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MAC 700

EMPIRE GLASS
COMPANY (A)
Group Members
Siti Fatimah Razak
Maslina Musa
Nurul Syafiqah Russain
Azmirah Md Jani
Hazlina Jamani

INTRODUCTION BUDGET
Budgeting is a process that consist of the
following stages :

communicating details of budget policy and


guidelines to those people responsible for the
preparation of budgets,
determine the factor that restrict output,

prepare the sales budget,

negotiation with superiors,

coordinate and review of budgets,

final acceptance of budget,

ongoing review of budget

PROFIT BUDGETING PROCESS AT


EMPIRE GLASS COMPANY (1)
Early May 15 Top Management ask the
product division Vice President (VP) to submit
the preliminary reports for their division
capital requirement, sales and income for
next budget year.
Division VP have to express their general
feeling towards the trends of the particular
items over the 2 years of the upcoming
budget year.
They made prediction of the forth coming
budget years market base of their planning
capital requirement in 5 years advanced.

RATIONALE
Submit preliminary report is important because this
process helps the forecasting function to be taken
seriously and helps the division managers get a
reasonably accurate estimate of the requirements of
capital, the sales during the year and the income to
be generated
In addition, by prepare the preliminary report can
reveals area where they are spending too much on
their yearly budget which is not so important to
them. Therefore, its can help division VP to manage
their funding well and refocus on their important
goals parallel with the organization objective

PROFIT BUDGETING PROCESS AT


EMPIRE GLASS COMPANY (2 N 3)
Market research staff develop performance
statement of the marketing climate in detail
for the forthcoming budget year.
Sales forecast is construct with consider the
relationship of the general economic climate
to our customer s needs
Explicitly are basic assumptions as :

Price

Weather condition

Introduction of new product and etc.

RATIONALE
The purpose of forecasting is to prepare people and
businesses from losing money and to enhance human
comfort. Furthermore, good forecasts pay off
economically not by generating large sums of money
but rather by preventing the loss of a large sum of
money good forecasts help people plan their day more
efficiently and keep them more comfortable. In addition,
it is an essential tool for managers, drawn up over a
specific period of time, generally a year, and designed
to provide a month-by-month estimate of a business's
sales. By producing an accurate sales forecast can
enable you to identify problems threatening your
business and opportunities available to you, and
therefore help you plan for the future of the business.

PROFIT BUDGETING PROCESS AT


EMPIRE GLASS COMPANY (4 N 5)
Top management ask the district manager what
he expect to do in the way of sales during the
budget year.
It is the soles responsibility of each district sales
manager to come up with his particular forecast.
The forecast are consolidate and review by the
division general manager of marketing
The same process go through at the division and
HQ level. This process will repeat until everyone
agree the sales budget are announced.
Then the level of management take responsibility
for its particular portion of the budget and these
sales budgets then become fixed objective.

RATIONALE
the four general objective in reviewing the
sales forecast are:

A review of the divisions competitive position


including plans for improving that position.

An evaluation of its efforts to gain either a


larger share of the market of offset
competitors activities

A consideration of the need to expend facilities


to improve the divisions products or introduce
new product.

A review and development of plans to improve


product quality, delivery methods and service.

PROFIT BUDGETING PROCESS AT


EMPIRE GLASS COMPANY (6)
After the sales budget has given the final
approval from VP, executive VP, and company
president, they breaking down the division
sales budget according to plant from which
finished good will be shipped.
These plants of sales budget are further
broken down on a monthly by price, volume
and end use.
The plants then budget their fixed expenses,
gross profit and income before taxes.

RATIONALE
The plant mgr should wish to acquaint on the
thinking behind the figures because this is
helpful which is when plant mgr come to
review that budget with top management,
they have the answer questions about the
budgets
The review is a way of giving guidance to the
plant managers in in determining whether
there are in line with what the company
needs to make in the way of profits

PROFIT BUDGETING PROCESS AT


EMPIRE GLASS COMPANY (7)
September 1 Plant budgets come into British City
and accounting department will consolidates them
The product division VP review their respective
division budget to see if division budget is
reasonable in term of what the VP think the
corporate management want.
if not satisfied with consolidated plant he will ask
the various within division to trim their budget
figures
They will send their budget to the company
president if division VP and executive VP are happy.
The final budget is approved at December Board of
Director meeting

PROFIT BUDGETING PROCESS AT


EMPIRE GLASS COMPANY (8)
Each plants need to compare between the
actual result and standards performance to
get the variance analysis within one week.
Beginning of each month, the plants manager
prepare current estimation for the upcoming
and quarter on forms similar to the variance
analysis sheet

RATIONALE

Finally, by using variance analysis to identify areas


of concern, management has another tool to monitor
project and organizational health. In addition, people
reviewing the variances should focus on the
important exceptions so management can become
aware of changes in the organization, the
environment and so on. Without this information,
management risks blindly proceeding down a path
that cannot be judged as good or bad.

SHOULD THE PLANT MANAGER BE HELD RESPONSIBLE


FOR PROFIT ??

NO !!

WHY ??

REASON..

In our opinion, the plant managers cannot be held responsible for


the profits. This is because they have no control over the selling
price of the productive the sales and promotional expenditure or the
administrative costs.

The plant managers responsibilities are :

Responsible for the cost that they have placed a budget and
variance in the cost of the production or quantity used.

Responsible for the wastage take place, the excess raw


materials or labor used.

Responsible for new product development or product


improvement.

Plan, organize and direct manufacturing and maintenance


operation which ensure the most effective return on asset.

Initiative plans and processes which minimize manufacturing


cost through effective utilization of manpower, equipment,
facilities, materials, and capital. Assure attainment of business
objectives and productions schedules while insuring product
standards that will exceed our customers expectations

THE END.