Budgetary plainning/ case study

Budgetary Planning / Case Study

Budgetary Planning / Case Study

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Abstract

Prasad and Green Inc have been instructed that they must decrease their declining . This essay looks at each of their costs and what the implications of reducing them would be , and makes recommendations based on this

Budgetary Planning / Case Study

Prasad and Green Inc , have been instructed by their managers to reduce expenses by 10 due to reduced sales . What would be the implications of reducing each of the costs

Implications of

reducing costs

Let 's take a look at each of the costs incurred by the company as laid out by the budget provided to us

Direct materials

The cost of direct materials is 240 ,000 , and this would include all the manufacturing materials , etc . A possible implication of reducing this cost would be a decline in quality of the completed product . However it may be possible to source generic producers of the material who provide the same quality at a lower price . Also , since new products are to be developed , new suppliers can be brought on board at a cheaper rate , and perhaps some of the older ones can be phased out . I believe that subsequent to doing costing and checking quality the company will find that this cost can be reduced by at least 15

Wages and salaries

The budget has broken wages and salaries down into Sales salaries 50 ,000 , office salaries 80 000 , factory salaries (indirect labor 50 ,000 ) and direct labor 110 ,000 . Each of these divisions can be looked at separately or as a whole . The implications of reducing this cost would be either a reduction in staff or salary cuts . But various options could be looked into - outsourcing , retrenchments , etc . I believe at least 20 of the office salaries and 10 of costs incurred on direct labor can be saved here

Insurance

Insurance is currently costing the company 50 000 . Depending on what the excess amount is , the premiums could be reduced on this . 10 of the 50 000 can be saved here

Machine repairs

Machine repairs incurred by the company on an annual basis Some pricing needs to be done in this case , and I believe this could be brought down to 20 ,000 (b ) The best way to obtain the 70 ,000 in cost savings requested

In findings and discussion in (a ) I have stated that 15 of the 240 ,000 being spent on direct materials can be saved - and 10 of costs incurred on direct labor 11 ,000 ) can be saved for the future is the development of new products , I don 't believe that the sales side , or the indirect labor side should be reduced . If you looked at direct labor though and considered converting that to indirect labor on a contractual basis , costs could be saved here

Finally I looked at insurance and machine repairs and motivated why each of these expenses could be dropped by 10 (a Added together , these expenses...