MET Emba-2011-2013

Preparation of a budget for eMBA Programme

A report submitted to the institute in partial fulfillment of the requirement for the award of eMBA for the year 20102011

Submitted to:

Prof: L. N. Chopde

Submitted By: Rahul Gandhi (129) Rima Tellis (132) Sneha Sawant (158)

MET ICSs PGDM 2010-2012 batch

CERTIFIC ATE

This is to certify that project titled Preparation of a budget for eMBA Programme a case study for student at XYZ College is based on the original study conducted by Rahul Gandhi (129) Rima Tellis (132) Sneha Sawant (158) Under my guidance and this had not formed a basis for the award of any other degree of this institute. Plac e Date Faculty Sign (L.N. Chopde)

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Certificate from the Organisation

This is to certify

that:

Rahul Gandhi

(129)

Rima Tellis (132)

Sneha Sawant

(158) Have successfully completed a study on Preparation of a budget for eMBA Programme a case study for student at MET College and have submitted the project report on the same. The study conducted was satisfactory. We wish them all the best.
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(Sign of the Officer)

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PREFA CE

In the following project we as a group have highlighted the importance of budgeting for a eMBA Programme.

The calculation of a budget for an educational programme has gained utmost importance over the recent years as the increasing expense of the fees and other study related material has increased in its prices. Against comparison of this, the job market has been too lucrative either. The job offers at hand after an educational programme at a management institute have been all the more important to recover the expenses of the education atleast within the first few years in the industry.

To understand this concept, we have studied the educational expenses for a Emba course at MET Institute of Management as an example from a students perspective and have brought forward a few points to the best of our ability.

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ACKNOWLEDGE MENT

We would also take this opportunity to express our deep gratitude towards our Coordinator Professor Gupte who is a constant source of motivation and for their never ending support and encouragement during this project. We would like to express our sincere thanks to Prof. L.N. Chopde who provided us an opportunity to do this project. And last but not the least, the librarian of MET, for helping us find the books and scan through the same for understanding the selected topic, our families, friends and colleagues who were a constant encouragement.

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CONTEN TS
SERIAL NO
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TITL E

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What is a Budget Types of Budgets Advantages of Budgets Problems in Budgeting Development of Budget for MBA Programme I Development of Budget for MBA Programme II Summa ry Bibliogra phy

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What is Budget?

A budget (derived from old French bougette, purse) is a list of all planned expenses and revenues. It is a plan for saving and spending. It is also the amount of money or resources earmarked for a particular institution, activity or time-frame. It is an itemized summary of intended expenditure; usually coupled with expected revenue. A budget is a financial document used to project future income and expenses. The budgeting process may be carried out by individuals or by companies to estimate whether the person/company can continue to operate with its projected income and expenses. In other terms, a budget is an organizational plan stated in monetary terms.

Objectives Budgeting:

of

The two major objectives of budgeting are to 1. Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. Enable the actual financial measured against the forecast. operation of the business to be

2.

Characteristics of a budget:
A good budget is characterized by the following: 1. Participation - involve as many people as possible in drawing up a budget. 2. 3. 4. 5. 6. Comprehensiveness - embrace the whole organisation. Standards - base it on established standards of performance. Flexibility - allow for changing circumstances. Feedback - constantly monitor performance. Analysis of costs and revenues - this can be done on the basis [ 88]

MET ICSs PGDM 2010-2012 of product lines, departments cost centers. batch

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Types of Budgets:
1. Sales budget: The sales budget is an estimate of future sales, often broken down into both - units and Rupees/ Dollars. It is used to create company sales goals. To enable us to forecast sales for the budget period one can use a number of methods and some are listed below: Customer Surveys Customer surveys include surveys of past customers as well as future customers and groups identified as being possible customers. These groups can provide information that will assist in predicting future trends in sales, such as whether sales demand will increase, decrease or remain stable. Market Research Market research can be carried out by organisations that specialise in this field and are skilled in market research techniques. Market research will enable those preparing the budget to make decisions on possible changes in the market and to identify new markets to move their products and services into. Statistical Analysis Statistical analysis will enable those preparing the budget to predict possible future demand. Statistical analysis can be as simplistic as calculating averages based on past sales to identify trends that can be extrapolated into the future. It can also include more complex regression analysis that takes into account changes in past sales and converts these into expectations on the basis of sales forecasting. 2. Production budget:

