Baker, J.J. & Baker, R.W., Budgets Static Essay

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Baker, J.J. & Baker, R.W., Budgets Static budgets are used to make sales, revenue, and expense forecasts for companies with predictable expense and sales patterns. Expense and revenue figures in static budgets do not change, regardless of the actual level of activity. Very often, therefore, there are deviations between actual amounts and budgeted amounts -- this difference is referred to as static budget variance.

In this case: budgeted sales (output) = 25,000 (2500 @ $10)

Actual sales (output) = (24,550) (2445 @ $10)

Static budget variance = $450

Net revenues = actual procedures done x budgeted cost

= $24,550

Net expenses = $1.85x 2455

= $4,546

Revenues -- expenses = $24,550 - $4,546

= $20,004

Part Two

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The shorter the amount of time taken to recover the same, the more profitable a project is (Graham & Smart, 2011).
The Average Rate of Return: the ARR determines a project's viability by totaling its generated cash flows over the years of investment, and dividing the same by the number of years.

The Net Present Value: this technique determines a project's viability based on the discounted sum of cash flows generated from it over its life course (Finance Formulas, 2014). A positive NPV indicates that a project is…

Sources Used in Documents:

References

Finance Formulas. (2014). Net Present Value. Finance Formulas. Retrieved 1 October 2014 from http://www.financeformulas.net/Net_Present_Value.html

Graham, J. & Scott, S. (2011). Introduction to Corporate Finance: What Companies Do (3rd ed.).Mason, OH: Cengage Learning.


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