Bsbfim501 assignment prepare a selling expense budget for

Question

Leadership and Management Financial Management Assignment

Purpose of the Assessment - The purpose of this assessment is to assess the student in the following learning outcomes:

• Plan financial management approaches
• Implement financial management approaches
• Monitor and control finances
• Review and evaluate financial management processes

Task 1:  Give some examples for the following costs:

• Direct cost
• Indirect cost
• Fixed cost
• Variable cost
• Step cost/Semi variable cost

Task 2: Classifying costs and Monitoring process for actual expenditure:

Part a:

A company incurs the following costs (as shown under 'Workings') during a manufacturing process. Identify them with one of the cost elements (direct material, direct labour or other costs) by ticking the appropriate column. Also indicate by a tick whether it is a direct or an indirect cost.

Part b:

i) Complete the following variance report.

PRODUCT	BUDGETED SALES		ACTUAL SALES		VARIANCE
	Qty	$	Qty	$	Qty	$
Product X	100	20 000	120	26 000
Product Y	150	18 000	160	17 600
Product Z	200	40 000	190	36 100
Total

ii) Complete the missing figures in the following cost of production report for product X.

Cost of production report

	Budget $	Actual $	Variance $
Direct material	8 950		650(U)
Direct labour	17 900	18 260
Factory overhead		6 420	120(F)

Part c:

From the information given, calculate and write down all possible variances (units or dollar amounts as applicable) in the variance columns stating whether they are favourable (F) or unfavourable (U).

		Budget	Actual	Variance (Total)
				Qty	$
Sales - Product A	Units	900	950
Sales - Product B	Units	1 200	1 180
Sales - Product C	Units	1 500	1 650
Sales - Product A	$/Unit	10	9
Sales - Product B	$/Unit	12	14
Sales - Product C	$/Unit	15	16
Production - Product A	Units	1000	1 100
Production - Product B	Units	1 200	1 320
Production - Product C	Units	1 800	1 780
Raw material X	$	5 700	6 875
Raw material Y	$	10 500	10 230
Raw material Z	$	7 200	7 476

Task 3a: Dissemination of budgets and financial plans

List the ways by which dissemination of budget and action requirements takes place.

Task 3b: Give some examples of budgets, and explain which parties these should be discussed with.

Case Study - Task 4

Performance indicators

Rural fire services consist of a number of volunteers who are drawn from the local communities. These volunteers are trained by the State's fire brigade.  They are called upon to assist the permanent staff in case of emergency.  Depending on the training and their capability they are provided with protective clothing where the well trained volunteers get a full set of uniform and the beginners get an identifying cap. These volunteers also help in fund raising activities.  The money collected goes into funding the unit.

Performance indicators linked to the activities of an organisation are necessary for the organisation to assess its performance.  The performance indicators used by commercial organisations are motivated by the need to make a profit for them to survive and provide returns to the investors. The performance indicators for not-for-profit organisations are somewhat different to those of commercial organisations.  Not-for-profit organisations are those organisations that provide services for organisation members or for other people but not interested in profits.  This is mainly due to the fact that these organisations survive on grants and donations.  Examples of such organisation include charities, churches and political parties. Some not-for-profit organisations are substantial organisations such as the International Red Cross that has a large budget and complex operations while others such as local sports teams are run for a local community.

What might be some of the performance indicators used to assess the performance of such units?

You might investigate such a unit or look at other not-for-profit groups and review how they go about measuring performance.

Task 5: Performance Indicators

Explain whether the items in the 'Workings' area are financial or non-financial performance indicators.

Task 6: Classification of work description

Identify the following as Trading (T), Manufacturing (M) or service (S) business.

(a) a grocery store                    (  )

(b) a furniture wholesaler           (  )

(c) a legal firm                          (  )

(d) a plumber                            (  )

(e) a dentist                              (  )

(f) a bakery                              (  )

(g) a food processing factory      (  )

(h) a restaurant                         (  )

(i) a super market                      (  )

(j) a doctor's surgery                  (  )

(k) a shoe store                         (  )

Task 7: Fees Budget

The Suburat Medical Centre, located in an affluent suburb, provides a 24-hour medical service to the residents. A recently recruited employee has been asked to help the management with the preparation of a fees budget for January 20X1and is provided with the following information:

• Forty-five per cent of patients pay in cash when services are performed, and those insured claim refunds from their medical funds. The fee charged to the patients is $25.
• Fifty-five per cent of the patients are accepted on bulk billing, where the fee charged is $19.
• The number of patients expected for consultation/treatment in January 20X1 is 1700.

