Question
Mr. Roy is an engineer. He completed his graduation five years before and started working with different manufacturing company. After getting some practical experience in
Mr. Roy is an engineer. He completed his graduation five years before and started working with different manufacturing company. After getting some practical experience in manufacturing industries, he decided to start a business of his own and established a private company two years before and named it Kitchener Manufacturing Company. It was established to make two basic products X-1 and X-2.
After first year of its operation, he realized that he should learn basic techniques of running a business. He heard about "The Centre for Entrepreneurship Development" of Conestoga College. This centre provides training to entrepreneurs on managerial, financial and technical aspects of establishing and running an enterprise. Mr. Roy took a course on financial planning during summer and learned about the importance of budgeting for financial planning and control.
He learned that budget is the quantitative tool for planning and control. It provides pre-determined estimate of cost or price for a certain level of activity. It helps to forecast the cash requirements in advance. He is interested in making an arrangement with the bank a line of credit in advance and getting a lower rate of interest for his loan.
He believes in participative budgeting system and gathered information about the operating levels and estimates of costs and revenues for 2018. He also gave the actual data which are different from the budgeted.
Data (both budgeted and actual) that have been assembled by the managers for 2018 follow:
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