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Contents

TASK 1.

Part A..

1.Budget Estimation for 2014.

2.Comparative Statement

Part B.

Comments on key factors of the sales revenue budget

Internal and External Stakeholders and their interest

Development of budgets with collaboration.

Task 3.

Part A..

Part B..

Measures to diminish the charges per hour from $160.6 to $140.

Task 4.

1.A report on the result of revenue comparative statement

Key Points of the Understanding of the Current Performance Vs the Future Actions.

Concept and Importance of Forecasting.

4 . Measures to Support, Monitor and Manage Staff.

References.

Operational Budget - Task 1

Operational Budget - Part A

1.Budget Estimation for 2014

The market volume for on-road bikes is forecasted to be increased by 10%, i.e. 22,000, and that the share of Roadster in this segment is 10%, which are 2,200 units.

Since the expected market volume for off-road bikes is estimated to be stable i.e. 30,000 but the product enhancement factor of Trailer will make its share from 15 to 20%, which is 6,000 units.

The increased price for the Roadster in 2014 will be the price for 5,200, which is a 4% increase, and for Trailer, it is 3,700, which is 5.71%.

Total sales estimation= $33,640,000

2.Comparative Statement

Forecasted sales for the on-road bikes for the year 2013 are estimated to be at 2000. The unit price of Roadster on-road bikes is $5000 and its share in the on-road bikes market is 10%. Therefore, it will generate an annual revenue of $10,000,000. Whereas for 2014, the market of on-road bikes is estimated to increase by 10%, thus the scope of sales our roadster is 2200 units at 4% increased price which is 5200. The revenue generation for 2014 will be $11,440,000.

Forecasted sale for the off-road bikes for the year 2013 are estimated to be at 4500 units. The unit price of Trailer off road bike is $3500 and its share in the off-road bikes market is at 15%. Thus, it will generate an annual revenue of $15,750,000. However, for 2014, the market of off-road bikes is estimated to be stable, yet Trailer’s product enhancement is expected to make its market share at 20%, i.e., 6000 units at a 5.7% increased price which is $3700, thus forecasting the revenue generation of $19,203,000.

Total sales estimation for 2013 (6500 units) at $25,750,000

Total sales estimation for 2014 (8200 units) at $33,640,000

Therefore, an increase of 30.6% in the sales estimation for 2014 with a 26% increase in unit sales.

Operational Budget - Part B

1. Comments on Key Factors of The Sales Revenue Budget

The sales budget is the description of the company’s sales expectation for a given period (year-on-year) in both units and currency. The information on the sales budget comes from several sources varied. It is extremely important to forecast the sales accurately, as all the other assumptions and budgeting is estimated based on of such a budget (Ahmed, Kanakarathanm, Saleh & Aik, 2019).

It is estimated that year 20x3 will be a normal stable year with other factors remaining stable and the peak of motorcycle sale will be in 2nd and 3rd quarter of the year which is 1200 units for Roadster and 2700 for Trailer, which is more than the other two quarters which is 800 and 1800 units respectively.

For the year 2014, two factors are estimated in the year are first, economic downturn and secondly, the repair calls of the bikes for the glitches in the new ABS technology in the first two quarters and thus lesser sales which are 770 units for Roadster and 2100 for Trailer, and relief from both the issues to some extent is expected and thus the sale will go up with estimated 1430 units for Roadster and 3900 units for Trailer.

2. Internal and External Stakeholders and Their Interest

Major internal stakeholders

  • BOD
  • The managers
  • Investors of the company

The sales major internal stakeholders are the managers, the Board of directors, and the investors. The managers have the prime responsibility for the smooth running of the business, thus a euphoric sales target will put additional pressure on managers and will be unachievable for them. Secondly, the sales budget has been made with the strict advice of the BOD as they are the caretakers and are advisable to the investors, who have to be kept Optimistic for the company else the company has to bear the distrust of the market and thus goodwill.

Major External Stakeholders

  • Consumers
  • Government Regulators
  • Suppliers

The budget is prepared to keep an eye on the customers and the government regulators. A substantial part of the budget has been given to the R&D. The company has a strict policy about the consumer satisfaction as well as consumer’s safety, and that’s why the new ABS has been installed in the bikes, whereas a part has been allocated in the budget to the provisions of penalty as the company has to pay penalty to regulators in case of a casualty of failure of the ABS and voluntarily the company will compensate the affected person according to its goodwill policy. Also, easily available and cheap spare parts have been made available to the suppliers so that they can effectively perform the after sales service functions.

3. Development of Budgets with Collaboration

Any major company or investment must take into consideration the collaboration of stakeholders, team members. They have a vested interest in the company who are or are not the actual decision-makers of the company. The role of the stakeholders varies according to the circumstances and the type of the project (Madariaga & Valor, 2007).

Stakeholders in any business or project can give solutions and ideas relating to making better the project as various stakeholders come from varying backgrounds and that they see the projects or the problems from different perspectives, thus covering a wider, risk-free solution.

Stakeholders generally involve in the process for a longer term as fewer of them are directly benefitted from the company or project. This increases the chance of overall success, intelligent decision-makers keep informed the stakeholders of project updates or any proceedings (Bhattacharya, Koschun & Sen, 2009).