Product oriented companies create a production budget which estimates the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with [1 010

MET ICSs PGDM 2010-2012 manufacturing those units, including labor and material. batch Once the sales budget has outlined the volume of sales that are required we need to set a budget for the expenses that will be incurred in producing that volume. The expenses

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MET ICSs PGDM 2010-2012 batch budget separates expenses into two main areas: the first being factory expenses and the second being what we will call administration. Factory, or operational costs, includes such things as the components and supplies used to produce the product, or services we provide. The raw materials used in production are called inventory. The sales budget provides an indication of the inventory that will be required to meet the projected volume of production. Factory costs will also include expenses such as power, machinery costs, and direct labour within the factory or operational side of the business itself. The administration costs are non-operational costs and will include things such as marketing, human resources, rents and vehicle costs as well as general administration. 3. Cash Flow/Cash budget: The cash flow budget is a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing. Generally not all revenue from sales is received in cash and other cash may be received from sources other than sales, such as when plant and equipment is sold. In the case of the cash flow budget not all expenses represent cash and there may be cash to be outlaid for things such as dividend payments, capital requisitions, and loan or lease payments, which are not expenses. These things need to be combined to report cash receipts and payments which, when adjusted for the cash at hand figure at the beginning and end of the period, will give you the cash-flow budget for the year. Also, the cash budget is for cash planning and control. It presents expected cash inflow and outflow for a designated time period. The cash budget helps management keep cash balances in reasonable relationship to its needs and aids in avoiding idle cash and possible cash shortages.

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MET ICSs PGDM 2010-2012 batch The cash budget typically consists of four major sections: a) Receipts section, which is the beginning cash balance, cash collections from customers, and other receipts b) Disbursement section, comprised of all cash payments made by purpose c) Cash surplus or deficit section, showing the difference between cash receipts and cash payments d) Financing section, providing a detailed account of the borrowings and repayments expected during the period. 4. Marketing budget: The marketing budget is an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service. 5. Project budget: The project budget is a prediction of the costs associated with a particular company project. These costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. 6. Revenue budget: The Revenue Budget consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies. 7. Expenditure budget: A budget type which include of spending data items. 8. Profit Budget: This budget is used to predict financial performance. The budgeted figures for sales and expenses from previous budget calculations are required and these are included in the profit budget. The profit budget will require figures that are converted into percentages so that management can easily assess how well the business is meeting its objectives.

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Advantages of budgeting budgetary control:

1.

and

It compels management to think about the future, which is probably the most important feature of a budgetary planning and control system. Forces management to look ahead, to set out detailed plans for achieving the targets for each department, operation and (ideally) each manager, to anticipate and give the organisation purpose and direction. It promotes coordination and communication. It clearly defines areas of responsibility. Requires managers of budget centres to be made responsible for the achievement of budget targets for the operations under their personal control. It provides a basis for performance appraisal (variance analysis). A budget is basically a yardstick against which actual performance is measured and assessed. Control is provided by comparisons of actual results against budget plan. Departures from budget can then be investigated and the reasons for the differences can be divided into controllable and non-controllable factors. It enables remedial action to be taken as variances emerge. It motivates employees by participating in the setting of budgets. It improves the allocation of scarce resources.

2. 3.

4.

5. 6. 7.

8. It economizes management time by using the management by exception principle.

Purpose of creating a Budget:

A budget is something that is necessary and something that can help you control your finances. But to become dedicated to keeping a budget, one needs to understand why one is creating it in the first place. By knowing the purpose of creating a budget, one can adjust to putting in the time and effort required to make it work. 1. Organization A budget lists all of your expenses for the month, including your monthly bills, and allows you to pay your bills on time and in full. [1 414

MET ICSs PGDM 2010-2012 Without a budget, it can be difficult to keep your bills organized and you batch may lose bills that wind up not getting paid. One purpose of a budget is to give a structure to your personal finances that allows you to

