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Flexible Budget for DirectTV for Three Levels of Activity

Requirement:

DIRECTV COMPANY WILL BE USED.

Budgeting is an important internal activity. Preparing budgets involve forecasting sales and estimating costs. For this SLP, you will prepare a flexible budget for next year for the company of your choice. The budget needs to be realistic and based on corporate and economic trends.

Companies prepare budgets based on absorption and/or variable costing. Due to lack of information, we're limiting our budgeting to the absorption approach. Don't forget that the presentation of the information is important.

Set up the flexible budget at three levels - minimum, average and high revenues. Use the financial statements and do research on the company of your choice to determine growth trends. Explain your estimates and prepare a flexible budget showing the low, the average, and the high revenues and adjust all other line items in the income statement to reflect the revised revenue assumptions.

What is the growth rate in sales for the past three years?
Are revenues and expenses growing at the same rate? What was the experience in the past few years?
What is the current growth rate in the economy?
How are the competitiors doing?
Current interest rates and tax burdens.
Discuss the implications of the information after you have completed the flexible budget.
What did you learn ; and
How can you use this information as a manger?

Solution Preview

What is the growth rate in sales for the past three years?

Revenues are up 26% from 2009 to 2011, with more of the increase occuring between 2009 a dn 2010 than from 2010 to 2011. US subscribers are up 3.6% frm 2010 to 2011 and Latin American subscribers are up 26.6% from 2010 to 2011.

Are revenues and expenses growing at the same rate? What was the experience in the past few years?

Expenses are growing more slowly than revenues. Expenses are up 19.6% while revenues are up 26% over the 2009 - 2011 span.
What is the current growth rate in the economy?

The economy is ...

Solution Summary

Your tutorial is 354 words plus a flexible budget showing the contribution margin and operating profits for 2011 and three levels of forecast for 2012. Assumption are noted. The 2011 financial statements and data used to support the analysis are provided.

$2.19