Information on Standby Generators - Essay Example

Accounting: Budgeting. Name: Course: Tutor: Date: INTRODUCTION In most of the companies plant and machinery are among the most vital assets that a company owns and also the company should look forward to introducing the most important machinery it needs to own in order to improve some processes. Profits and losses mostly depend on the current assets and current liabilities. For a firm to be liquid enough, it must ensure that the current or total assets can meet the liabilities. Most of the companies require electricity for their process to run. Since it is not always available, the company needs to look forward on getting a booster for extracting the power. A large percentage of companies undergo problems when there is there is a blackout within the firm. In most cases, several activities are delayed due to lack of a backup machine to take through with the activities. Fluctuation in power tends to cause low production limiting the firm to meet some of its objectives. Low production leads to poor performance due to low sales hence affecting the organizations profitability as well as a reduction in the market share (Momani 272). These are just among the many reasons that a firm should consider and install an alternative power source so as to avoid such negative consequences. In this regard, I recommend that we should inform the company’s management on the importance of making decisions regarding implementation of the power generators. The new move is likely to enhance better performance and improvement of the processes carried out in the company to avoid such problems hence higher profits (Allianz np). Power generator is a machine that generate electrical power from another primary energy source hence the company can have most power sources without any delays. Power fluctuation from unreliable sources such as electricity in areas prone to vandalism can lead to losses the company cannot meet. To avoid all these problems, installation of a new power generator can serve as an effective alternative. Several companies face some challenges in selecting the best generator to install. There are two types of generators that include; portable generators and standby generators. The two work differently and also their costs are different. The most appropriate power generator is the standby generator. INFORMATION ON STANDBY GENERATORS A standby generator is a machine system that operates automatically and it is also fast in response. Within a short time of a power shortage an automatic transfer gadget senses the power loss that then invokes the generator circuits to start and then transfers the electrical voltage to the generator. The standby generator begins supplying the electric voltage in the circuits for the generator to transfer to the other electric gadgets. Also, the standby generator runs a weekly self-test this is in order to ensure a proper response to an outage. Most power generators run on diesel, natural gas or liquid propane gas which varies from the power generator that is being used[gre07]. The standby generators may be required by building codes for critical safety systems in the company such as elevators in high-rise building area, fire protection systems, medical and life support building and also provides backup electrical power to HVAC. For effective performance and maintaining positive figures, any firm should have its generator or any other source of power in order to avoid blackouts and another loss related to power fluctuation (Business corner np). The initial cost of the best quality of standby generators is from $10,000 at a fair price and the maintenance is not at a high cost since it needs regular maintenance. However, most of the standby generators need at least one service every two years or after two hundred hours after of use. The generator requires a maintenance kit. The best kit which cost is around $50-$55 which is at a fair price. The maintenance requirements are all included in the maintenance kit such as the oil spark plugs and also the air filters[gre07]. REASONS FOR INRODUCTION OF THE POWER GENERATORS For improvement of the activities in the company for a smooth and conducive working environment since, there tend to be no delays in some of the processes while work is in progress. After the buying of the generator, it becomes permanently owned by the company hence it becomes an asset. Also, the introduction of the generators save the company from getting losses in some of the processes since the back-up generator helps when there is a shortage of electricity and hence continuity of work being done. It does not cost much on the maintenance of the generator since it has some gadgets that help the generator to have a better running life without the company spending much on the repair of the generator (Puget Sound Energy np). The generator is also able to help in some activities such as construction, manufacturing department or any other sector in the firm that requires power. It makes work easier for the constructors especially in the high-rise buildings which require elevators, in such a case the company stands in a better position to save a good value of their profits due to a reduction in cost associated with hiring the required power alternative machines. Instead of hiring the generators, the company can invest the cash in different platforms hence boosting the firm’s production profits. Also, the generator is durable as long as maintenance is done at a high level of regular service. The generators are also not hard to get since they are available in almost every structural types and that depend on the generator that the company requires. The overall consumption of the generators tends to be less since it comprises long running feature for a maximum number of hours because it also cools down quickly due to water and air cooled engine thatis one of the features the standby generator has (Robert np). BUDGETING OF THE POWER GENERATOR The power generator lies on the operational budget classification depending on some of the determining factors discussed below. Operating budgets focuses on managing current expenses in a company of which the introduction of the power generator is a current expense in the company’s budget list. It also