Week 5 Homework 2024 V3- Manipal
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Prasad V. Potluri Siddhartha Institute of Technology *
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5200
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Accounting
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May 7, 2024
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Week 5 Homework 2024 1.
According to the week 5 lecture, how do budgets assist managers?
Ans. According to week 5 lecture, budgets assist the management and managers in:
control finances.
meet current commitments.
provide funding for future ventures, and
make financial decisions and meet organizational goals.
2.
Budgeting
is the process to develop an organizations budget. It is an integral part of planning.
3.
You have recently been promoted within your organization, and you are now a vice president over the Texas division. There are 150 employees in your organization including 10 sales personnel. You are required to create a budget for your division and submit it to the president (your boss) located in the corporate office in Kansas. Describe the steps from the lecture that you will use to create this budget.
Ans. These are the steps I will take to make a budget for the Texas division: 1. Make a list of the things that will be in the budget. This means listing all of the division's expected sources of income and expenses. This includes sales income, operating costs, salaries, marketing costs, overhead costs, and any other important financial factors. 2. List the changes you expect for each budget item: - Look at past sales numbers and trends, economic signs, what competitors are doing, market research studies, and any possible government rules that could affect the business. Look at how each of these things might affect the division's future income and costs. 3. Add Expected Changes to Each Budget Item: - Add the expected changes to each item's budget report.
For instance, if sales have been steadily going up in the past, you should expect the same rate of growth in the coming time. Also, if you think that market trends or changes in the law will cause costs to go up, you should make changes to the budget to reflect this. 4. "Follow-up and the comparison": When the budget time is over, compare the real financial results to what was planned. Take note of any differences and think about why they happen. By making changes to
your plans and estimates based on this information, you can make future budgets more accurate. By doing these things, I'll be able to make a complete budget for the Texas division that takes into account expected changes in income and costs, fits with the company's goals, and makes it easier to handle money and make decisions.
4.
The Calendar Company expects to have $4,000 in cash on hand at the beginning of January, and the company's target cash balance is $2,000. Net cash flow for January is minus $10,000. The company borrows to meet short term cash needs. What amount will Calendar Company need to borrow to meet their target cash balance at the end of January?
To figure out how much the Calendar Company needs to borrow to reach their target cash balance by the end of January, we need to look at their starting cash balance, their net cash flow for January, and their target cash balance. Details:
Starting
cash balance
is $4,000. Target cash on hand: $2,000 Net cash flow: -$10,000 (a negative number means cash
outflow).
Here's how to figure out how much cash the company had at the end of January: To explain, ending cash balance equals beginning cash balance plus net cash flow. Cash on hand at the end of the day = $4,000 - $10,000 = -$6,000 It needs to borrow money to close the gap between its ending cash balance and its goal cash balance because its ending cash balance is less than its target cash balance.
Calendar Company needs to borrow the difference between how much cash they want to have on hand and how much cash they actually have: How it works: Amount to borrow = Target cash amount - Cash amount at the end How much to borrow = $2,000 - ($6,000) How much to borrow = $2,000 plus $6,000 Loan amount = $8000 The Calendar Company needs to borrow $8,000 in order to reach their goal of having $8,000 in cash on hand at the end of January.
5.
Roberts and Company had a balance in their retained earnings account at the end of 2023 in the amount of 3,000,000. They have forecasted net income in 2024 in the amount of 800,000. They
pay an estimated 35% of their net income in dividends. What will be the budgeted addition to retained earnings at the end of 2024?
Ans. To figure out the budgeted addition in retained earnings at the end of 2024, we need to think about the following:
1. The forecasted net income in 2024 is $800,000.
2. The estimated dividend payout rate is 35%
First, we calculate the amount of dividends to be paid out:
Dividends = Net Income ( Dividend Payout Ratio). Dividends = $800,000 X 35% = $280,000.
