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What are the important variables in a production budget?

Budgeting is basically termed as the formulation of planning future business actions and asserting them into business actions. In my current employer there are a group of people who serve as the financial gurus or as we call them, the budget committee. On this committee there are marketing concentration who come up with innovations to sell the product to a wide array of genres. The marketers work with the sales department who in turn speak with the revenue department. The sales department will speak with the revenue department on how much money can be spent towards a new marketing strategy. The accounting and budget committee will brainstorm to formulate a master budget. The master budget is the planning of future cash flows of each individual department budgeting expenses. In this master budget it may include the operating budget (sales, overhead cost, selling expenses, office expenses). The assets budget is incorporated into the master budget along with the financial budgets of employer salaries, the balance sheet and income statement. So in the accounting world we do as many average hard working people do. We budget our operating expenses compared with our financial budgets; assets with revenue with liabilities. The cash flow has to turn a profit for successful budgeting.

Wild, J. J. (2013). Financial and Managerial Accounting. New York : Mcgraw-Hill.

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Budgeting is used at the credit union as a planning tool and an accountability tool. The budget for the credit union is created after the strategic plan is developed. The strategic plan is created by the board of directors and the executives. The main purpose of the board of directors is to oversee the direction of the credit union for the membership. Once the two parties have developed the strategic plan for the year, it is the executives’ responsibility to create the budget. If the budget is approved by the board, the executive present the budget to the management staff. It is the responsibility of management to explain to the employees the importance of the strategic plan, the budget and to hold them accountable. Our text refers to this type of budgeting as Top Down budgeting. Bottom Up budgeting is referred to as the best type of budgeting but it would not work in a financial setting. The strategic plan would not be conjoined and each department would jockey so their department would benefit the most from the budget. The budget is an annual budget and is not revised every month. However, each manager is responsible for reviewing their department or branch budget month to verify they are on track with achieving the yearly budget.

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