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MET ICSs PGDM 2010-2012 batch account for all of your bills and maintain a good credit rating by making sure your bills are paid. 2. Control When you are putting together a budget, you need to analyze your monthly spending on expenses such as food and gasoline. You can also examine your bills to see which ones can be altered to lower your monthly obligation. For example, by reducing your cable television bill to just basic cable and renting movies when you feel like watching them you can save money on your monthly entertainment expenses. A budget allows you to gain control of your spending, which can increase the amount of extra money you have each month. With your budget planning, you can then determine the best ways to use that extra money. 3. Planning A budget will allow you to see where all of your money goes each month, and it will also help you to plan for saving for large purchases or plan on paying down debt. When you use a budget you are engaging in a form of financial planning for yourself. Use that tool to save for a child's education, apply additional funds to paying off existing debt or saving for a family vacation. 4. Emergencies A financial emergency can cause problems for a family that is not prepared. Using a personal budget will help you to immediately understand your financial situation and make plans to deal with an emergency. One of the contingencies you can include in your budget each month is to set aside money in a savings account that can be used for emergencies only.

Budgeting:
Budgeting is the formal procedure of preparing budgets. It involves the following basic steps: 1. Identifying expenses: Fixed expenses like rent/mortgage, utilities, administrative expenses, taxes and insurance of premises. [1 616

MET ICSs PGDM 2010-2012 batch variable expenses like raw material cost, direct labour, direct expenses 2. 3. 4. 5. 6. 7. 8. Determining different sources of income Preparing the budget Establishing the budget period Laying down the budget procedure Allocating income for expenses Monitoring the efficiency of the budget Re-assessing the budget

Problems in budgeting
Whilst budgets may be an essential part of any marketing activity they do have a number of disadvantages, particularly in perception terms. 1. Budgets can be seen as pressure devices imposed by management, thus resulting in: a) b) 2. bad labour relations Inaccurate record-keeping.

Departmental conflict arises due to: Disputes over resource allocation Departments blaming each other if targets are not attained.

3.

It is difficult to reconcile personal/individual and corporate goals.

4. Waste may arise as managers adopt the view, "we had better spend it or we will lose it". This is often coupled with "empire building" in order to enhance the prestige of a department. 5. Managers may overestimate costs so that they will not be blamed in the future should they overspend. [1 717

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Development of Budget for MBA program in XYZ College

Case 1: Resident student preparing for the MBA Course

Schedule: Cost of Entrance Exam Cost for Entrance Exam & others Serial No. 1 2 3 4 5 6 7

Particulars Cost of Tuition classes for Preparatory Exams Cost of Books & Stationary Cost of Mock Tests Cost of Forms for different Colleges Cost of Food Cost of Travelling Other Miscellaneous Expenses (5% of Total) Total

Amount (in Rs.) 20,000 3,000 10,000 15,000 5,000 10,000 3,150 66,150

Assumptions - The individual starts preparing for the exam a year before from his Local place and an individual stays at his own residential house, hence not taken into account the Rents and other major expenses (food, travelling, etc). Sr. No. 4 - Cost of Forms for different Colleges Here individual applies for 10 different colleges and costs him Rs 1500 /per form So, total expense incurred by him Rs 1500*10 [1 818 Rs 15,000/-

MET ICSs PGDM 2010-2012 batch Sr. No. 5 & 6 - Cost of Food & Travelling As he is resident and stays with family so expense incurred is minimal assumed Rs 5000 /- per annum. And assumed Rs 30 per day of travelling so Total cost per annum adds up to around Rs 10,000 /- Now, the individual has been selected to PGDM (EBusiness program) for a XYZ College Assumption - His initial cash balance is of Rs 10 lakhs (from his earnings and provided by his family) So, his total expenditure occurred during the 1 year Cost for the budget of PGDM (E-business Program) Serial No. Particulars 1 2 3 4 5 6 7 8 9 Cost of registration expense Cost of documentation and attestation Tuition Fees Travelling expenses Food Expense Books and stationery Cost of formal blazer Cost of formal shoes Miscellaneous expenses (10% of total) Sum total Amount (in Rs.) 1,000 100 207,000 71,420 91,250 7,123 4,000 3,000 38,489 423,382
st

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MET ICSs PGDM 2010-2012 batch Schedules: Sr. No. 4 Travelling expenses Serial No. Particulars 1 Railway fare (quarterly pass - First class) Rs. 2540 x 8 2 college being 52 weeks a year for 2 years Auto Rickshaw fare Bandra R.S - METR.S Rs. 30 x no of trips Auto Rickshaw fare house - R.S. - House Rs. 40 x no of trips 29,200 Amount (in Rs.) 20,320

21,900

Total

71,420

Sr. No. 5 Food Expenses Serial No. 1 Particulars Cost of breakfast / day = Rs. 25 Cost of breakfast for 2 years 2 Cost of lunch / day = Rs. 50 Cost of lunch for two years Cost of Dinner / day = Rs. 50 3 Cost of dinner for 2 years Sum total 36,500 91,250 36,500 18,250 Amount (in Rs.)

