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Milsetones 2 and 3 included, Assignments of Management Accounting

Milestones 2 and 3 and Final assessment.

Typology: Assignments

2023/2024

Uploaded on 12/24/2024

ashley-arbogast
ashley-arbogast 🇺🇸

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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.
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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.
  1. Direct Labor Budget: This budget is useful for business to identify expenses related to the cost of labor necessary to produce the aforementioned goods. These types of budgets are significant in that they can help the business determine employee costs as well as the amount of time needed to complete production.
  2. Manufacturing Overhead Budget: This budget includes all other costs other than labor and material costs for production. This budget consists of variable costs such as utilities, supplies, etc., as well as fixed costs such as facility cost and equipment.
  3. Selling and Administrative Budget: This specific budget does not directly relate to the production of a business's products. Rather, it is the expenses allocated for marketing, advertising, insurance and administrative employees' salaries.
  4. Cash Collections Schedule: This budgeting schedule includes all expected payments from customers. This provides the business plan to meet their financial obligations.
  5. Cash Payments Schedule: This budgeting schedule indicates what the business can expect regarding the output of money. This type of budget is necessary when cash is used to purchase materials, marketing products, etc.
  6. Cash Budget: This is a financial planning tool that combines the data from the cash collection schedule and the cash payments schedule from a selected period of time into one document. The result provides the business with their financial overview, if goals are being met and assists in future planning.
  7. Capital Asset/Expenditure Budget: This budget specifies the funds that the business will allocate for long-term expenses. This can include buying or upgrading equipment, the maintenance of equipment and licenses.
  8. Budgeted Income Statement: This is another financial tool that businesses use to help estimate future revenue and expenses of the company. It is created by estimating the projected sales from the projected expenses. Many companies use this tool at the beginning of their fiscal year to assist in creating their annual budgets.
  9. Budgeted Balance Sheet: This is the last step in the budgeting process. This budget sheet provides investors and other stakeholders with the company’s overall financial position. It includes the projected assets and liabilities at the end of the year. The order in which budgetary documents should be completed is as follows:

Two examples of variable costs for a bakery that sells bread to retail stores, would be ingredients and labor. Regardless of how many loaves the bakery must make, the ingredients needed to make each loaf of bread are the same. The more bread that is needed to be made requires more ingredients to be on supply. Hence, more out of pocket expenses are incurred to produce the necessary loaves of bread required for the retail store. When the demand for the bread increases, so does the need for labor. Which results in the bakery needing to increase the number of hours worked of their current bakers or hire more bakers to meet production goals. I believe that fixed costs tend to be higher than variable costs because there is no flexibility with these expenses. Unlike variable costs, fixed costs remain the same no matter the production volume. When there are many fixed costs within a company and production and demand are low, this can affect the business’s bottom line. In order to make a profit, the company must generate more revenue than if they had less fixed costs and more variable costs. For instance, if a company has a fixed facility monthly rent of $7,000, they will have to pay this amount every month, regardless of if they produce 1,000 or 10,000 products. I think that UMPI Manufacturing would have the greatest increase in profits if sales increased because the majority of their expenses are fixed. Since fixed costs remain the same regardless of production volume, the company would not have to drastically change their allocated resources to keep up with demand. In turn, they would reap the benefit of the increased sales by earning more profit.