Empire Glass Company (A)

Empire Glass Company (A)Group MembersSiti Fatimah RazakMaslina MusaNurul Syafiqah RussainAzmirah Md JaniHazlina Jamani

Mac 700

Introduction BudgetBudgeting is a process that consist of the following stages :communicating details of budget policy and guidelines to those people responsible for the preparation of budgets, determine the factor that restrict output, prepare the sales budget, negotiation with superiors, coordinate and review of budgets, final acceptance of budget, ongoing review of budget

Profit Budgeting Process at Empire Glass Company (1)Early May 15 Top Management ask the product division Vice President (VP) to submit the preliminary reports for their division capital requirement, sales and income for next budget year.Division VP have to express their general feeling towards the trends of the particular items over the 2 years of the upcoming budget year.They made prediction of the forth coming budget years market base of their planning capital requirement in 5 years advanced.

RationaleSubmit preliminary report is important because this process helps the forecasting function to be taken seriously and helps the division managers get a reasonably accurate estimate of the requirements of capital, the sales during the year and the income to be generatedIn addition, by prepare the preliminary report can reveals area where they are spending too much on their yearly budget which is not so important to them. Therefore, its can help division VP to manage their funding well and refocus on their important goals parallel with the organization objective

Profit Budgeting Process at Empire Glass Company (2 n 3)Market research staff develop performance statement of the marketing climate in detail for the forthcoming budget year. Sales forecast is construct with consider the relationship of the general economic climate to our customer s needsExplicitly are basic assumptions as :PriceWeather conditionIntroduction of new product and etc.

RationaleThe purpose of forecasting is to prepare people and businesses from losing money and to enhance human comfort. Furthermore, good forecasts pay off economically not by generating large sums of money but rather by preventing the loss of a large sum of money good forecasts help people plan their day more efficiently and keep them more comfortable. In addition, it is an essential tool for managers, drawn up over a specific period of time, generally a year, and designed to provide a month-by-month estimate of a business's sales. By producing an accurate sales forecast can enable you to identify problems threatening your business and opportunities available to you, and therefore help you plan for the future of the business.

Profit Budgeting Process at Empire Glass Company (4 n 5)Top management ask the district manager what he expect to do in the way of sales during the budget year. It is the soles responsibility of each district sales manager to come up with his particular forecast.The forecast are consolidate and review by the division general manager of marketingThe same process go through at the division and HQ level. This process will repeat until everyone agree the sales budget are announced. Then the level of management take responsibility for its particular portion of the budget and these sales budgets then become fixed objective.

Rationalethe four general objective in reviewing the sales forecast are:A review of the divisions competitive position including plans for improving that position.An evaluation of its efforts to gain either a larger share of the market of offset competitors activitiesA consideration of the need to expend facilities to improve the divisions products or introduce new product.A review and development of plans to improve product quality, delivery methods and service.

Profit Budgeting Process at Empire Glass Company (6)After the sales budget has given the final approval from VP, executive VP, and company president, they breaking down the division sales budget according to plant from which finished good will be shipped.These plants of sales budget are further broken down on a monthly by price, volume and end use.The plants then budget their fixed expenses, gross profit and income before taxes.

RationaleThe plant mgr should wish to acquaint on the thinking behind the figures because this is helpful which is when plant mgr come to review that budget with top management, they have the answer questions about the budgets The review is a way of giving guidance to the plant managers in in determining whether there are in line with what the company needs to make in the way of profits

Profit Budgeting Process at Empire Glass Company (7)September 1 Plant budgets come into British City and accounting department will consolidates themThe product division VP review their respective division budget to see if division budget is reasonable in term of what the VP think the corporate management want.if not satisfied with consolidated plant he will ask the various within division to trim their budget figuresThey will send their budget to the company president if division VP and executive VP are happy.The final budget is approved at December Board of Director meeting

Profit Budgeting Process at Empire Glass Company (8)Each plants need to compare between the actual result and standards performance to get the variance analysis within one week.Beginning of each month, the plants manager prepare current estimation for the upcoming and quarter on forms similar to the variance analysis sheet

Rationale Finally, by using variance analysis to identify areas of concern, management has another tool to monitor project and organizational health. In addition, people reviewing the variances should focus on the important exceptions so management can become aware of changes in the organization, the environment and so on. Without this information, management risks blindly proceeding down a path that cannot be judged as good or bad.

Should The Plant Manager Be Held Responsible For Profit ??

NO !!

WHY ??

Reason..In our opinion, the plant managers cannot be held responsible for the profits. This is because they have no control over the selling price of the productive the sales and promotional expenditure or the administrative costs.The plant managers responsibilities are :Responsible for the cost that they have placed a budget and variance in the cost of the production or quantity used.Responsible for the wastage take place, the excess raw materials or labor used.Responsible for new product development or product improvement.Plan, organize and direct manufacturing and maintenance operation which ensure the most effective return on asset.Initiative plans and processes which minimize manufacturing cost through effective utilization of manpower, equipment, facilities, materials, and capital. Assure attainment of business objectives and productions schedules while insuring product standards that will exceed our customers expectations

The end.