Programme: Professional Diploma Management ACCOUNTABILITY AND FINANCIAL ANALYSIS

For a very long time now since the past up until the present moment, budgets had had a key and integral role to play in accounting and also management control. Budgeting is an aspect or notion that is by now ingrained and deep-rooted in the viewpoint of business (DeWaal, 2005; Becker, Messner and Schaffer, 2009). The following paper will seek to show what budgeting is, its importance and also its application. Furthermore, the paper will seek to demonstrate the application and integration of input data into a practical budget. In conclusion, the paper will demonstrate a hypothetical budget prepared on a spreadsheet and explain how the budget was prepared and calculated. It will also show the knowledge gained and the interesting aspects noticed whilst preparing the hypothetical budget.

Budgeting Concept, its role and use

A budget can be defined as a management's quantitative expression of plans for a forthcoming period. Budgets are prepared at various levels of an organization as it can be done by managers and also by the workers as well. Budgeting is an implement or an instrument of planning. It encompasses description of the basic aims and goals that the organization will follow and the important guidelines that will monitor it (Khan, 2004). Budgets have several uses and purposes. To begin with, a company can use budgeting as a technique of planning how to make use of its resources. It is also perceived as a means of estimating the expenses a business is bound to incur and the profits that the business is bound to generate. Another use for budgeting is as a way of monitoring the activities of different departments within the company. Budgeting is also used as a way of encouraging personnel to attain performance heights arranged and fixed as well as a way of interconnecting the desires and objectives of senior management. Budgets are also employed as a means of determining conflicts of interest between different departments within the company.

The budgeting concept also plays numerous roles to individuals and also entities. The following are some of the roles played by budgeting:

i. To help the scheduling of the organization in a methodical and rational manner that observes to the long-term policy

ii. To offer a context for assessing the performance of supervisors in meeting personal and division objectives iii. To create objectives and criteria which personnel are inspired to accomplish

iv. To control undertakings by assessing development against the primary strategy, making alterations where needed

v. To bring forth goals, prospects and strategies to different managers

vi. Enable delegation of duties without giving up any kind of control vii. To assess performance against the budget viii. To control revenue and costs

Hypothetical Scenario: Business of Corn Maze

One of the growing businesses in the agricultural sector is the creation of corn mazes inside farms particularly corn fields for tourists to tour and walk past. This is a business idea that is fast becoming more lucrative than rearing animals and even opting to plant crops only. The following will be a hypothetical budget for this particular business. As mentioned earlier, budgeting is an implement of planning and therefore before constructing the budget there are several factors to consider. First off is the revenue which encompasses the number of visitors that can be handled at the field. There is also the consideration of expenses such as ascertaining whether there is need for additional personnel and also how to advertise the maze in order to lure in the customers. Cautious budgeting for the creation and process of this business is a significant constituent in shaping its financial viability and handling farm economic risk. The following is a hypothetical budget showing the expenditures related with planning, launching, and operating the business (Schilling, 2013).

Hypothetical Budget

1. Input data

A. COSTS

The data to be employed in the budget is completely hypothetical. However, it is imperative to not that the data to be incorporated into the budget is split into different categories.

i. Corn production:

The expense incurred in producing corn centered on references intended for optimal grain yield fluctuate, but naturally range from about $480 to $550 for every acre. This mirrors fixed production costs, comprising spores, manure, petroleum, and reaping, administration, and land rates. On the other hand, in numerous occurrences, farmers become accustomed to their production practices to simplify the formation of a maze. For instance, to make certain leavings or stems keep on being green in the course of the operation period, the operators every so often postpone corn planting, which may decrease grain produces.

The input data required for this category is as follows:

Total cost of production = (planted number of acres) x (production costs/acre)

____ (acres) x ____ (production costs/acre)...

Design and cutting expenses
Designing of the maze can be done by the individual owner or procuring can be done to other designers who can undertake such tasks. The usual range of making such designs can vary from $1,300 to about $2,000 for a size similar to the farm which is 5 acres. This whole process encompasses creating the design and cutting the whole field to fit such a design. One of the variations that can take place to make it more realistic is that some farmers opt to undertake this on their iown which makes it much cheaper.

In this calculation, we consider both options. The first one is contracting professional designers which would be calculated as:

____ Estimated Cost of Design (professional design)

Or if the whole process is done by the owner:

____ Estimated Cost of Design (labor and petroleum cost) = ____ (Number of hours) x ____ (Average wage rate) = ____ Estimated Labor Expense for Design + ____ (Number of gallons of petroleum) x ____ (Amount per gallon) = ____ Estimated Fuel Expense of Design

Part of this category also covers the expense of maintaining the paths that are cut for the design of the maze. The paths ought to be sheared or trimmed from time to ensure that they do not have weeds. The rate of recurrence will be determined by a number of factors including weather conditions, kind of pesticides, and wildflower pressure. The labor hours required to sustain a maze will be different centered on the extent, intricacy and sophistication of the network.

In this case, we make the assumption that the shearing process will take roughly five hours every week for seven weeks. The hypothetical budget demonstrated makes the assumption that the individual farmer has possession of a suitable lawn mower and for that reason takes account of only hourly remunerations. For realistic purposes, expenses such as repairs and fuel ought to also be counted in for accurate budgeting.

Labor expense of maintaining the path = (Number of hours/week) x (Number of weeks) x (Average remuneration fee)

____ (Number hours/week) x ____ (Number of weeks) x ____ (Average remuneration fee) = ____ Estimated Labor Expense

Fuel expense of maintaining the path = (Number gallons for every session of cutting) x (Number of cuttings) x (Average fuel expense per gallon)

____ (Number of gallons per cutting) x ____ (Number of cuttings) x ____ (Amount per gallon of fuel)

= ____ Estimated Fuel expense

In this particular case, we assumed that the owner will be more comfortable in creating his own design.

Quantity

Price/Unit

Total

Design and Cutting

Design Costs and Initial Cutting

1

1,800

1,800

Creating path Maintenance (labor hours)

35

9

Fuel in gallons

40

5

Total design and cutting

2,315

iii. Promotion and Advertising

Proper promotion and marketing are vital to the accomplishment of this particular business. These expenses are extremely variable. It is largely suggested that marketing and advertising encompass ten percent to thirty percent of the total operating expenses. Marketing and advertising costs and approaches will also fluctuate and differ over the course of time, particularly as the use of IT and social media to influence consumers continues to advance and progress. It is imperative to be premeditated by selecting advertising media that aim at the customer base most probable to stopover or make a social call to the business. Considerations should also be made to determine whether the owner has the time and knowledge to be an operational salesperson, or whether it is more economical to employ or appoint an expertise. Rough estimations of marketing and advertising of a farm that is five acres large can cost between five thousand and ten thousand or even higher with regards to the kind of marketing and advertising is done each season.

In this particular hypothetical budget, we assume that each advertisement made for the business will cost $2,800.

____ (Price of promotion/advertisement 1)

+ ____ (Price of promotion/advertisement 2)

+ ____ (Price of promotion/advertisement 3)

+ ____ (Price of promotion/advertisement 4)

= ____ Estimated Marketing and Advertising Expenses

iv. Online Marketing

With the advancement in technology in the present world, majority of the marketing that is done is undertaken online as the internet has progressed. This implies online marketing on sites such as Facebook, advertisements on sites such as YouTube and others as well. Online advertisements are not as costly as billboards,…