Saturday, October 5, 2019

Budget Plan Essay Example | Topics and Well Written Essays - 750 words

Budget Plan - Essay Example The document studies differences between flexible and static budget and also provides information derived from these two budget plans (Stice, Stice, & Swain, 2010; Oliver, 2000). Microsoft Corporation is the largest manufacturer, service provider and developer of computer software. It has high profit margins and a turnover of 70 billion annually. Analyzing the financial information reflects that the business has rapidly expanded; expenses have been proportionately increased with the revenue. But the interest and tax expenses are significantly higher that has had an impact on profit margins (Callahan, Stetz, & Brooks, 2011). The other intervention, mergers and joint ventures (Skype, bingo etc) have increased the efficiency and reduced the costs. Revenue Growth Average growth rate of 8.5% in revenues of Microsoft is calculated based on the growth rates reported by the company in the last 3 years.From the above, it could be indicated that cost of goods is increasing not in proportion to the revenue. In 2010, it was 20% of revenues then 22% in 2011 and became 24% in 2012. Similarly, changes in total operating expenses were 42% of total revenues in 2011, 39% in 2011, and reached 47% of revenues in 2012. This implies that they were not in proportion to changes in revenues. The company’s does not use any external borrowing therefore it has not paid any interest charges during the last three years. The US GDP has grown by an average of 2.6% in 2012. However, since Microsoft is an international company, economic growth rate of different countries where it is operating applies. The tax burden of the company is calculated in the above table as a proportion of sales. It was 10% of total revenues in 2010 and then remained at 7% for both 2011 and 2012. Microsoft’s competitors include Apple Incorporation. It has recorded phenomenal growth in the last three years as calculated in the following;    2012 2011 2010 Revenue 156,508,000 108,249,000 65,225,000    à ‚   48,259,000 43,024,000       45% 66% In 2012, Microsoft only reported a 5% growth in revenues whereas Apple has reported 45% in the same period. Flexible Budget of Microsoft For creating flexible budget of Microsoft three different growth rates are used for predicting future revenues and other elements of the income statement are presented on the basis of the average rate of each element as a proportion to revenues recorded in the last three years. Low: 3.5% Average: 8.5% High: 13.5%    2013 2013 2013    3.50% 8.50% 13.50% Total Revenue 76,303,305 82,789,086 93,965,613 Cost of Revenue 16,757,800 18,182,213 20,636,811             Gross Profit 59,545,505 64,606,873 73,328,801             Operating Expenses          Research Development 10,220,317 11,089,044 12,586,065 Selling General and Administrative 19,994,186 21,693,692 24,622,340 Non Recurring 2,136,585 2,318,195 2,631,151 Others                      Total Operating Expenses 32,351,0 88 35,100,930 39,839,556             Operating Income or Loss 27,194,417 29,505,943 33,489,245

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