The company I selected in unit 2 was Unilever Nigeria plc. Unilever uses Zero-based budgeting
which is a budgeting approach that involves developing a new budget from scratch every time
rather than relying on the previous period's budget. In developing a budgeted income statement
they first prepare the sales budget.
A sales budget is the management’s estimation of sales for a future financial period (Greyling,
2021). Unilever uses internal sales staff and external researchers to prepare sales forecasts. The
chief marketing officer will oversee the whole process. The line items we have in the sales
budget include the sales in units, sales price per unit, and sales revenue. The sales in units are
calculated by multiplying last year's sales in that quarter by the expected percentage increase
provided by the professionals above.
The production budget is prepared based on the sales budget prepared above. However, a certain
level of ending finished goods inventory is required additionally there may be a finished goods
inventory that has rolled over from the last quarter. The desired ending finished goods inventory
will be a percentage of next quarter's sales in units. This value is added to the sales in units to
give the total finished goods inventory. Next, we deduct the beginning finished goods inventory
which gives us the units to be produced.
Unilever uses a rolling budget approach to ensure the planning process is kept ongoing. A rolling
budget is continually updated to add a new budget period as the most recent budget period is
completed (Bragg, 2021a). It operates in a system where a yearly budget of units and resources is
divided into quarterly periods. All these are coupled with bottom-up forecasting where the
budget process starts from lower-level employees then goes up the ladder to top management.
The direct materials purchases budget is used to assess the units of raw materials required to
achieve a desired level of production. The materials required per unit multiplied by the sales in
units will give us the materials needed in production. However, we have to know the beginning
and ending inventory levels required. The direct materials cost per unit is equal to the materials
required per unit multiplied by the unit cost. The production manager will provide budgeting
information.
The direct labor budget will show the total direct labor hours needed for production that we get
by multiplying the units to be produced by the direct labor hours per unit. Then we multiply this
which is a budgeting approach that involves developing a new budget from scratch every time
rather than relying on the previous period's budget. In developing a budgeted income statement
they first prepare the sales budget.
A sales budget is the management’s estimation of sales for a future financial period (Greyling,
2021). Unilever uses internal sales staff and external researchers to prepare sales forecasts. The
chief marketing officer will oversee the whole process. The line items we have in the sales
budget include the sales in units, sales price per unit, and sales revenue. The sales in units are
calculated by multiplying last year's sales in that quarter by the expected percentage increase
provided by the professionals above.
The production budget is prepared based on the sales budget prepared above. However, a certain
level of ending finished goods inventory is required additionally there may be a finished goods
inventory that has rolled over from the last quarter. The desired ending finished goods inventory
will be a percentage of next quarter's sales in units. This value is added to the sales in units to
give the total finished goods inventory. Next, we deduct the beginning finished goods inventory
which gives us the units to be produced.
Unilever uses a rolling budget approach to ensure the planning process is kept ongoing. A rolling
budget is continually updated to add a new budget period as the most recent budget period is
completed (Bragg, 2021a). It operates in a system where a yearly budget of units and resources is
divided into quarterly periods. All these are coupled with bottom-up forecasting where the
budget process starts from lower-level employees then goes up the ladder to top management.
The direct materials purchases budget is used to assess the units of raw materials required to
achieve a desired level of production. The materials required per unit multiplied by the sales in
units will give us the materials needed in production. However, we have to know the beginning
and ending inventory levels required. The direct materials cost per unit is equal to the materials
required per unit multiplied by the unit cost. The production manager will provide budgeting
information.
The direct labor budget will show the total direct labor hours needed for production that we get
by multiplying the units to be produced by the direct labor hours per unit. Then we multiply this
