Ashley Arbogast
November 7, 2024
Managerial Accounting
Milestone 2
I. Marj’s Magical Memory Medicine is a new up-and-coming business
started by Marjorie Majors. Her business objective is to produce and sell
memory medicine to individuals with memory loss. She is currently in the
process of preparing items needed for budgeting documents for her new
business.
To align finances with the business goals, budgets must be put in
place. Marjorie’s business budgeting will allow her to set clear goals and
control spending while saving for any future needs of the business.
Budgeting is an important aspect in any business as it focuses on
maximizing financial resources and promotes business success and stability.
The business budget should begin with the Sales Budget because all of
the other budgets are dependent on the estimated sale volume. The budget
plan itself must follow a specific order to ensure that all revenues and
expenses are accounted for. This also assists in making business decisions
such as how to allocate finances and meeting financial goals. Each part of
the budget has a specific function and plays a role in the overall budget of
the business. I have provided the proper sequence of the budget and the
purpose of each below:
1. Sales Budget: This is the starting point of the budget process. This
budget’s purpose is to provide an estimate of expected future sales
and is based on various factors such as unit sales and price, previous
sales patterns and market competition. This process assists
businesses to set margins, allocate resources and make goals for the
company.
2. Production Budget: This budget is based on the needs of the inventory
and its purpose is to ensure that the correct number of units
(inventory) are made to meet the demands of the customers. The goal
is to make enough inventory and prevent overproduction or running
out of stock.
3. Direct Materials Budget: This particular budget calculates the cost of
materials required to meet the production goals outlined in the
production budget.
