Meant of standard budget

The definition of the standard budget Is the same as definition of the budge, but the value of general and administrative expenses are placed through "Geneec" program and not by the management of the company where it should be available in value general and administrative expenses tow prerequisites as following:

1- The value of general and administrative expenses is pertaining the activity of the company without other.

2- The value of the general and administrative expenses must reach to max and any has exceeded in the value of the general expenses and administrative will lead to extravagant in those expenses.

The objectives of preparing the standard budget

1 - Budget gives opportunity to compare with what has been done with what was planned in the Budget to find out the deviations and the causes and treatment of those deviations.

2 - Put everyone in the company in front of the responsibilities entrusted with.

3 - Budget helps in making decisions on reward and punishment based on what has been achieved from Budget.

4 – The standard budget determines responsible for covering the general and administrative expenses in the standard budget. If the company's results were affected negatively, although the marketing manager has achieved a sales value at the same cost of product that contained in the standard budget, this means that the company has exceeded the value of the general and administrative expenses then becomes responsible for the negative results is administrator and not a marketing manager and this is the goal of the work of the standard budget.

5- The standard budget can be used for new projects as a reference in determining the value of expenses that should not be exceeded to achieve the target of the project.

Requirements for the preparation of standard budget

In the case of the preparation of the standard budget for one product

1 - The value of the sale price of the product per unit

2 - The value of product cost per unit

3 - The share of the product ( for example, A ) from total fixed and current assets.

4 - Choose the degree of efficiency of the preparation of the budget which aimed to be achieved ( Good degree is the start point of safety - or very good degree – or high very good degree)

Example

1 - The selling price of the product ( A) = 12 pounds

2 - The cost of the product ( A) = 8 pounds

3- The share of the product ( for example, A ) from total fixed and current assets which amounts to 2500000 pounds estimated 833 333 pounds equal to one third

4 - the company targeted to achieve a good degree standard budget.

The program will prepare the standard budget for the coming year in the product ( A) in accordance with the previous data as follows

Budget for the product ( A) with good degree

Sales value = 729,166.36

(-) The value of purchases = 486,110.90

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Gross Profit = 243,055.46

(-) Expenses = 138,888.83

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Net Profit = 104,166.63

In the case of the preparation of the total standard budget for all products

1 - Total price values ​​of company's products

2 - The total cost values ​​of the company's products

3 - Total fixed and current assets.

4 - Choose the degree of efficiency of the preparation of the standard budget which aimed to be achieved ( Good degree is the start point of safety - or very good degree – or high very good degree)

Example

1 - The sale price of the product ( A) = 12 pounds

The sale price of the product ( B) = 20 pounds

The sale price of the product ( C) = 26 pounds

Total price values of ​​the company's products = 58 pounds ( enter in the data entry form )

2 - The cost of the product ( A) = 8 pounds

The cost of the product ( B) = 17 pounds

The cost of the product ( C) = 21 pounds

Total costs of the values ​​of the company's products = 46 pounds ( enter in the data entry form )

3 - Total fixed and current assets, which amounts to 2,500,000 pounds (This value is included in the data entry form )

4 - The company targeted to achieve a good degree budget

The program will prepare total standard budget for the coming year in accordance with the previous data as follows

Budget for the company's products with good degree

Sales value = 4062500

(-) The value of purchases = 3,221,982.76

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Gross Profit = 840,517.24

(-) Expenses = 528,017.24

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Net Profit = 312500