Page 32 - Budgeting for Managers

Budgeting: Why and How
Taxable item A line item that is subject to sales or some
other tax.A line item may be subject to sales tax in one sit-
uation and not in another. For example, if you buy supplies
for internal use in a business, they are taxable. If you buy the same
item to produce items for sale, you can make a tax-exempt purchase. 15
And, if you work for a not-for-profit organization, then almost all pur-
chases are tax-exempt.Whether an item is taxable or not also varies
from state to state. For example, in the print shop budget, repair serv-
ices were taxable. In other states, repairs are broken into parts (tax-
able) and service (not taxable).
tion and reasoning are important as well. With this information,
you and others can review the budget, improve it, and easily
extend it into the future.
And, if errors appear, it’s
Budgetary assumptions
possible to trace the A short document that
source of the mistakes. answers the questions:
Perhaps your planning was • Where did you get your numbers?
right, but you were given • What thinking led you to this esti-
the wrong information to mate?
begin with.
We put all this information into a one- or two-page docu-
ment called budgetary assumptions (Table 1-4). Keep it short
and simple. Also, make sure it is clear so that you can remem-

Print Shop Budgetary Assumptions
General: Year 2002 figures were provided by the accounting depart-
ment using year-end actual results.
Line item
Equipment leases: Costs lowered because one of three units will
be purchased in 1/2003.
Equipment purchase: Increase due to execution of buy option
on leased photocopy machine
All supply items: 20% increase based on discussions with cus-
tomers about expected growth in demand for services.
Sales tax: Calculated as 6% of total taxable items in 2002. Due to
rate increase, calculated at 8% of total taxable items in 2003

Table 1-4.The print shop: budgetary assumptions