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Sales Budget

Sales Budget

Particulars

January

February

March

Total

Sales(units)

76820

61450

69130

207400

Average Selling Price

7500

7500

7500

7500

Sales ($)

576150000

460875000

518475000

1555500000

Production Budget

Products

January

February

March

Total

Forecasted Sales in units

76820

61450

69130

207400

Desired Finished goods ending each month

36870

41478

55308

Beginning finished goods

49200

36870

41478

Total Budgeted Production

64490

66058

82960

213508

 Direct Materials Purchases Budget

Direct Material Purchases Budget

Products

January

February

March

Total

Total Budgeted Production

64490

66058

82960

213508

cost of material per unit

19.45

19.45

19.45

19.45

Cost of material for units to be produced

1254330.5

1284828.1

1613572

4152730.6

Cost of material in ending inventory

239040.5

268915.7

358580.2

866536.4

Total Cost of Material Needed

1493371

1553743.8

1972152.2

5019267

Cost of material in beginning inventory

298829.8

239040.5

268915.7

806786

Cost of material to Purchases

1194541.2

1314703.3

1703236.5

4212481

 Labor Budget

Labour Budget

Particulars

January

February

March

Total

Total production units

64490

66058

82960

213508

Direct labour hours per unit

9

9

9

9

Total direct Labour hours

580410

594522

746640

1921572

Direct labour cost per hour

50

50

50

50

Total Direct labour cost

29020500

29726100

37332000

96078600

Manufacturing Overhead Budget

Particulars

January

February

March

Total

Total Budgeted Production

64490

66058

82960

213508

(A) Variable Overhead

Indirect Labour @ $64.52

4160894.8

4262062.16

5352579.2

13775536.16

Power @ $6.15

396613.5

406256.7

510204

1313074.2

Maintenance @ $60.65

35201866.5

36057759.3

45283716

116543341.8

Variable manufacturing cost for opening finished goods inventory

107748000

80745300

90836820

279330120

Other cost @ $46.09

2972344.1

3044613.22

3823626.4

9840583.72

Total Variable Overhead (A)

150479718.9

124515991.4

145806946

420802655.9

(B) Fixed Overhead

Supervision

43016400

43016400

43016400

129049200

Depreciation

3840800

3840800

3840800

11522400

Rates and Utilities

3174000

3174000

3174000

9522000

Maintenance Cost

1254330.5

1284828.1

1613572

4152730.6

Other cost

15363000

15363000

15363000

46089000

Total Fixed Overhead

66648530.5

66679028.1

67007772

200335330.6

Total Manufacturing Overhead (A+B)

