Reference no: EM132692057
"A budget is a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time" (Hilton, 2016). When worked in the supply chain for UT Health East Texas (UTHET), our master budgets were prepared by the very top-level executives. They examine and planned out each stage in the budgeting process: planning; facilitating communication & coordination; allocating resources; controlling profit and operations; and evaluating performance and providing incentives (Hilton, 2016). They prepared the master budget in line with the strategy of UTHET. My directors mainly assisted with plans supplying materials for building remodels or building expansions. , however, did not work directly with these individuals who planned the master budget.
My department mainly dealt with the capital budgets. "A capital budget is a plan for the acquisition of capital assets, such as buildings and equipment" (Hilton, 2016). Each quarter the various departments would receive a dollar amount that they could use to upgrade their department. They could request new equipment, new service agreements, or even remodel/ expand their department. Once the request is submitted, a committee comes together to evaluate the prospective project's cash inflows and outflows to determine if the investment will generate potential returns. The committee uses tools like discounted cash flow analysis, payback, and throughput analyses to determine if the project is worth investing in (Kenton, 2020). Once the project has been analyzed it is either approved and pushed forward or denied and sent back for review. If the project is pushed forward service plans are negotiated, capital money is cut, and delivery dates are set.
Problem 1: Do you find that the capital budget has a similar level of scrutiny as other budgets within the master budget? Critiquing the budgeting process is part of our DQ discussion, so is there a part of the capital budgeting process you can envision an improvement?