Importance of a material supply budget Materials supply budget represents the estimates of the materials required for a project. Such a budget entails details such as the materials themselves in form of composition, where they are found and how they would reach their destination. The overall costs that relates to all the aforementioned activities are given estimates in a budget form, previous costs are also recorded to aid comparison and all the necessary adjustments are done (Horngren, Datar & Rajan, 2012).
Such forms of budgets are therefore important and vital in several ways, which entails on saving time through created convenience as well as incurring planned costs, which ultimately saves on the costs themselves. As a formal written summary of goals and objectives, a material supply budget has the following importance.
The budget helps in setting the mentioned goals themselves and monitors the way towards achieving them, like in our case we will know the aggregate materials are needed for road repairs and maintenance hence able to set when we expect the completion of the projects to be (Horngren, Datar & Rajan, 2012). A budget will also ensure that projects are run in a timely manner and that they are achieved within the set time hence saving time.
This is because the plans will enable the materials to reach the site in time and with the right specifications. The workers at the site will therefore have an increased efficiency in the way they conduct their work. Materials supply budget also helps the authorities in planning enabling the achievement of the future routines of the contractor (Horngren, Datar & Rajan, 2012). Control is enhanced through material supply budgets.
This is realized when costs are compared from the past, the present and the prediction of the future costs hence made possible. A budget is therefore an important and integral tool of any formal organization since it guides the way tasks are performed. More importantly, it quantifies and defines the goals and objectives of any given organization. It defines the quantities in their exact forms in terms of the accuracy required.
Project Material Supply Budget The budget as considered by Ted Barton for the city of Granston in Canada as at 25th November would consider much details ranging from; the annual budget which is set at $700 million, the company has a workforce of 900,000 people. For supplies of road construction and repairs, the company spent $3 million to contract the responsible companies. The contracts were to last for 3 years with 2 additional years at 2% increase in the costs, the costs are adjustable to inflation. Current period budget
When the project is extended for two years the total budget increases by 2% and becomes 102 %( 2,498,730) = $2,548,704.60. Considering Q3 Exhibit 2, the total budget becomes (337,500*.9614) = $3,244,725. The budget can be said to be favorable since it falls within the $3 million planned expenditure.
The material supply budget projected above would therefore act as a guide to the activities of the city through the able leadership of Ted Barton. It will assist the city achieve its planning and controlling goals, therefore, its implementation and constant review must be conducted to attain the efficiency required (Horngren, Datar & Rajan, 2012).
References
Horngren, C. T., Datar, S. M., & Rajan, M. V. (2012). Cost accounting: a managerial emphasis (14th ed.). Upper Saddle River, N.J.: Pearson/Prentice Hall.