Paredes Optical Co., Inc.: Change The Budget Figures

Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.

The key determinant of Chester’s’ success was the management commitment to superior business processes. Chester has a state of the art facility. Management increased capacity in the years after the government split and will continue to add capacity as growth dictates. However, capacity will be expanded at a lower rate than previously, in an attempt to avoid cash flow shortages seen in prior years. Chester has enhanced automation and quality processes in order to gain production efficiencies and cost savings. Chester has invested in labor recruiting and training; developing core competencies in it’s’ workforce. The firm has and will continue to maintain investment in research and development, as product improvements will continue to be demanded by the customers. The other key factor of the corporation’s success was the superior growth of the industry. It would have been much more difficult to sustain profitable growth in this extremely competitive market without the superior volume growth of the sensor industry.

While it is true that Ms. Forthright had always exceeded her budgeted sales, the extent to which she diverts away from the managers projections does not necessarily means that she is violating honesty and integrity. Her decision on what her budgeted sales for the year is highly relevant to the data available to her. Her projections tends to lie between the field manager and the marketing manager’s predictions, which can be reasonable because in the past years, the field manager’s projections tend to be over what the actual sales of the year will be.

The income over the last three years has been fluctuating.. This tells us the company has an initial growth period. Sales also drop between years 7 and 8 and the gross profit margin decreased as well. This may be due to operating expenses. This leads to the prospect of stable future sales. The stakeholders are continuing to back the company and the company does predict sales will remain stable. The modest increase in sales does not show enough to recover without making adjustments to free capital.

* Our company’s sales forecast has been based on performance from previous years along with market circumstances. We are looking at the future of the business objectively which we then can evaluate past to

Introduction to Financial Planning and how do we create an integrated plan: Focus on cash flow forecast using operations plan

The sales forecast is the basis for all the company’s budgets (e.g. production budgets, selling and administrative expense budgets, etc.). Understating the sales budget can have an adverse effect on the company as all the company’s budgets depend on the sales budget. Therefore, if the sales budget is understated the remaining budgets will follow suit. In the case of William George, marketing manager of Crunchy Cookie Company, understating the sales forecast is poor management style, an unethical practice, and can affect the ability to plan for future operations.

The second task that needed to be finished was to forecast the income statement and the balance sheet for the next two years. We grew sales at a 15% rate, which is the stated rate from Koh. Also, in forecasting the balance sheet, we only showed debt financing for the capital expenditure of the DVD manufacturing equipment, which was the requested structure. Other relevant facts and assumptions for preparing the financial forecast are stated below-

Based on the master budget, there have something wrong and unclear. All the numbers are the same, evenly quarter two have more sale than other quarter, at least less 30% than quarter two. We can easy to recognize with a few changes and we can achieve a goal $1.000.000

Analyzing the company’s performance compared to its historical figures is always useful; nevertheless, these historical figures can be also a very useful tool to forecast future ProForma figures. We usually start by forecasting future sales (based on an average increase in sales figure) and other balance sheet and income statement items are forecasted as percentage of sales, this percent is normally consistent from historically figures. A close look should be given to the company’s operations and plan for the coming year while making our assumptions and forecasted figures. Normally we should follow

Fixing the forecasts allows to build the communication between the different departments of a firm (communication between the operational staff, the financial staff, etc.). It should be also a guide for financial planning and monitoring the activity and the performance. It is a tool to evaluate profitability and productivity, to identify an eventual gap between actuals and OP (operating plan), and to fix it.

Consists of employees from manufacturing (line workers), sales, and accounting. Together develop annual sales forecasts,

It is common to business manager in a business unit to adjust different variables (fixed cost, variable cost and price strategy) to maximize the bottom-line or top-line to either maximize profit or minimize the operation cost. Provided the data as below,

Regional cost of living adjustment on the data would help determine the actual value of their annual income and purchases. This would take some of the error out of the data that is collected. For example $1 in California might only be worth $0.93 in Indiana, this isn 't very much but when multiplied into the thousands or tens of thousands in grows very large.

Time Series and Associative models are both quantitative forecast techniques are more objective than qualitative techniques such as the Delphi Technique and market research.