Question

You are a supervisor in the Finance Department of your PHCO. Your department manager has asked for your help in reviewing the PHCOs budget request for the upcoming fiscal year. describe how you would go about conducting the review. You do not have to create a budget to answer this assignment; you do need to understand what matters in reviewing a budget. For example, what sorts of things would you need to look at in order to determine whether or not the proposed budget is realistic and accurate? Give examples of questions you would want answers to

Answer 1

ANSWER:-

As the supervisor in the Finance Department, to review the PHCO’s budget for the upcoming fiscal year, we have to question the budget at the following points to determine its successfulness:

1) Projected Sales : The sales projection in the budget should be adjusted according to sales department and the production department. The overestimate of the sales figure will make the Budget out of the success story.

2) The direct costs : The estimated direct costs should not vary much of the previous year’s percentage. The changes in the costs can be made in consultation with the technical department, which make changes according to design and quality amendments.

3) The Gross Margin: The gross margin should be maintained and let constant because any reduction in the gross margin is taken as decline in the profitability of the concern.

4) The overheads and fixed costs : The overheads and fixed costs should be considered according to the previous year’s actual figures and the management expectations on expenditure on advertisement and promotion of the products.

5) New Projects : The new projects which the company is going to launch in the coming year should be considered for the points like financing, profitability, facilities and man-power.

6) The Government policies : The policies drawn by the Government for the upcoming year should be considered for drawing various costs and overhead part of the budget.

7) Tax exemption : The tax exemptions under the tax laws and on upcoming projects the tax-holidays available from the tax authorities should be considered.

8) Financing projections: The management’s expected cheap financing and the impact on the Financing cost of capital would be considered while framing budgets.

If the PHCO’s budget for the upcoming fiscal year came across and pass through all the above points of reviewing, than we can consider the success on the execution of the same.