Jet2 Task 2
Task 2 – Budgeting
A1 - Prepare a summary report in which you do the following:
1. Discuss specific budgetary items raise concern in the budget planning (Spreadsheet Tab: Task 2_Budgets_and_Proformas). Competition Bikes has prepared a budget for year nine of operations. In reviewing the budget presented several technical areas of concern have been noted. For ease of review, budgetary issues that raise concerns are presented in a bullet format.
· The first issue of concern is in the direct materials budget, it appears to be missing the total direct materials budget. There is a raw materials budget and a components budget present, but the two are never combined to complete the direct materials budget. On the surface this omission does not appear to be particularly egregious. However, omitting a total for direct materials can confuse the evaluation of how much money is going just to materials.
· The second issue of concern can be found in the Manufacturing Overhead Budget. The budget lists quality control under Unit Level Costs, however, quality control is a Batch Level Cost. Unit Level Costs are costs relating to activities performed on each unit. These costs are incurred in a more or less linear pattern which varies directly with the number of units produced. Examples include the electricity used to run production machines and the indirect material such as nuts and bolts used in production.
o Batch Level Costs are costs related to production batches. They change in a more or less linear way, varying with the number of batches run. Batch level costs include costs such as machine set up costs, purchasing and material handling costs, and of course quality control and inspection.
· The third area of concern has to do with utility costs. Included in the manufacturing overhead budget under facility in general operations level costs $55,747 is budgeted for utilities and services. This figure appears again on the budgeted schedule of cost of goods
A1 - Prepare a summary report in which you do the following:
1. Discuss specific budgetary items raise concern in the budget planning (Spreadsheet Tab: Task 2_Budgets_and_Proformas). Competition Bikes has prepared a budget for year nine of operations. In reviewing the budget presented several technical areas of concern have been noted. For ease of review, budgetary issues that raise concerns are presented in a bullet format.
· The first issue of concern is in the direct materials budget, it appears to be missing the total direct materials budget. There is a raw materials budget and a components budget present, but the two are never combined to complete the direct materials budget. On the surface this omission does not appear to be particularly egregious. However, omitting a total for direct materials can confuse the evaluation of how much money is going just to materials.
· The second issue of concern can be found in the Manufacturing Overhead Budget. The budget lists quality control under Unit Level Costs, however, quality control is a Batch Level Cost. Unit Level Costs are costs relating to activities performed on each unit. These costs are incurred in a more or less linear pattern which varies directly with the number of units produced. Examples include the electricity used to run production machines and the indirect material such as nuts and bolts used in production.
o Batch Level Costs are costs related to production batches. They change in a more or less linear way, varying with the number of batches run. Batch level costs include costs such as machine set up costs, purchasing and material handling costs, and of course quality control and inspection.
· The third area of concern has to do with utility costs. Included in the manufacturing overhead budget under facility in general operations level costs $55,747 is budgeted for utilities and services. This figure appears again on the budgeted schedule of cost of goods