Next, we take the net income and take away the dividends paid out to get the amount that will be added to retained earnings:
Now take away the dividends, this is the net income.
$800,000 - $280,000 = $520,000 Budgeted Addition to retained earnings= $520,000 6.
Given the same information in #5, what will be the budgeted ending balance in retained earnings at the end of 2024 for Roberts and Company?
Ans. Budgeted ending balance in retained earnings at the end of 2024:
Ending Balance = Retained Earnings at the end of 2023 + Budgeted addition to retained earnings
= $3,000,000 + $520,000
= $3,520,000 7.
You are the financial analyst for ABC company, and the president has asked you to create an expense budget for the sales department. The sales department is located in another office building, as there is no space available for them at the headquarters office. Last Year
Forecasting Assumption Budget for this Year
Salaries
$300,000 5% increase
5%increase=$300,000X1.05 = $315,000
Stationary
$ 2,000 3% decrease
0.97X 2000= $1,940
Cell Phones
$ 10,000 10% increase
1.10 X10000=
$11,000
Electricity
$ 6,000 4% increase
1.04 X6000=
$6,240
Office Rent
$ 50,000 4% increase
1.04 X 50000= $52,000
Real Estate Taxes
$ 7,000
no change
=$7000
______
Total: $375,000
$393,180
8.
How much could be saved if you suggested a work from home option for the sales department, and it was implemented?
To calculate the potential savings from implementing a work-from-home option for the sales department, we need to consider the expenses associated with the office space that would no longer be required.
Let's break down the potential savings:
Office Rent:
Savings = Annual rent expense
Electricity:
Savings = Annual electricity expense
Real Estate Taxes:
Savings = Annual real estate taxes expense
Adding up these savings will give us the total amount that could be saved if the work-from-home
option is implemented.
Given the data provided:
Office Rent: $52,000
Electricity: $6,240
Real Estate Taxes: $7,000
Total Potential Savings:
= Office Rent + Electricity + Real Estate Taxes
= $52,000 + $6,240 + $7,000
= $65,240
Therefore, if a work-from-home option is suggested for the sales department and implemented, the company could potentially save $65,240 annually.
9.
Steve and Company have budgeted sales commissions of $600,000 for 2024, based on sales estimates of $3,000,000 for the same year. After the first quarter however, they realize that sales are exceeding expectations. Sales are now expected to reach $4,000,000 for 2024. By how
much will Steve and Company adjust their budget beginning in the 2
nd
quarter for sales commissions, assuming this trend continues? Steve and Company uses a static budgeting process.
Ans. The budget for sales commissions needs to be changed for the second quarter because sales have gone up. To do this, we need to update the sales commission using the new estimate of $4,000,000 in sales for 2024.
First, let's figure out the sales fee rate that was planned in the first place: Originally, the commission rate was calculated by dividing the planned sales by the planned commissions.
= $600,000 / $3,000,000
= 0.20 or 20% Based on the new sales estimate, let's figure out the new sales commissions: Adjusted Sales Commissions = Adjusted Sales * Original Commission Rate = $4,000,000 * 0.20 = $800,000
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Related Questions
Flag question: Question 33
Why is budget important?
Group of answer choices
-It gives stakeholder good information about financial statement;
-provide a good orderly management activities within an organization;
-it is important to create balance sheet;
-It is useful to manage liabilities.
arrow_forward
Q5
A budget is 'accepted' by managers when they______.
Select one:
a. relates it to their own personal objectives
b. receive the budget in writing
c. are consulted by top management
d. agree to it verbally
arrow_forward
Q.How does preparing the budget help Hazlett’s management team better manage the company?
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X
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EXPERT
SOLUTION
RECOMMENDED
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Homework help starts here!
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Step 6 Budgeted Balance Sheet
Minden Company
Budgeted Balance sheet as on May 31
Assets
Cash
Accounts Receivable
Inventory
Building and equipment, net of Depreciation
Total Assets
Liabilities and stakeholders equity
Accounts Payable
Notes Payable
Common Stock
Retained Earnings
Total Liabilities and stakeholders equity
Still Need Help?
