Page 42 - Budgeting for Managers

The Parts of a Budget
Long Term
A long-term budget looks further ahead. What will your depart-
ment be doing for the next five, 10, or 20 years? It may be hard
to imagine. But thinking that far ahead is part of being a good
manager and making a good budget. 25
If the copy shop needs to buy new copiers every five to
seven years, it would be best to know what years we’re likely to
need to do so. That way, we can say, “Three years from now,
we’ll need a new copier.” That’s a lot better than not planning
ahead. If we don’t plan, we could find that we suddenly need to
buy a new copier next month and we didn’t plan for it when we
made the budget for the year.
Table 2-2 shows a simplified long-term budget. Take a look
at it, and then we will explain the terms and the thinking that
helped us look 20 years ahead.
1 Year 5 Years 10 Years 20 Years
Income
Sales $15,000 $75,000 $150,000 $300,000
Gross Income $15,000 $75,000 $150,000 $300,000
Expenses
Fixed Costs
Fixed Annual 8,925 44,625 89,250 178,500
Start-up 1,000 3,000 3,000 3,000
Interim — — 4,000 6,000
Total Fixed Costs $9,925 $47,625 $96,250 $187,500
Expenses
Variable Costs
Annual 800 4,700 9,800 19,500
Project — 2,500 2,500 7,500
Total Variable Costs $800 $7,200 $12,300 $27,000
Expenses
Semi-Variable Costs
Fixed Base/Variable
Volume 1,000 7,000 12,000 25,000
Total Expenses $11,725 $61,825 $120,550 $239,500
Net Income $3,275 $13,175 $29,450 $60,500

Table 2-2. Simple long-term budget