Overview
4052.6.1 : Budgeting
The graduate creates IT capital and operating budgets that meet an organization’s mission and goals.
For this task, assume that you are the chief technology officer (CTO) of Sparkit Technologies Corporation, who has been tasked with creating and maintaining an operating and capital budget for the next fiscal year for the information technology department.
As a leader in IT management, you must be able to appropriately communicate information to executives in a concise and effective manner.
Inputs for this task include the actual operational and capital expenses incurred by IT for Fiscal Year 1 and the budgeted expenses for IT for Fiscal Year 2 that were created by the chief information officer (CIO) about 12 months ago and revised by the chief financial officer (CFO).
An actual budget for Sparkit would have subsidiary budgets for every line appearing in the operating and capital budgets. This assignment has been simplified by not requiring subsidiary budgets and providing only the subsidiary budget for personnel and laptops.
Note: For the remainder of the task to work properly, follow the directions below.
1. Download the Operating Budget as an Excel file.
• Enter your 9-digit student ID number in cell B6 and press “Enter.”
• Enter your name in cell B7 and press “Enter.”
• Click save.
• Use this copy of the file to respond to the task prompts.
2. Download the Capital Budget as an Excel file.
• Enter your 9-digit student ID number in cell B5 and press “Enter.”
• Enter your name in cell B6 and press “Enter.”
• Click save.
• Use this copy of the file to respond to the task prompts.
Sparkit Technologies Corporation is a diversified advanced technology company with headquarters in Houston, Texas, and offices and manufacturing plants throughout North America. Sparkit designs, manufactures, and markets advanced electronics, robotics, subassemblies, engines, and other types of systems for automotive, medical, aerospace, manufacturing, defense, governmental, and other applications.
At the end of Year 1, Sparkit had 45,000 total employees, an annual revenue of about $60 billion, an annual net income of about $3.8 billion, and an annual information technology budget of about $2.4 million. Sparkit is organized in a traditional hierarchical management structure with divisions structured according to function. The information technology department is responsible for all information technology functions within the firm.
The IT CTO, who manages the capital and operating budgets, has been requested by the CFO to cut the capital and operating budgets due to a reduction in revenue from the prior year and requirements of all departments to make cuts.
Your submission must be your original work. No more than a combined total of 30% of the submission and no more than a 10% match to any one individual source can be directly quoted or closely paraphrased from sources, even if cited correctly. The originality report that is provided when you submit your task can be used as a guide.
You must use the rubric to direct the creation of your submission because it provides detailed criteria that will be used to evaluate your work. Each requirement below may be evaluated by more than one rubric aspect. The rubric aspect titles may contain hyperlinks to relevant portions of the course.
Tasks may not be submitted as cloud links, such as links to Google Docs, Google Slides, OneDrive, etc., unless specified in the task requirements. All other submissions must be file types that are uploaded and submitted as attachments (e.g., .docx, .pdf, .ppt).
A. Analyze the Capital and Operating Budgets for Sparkit using the attached "Operating Budget" and "Capital Budget" by doing the following:
1. Discuss the importance for a financial manager to understand capital budgets and how they meet the organization’s mission and goals (suggested length of 3–5 sentences).
2. Discuss the importance for a financial manager to understand operational budgets and how they meet the organization’s mission and goals (suggested length of 3–5 sentences).
B. Adjust fiscal year 3 in the attached “Capital Budget” to a maximum of $300,000,000, with consideration of the internal rate of return (IRR), by reducing 2-4 capital expenditures in the “Proposed Fiscal Year 3 Capital Project Spend” column. Attach the edited spreadsheet to your submission.
1. Explain how the cost of capital and IRR influenced your decision of each capital expenditure you chose to reduce.
C. Adjust the third fiscal year in the attached “Operating Budget” to a maximum of $1,000,000 by reducing 2–4 variable expenses in the “Year 3 Proposed Budgeted Amount” column. Attach the edited spreadsheet to your submission.
1. Explain how the variable cost influenced your decision of each operating expense you chose to reduce.
D. Acknowledge sources, using in-text citations and references, for content that is quoted, paraphrased, or summarized.
E. Demonstrate professional communication in the content and presentation of your submission.
File Restrictions
File name may contain only letters, numbers, spaces, and these symbols: ! - _ . * ' ( ) File size limit: 200 MB File types allowed: doc, docx, rtf, xls, xlsx, ppt, pptx, odt, pdf, csv, txt, qt, mov, mpg, avi, mp3, wav, mp4, wma, flv, asf, mpeg, wmv, m4v, svg, tif, tiff, jpeg, jpg, gif, png, zip, rar, tar, 7z