Riorden Manufacturing Budget Money Management Is an Essay

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Riorden Manufacturing Budget

Money management is an important skill for managers. No company, and thus no manager, has access to infinite amounts of money, so it is critical that a manager learn to review budgets, to account for increases in costs, and to determine how to trim a budget if the situation requires it. The Riorden Manufacturing IT Manager oversees a budget of under 2 million dollars, and must be capable of balancing the budget, which means balancing the requirements of running a capable IT department with the actual amount of money he has been given to run his department. His original budget included costs totaling $1,901,300 for the financial year, which runs from October through September. He has been tasked with decreasing the total budget from the expected level by 2%, to meet a total budget of $1,863,274 or less.

In the same financial period, Riorden Manufacturing has been forced to increase costs for hardware, software, and outside IT support, which fall into the budget categories of Contracts, Hardware, and Software Licenses, by 4% in the most recent iteration of his annual budget.

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Should his other costs remain unchanged, he would require $1,905,048 to fully fund his department's operations for the year. Given the rising costs, the IT Manager must now seek to cut at least $41,774 from his budget for the 2004 financial year.

Table 1: Rioden Manufacturing Revised Budget

Item

Original Total

Cost Increase

New Total

Reduction ($)

Final Total

% Overall Reduction

Compensation

Wages & Salaries

1,111,992.00

1,111,992.00

1,111,992.00

Benefits

255,758.16

255,758.16

255,758.16

Bonuses

200,000.00

200,000.00

20,000.00

180,000.00

10.0%

Total

1,567,750.16

1,567,750.16

20,000.00

1,547,750.16

1.3%

Other Expenses

Conferences

3,750.00

3,750.00

1,000.00

2,750.00

26.7%

Contracts (1)

43,200.00

1,728.00

44,928.00

44,928.00

Hardware (2)

8,500.00

8,840.00

8,840.00

Leased Lines

50,400.00

50,400.00

50,400.00

Maintenance

3,000.00

3,000.00

3,000.00

Office supplies

1,200.00

1,200.00

1,200.00

Postage

Shipping

2,400.00

2,400.00

2,400.00

Software Licenses

42,000.00

1,680.00

43,680.00

43,680.00

Special Projects

150,000.00

150,000.00

16,000.00

134,000.00

10.7%

Subscriptions

Telephone

3,000.00

3,000.00

3,000.00

Training

1,500.00

1,500.00

1,500.00

Travel

22,000.00

22,000.00

4,800.00

17,200.00

21.8%

Entertainment

1,400.00

1,400.00

1,200.00

14.3%

Total

333,550.00

3,748.00

337,298.00

22,000.00

315,298.00

5.5%

Total Operating Expenses

1,901,300.16

3,748.00

1,905,048.16

42,000.00

1,863,048.16

2.0%

The IT manager should attempt to make cuts that maintain.....

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