Objectives of Master Budgets
Read Case 13-4. How would a master budget support the three objectives of planning, directing and control for Domino’s?
Objectives of the master budget Domino’s Pizza L.L.C. operates pizza delivery and carry-out… 1 answer below » Objectives of the master budget Domino’s Pizza L.L.C. operates pizza delivery and carry-out restaurants. The annual report describes its business as follows: We offer a focused menu of high-quality, value-priced pizza with three types of crust (Hand- Tossed, Thin Crust, and Deep Dish), along with buffalo wings, bread sticks, cheesy bread, CinnaStix ® , and Coca-Cola ® products. Our hand-tossed pizza is made from fresh dough produced in our regional distribution centers. We prepare every pizza using real cheese, pizza sauce made from fresh tomatoes, and a choice of high-quality View complete question » Objectives of the master budget Domino’s Pizza L.L.C. operates pizza delivery and carry-out restaurants. The annual report describes its business as follows: We offer a focused menu of high-quality, value-priced pizza with three types of crust (Hand- Tossed, Thin Crust, and Deep Dish), along with buffalo wings, bread sticks, cheesy bread, CinnaStix ® , and Coca-Cola ® products. Our hand-tossed pizza is made from fresh dough produced in our regional distribution centers. We prepare every pizza using real cheese, pizza sauce made from fresh tomatoes, and a choice of high-quality meat and vegetable toppings in generous portions. Our focused menu and use of premium ingredients enable us to consistently and efficiently produce the highest-quality pizza. Over the 41 years since our founding, we have developed a simple, cost-efficient model. We offer a limited menu, our stores are designed for delivery and carry-out, and we do not generally offer dine-in service. As a result, our stores require relatively small, lower- rent locations and limited capital expenditures. How would a master budget support planning, directing, and control for Domino’s?
Post by classmate 1
Domino’s Pizza can use a master budget to plan all its operations based on sales forecast made by the Sales Department. This sales forecast is useful to elaborate both the sales budget and the production budget, and both would be identical since Domino’s does not currently have a “finished goods inventory”. Both budgets can also be used to elaborate the direct labor budget, that is, salaries for cooks, drivers who deliver pizzas, wages for people that make the dough. Furthermore, both budgets can be used to elaborate direct material purchases budget, that is, all the ingredients needed to make pizzas, the packaging in which they will be delivered, drinks, and so on. Moreover, overhead budget shall include rent, salaries for management, insurance, etc. Assuming that drivers own their own vehicles, depreciation and maintenance for those are not included in the overhead budget.
Individual restaurants can use the budget process to coordinate and direct all operations. That way managers will know that each restaurant is working under the same assumptions on the budgets. Thus, the operations of the whole company and each restaurant can be controlled, and feedback will be made when needed. Finally, feedback can be used to adjust any production cost if the sales drop or rise. This would prevent the company (and each restaurant) from having made any unnecessary direct material purchase if sales drop, or having a shortage in food due to sales rising.
Warren, Carl S (2018). Survey Of Accounting 8e. Chapter 13 Budgeting and standard costs. Pages 553-559
Post by classmate 2
A master budget is a necessary planning tool for businesses and corporations. The master budget is used by the management team to direct the activities of the corporation and judge the performance and goal-meeting of all of its responsible teams and departments. The master budget is a one-year document that encompasses all other budgets (Carlson, 2019) including the operational budget and financial budget.
American pizza chain Domino’s relies on a simple model of business with a limited menu and small stores to cut overhead costs. This model has allowed Domino’s to pass its savings on to consumers in the form of numerous deals for ordering pizza and other food. In its budgetary planning, a master budget would serve the business well for planning, directing, and control. In order to keep track of its lower costs, a mater budget help as it includes the direct materials, labor, and overhead within the operating budget. Domino’s also boasts low capital expenditures, and these are recorded on the master budget. The company can use the master budget to state the budgetary figures for all of its larger and expensive fixed assets such as rent and utilities. Using a master budget also allows Domino’s to evaluate how the company has performed in the past during the planning period, for which the budget is also effective.
Other parts of the master budget include a budgeted balance sheet, which shows the ending balances of all of its liability, asset, and equity accounts, and the cash budget, stating cash inflows, outflows, borrows, and investments. A master budget would benefit Domino’s since it allows for a visual and formal representation of its limited store and capacity model. The company would have much to keep up with, but it would be laid out in a simple and defined way with a master budget.
Carlson, R. (2019, September 9). How to Prepare a Master Budget for Your Company. Retrieved April 20, 2020, from https://www.thebalancesmb.com/budgeting-what-is-a-master-budget-393049
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