FOLLOW UP QUESTION
WAS THIS HELPFUL?
FEEDBACK
The company is in the process of preparing a budget...
во
Amount $
8900
70000
40000
211500
330400
ASK AN EXPERT CHAT | √ MATH SOLVER
72000
20000
180000
58400
330400
where from
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Q.How does preparing the budget help Skulas’s management team better manage the company?
arrow_forward
q: Budgeting: The various activities within a company should be coordinated bythe preparation of plans and actions for future periods. These detailed plans areusually referred to as budgets. Discuss the multiple functions of budgets.
Q2: Agency theory: Briefly discuss the agency theory and highlight real lifechallenges and issues
arrow_forward
Budgeting types
Consider the following budgets and budget types.
Which budget or budget type should be used to meet the following needs?
a. Upper management is planning for the next five years.
b. A store manager wants to plan for different levels of sales.
c. The accountant wants to determine if the company will have sufficient funds to pay expenses.
d. The CEO wants to make companywide plans for the next year.
arrow_forward
1. Explain why a company needs these budgets used in #2 of your
homework and how will they help the manager prepare for the next year?
For example: ordering inventory, increasing or decreasing material costs so
their sales will increase and cost decrease (labor, raw materials, or costs
that pertain to operations)? Make sure to explain what each budget tells
the manager.
arrow_forward
The preparation of an organization's budgeta. forces management to look ahead and try to see the future of the organization.b. requires that the entire management team work together to make and carry out the yearly plan.c. makes performance review possible at all levels of management.d. all of the above
arrow_forward
Planning and Control
Many companies use budgets for three purposes. First, they use them to plan how to deploy resources to best serve customers. Second, they use them to establish challenging goals, or stretch targets, to motivate employees to strive for exceptional results. Third, they use them to evaluate and reward employees.
Assume that you are a sales manager working with your boss to create a sales budget for next year. Once the sales budget is established, it will influence how other departments within the company plan to deploy their resources. For example, the manufacturing manager will plan to produce enough units to meet budgeted unit sales. The sales budget will also be instrumental in determining your pay raise, potential for promotion, and bonus. If actual sales exceed the sales budget, it bodes well for your career. If actual sales are less than budgeted sales, it will diminish your financial compensation and potential for promotion.
Required:
1. Do you think it would…
arrow_forward
Categorize each of the following activities as to which management responsibility it fulfills: planning, directing, or controlling. Some activities may fulfill more than one
responsibility. (Select an "X" in the input field if the management responsibility is fulfilled. If the management responsibility is not fulfilled, leave the input field empty.)
Question content area bottom Part 1 Activity Management Responsibility Planning Directing Controlling a. Management decides to increase sales growth by 20% next year.
b. Management analyzes the impact of a recent advertising campaign by comparing budgeted sales to actual sales. c. Management reviews hourly sales reports to
determine the level of staffing needed to staff the customer service desk. d. Management uses information on product costs to determine sales prices. e. To lower
production costs, management moves production to China.
arrow_forward
Please select the correct answer
“Communication”
a.is when a department is willing to prepare a budget and share the information with other departments
b.forces executives to think of relationships among individual operations, departments, and the company as a whole
c.All of the responses are correct
d.is ensuring that all relevant parties are aware of the company’s objectives and that the objectives are understood and accepted by all departments and functions, especially when plans are developed
arrow_forward
Question 5
Evaluate 2 types of budgeting used in a medium sized private company with
identification of merits and disadvantages of each method.
a)
b)
What is an annual budget? Do all companies need to provide annual budgets?
Please justify your answer.
