Professional Documents
Culture Documents
Policy effect of long term plan. To those responsible for preparing the current
years budget. Policy might include change in sales mix or the expansion or
contraction of certain activity.
Budget need to be specified. Example, allowance for price and wage increase
and expected change in activity.
Expected changes in industry demand and output.
The top management should talk about it, to make sure all managers
be made aware of the policy of top management for implementing the
long-term plant in the current year budget. So, common guidelines
can be established. It also prepare the manager for preparing budgets
how they should respond to any expected environment changes.
Past data.
Useful guild line
Guideline provided by top management.
Example: guild line may provide specific instruction and
permitted changes that can be made in the prices of purchases
of material and services.
Negotiation of budgets.
It determine whether the budget become
really effective management tool or just
a routine to follow.
If managers are successful in establishing
a position or trust and confidence with
their subordinate, negotiate process will
produce a meaningful improvement in
the budgetary process and outcomes for
the period.
Dept A
2
Manager
of plant 1
3
Dept B
4
Productio
n
manager
5
Dept C
6
Manager
of plant 2
7
Dept D
8
Coordination Process.
Budgeted profit and loss account, a
balance sheet and cash flow
statement should be prepare to
ensure that all parts combine to
produce an acceptable whole or need
adjustment and budget need redo
until them approve.
Budget review.
Sales budget.
Shows the quantities of each product that
the company plans to sell and intended
selling price. It provides the prediction of
total revenue from which cash receipts
from the customer will estimated and it
also supplies the basic data to
constructing budgets for production cost
and for selling, distribution and
administrative expenses. It is a
foundation for all other budget.
Example:
Royal company is preparing budget for ending 30 June.
Budgeted unit sell for next month are:
April-20,000 unit
May-50,000 unit
June-30,000 unit
*selling price RM 10 per unit.
Month
Unit
Sold
Selling
Price
Total
April
May
June
Quarter
20,000
50,000
30,000
100,000
RM10
RM10
RM10
RM10
Example:
The management at Royal company
want ending inventory on April, May
and June are 10,000, 6,000 and
5,000. On 31 March, 4,000 unit were
Quarte
on hand.
Month
April
May
June
Unit sold
Add: planned closing
inventory
Total unit required for
sales and inventory
Less: planned opening
inventory
Unit to be produce
20,00
0
10,00
0
30,00
0
4,000
26,00
0
r
100,00
0
50,00
0
30,000
6,000
5,000
5,000
35,000
105,00
0
6,000
4,000
29,000
101,00
0
56,00
0
10,00
0
46,00
0
26,000
46,000
29,000
101,00
0
Material per
units
5Kg
5Kg
5Kg
5Kg
Total
130,00
0
230,00
0
145,00
0
505,00
0
Example:
Management want materials on hand
at the end of month April, May and
June equal to 23,000, 14,500 and
11,500. On 31 March, 13,000 kg
materials are on hand. Materials are
Quarte
cost RM0.40
per kg.
Month
April
May
June
Total unit
130,000
230,00
0
145,00
0
r
505,00
0
23,000
14,500
11,500
49,000
153,000
244,50
0
156,50
0
554,00
0
13,000
23,000
14,500
50,500
221,50
142,00
503,50