Budgeted Income Statement Revised Excel Spreadsheet
Budgeted Income Statement
Resource and Risk Management
Resource and Risk Management: Component 4: Phase 4
- Does the budgeted income statement indicate any changes in Gross Profits for 2013. If so, how much change (+/-), and why?
The Gross Profits will change between 2012 and 2013. Gross Profits in 2013 will be down by $4,400 because of the expected increase in raw materials that the VP of Purchasing has predicted.
- Does the budgeted income statement indicate any changes in Net Operating Income for 2013? If so, how much change (+/-), and why?
The Net Operating Income will change between 2012 and 2013. The Net Operating Income for 2013 will have increased by $5,600 due to the decrease of Depreciation Expenses.
- Does the budgeted income statement indicate any changes in Net Income (Earnings after Taxes, EAT) for 2013? If so, how much change (+/-), and why?
The Net Income will have changed between 2012 and 2013. The Net Income in 2013 will have risen by $4,200. This decrease is due to the reduction of Deferred Taxes that will be paid.
- What are the Earnings per Share in the 2013 budgeted income statement? How much did they change (+/-) from 2012, and why?
The Earnings per Share for 2013 are $3.35 per share. This figure is up by $0.04 per 100,000 shares outstanding, so an increase of $4,000. This increase is based on the decrease of expenses and the expected decrease in dividends that will be paid.
- What are the Retained Earnings in the 2013 budgeted income statement? How much did they change (+/-) from 2012, and why?
The Retained Earnings for 2013 are expected to be $235,300. This is an increase of $15,300 from the Retained Earnings in 2012 because of the reduction in dividends and taxes paid out in 2013.
- Name at least three external factors that should be considered when preparing a budgeting or forecasting document. Explain why their consideration is important.
There are many factors that should be considered when planning a budget or trying to forecast. If these factors are ignored than it could very easily make your budget or forecast inaccurate and lead to the company losing a large sum of money. When I think of external factors that will or could affect the budget or forecast, I think of competitors, suppliers, and customer demand. These are very large areas to look at and can and will change drastically, but with proper planning the impacts of this can be reduced.
The competitors of any business should always be considered when talking about a budget or forecast because if anyone is going to impact your sales, it will be the competition (CPAaustralia, 2010). If you know that the competition is going to release a new item that is similar to your own item, lower their prices, or go out of business than your company can prepare to lower prices to keep sales up or expect a higher unit of sales than normal. At this point a company can decide to increase profits or reduce profits and with that the amount of supplies or materials that they will order as well to help cut expenses.
Suppliers of any company can easily impact the budget and forecast for any company; after all, it is rather difficult to sell product when your company doesn’t have any on the shelf (Tennent, 2008). Hopefully the supplier and the company are on good terms and will communicate about expectations, so both can predict the budget and forecast. If communication of expectations are not than a company could be faced with a large dilemma when the supplier goes out of business or is having maintenance and your company is unable to get any supplies or materials to sell.
Customer demand is one of those aspects of forecasting and budgeting that is difficult to figure out because all people change and so will their needs and wants (Oster, 2015). Customer demand can be effected by laws, market health, or social trends. A good example of this is if a law is passed raising wages for the workers of a state then that state may have to raise gas prices to pay for that increase in wages and therefore people may not drive as much or drive more fuel efficient vehicles. We have all seen the impact that this had on the truck and diesel market for manufactures that saw record losses. Social trends like eating healthier can also impact companies as they will now have to invest additional money into making healthier foods and recipes to help sell their products over the competitors.
While it is very difficult for a person to look at and try to figure out what factors could and will impact a company, it is very important that the appropriate amount of time is taken and each factor is researched fully. Any factor that sees a change has a high chance of influencing your company and that influence can be massive at times and the only way to help reduce that impact or turn it in your favor is to do research. With the research a company can create budgets and forecasts that will help to set a plan for the company and its revenues to help ensure the company does the best that it can with the current factors.
CPAaustralia. (2010). Malcolm Simister on budgets, forecasts and relative targets. Retrieved from https://www.youtube.com/watch?v=UvhNBeuaxdE
Oster, K. (2015). External Environmental Factors that Affect Staffing Forecasts. Retrieved from http://smallbusiness.chron.com/external-environmental-factors-affect-staffing-forecasts-78405.html
Tennent, J. (2008). Guide to Financial Management. Retrieved from http://site.ebrary.com.ezproxy.bellevue.edu/lib/bellevue/reader.action?docID=10235177&ppg=185