217128249.4

191195019.5

212814718

621137986.5

 Ending finished Goods Inventory Budget

Ending Finished Goods Inventory Budget

January

Cost per unit

February

Cost per unit

March

Cost per unit

Total

Direct Materials

19.45

Direct Materials

19.45

Direct Materials

19.45

Direct labours

450

Direct labours

450

Direct labours

450

Manufacturing overhead

374.0946045

Manufacturing overhead

321.5945238

Manufacturing overhead

285.0298907

Total cost per unit

843.5446045

Total cost per unit

791.0445238

Total cost per unit

754.4798907

Budgeted finished goods inventory

Budgeted finished goods inventory

Budgeted finished goods inventory

Closing finished goods inventory in units

36870

Closing finished goods inventory in units

41478

Closing finished goods inventory in units

55308

Ending finished goods inventory

31101489.57

Ending finished goods inventory

32810944.76

Ending finished goods inventory

41728773.8

105641208.1


Cost of Goods Sold Budget

Cost of Goods Sold Budget

Particulars

January

February

March

Total

Direct materials

Beginning inventory

298829.8

239040.5

268915.7

806786

Material Purchase

1194541.2

1314703.3

1703236.5

4212481

Total

1493371

1553743.8

1972152.2

5019267

Closing Inventory

239040.5

268915.7

358580.2

866536.4

Cost of Direct material used

1254330.5

1284828.1

1613572

4152730.6

Direct labour

29020500

29726100

37332000

96078600

Manufacturing Overhead

217128249.4

191195019.5

212814718

621137986.5

Total Factory Cost

247403079.9

222205947.6

251760290

721369317.1

Beginning finished goods inventory

151044000

113190900

127337460

391572360

Total goods available for sale

398447079.9

335396847.6

379097750

1112941677

Closing finished goods inventory

31101489.57

32810944.76

41728773.8

105641208.1

Cost of Goods Sold

367345590.3

302585902.8

337368976

1007300469

Budgeted Income Statement

Particulars

January

February

March

Total

Sales

576150000

460875000

518475000

1555500000

Cost of Goods Sold

367345590.3

302585902.8

337368976

1007300469

Gross Profit

208804409.7

158289097.2

181106024

548199531

Selling and Administration Expenses

Variable Selling and Administration overhead

86422500

69131250

77771250

233325000

Fixed Selling and Administration overhead

27653400

22122700

24888100

74664200

Net Profit

94728509.67

67035147.18

78446674.2

240210331


Cash Budget


Cash Budget

Particulars

January

February

March

Total

(A) Opening Balance

3840800

175407759

590663156

769911714.3

Receipts

Collection From customers

391782000

486240000

490825500

1368847500

Total (A)

395622800

661647759

1081488656

2138759214

(B) Payments

Payment for Direct Material

1194541.2

1314703.3

1703236.5

4212481

Payment to Labour

29020500

29726100

37332000

96078600

Purchase of Land

         -

39943800

         -

39943800

Payment of Dividend

190000000

        -

         -

190000000

Total (B)

220215041

70984603

39035236.5

330234881

Closing Balance(A-B)

175407759

590663156

1042453419

1808524333

Wittgenstein Pty Ltd makes the production of propellers which is used for the production of wind-powered electricity generating equipment. They sold these propellers to various engineering companies in Europe and Australia. The sales manager of Wittgenstein Pty Ltd analyze the various possible outcomes if the current government failed to wins the election then the new government may support the wind-powered electricity generating equipment or may not. The alternative power generating equipment is highly volatile which puts the company’s product in uncertain position. If the new government does not support the current electricity power equipment then the business of the company will go down and the sales of the company will also go down. So the company has to prepare themselves according to the changes in the dynamic environment and think about to produce the alternative source of energy.  Rita Arthurs, the sales manager have to develop new plans for the survival of the company. If the company wants to survive in the dynamic market then the sales manager has to develop new options for making sales. They will export more in those countries where they already selling their product or where the policies regarding the power generating equipment is same as the company’s current government policy.

Paulo Farmer is the production manager in the Wittgenstein Pty Ltd and he makes the budget for every production company makes. He purchased a land in February to build a new highly automated manufacturing facility in which the use of the labour will reduce and the major work is done by the machine itself. So the cost of labour will reduce and the wastage in the direct material will also reduce (Jan, 2013). The new manufacturing facility will increase the fixed overhead cost by 50%.  If the new manufacturing facility will introduce by Paulo then the direct material cost and direct labour cost will decrease by 25% and the cost of goods sold will also decrease but the fixed overhead will increase by 50% and it will increase the fixed manufacturing overhead of the company. But this new facility will increase the profit of the company because the labour cost and material cost will decrease more as compared to the cost of fixed overhead. If the other things remain same as before then the Paulo can think about the investment as he has the required amount of money to build a manufacturing facility.

Production Budget

A budget is a financial plan made by the analyst for a defined time. It is made on the basis of past data and the forecasted changes in the future. Different types of the budget have been made by the Paulo farmer to anticipate the conditions of future. But the budgeted figure has not been always accurate. Paulo farmer is trying to find the difference between the budgeted figures and the actual figures. The cost of the direct material used is very high in actual but the budget shows that the cost of direct material is very low. The budgeted cost of the direct labor is very low but the actual labor cost is very high and it creates the variances between the actual figure and budgeted figure. The difference between the actual figure and the budgeted figure is known as variances. So the Paulo calculate the different variances for finding the reason behind the actual and budgeted figures.

Sometimes the reason for the variances is incorrect information is taken for making the budget for a period. And all the plans and policies are made according to the need of budget. The Anticipation of waste is not made correctly by the Paulo and because of that, the direct material cost is increased as compared to budgeted figures. The budgeted figures of direct labor cost are also different because the measurement of completion of work is not made correctly by the Paulo. Idle time is not taken into consideration while making the budget of the labor cost and because of those differences arises in the actual and budgeted figures.

