Budgeting is an important internal activity.

Budgeting is an important
internal activity. Preparing budgets involves forecasting sales and estimating
costs. For this SLP, you will prepare a flexible budget for next year for Raytheon Corporation.The budget needs to be
realistic and based on corporate and economic trends.
Companies prepare budgets
based on absorption and/or variable costing. Due to lack of information, we’re
limiting our budgeting to the absorption approach.
Don’t forget that the presentation of the information is important.
Set up the
flexible budget showing three different growth rates. Use the financial
statements and do research on the company of your choice to determine growth
trends. Explain your estimates and prepare a flexible budget showing the low,
the average, and the high revenues and adjust all other line items in the
income statement to reflect the revised revenue assumptions.
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What is the growth rate in sales for
the past three years?
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Are revenues and expenses growing at
the same rate? What was the experience in the past few years?
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What is the current growth rate in the
economy?
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How are the competitors doing?
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Current interest rates and tax burdens.
Discuss the implications of the information after you have completed the
flexible budget.
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How does the flexible budget differ
from a static budget?
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Budgets are used for planning and
control. Discuss how you can use the information derived for these two
purposes?
•
Comment on using this information for
performance evaluations.