Operating and Financial Budget Analysis †MyAssignmenthelp.com

Question: Discuss about the Operating and Financial Budget Analysis. Answer: Introduction Organization is accompanied by complex set of activities in which various functions are performed to achieve certain goals and objectives. This presentation shows the operating and financial business plan of the company running its business in United Arab Emirates. However, due to high import cost and non-availability of the workforce, company has to bear high cost in its manufacturing activities. Present description of organization This company is accompanied by five members with a view to manufacture furniture in UAE. The name of the company is Adroal Business Company which is operated in UAE to sell its products on domestic and international level. Description of operating and financial budget Operating budget- These are the expected expenses which are prepared in advance with a view to evaluate the future income and expense of the business (Samuels Sawers, 2017). Finance budget- This budget format helps company to evaluate or identify the future cash inflow and outflow from the business. It helps in identify the cost of capital and efficiency of business in advances. Budget analysis of company This Adroal business company is manufacturing furniture and other wooden structured items and sells these products in UAE and other countries. However, budget is prepared to estimate the total amount of cost involved in the manufacturing of these furnitures. Most of the part of the cost for manufacturing of furniture is related to wages, rent building, machinery rent and factory cost. This budget is prepared to evaluate the proper cost of the business and identify the per units of furniture of the organization. The total furniture unit cost of the Adroal business company is AED 61160. In this cost, Adroal Business Company will manufacture around 100 units of its furnitures and 20 other items. Project escalation of AED 2000 has also been added as safety margin for the company in case of sluggish market condition. Financial budget of the Adroal business company This financial budget of Adroal Business Company is computed on the basis of the real data and actual cost which will be involved in manufacturing the furniture (Hastings, (2015). Name of the company- Adroal business company Fiscal Year 2017-2018 Operating Budget Code Description Actual Expenditures Actual Expenditures Operating Budget Object of Expense: . . . 1001 Wages and salaries to employees (100 employees) AED 50,000 AED 50,000 AED 40,000 1002 Personnel Benefits AED 5,000 AED 5,000 AED 4,000 2001 Utilities AED 300 AED 400 AED 400 2002 Rent-Building AED 80 AED 80 AED 70 2003 Professional Fees and Services AED 80 AED 80 AED 90 3001 Equipment AED 2,000 AED 2,500 AED 3,000 3002 Rent-Machine and other AED 450 AED 400 AED 700 4001 Communication Costs AED 500 AED 500 AED 400 4002 Consumable Supplies AED 500 AED 500 AED 400 4003 Other Operating Expense AED 800 AED 700 AED 700 4004 Travel AED 450 AED 400 AED 700 4005 Marketing Expenses AED 500 AED 500 AED 400 5001 Service Delivery Costs AED 500 AED 500 AED 400 . Total Object of Expense AED 61,160 AED 61,560 AED 51,260 The operating cost of the company is AED 51260 which is very low. Company could develop core competency in cost by selling its furniture at very low cost. Computation of units per furniture of the Adroal Business Company This the cost per units which is computed on the basis of the estimated expenses incurred in factory and units of furniture produced by using the same. However, company has followed cost leadership strategy. This will allow company to add only 10% profit margin in its cost of the per units furniture (Whitecotton, Libby Phillips, 2013). Cost of per unit furniture = Cost of the furniture units Amount Total cost of all furniture AED 61,560 Furniture manufactured 60 Per unit cost AED 1,026 Sales price of the furnitures units After evaluating the data, it is observed that per unit cost of the furniture is AED 1128.6 which would be very low as compared to other rivals in market (Finkler et al. 2016). Cost of the furniture units Amount Total cost of all furniture AED 61,560 Furniture manufactured 60 Per unit cost AED 1,026 Profit margin 10% Sales prices AED 1,128.60 Recommendation Prepared budget should also include at least 20% of the project margin which is added with a view to fight with the sluggish market condition (Sullivan, et al. 2014). Adroal Business Company should follow absorption strategy to allocate its cost to different department. By products incurred from the factory should be sold in market and its income should be used to deduct the cost of overall manufactured furniture. Conclusion Adroal business Company has kept its price low and followed cost leadership strategy. This prepared budget will allow Adroal business Company to identify the cost associated with the business and setting the price of its products in advances. This will help in making advertisement of the products in advance and arrangement of capital as well. References Samuels, J.A. Sawers, K.M., (2017). SRS Educational Supply Company: An Instructional Budget Project.Issues in Accounting Education. Hastings, N.A.J., (2015). Capital Planning and Budget. InPhysical Asset Management(pp. 207-222). Springer International Publishing. Whitecotton, S., Libby, R. Phillips, F., (2013).Managerial accounting. McGraw-Hill Higher Education. Finkler, S.A., Smith, D.L., Calabrese, T.D. Purtell, R.M., (2016).Financial management for public, health, and not-for-profit organizations. CQ Press. Sullivan, S.D., Mauskopf, J.A., Augustovski, F., Caro, J.J., Lee, K.M., Minchin, M., Orlewska, E., Penna, P., Barrios, J.M.R. Shau, W.Y., (2014). Budget impact analysisprinciples of good practice: report of the ISPOR 2012 Budget Impact Analysis Good Practice II Task Force.Value in health,17(1), pp.5-14.