Video 1 - The ending inventory budget

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Del curso dictado por Fundação Instituto de Administração

Budgeting essentials and development

28 calificaciones

Fundação Instituto de Administração

Budgeting essentials and development

28 calificaciones

The Budgeting Essentials and Development course focus on an integrative and practical view of concepts, methods, and techniques to develop a budget. After finishing this course, learners will be able to: - Develop the budget with a broad view of the corporate functions; - Integrate the strategic guidelines into the discussions of budgeting process; - Structure the budget planning and development in a logical sequence - Coordinate the project of budget planning with the different areas of the company - Actively promote assumptions discussions to improve the process of developing the budget - Apply financial concepts to support the budget planning process - Design a budget monitoring and control model to support the performance management - Evaluate the performance of the company by managing the results and the budget In this course, learners will have a deeper understanding of the budgeting process, its challenges, common issues, and approaches to mitigate the problems and improve the learning curve of budget planning. It is integrative by emphasizing the transition between the corporate strategy and the budget. It is practical by following a structured process of going through a framework that illustrates and demonstrates how to analyze, develop and control the budget.

De la lección

Module 3.1 - The company operations and the Budget

In this module, the discussion goes through a step-by-step framework to support the budget development. Each of the steps represents a relevant component of the budget, and the links between the budget of each area of the company are discussed. The integration of the different area's budget is one of the primary objectives of this module, which will lead learners to an integrative view of the budget development. And this integration is the key learning objective of the module.

Video 1 - The ending inventory budget3:51

Video 2 - Production budget5:06

Video 3 - Direct materials budget5:12

Video 4 - Direct materials: Combining Methods4:09

Conoce a los instructores

Alberto Sansiviero Jr.
MBA
FIA Futures Studies Program
Samantha Mazzero
MSc, MBA, BS Math
FIA Profuturo – Futures Studies Program
Nelson Yoshida
Ph.D., MBA, B.Eng.
FIA Profuturo – Futures Studies Program
Roberto Dumas Damas
M.Sc., CFA
FIA Profuturo - Futures Studies Program
Fernando Fleury
Ph.D.
FIA Profuturo - Futures Studies Program

[SOUND] Hi,

welcome back.

In this video, we start talking about production and inventory budget.

Look at where we are in the framework here.

Before thinking about production, we analyze the inventory of finished goods.

Why?

Because the company may or should have a policy for finished goods inventory.

And this policy impacts the production.

It may look simple in terms of starting and ending inventory.

However, there are issues to be considered, let's go through them.

For example, if the company applies a just in time model in the production,

then the inventory level would be low.

In contrast, if the company applies production planning,

then inventory level would probably be higher.

Or if managers define a minimum service level to serve customers

such as the delivery time then eventually what have to be higher.

Analyze inventory historical data in relation to quality of information.

Bad quality information demands for a higher inventory.

Check for a new product launches or products substitution.

Inventory level should be defined based on product life cycle.

Check for sales seasonality, the company will have to make to inventory

if production capacity can not be increased above the limit.

Remember also that a high finished good inventory will demand for

more working capital.

Managers may decide for a high level, they should be aware of debt.

The aspects we just discussed should be assessed to support ending finished goods

inventory, analyze each of them, and verify if adjustments

in the inventory should be done for every period of the budget.

For example, on a quarterly basis you may have to adjust

inventory level due to the plan of actions for the next budget period.

Remember, every budget period may have changes.

Look for them.

Talk to people.

The factors that may demand for inventory adjustment maybe for example, seasonality,

product substitution, or a change in the service level.

Look at this example here.

We can see here that the inventory level is adjusted

according to the changes in policies.

And the factors to adjust are, as I said, seasonality,

product substitution schedule, and change in service level.

Other factors could be relevant, for sure.

We need to assess which ones should be applied.

Remember again, budgeting is about assumptions.

Well, think about a company portfolio.

If it has too many products, it may be time consuming to do it for

every product line.

Here between us, imagine doing it for every single product.

And let's not forget, it may be hard to track an accurate record of inventory.

If this is the case, maybe it wouldn't be worth

to develop a drill down inventory for each single product.

Consider instead aggregating in product lines, business units or in territories.

Well, having the end in finished goods inventory budget,

we can think about production inventory.

Read the materials, stay tuned and see you soon.

[SOUND]

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