Question

You have been asked to prepare the annual budget for a small business. The CEO has been helpful and shown you around. They have been responsible for the previous period’s budgets. You have been introduced to the three departmental managers of marketing, production and logistics. The marketing manager has given you a sales forecast that they are confident with.
a. Describe who else you will talk to in order to set the sales assumption forecast. How will you document this? How is the sales budget used to build the other budgets? (100–120 words)
b. What five steps does Shim propose for building the master budget?
c. Who is responsible and what standards for negotiations should be set during budget meetings with the managers and CEO? (120–150 words)
d. In what circumstances do NFPs compete for funding and what can influence the outcome of funding applications? (50–80 words)

Answer 1

Ans.

a) In order to set the sales assumption forecast along with marketing manager one should have to talk with both production manager and logistic manager as sometimes there may be demand in the market but the available resources with the company will not match with it and in that case there are chances that sales were not according to demand. So by talking to both the managers that whether the company can produce according to demand and have resources to store it, then only sales estimate will be taken.

Documentation in this regards as firstly we prepare sales Budget to calculate the sales figure by multiplying  the number of unit sales and expected unit price. After that we prepare production Budget which calculates the number of units of products that must be manufactured. And also estimate the production cost and the costs attributable to sales.

Sales Budget is the first step to prepare Budget.After forecasting sales the managers will able to forecast the scale of operation which they have to perform and then only they will able to forecast other expenses which is directly attributable to sales.

b) Steps to prepare Master Budget as follows:

1.Prepare sales Budget by forecasting sales.

2.After this prepare production Budget by estimating units to be produced and the beginning and ending inventory level.

3.Then prepare all the expenses Budget as Material required and usage, Machine Utilization , Labour or Wages Budget, Overhead Budget etc.

4.Then estimate cash flows by preparing cash budget and then estimate the debtors and creditors .

5.After all this Prepare master Budget as the summary of all the above budgets.

c) The manager of each and every department of an organisation is responsible for budget preparation. As Budgets are generally prepared to confirm the viability of projects and to estimate that what are the inflows and outflows from the project in future. And Budget is actually prepared by discussing each and every department of the company so every manager is held responsible for their part.

Standards for negotiation during budgets meeting as follows

The manager and CEO shall meet at reasonable times to discuss on the budget forecast, so that they were negotiate in good faith with respect to raw material procurement and utilization, Wages to be paid to labors ,working hours, Quality standards , production and performance, inventory management, cash inflows and outflows.

d) The competition among NFPs are getting higher day by day. Many NFPs are unable to compete for funding by their business practices. Also the number of NFPs continues to grow, which means that it is very difficult to compete and stand out from the crowd to attract public support and funding.

NFPs can compete only if they find the way to reduce their dependency on one or two income sources and also step forward to merge and build partnerships with complementary organisations.As now the social media is in trend NFPs tried to make more use of these sites to communicate with public to get their support. If the NFPs adopt commercial approach to run their organisation then only they will get funds and survive in this competitive market. The organisations which provide new products or services at cheaper rates will survive in the market for long run NFPs have to apply funds in such a manner that it may be possible that they will not get return in short span but definitely get benefited in long run.