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MET ICSs PGDM 2010-2012 batch Note: miscellaneous snacks have been considered to have costed and offset at rounding of the amount for lunch and dinner on the higher side Sr. No. 6. Books and stationary Serial No. 1 Amount (in Rs.)

Particulars Total number of Subjects = 37

Cost of books / subject assumed 5,550 at Rs. 150 including the return amount facility available at the leading book stores across the city 2 Cost of 1 notebook = Rs. 25 Cost of notebooks for 37 subjects 3 925

Miscellaneous stationery = 10% of 648 total Sum total 7,123

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Cash Budget
Cash Budget for 3 years Particulars Cash Balance Year 1 Year 2 Year 3

1000000 1233850 858670

Cash Receipts Salary Received 300000 0 10000

Total Cash

1300000 1233850 868670

Cash Payments Schedule for Budget for PGDM E Business 66150 423382 423382

Total Cash Balance

1233850 858670

493490

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MET ICSs PGDM 2010-2012 batch Case 2 : Non Resident student preparing for the MBA Programme

Cost for the budget of PGDM (E-business Program) Serial No. Particulars Amount (in Rs.)

1 2 3 4 5 6 7 8 9

Cost of registration expense Cost of documentation and attestation MET Fees Travelling expenses Food Expense Books and stationery Cost of formal blazer Cost of formal shoes Miscellaneous expenses (10% of total) Sum total

1,000 100 207,000 71,420 91,250 7,123 4,000 3,000 38,489

423,382

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MET ICSs PGDM 2010-2012 batch Schedules: Sr. No. 4 Travelling expenses Serial No. 1 Particulars Railway fare (quarterly pass - First class) Rs. 2540 x 8 2 college being 52 weeks a year for 2 years AutoRickshaw fare Bandra R.S - MET- R.S Rs. 30 x no of trips 3 AutoRIckshaw fare house - R.S. - House Rs. 40 x no of trips Total 29,200 71,420 21,900 20,320 Amount (in Rs.)

Sr. No. 5 Food Expenses Serial No. Particulars 1 Cost of breakfast / day = Rs. 25 Cost of breakfast for 2 years Cost of lunch / day = Rs. 50 Cost of lunch for two years Cost of Dinner / day = Rs. 50 3 Cost of dinner for 2 years Sum total 36,500 91,250 36,500 Amount (in Rs.)

18,250

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MET ICSs PGDM 2010-2012 batch Note: miscellaneous snacks have been considered to have costed and offset at rounding of the amount for lunch and dinner on the higher side

Sr. No. 6. Books and stationary Serial No. 1

Particulars Total number of Subjects = 37

Amount (in Rs.)

Cost of books / subject assumed 5,550 at Rs. 150 including the return amount facility available at the leading book stores across the city 2 Cost of 1 notebook = Rs. 25 Cost of notebooks for 37 subjects 3 925

Miscellaneous stationery = 10% of 648 total Sum total 7,123

Now, the individual has been selected to PGDM (E-Business program)

Assumed his initial start cash balance of Rs 10 lakhs (from his earnings and provided by his family) So, his total expenditure occurred during the 2 years

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Summa ry:
Creating a budget plan has several benefits---it can help you organize your individual and family expenses, track what is spent on unneeded goods, and make sure you are living within your means by managing your money and budget for the months ahead. Currently we can find plenty of helpful tools online, such as budget calculators, budget planners and home budget software. Hence from Business point of view Budgeting plays a vital role by looking into cash expenses for payroll, advertising and plant and equipment exceeded the budgeted amounts the Company.

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Bibliography: Managerial Accounts Khan & Jain Fundamentals of Financial Management Van Horne Financial Management site: www. financialmanagementdevelopment.com

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