5.1 Forecasting a hypothetical manufacturing company’s budget in one year period

  

Budgeting process to be written in a budgeted income statement or in a master budget is a process of making estimation of expenses, revenue and profit for a chosen period of time (Picincu, 2020). Through the SG&A budgets, the budgeting process of a one year period can be started with the sales budget. The sales budget is estimation of expected sales price per unit times expected units of product sales. As previously mentioned, a manufacturing company for example the Krakatau steel Inc is supposed to have three units of business, including Hot Rolled Coil (HRC), Cold Rolled Coil (CRC), and Wired Rod (WR). Let’s suppose the calculation for one of business unit in four quarter of a period of year or the calculation of sales budget can be done by the following collaboration of real and hypothetical values of all products are considered as having the same price per unit:

Suppose the Krakatau Steel inc wants to increase 15 % sales ($ 1055277 /price per unit of the company’s product) as (Karim & Tardi, 2021) reported in the coming year of our consideration, then we simply multiply the first quarter sale of the last year by 1.15 with no change of price per unit in such a way that we can get the hypothetical values in the table. The super positional calculation started with the sales budget giving the production budget in terms of the units to be produced for and through the SG&A or the company’s overall overhead budget will be supposed to continue using the following analytical table (Heisinger & Hoyle, (n.d.)),

 

The above result successfully forecasted that if we achieve 278000 units of sales of the year, then at the time period, the total cost of sold goods per unit is $4.31 and the net income of the year is $332,932.00.

Other than the above quantitative analysis, we should be aware of the involved individuals in developing the budgets. Involved individuals in the sales budget are sales staff, economist, and market researcher (Heisinger & Hoyle, (n.d.)). Involved individuals in the process of production budgeting are a production accountant, unit production manager and line producer. Involved individuals in the direct labor and material budgeting are most probably the managers and directors of the company especially the human resource development managers, and the material production managers. In general, all budgets including the selling, administrative and budgeted income statements should be created by a budget committee lead by the company’s CFO (Ingram, 2016).    

  

References

Picincu, A. (2020, December 14). What is a budgeted income statement? Small Business - Chron.com. Retrieved October 4, 2021, from https://smallbusiness.chron.com/budgeted-income-statement-22939.html.

 Heisinger, K., & Hoyle, J. B. (n.d.). Develop the component of master budget. The master budget. Retrieved October 5, 2021, from https://2012books.lardbucket.org/books/accounting-for-managers/s13-03-the-master-budget.html.

 Karim, S., & Tardi. (2021). Financial Reports / Statements of PT. Krakatau Steel. www.krakatausteel.com. Retrieved September 16, 2021, from https://www.krakatausteel.com/public/pdf/Financial%20Report%20KRAS%20June%202021.pdf.  

Anonimous. (2021, September 18). Film budgeting. Wikipedia. Retrieved October 5, 2021, from https://en.wikipedia.org/wiki/Film_budgeting.

 Ingram, D. (2016, October 26). Who handles the budget in a corporate business? Small Business - Chron.com. Retrieved October 5, 2021, from https://smallbusiness.chron.com/handles-budget-corporate-business-70104.html.