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Question 3
Mischa Furniture Stores (“MFS”) is a company that specialises in office furniture based in Windhoek. Due to the effects of Covid-19, it has become very imperative for the company to manage its cash flows effectively. The owner of MFS knows of your skills in management accounting and has requested your service in the preparation of the forth coming quarter’s cash budget. Upon interviews with different departments at MFS, you have ascertained the following information:
Budget information for January, February and March 2023 is as follows:
January
February
March
N$
N$
N$
Sales
590 000
650 000
750 000
Production costs
300 000
350 000
420 000
Sales and Administration costs
150 000
170 000
200 000
Purchase of non-current assets…
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Select all of the benefits of budgeting.
Facilitates the coordination of activities within the business
O Requires management to plan ahead and formalize goals
O Motivates personal throughout the organization to meet planned objectives
ns
O Results in greater management awareness of the business's overall operations
O Provides definite objectives for evaluating performance
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I have a finance team at work. As the year progresses, they need to maintain a record of cash
flow and expenditure. What will they be required to do as a first step to building a budget?
Question 1Select one: A. Find out the balance sheet of the company B. Find the profit and
loss for the previous year C. Identify the expenditure and demand along with the cash flow of
the company D. Build an income and expenditure statement Incorrect
arrow_forward
Prioritizing Expenses for a Company Website
Part 1:
Select a website for a local small business. Examine it carefully.
If you were to improve your selected website, how would you prioritize your budget? Begin by listing everything that went into making the website. Decide which elements need improving. Then, rank them from 1-5, for example, where one is the highest priority (i.e. most money would be spent) and 5 is the lowest priority (i.e. least amount of money would be allocated).
Part 2:
Now, you need to decide how to promote the company using this website most effectively.
You have a $100,000 budget—determine how you allocate the budget using the template that follows.
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Part C:
Budgeting and Financial plan Required:
Research Unilever PLC and complete the following task:
Task 3A:
Critically evaluate the impact of budgeting process on any potential project and demonstrate how budgets, objectives, and strategic plans are related.
Task 3B:
Briefly discuss the significance of Business plan and analyse key elements of its financial plan section of a proposed business plan.
Task 3C:
There is a growing nascent for using of Artificial Intelligence (AI) and Machine Learning (ML) in financial community. Critical discuss (in 5-line ofwords), how either AI or ML could be effective in preparing a long-term budget.
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- Flag question: Question 33 Why is budget important? Group of answer choices -It gives stakeholder good information about financial statement; -provide a good orderly management activities within an organization; -it is important to create balance sheet; -It is useful to manage liabilities.arrow_forwardQ5 A budget is 'accepted' by managers when they______. Select one: a. relates it to their own personal objectives b. receive the budget in writing c. are consulted by top management d. agree to it verballyarrow_forwardQ.How does preparing the budget help Hazlett’s management team better manage the company?arrow_forward
- X Search the web ↑ EXPERT SOLUTION RECOMMENDED QUESTIONS Homework help starts here! ← Q&A Library Step 6 Budgeted Balance Sheet Minden Company Budgeted Balance sheet as on May 31 Assets Cash Accounts Receivable Inventory Building and equipment, net of Depreciation Total Assets Liabilities and stakeholders equity Accounts Payable Notes Payable Common Stock Retained Earnings Total Liabilities and stakeholders equity Still Need Help? FOLLOW UP QUESTION WAS THIS HELPFUL? FEEDBACK The company is in the process of preparing a budget... во Amount $ 8900 70000 40000 211500 330400 ASK AN EXPERT CHAT | √ MATH SOLVER 72000 20000 180000 58400 330400 where fromarrow_forwardQ.How does preparing the budget help Skulas’s management team better manage the company?arrow_forwardq: Budgeting: The various activities within a company should be coordinated bythe preparation of plans and actions for future periods. These detailed plans areusually referred to as budgets. Discuss the multiple functions of budgets. Q2: Agency theory: Briefly discuss the agency theory and highlight real lifechallenges and issuesarrow_forward
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