Page 65 - Budgeting for Managers

Budgeting for Managers
48
Get to Know Your Business Better
One manager of a small health food and vitamin store felt
that he was wasting his time and the company’s money by
staying open until 10:00 every night instead of closing at 9:00. But he
didn’t just decide to change the closing hour. He tallied the register at
9:00 every night for two months. When he closed at 10:00, he
checked the difference to find out how much money the store made
in the last hour.After two months he saw that, though sales were spo-
radic, they paid off. He kept the late hours and made more money.
The smart manager experiments and goes with what works, rather
than making decisions based on assumptions without evidence.
Budgeting for Multiple-Shift Operations
So far, we’ve been discussing only companies that run one shift
per day. If we work at a store that has long hours or a factory
that runs all the time, we need to be able to create budgets for
multiple shifts. Let’s pick a simple example: a manufacturing
facility that runs 24/7, that is, 24 hours a day, 7 days a week,
but shuts down one week a year for facilities maintenance. Staff
attend training during their week off. Tables 3-3 and 3-4 show a
spreadsheet that lets you calculate costs for any time period
and see what they are for any other time period.
If we enter a cost or an income item in the shaded cell on
any line, the spreadsheet will calculate that cost or income for
all other time periods. The first six columns are for items that
apply 52 weeks per year, such as rent. The second set of six
columns shows results per the work year, which is 51 weeks.
For example, if electricity costs $100 per hour for the 51 weeks
the plant is operating, that is only $98 per hour divided over the
52-week year. On the other hand, if a piece of equipment rents
for $100 per week, and we pay the rental fee all year, although
it’s used only 51 weeks a year, then it should be worth $102 per
week of operation.
If you want to create a similar spreadsheet, the formulas are
shown in Table 3-4. We have included only one line of formulas
and split it into two rows so that it will fit on the page. You