19 Oct money down the road
In our readings this week, the authors of our textbook described how several businesses have made decisions to spend more money upfront, hoping that they will save money down the road. For example, Staples purchased electric delivery trucks that cost more than diesel trucks, yet the savings in gas and maintenance are anticipated to make up for this expense. With this kind of decision-making, businesses are using the concept of time regarding money. We also learned about budgeting in Chapter 9. Have you developed a budget for your personal income and expenses? Let’s think of something close to home for this week’s discussion forum conversation.
In your initial post, compare the information pertaining to Master Budgets (chapter 9) to your personal budget (you do not need to provide actual number!) If you were to use your personal budget as business managers use the Master Budget, you would probably find some areas where you could save money, or make a change so that you will have more money in the future.
Provide an example of investing in something that will hopefully realize future profits (incorporating alternative energy sources as you build your new home; buying a hybrid vehicle for your next car; switching to a “whole food” diet rather than buying pre-packaged foods). Give enough information in your example so that your peers can address the following questions in their replies.
How did the example illustrate the time value of money concept?
How was the Net Present Value concept illustrated?
How was the payback period determined?
Write at least 300 words
Post at least two replies to either peers or the instructor
Write at least 150 words per reply
Chad Watkins
There is a significant difference between a master budget and a personal budget. A master budget consists of a number of separate but interdependent budgets that formally lay out the company sales, production, and financial goals (Noreen, 2017). In more depth, a master budget consists of a number of separate yet interdependent budgets. These budgets outline specifically the company’s sales, unit production, and financial goals. Combined together this is represented in greater detail within a cash budget, budgeted income statement, and budgeted balance sheet.
In the example provided, there are opportunities in which an upfront cost will exceed the alternative options such as a diesel truck vs an electric truck. However, in the long term outcome, there are significant cost savings opportunities that are relative parts of the master budget. For example, in my personal budget for the department I manager, there are opportunities in which cost savings are possible to achieve. In pharmacy, there are significant opportunities that include the incorporation of automation to facilitate workflow. The upfront cost may pose a significant barrier, yet there are significant cost savings opportunities due to improved efficiencies and decreased labor costs. For example, an automation device has the capability to prepare prescriptions based on an automatic dispensing feature. There is an upfront cost of $250,000 that is required, yet the device has the potential to save 20 hours of labor costs per day from the pharmacy technician staff. This will over time create an opportunity in which there will be savings that will exceed the cost of the technician labor.
In developing a master budget, this is important to understand the implications that any improvement would have on an entire department. For example, in this example there is a potential for significant cost savings for a department. It would be fairly simple to calculate the payback period. In this instance, the average technician rate of $20/hr divided by the purchase price of $250,000 would yield a required 12,500 hours that must be saved prior to surpassing the payback period. In this instance, saving an average of 20 hours per day, after 625 days the payback period would be exceeded. For such reasons, in the long term the implementation of pharmacy automation could serve as a worthwhile investment.
References:
Noreen, E. (2017). Managerial Accounting for Managers (4th Edition). Mcgraw-Hill Education.
Steven Pelkey
Hello
A budget could be used for anything such as one employer I worked for we set a budget a budget can be used for many different items or a budget can be used for saving money or even saving cost for many reasons such as saving money for a department in a company a budget can be used to buy parts as well as pay for services within a company a master budget or even a setting up an income statement can be a good idea for any startup when setting up a budget it is important to understand what you are trying to setup or start up, below I have a basic idea for a company.
A company for landscaping we used a monthly plan set to save on services we used for landscaping the hospital areas the main are we looked at was mowing, stick edge and weed eat but there were other areas we looked into such as spraying for weeds as well as bugs in grass, my budget would include the following income as well as spending I also need to think about housing and food. when planning a master budget one must realize that when planning for the budget not only the long term plan but also must think about short term planning that must happen when thinking about company or department.
When setting up planning of course most people are thinking of saving for company but what we must realize when setting up for savings we must think or calculate everything within the department or company below I have a small calculation for a employee in a landscaping company on a typical 40 hour work week.
Landscape 1000
Mow grass $300
Stick edge $300
Weed eat $100
Weeds $ 200
Bugs $100
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