managing-budgets

Do we need to adjust our investment strategy why

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Unformatted text preview: surance payments would be the same every month. You can tell we have several fixed expenses by noticing that: Download free ebooks at bookboon.com 43 Understanding Budgets Managing Budgets Office rent of $12,600 / 12 months = $1,050 per month In November, the fifth month, our Year-to-Date amount should be 5 x $1,050, or $5,250 Utilities of $5,200 / 12 months = $433.33 per month In November, the fifth month, our Year-to-Date amount should be 5 x $433.33, rounded up to $2,167 In both cases, we see that these are indeed fixed expenses. Now take a look at the budgeted amount for insurance. Since we budgeted $1,440, which is the same as the projected actual and the Year-to-Date amount, we can assume that the insurance payment is made once per year and that it has already been made for the year. There are also some questions to wonder about as well, such as: Why has the projection for salaries decreased from the budgeted amount? Perhaps someone is under-performing. Or perhaps you’ve had a vacancy for a time so that you haven’t spent all of your budgeted salary dollars. For benefits, the same question could apply. Note that for simplicity, benefits were budgeted in the example at a flat 10% of the salary numbers. But that won’t always be the case. For example, if someone were out on leave, the benefits amount paid could remain as predicted even if the salary amount were reduced. Marketing is not a fixed expense, since if it were we would see just $5,000 spent by this time of year ($12,000 / 12 = $1,000, multiply that by five for the fifth month and you would get $5,000). What does that do to the rest of the year’s marketing plans? Especially given that our sales figure isn’t where we wanted it to be for this time of year? 7.2.3 Budget Deviation What we’ve been doing in the last two sections is a form of budget deviation analysis. Budget deviation is important because it helps you to identify areas of potential concern. The larger the deviation, and for the longer amoun...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.

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