Operational Budget - Task 3

Operational Budget - Part A

  1. Total productive hours available – ((52*5*6)-30)*20= 27600 man/ hours.
  2. Average charge per hour= Total expenses + Profit/total man hours

4,032,772+400,000/27,600 = 160.6. Thus average hourly charge be $160.6.

  1. A profit and loss statement is a statement that summarizes the revenues, expenses, and losses, profits for a particular period time, usually being a year. It is also called as income statement sometimes.

P & L statement of the DS financial Group for the year ending xxxx.

Sales

4,432,772

Less Expenses

 

Wages And Salaries

3,086,910

Employees Expenses

617,382

Commission

100,000

Travel

31,450

Entertainment

12,580

Motor Vehicle Expenses

105,000

Stationery

7,000

Rent

31,500

Rates And Taxes

15,750

Telephone

5,200

Computer Expense

20,000

Total Expenses

4,032,772

Net Profit Before Tax

400,000

  1. Total productive hours to achieve the break even= Total expenses/average hourly charge to the client

 4032772/160.6=25110.6 hours.

Operational Budget - Part B

Measures to diminish the charges per hour from $160.6 to $140.

Desired profit is $400,000

The current charge out rate is $140/hour.

 The total-man hours available are 27600. Thus total revenue possible is $ 3,864,000. Our desired profit is 400,000. Thus we have to manage the expenses to bring down the hourly rate of 160.6 to current 140. The company needs to cut down expenses by 568,000 to come to an hourly charge of $140.

Firstly, the company needs to cut down on the employees’ expenses as the travel and stationery charges are being provided. The company is a financial advising company and does not necessarily need other important expenses. If it can cut down employee’s expenses, these are estimated at $617,382, which is a substantial amount to come towards desired total expenses.

Secondly, the company saves expenses of travel and motor vehicles, as they are kept I separate category and needs to be kept in one. As more and more employees are encouraged to travel in public transport for the sake of environment concern as the company identifies itself with environmentally concerned. This will save the expenses which are estimated at $136,450.

Operational Budget - Task 4

1. A Report on The Result of Revenue Comparative Statement

The revenue budget for dress shoes was 3,000,000 and the actually received is 3,400,000 with a variance of 400,000, which is an increase of 13.4 %. The revenue budget for casual shoes was 1,500,000 whereas the revenue received was 1,920,000 marking a positive variance of a whopping 28%. The revenue budget for boots was 3,000,000 with actual revenues of 1,200,000, marking a heavy decrease of 1,800,000, which is 60%. This concludes to total revenues of $6,520,000 against budgeted 7,500,000 marking a negative variance of 980,000. Thus it can be seen that the decrease in boot sales has canopied the profit and heavy actual performance of the dress shoes and casual shoes. The company needs to pay heed on boots on a serious note.

2. Key Points of The Understanding of The Current Performance vs The Future Actions

The assumptions made are early as compared to the performance of the company in the market. The gross profit is reduced by 4% due to decreased sale of boots by $1,800,000. The company is required to look into the issues which resulted in the decreased sales than estimated boots. There is some loophole in the boots estimation and that needs to be corrected with all the factors to be kept in mind. It can launch an advertising campaign instead of saving costs. Also, the efficiency in production seems to be decreasing as COGS has been increased overall. Hence production efficiency needs to be improved.

3. Concept and Importance of Forecasting

.The average collection period has been increased from 33 to 41 days, an increase of 9 days; this is not in favor of the company as the company has low cash reserves. The company's Stock TO is decreasing heavily. A low turnover implies weak sales and excess inventory. The cash pool has decreased and another CA, as well as CL, has increased which decreased the CR. The company might not face liquidity shortly soon but the analysis shows the company's inefficiency.

The data company has is of 8 months and that there is a difference in the pattern of the market quarter by quarter. The company needs to plan for those quarters which are covered during his 8 months period and need to make a new plan by buying data and estimation for that quarter of which w have no experience.

4. Measures to Support, Monitor and Manage Staff

The managers are required to keep an eye on the staff to make the utmost productivity while making them comfortable in the leisure time by educating them on the company’s productivity with entertaining methods. The BOD is required to check for boots from the perspectives of marketing, quality, trend, or overestimation in the budget and thus advise or order accordingly for the next season. 

Some productivity increment measures for the staff will be necessary like a party, outing, yoga, sports, to maintain their encouragement level and empowering them to directly report me in case they face any discrepancy or problem in the productivity chain. The staff will be encouraged to consider this company as theirs and an application will be sent to the GM for consideration that the increase in performance of the company will attract an additional commission of staff according to their pay grade.

References for Operational Budget

Ahmed, Y.M., Kanakarathanm, R.A., Saleh, M. & Aik, K.L. ( 2019). Enhance Smart Sales Forecast and Budgeting Management. 9th International Conference of IEEE. Published by: IEEE. Retrieved from https://ieeexplore.ieee.org/abstract/document/8906391/authors#authors

Bhattacharya, C.B., Koschun, D. & Sen, S. (2009). Strengthening Stakeholder–Company Relationships Through Mutually Beneficial Corporate Social Responsibility Initiatives. Journal of Business Ethics 85

Madariaga, J.G. & Valor, C. (2007). Stakeholders Management Systems: Empirical Insights from Relationship Marketing and Market Orientation Perspectives. Journal of Business Ethics 71. Retrieved from https://link.springer.com/article/10.1007/s10551-006-9149-7

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