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Business Budget

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INTRODUCTION

Budget is required to be prepared by company as it provides several benefits. Present report deals with budget preparation of Restaurant Beachside for three months. On the other hand, another organisation is Ocean Fresh Ltd for which sales budget is prepared. Hence, it is quite beneficial for company to formulate budget for initiating control upon expenses and gaining income. Hence, budget provides clarity about expenditures to be incurred and income to be earned.

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CASE STUDY 1

Preparation of budget for the Chef for December to January

Business Budget for Restaurant Beachside

 

Business Budget for three months for Restaurant Beachside

     

Particulars

December

January

February

Totals for the quarter

Volume

5000

5000

5000

15000

Cost per unit

8

8

8

24

Adding mark up of 50 % (8 * 0.5)

12

12

12

36

Total selling units for month

5000

6500

8450

19950

Total sales

60000

78000

101400

239400

       

Total purchases at cost

40000

52000

67600

159600

Shop expenses

4000

4000

4000

12000

Wages

5500

5500

5500

16500

Rent

2000

2000

2000

6000

Other costs

4000

4000

4000

12000

Living expenses

2500

2500

2500

7500

Computer and shop fittings

 

10000

 

10000

Total expenses

58000

80000

85600

223600

Surplus / Deficit for month

2000

-2000

15800

15800

Opening balance of bank

1000

1000

-3000

8000

Closing balance for month

1000

-3000

18800

16800

The budget is termed as a financial goal which is estimated to be achieved by organisation in the future course of action quite effectually. Preparation of budget is essentially required so that business may be able to estimate expenses that will be incurred and income to be earned in effectual manner. It is needed by the company as without anticipation of total expenses, income cannot be estimated. This is needed so that organisation can easily able to carry out expenditures in the best possible way. In relation to this, if expenses incurred are more than income garnered, it will initiate losses for the company. Thus, preparation of budget resolves problems in effective way as budget is formulated in anticipation of profits and expenses (Maher, Fakhar and Karimi, 2018).

It can be interpreted from above budget prepared for three months such as December, January and February. The organisation named as Restaurant Beachside is planning to purchase particular type of dessert that it sells in the site in effective way. Furthermore, each dessert will cost around 8 inclusive of GST and volume of sales will be 5000 in further months. The sales will increase by 30 % in next two months ie January and February. The total sales are arrived at mark up of 50 %. Hence, sales are estimated to be 60000, 78000 and 101400 for three months. On the other hand, purchases are assumed to be same of units sold in each of the month in effective manner. It can be interpreted that firm will be able to sell products in the best possible way. It will be maximized up to a high extent.

Furthermore, expenditures are also taken with reference to the budget. The wages are 5500, rent expenses are 2000, shop expenses are 4000, other costs are 4000. Apart from this, living expenditures are 2500 and new computer and shop fittings cost amounts to 10000 in the month of January. Hence, total expenses are 58000, 80000 and 85600 for the three months and total amounts to 223600. In relation to this, sales are being deducted from expenses and surplus or deficit is taken out with much ease. In addressing this, bank balance of 1000 of Chef is taken. Thus, budget is effectively formulated for months for the restaurant. Thus, budget is immensely helpful for business so that it may easily accounts for estimation of income and expenditures which would be incurred in coming period in effectual manner (Xu, Zhang and Pinedo, 2017). It helps to keep track of costs so that it may not exceed profits of company.

CASE STUDY 2

Preparation of sales budget for Ocean Fresh Ltd

Sales Budget

 

Sales budget for Ocean Fresh Ltd

       

Particulars

Quarters

Tuna Council

Department of fisheries

Total estimates

Average of two estimates

Q1

Quarter ended 31/03

35

38

73

36.5

Q2

Quarter ended 30/06

40

39

79

39.5

Q3

Quarter ended 30/09

47

44.5

91.5

45.75

Q4

Quarter ended 31/12

38

40.5

78.5

39.25

Sales budget is termed as company's expectation regarding sales that will be achieved in effective manner. It is prepared in units and in terms of dollars for the budget period quite effectually. When organisation has larger quantum of products, then it is better to aggregate sales which are expected into categories because if it is not done like this way, then estimation regarding sales becomes way difficult (Sales Budget Definition. 2017). The budget can be formulated on quarterly or monthly basis. The information with regards to sales are provided by the personnels who handles daily operational tasks and also from marketing personnel who has responsibility to promote products in effective manner.

In relation to this, sales budget estimate is prepared for Ocean Fresh Ltd on quarterly basis. It can be said that estimates of production are being provided by two bodies such as Tuna industry council and Department of Fisheries. The estimates of these two are taken into account and average estimates are carried out in effective way. It can be analysed that average production for Q1 is 36.5, 39.5 for next quarter, Q3 is 45.75 and for Q4 is 39.25. Hence, it can be said that firm is able to produce in accordance to the average extracted out of two estimation. Thus, sales budget is effectively prepared for quarters.

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CONCLUSION

Hereby it can be concluded that firm is benefited by preparation of budget in effective manner. It is required to anticipate income and expenditures so that desired profits can be attained with much ease. Furthermore, it is beneficial for company as expenses should not exceed revenue else losses will start occurring. Hence, organisation is able to keep track of costs for maximizing profits.

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REFERENCES

  • Maher, M. H., Fakhar, M. S. and Karimi, Z., 2018. The relationship between budget emphasis, budget planning models and performance.Journal of Health Management and Informatics.5(1).pp.16-20.
  • Xu, Y., Zhang, J. and Pinedo, M., 2017. Budget allocations in operational risk management.Probability in the Engineering and Informational Sciences, pp.1-26.
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