have to do some grant writing for the next three years while we institute the program. In anticipation of potential classroom interruptions and challenges while the program is being introduced we have recruited support from parents, mentors provided by our business partner and our sponsor Northern Mutual Insurance Corporation to provide tutoring and other supports as needed before and after school, once or twice a week. The district has increased its budget for paraprofessionals. Some of paraprofessionals within the district at a nearby school will be flexing their time between schools to provide additional in classroom support for the most challenging classrooms or students. When we successfully implement the program we hope to use the same paraprofessionals that are trained to begin the program in the other school. This program will cost everyone in the school extra effort to implement, in addition to any financial cost.

If the budget for a line-item is $1,000 and 10% is assigned to a particular function (such as General Program), then if an additional 6% is added to that function (due to 3 new projects with 2% per new project) the new budget for that function is [10% + (3 x 2%)] multiplied by the original budget for that line item. In this case, .16 x $1,000 = $160 while the budget for the entire line-item is $1,000 x 1.06 = $1,060.

7.0 Budget Estimate and Financial AnalysisA preliminary estimate of the cost for the entire project is $200,000. This includes the hire of a temporary project manager, and the hours used by current employees to work on the project. Project savings comes in the form of reduced health insurance cost due to a healthier workforce that makes fewer claims.