Question

Think about your personal budget. How different do you think it is from a company budget? Understanding the different components outlined in a company budget, in addition to the order of completion, helps a business owner, professional, and/or student set reasonable and attainable goals. Budgeting is considered a benchmark document that is pertinent to setting goals and answering questions. Read the following scenario and complete the questions posed below. Scenario Don Flowers, owner of VGTBLS (pronounced Vegetables), has three food trucks that specialize in vegetarian and vegan fast- prepared cuisine. He looks around the conference room as his management team chatting as they settle in for the monthly meeting. "Let's get started," Don said, "we have a lot to cover today, and frankly it's not all good news." The room fell quiet. Don continued, "As you know we recently experienced a cash shortage despite last quarter's record sales. I can't keep going. back to the bank to support operations. I am counting on each of you to figure out a way to keep this from happening in the future." Jasmine Mitchell, the newest truck manager, raised her hand somewhat sheepishly. "Sir, perhaps if we looked at the Master Budget for last month we could begin to identify areas for improvement."

you dont need numbers , just budgets that they are going to need to make

Answer 1

As per the discussion provided in the Question, Jasmine and Alex need to construct a master budget so that Don can understand the correct situation of the company.

Construction of a Master Budget-

Master budget is an aggregate of company's individual budgets designed to present a complete picture of its financial activity and health. In order to prepare Master Budget, Jasmine and Alex has to prepare various budgets such as Sales Budget, Operating Budget, Cashflow Budget.

1. Sales Budget-

Sales budget provides related to amount of sales made during the period, it also provides details related to cash sales and credit sales resulting in actual cashflow details.

Information needed - Information required by jasmine to create sales budget for Don Flowers-

All these information to be provided by truck managers:

a. Details of 3 food trucks

b. Amount of items sold by each food truck individually per day

c. Estimated amount of sales for the period say month, quarter etc.

d. Bifurcation of cash sales and credit sales made, if any.

2. Operating Budget -

Operating budget is a forecast and analysis of projected income and expenses over the course of a specified time period. A manager will need to compare these reports month after month to see if a company is overspending on supplies and also the revenue earned during the period.

Information needed - Information required by jasmine to create Operating budget for Don Flowers-

All these information to be provided by truck managers:

a. Sales made for the period

b. Raw materials cost such as food items and resources used to prepare and their cost accordingly

c. Labor cost such as number of workers, wages paid, any expected overtime to be paid for the period

d. Other overheads such as miscellaneous expenses, truck cost and related depreciation, space cost etc to be obtained

e. Based on the details received, Jasmine should compare the income with the expenses and arrive at net profit from the business

3. Cash flow Budget -

Cash flow budget is a means of projecting how and when cash comes in and flows out of a business within a specified time period. It can be useful in helping a company determine whether it's managing its cash wisely. It is also used to analyse how payment to be made and also to decide due dates with vendors and customers.

Information needed - Information required by jasmine to create Cash flow budget for Don Flowers-

a. Jasmine should analyse the cash receipts and cash disbursements happened during the period

b. To analyse cash movement related to operating activities, investing activities and financing activities

c. To analyse cash productivity and cash generating capacity of company

d. Details of customer receipts, vendor payments, loans obtained, investments made etc to be analysed.

Jasmine and Alex will need to create these budgets and resolve the issues accordingly and the information mentioned above has to be obtained from project managers and create the budgets.