ensures that there are funds to maintain the continued operation of the company with proper distribution of funds is done in a cost efficient manner. The operational budget also makes the management understand how much income the company needs to manage so that it can continue with normal operations at current levels smoothly with minimal or no interferences[Ram13]. The operating budget makes the company aware about any information relating to the power generator bringing any profits in the future. It also enables the management to decide whether to continue with the operation of the power generator or not. If it does not make any profits for the company then it is not of any value and they management can seek better alternative sources that can add value to both profits and production of the firm[Ram13]. IMPACTS OF THE POWER GENERATOR TO THE OPERATIONAL BUDGET The operational budget embraces the impacts of operational decisions made by the management since it contains forecast of the company’s sale for the future. The company is also adhered to know the total revenue in the accounting period of the company excluding the total expenses of the company at that period. By carrying out this process, the organization can know if it is making an operating profit, loss or just breaking even. From the operating budget of the firm, the management can know or estimate the total cost incurred during sales of goods and services that the company produce. It gets easier to keep track on daily administrative expenses where some can be set aside if they are not productive. The main pillar of an operational budget is the future sales of the company during the period given. By preparing the sales budget for this financial period, it provides the basic supportive base for the operational budget. By formulating the sales budget of the company, it assists in making it easier for the preparation process of the production budget as well[Ram13]. Installation of a power generator affects the operational budget by increasing its cost since the company may include it in its operational budget of that year. By this, it can also affect the profits of the company by increasing them since it reduces some of the challenges faced in the company since they are avoidable. Also, the power generator reduces the operational budget after it is introduced in the company since it is already an asset owned permanently by the company. The company’s management department should also have an idea on how much the power generator can produce for better planning on consumption hence ensuring efficient performance of the generator without fluctuating the power at any time whenever it is much needed. Operating impacts can also be included in planning about the implementation of a new service or program in the company. Most of the maintenance cost and programming cost incurred during the ongoing processes tend to add up increasing the total cost. Despite the fact that the introduction of new programs increases the firm’s production, they can as well result in to losses if not observed since they are part of the operational budget. The operational budget also consists of the direct material and labor budget, ending inventory budget, company overheads budget selling and administrative budget and also the budgeted income statement[Ram13]. REASONS OF MODIFYING THE BUDGET The budget that I recommend for the company is the operational budget rather than capital expenditure budget due to some of the crucial factors determining classification of budgets. Some of the determining factors considered include: The operational budget provides a basis for prioritization of projects within the program areas of the capital improvement plan based on comparative operating budget impacts. It also stimulates more precise facility planning within the context of planning a multi-year operating budget. It also ensures a quantitative basis for cost decisions of the company and even funding schedules of projects in the capital improvement plans (CIP)[Hal14]. The operating budget also provides a framework for evaluating proposals in the company’s management other than meeting program or service delivery needs. It also identifies the future demands for the expansion of operating program or service delivery of the company that may result from the particular capital budget in the company’s management that is in the operational budget. Also, the operational budget displays the extent to which identified programs in the company needs or approved standards of service delivery drive the country capital budgeting program. It also displays the differences between capital improvement plans, project expenditure schedules and the timing of the prediction of new or additional operating budget. It is as a result of the requirements the company must meet to complete any of the ongoing projects[Hal14]. Some of the rationales associated with the budget modification are the facts that the management of the company tends to be aware of the future prospects concerning the loss and profits the company. It ensures that the company has better planning strategies for the future. It also ensures that there are funds to maintain the ongoing operations of the company. The company’s management is also in a better position to forecast on the future cash flows concerning the operation of the firm. Having the forecasted cash flows enables the firm to avoid any risks as well as losses due to risk averseness of any firm aiming at profit maximization. Works cited Allianz, Power cuts are becoming more and more frequent, 2010 web 18th may 2014 Business corner. The Importance of Backup Power. web 18th may 2014. gre07: , (Great Britain;estates and facilities division 23), gre07: , (Great Britain;estates and facilities division 59), Ram13: , (Ramsey, Dunn and Pierce), Hal14: , (Halifax Regional Municipality), Puget sound energy .”Important information on selecting and safely installing a generator in your residence or home busines.” web. May 18 2014 Ramsey, Dr.James, Dr.David Dunn and Dr.William Pierce. "operating budgeting." (2013): Print 1-299. Robert Hamilton, Lessons in emergency power preparedness. 2009 < http://www.cumminspower.com/www/literature/technicalpapers/PT-7006-Standby-Katrina-en.pdf> web. 18th May 2014 Read More