Some are the causes for the difference in actual and budgeted material is poor management of materials, lower quality of material purchased by the company, a rise in market price, etc. The reasons for the difference in actual and budgeted labor cost is a rise in market labor rate, poor negotiation of wages between the employer and labor, poor training is given to the labors, etc.  When the next time Paulo makes the budget he has to analyze the possibilities of these factors and make decisions according to the requirements of the company. So the chances of differences between the actual and budgeted figure will decrease (Schmidt, 2017).  

Imposed Budgetary approach: Imposed budget is basically a budget developed and prepared by the higher authority and the top management having little or no input from the operating personnel; objectives of the budget and constraints of the budget then informed to these operating personnel’s. This budget process may be seen as a punitive device and in this approach there is a high competition for the funds among the lower-level management. This budgeting bottom approach need to create the budgets that are imposed on a company by the top level management, having very less participation by the employees and the staff of the company. In a top-bottom system, budgets are imposed on the individuals by their top level managers (Bragg, 2013). The budget is mainly prepared by the top-level and higher management and then imposed on the lower layers of the organization. Imposed approach of budgeting can contribute to a lack of team spirit. It can also lead to staff dissatisfaction and poor morale. In the current situation all the decisions regarding the budget are made by the Paulo and so many differences have come in the actual and budgeted figures. If the imposed budgetary approach is made for preparation of budget than the decision making will be done by the top management of the company and the only work is done by the Paulo is to implement the budget in the organization.

Participative budgeting approach: It is a process of budgeting in which the people are energetically involved in the creation process of the budget. The basic and structures approach to budgeting need to create budgets which are highly achievable than are top-bottom budgets that are majorly imposed by the top level management, having very less participation of the employees and the staff of the company. This budget is also good for the morale, and needs to conclude in high efforts by the employees and the staff to attain the budget which was previously predicted (SEOPE, 2015). It is the matter of fact that a quality participative budget does not take top-level strategic considerations into the material account. The management required providing the employees and the staff with the guidelines concerning the overall direction and area of the organization, and also the matter of fact is that how their individual and personal departments fit into that area and direction. In the current situation all the decision making is done by the Paulo himself. This approach states that the all the members of the organization will take part in the activities of the companies. If the suggestion from different personal has taken by the Paulo than the variances might be low and he will not be liable for all the differences between the actual and budgeted figures.

Bragg, S. (2013). Budget variance. Retrieved Aug 10, 2017, from https://www.accountingtools.com/articles/what-is-a-budget-variance.html

Jan, I. (2013). Cash Budget. Retrieved Aug 10, 2017, from https://accountingexplained.com/managerial/master-budget/cash-budget

Schmidt, M. (2017). Budget, Budgeting, and Variance Analysis. Retrieved Aug 10, 2017, from https://www.business-case-analysis.com/budget.html

SEOPE, O. (2015). BUDGETING AS A POLITICAL PROCESS: A CASE STUDY OF DR RUTH SEGOMOTSI MOMPATI DISTRICT MUNICIPALITY. Retrieved Sept 15, 2017, from https://dspace.nwu.ac.za/bitstream/handle/10394/17657/Seope_OE.pdf?sequence=1 

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My Assignment Help. (2022). Operating Budget Essay For Wittgenstein Pty Ltd.. Retrieved from https://myassignmenthelp.com/free-samples/act507-accounting-for-managers/wind-powered-electricity-file-A9B88E.html.

"Operating Budget Essay For Wittgenstein Pty Ltd.." My Assignment Help, 2022, https://myassignmenthelp.com/free-samples/act507-accounting-for-managers/wind-powered-electricity-file-A9B88E.html.

My Assignment Help (2022) Operating Budget Essay For Wittgenstein Pty Ltd. [Online]. Available from: https://myassignmenthelp.com/free-samples/act507-accounting-for-managers/wind-powered-electricity-file-A9B88E.html
[Accessed 14 April 2024].

My Assignment Help. 'Operating Budget Essay For Wittgenstein Pty Ltd.' (My Assignment Help, 2022) <https://myassignmenthelp.com/free-samples/act507-accounting-for-managers/wind-powered-electricity-file-A9B88E.html> accessed 14 April 2024.

My Assignment Help. Operating Budget Essay For Wittgenstein Pty Ltd. [Internet]. My Assignment Help. 2022 [cited 14 April 2024]. Available from: https://myassignmenthelp.com/free-samples/act507-accounting-for-managers/wind-powered-electricity-file-A9B88E.html.

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