IENG 216 Budgeting.

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Presentation transcript:

IENG 216 Budgeting

Guidelines Set Objectives Bottom Up vs Top Down Sales Forecast Historical Data Non-Financial Parameters Responsibility Accounting

Setting Objectives

Setting Objectives Profit Increased market share Return on Investment Cost Reduction Revenue increases

Bottom Up vs Top Down Iterative Process You cannot ask a manager at any level to accept responsibility for living within budgets that he or she had no hand in setting.

Categories Operating Budget Financial Budget Sales Production Direct Materials/Labor Factory Overhead Pro-forma income Financial Budget Cash Pro-forma balance sheet

Preparation Prepare sales forecast Determine aggregate production Estimate manufacturing costs & operating exp. Determine cash flow Formulate project financial statements

Sales Budget Production Budget Direct Material Factory Overhead Labor Cost of Good Sold Budget Selling Expense Admin Expense Budgeted Income Budgeted Balance Desired Ending Inventory Capital Budget Cash Budget

Sales Forecast

Sales Forecast

Sales Forecast

Sales Forecast

Sales Forecast

Example

Example (cont.)

Example (cont.)

Example (cont.)

Example (cont.)

Example (cont.)

Example (cont.)

Selling & Admin Expenses

Cash Budget

Budget Income

Pro-forma Balance