Show how the fees budget will be prepared.

Task 8: Sales Budget and production budget

The projected sales in units for Parker and Company for the month of January 20XX is 12000. The inventory of finished goods on 1 January 20XX was 6,000. The company expects the ending inventory for January to be 7000 units and expects to maintain it at that level for the coming months. The sales for February and March are each expected to increase by 10% over the previous month. Prepare a production units budget for these three months.

Task 9: Expense budget

Prepare a selling expense budget for the month of February 20XX for Dajan & Co. The sales for February are expected to be $120000. The bases to be used for budget purposes are as follows:

• Annual fixed expenses are allocated equally to each month.
• Sales staff salaries are equal to 4% of sales.
• Depreciation of sales vehicles is an amount of $18000 per annum.
• Sales staff insurance is 2.5% of total sales staff salaries.
• The advertising budget is currently $19200 per annum.
• Sales vehicle maintenance costs the organisation 2% of sales revenue.
• Freight out is calculated at 0.65% of revenue.

Task 10: Preparing P & L and Balance sheet using Spreadsheet

Complete the following P & L and Balance sheet.

P & L Statement IBC Pty Ltd July 1, 2013 to June 30, 2014

Gross sales	346,400
Les: sales returns and allowances	1,000
A. Total Business Income
Cost of Goods Sold:
Beginning Inventory, July 2012	160,000
Add:
Direct material	90,000
Direct labour	50,000
Factory overhead	2,000
Less:
Closing inventory, June 2013	100,000
B. Cost of Goods Sold
C. Gross Profit (A-B)
Expenses
Salaries	68,250
Utility bills	5,800
Rent	23,000
Office supplies	2,250
Insurance	3,900
Advertising	8,650
Telephone	2,700
Travel and entertainment	2,550
Dues and subscriptions	1,100
Interest paid	2,140
Commission paid	1,250
Owner's drawings	11,700
D. Total expenses
Net Profit (C-D)

Balance Sheet IBC Pty Ltd July 1, 2013 to June 30, 2014

Assets
Cash	8,450
Accounts Receivable	65,000
Inventory	19,550
Land	65,000
Buildings	32,500
Plant & equipment	32,500
Less: Accumulated depreciation	(16,900)
Goodwill	22,100
A. Total Assets
Liabilities
Accounts payable	44,200
Bank overdraft	1,000
Short term loans	15,000
Mortgage	35,000
B. Total liabilities
C. Net Assets (A-B)
Owner's equity
Opening equity	66,500
Retained profit	66,500
D. Total owner's equity

Task 11: Prepare a Profit & Loss Statement and a Balance Sheet from the following Trial Balance.

Trial Balance of Marco's Café As at 30 June 2014

Account Name	Debit $	Credit$
Cash at bank	20 000
Accounts Receivable	134 000
Inventory	40 000
Prepayments(Asset)	3 000
Plant and equipment (P & E)	430 000
Accumulated Depreciation-(P & E) (put this amount as negative under asset)		20 000
Accounts Payable		71 000
Accrued Expense(Liability)		3 000
Loan from bank		29 000
GST payable		10 000
Capital		100 000
Retained Profit(OE)		100 000
Reserves(OE)		10 000
Long Term Loan		150 000
Sales		550 000
Purchases	320 000
Electricity	15 000
Rent	41 000
Advertising	27 000
Interest Expense	13 000
	1 043 000	1 043 000

Task 12: Sources of Finance

You are owner of a manufacturing company. Due to increased competition in the marker you are planning to open a new product line. This involves a certain amount of investments and requires capital. You are planning to approach financial institutions to apply for financing. What are the different sources you can manage finance for your business?

Task 13: Clarification of budgets and financial plans:

In a retail environment where floor staff may have scope to vary the price of products sold what information might the store management need to pass to various sales work groups in respect to issues such as cost and discounts that might impact on sales budgets being achieved?

Task 14: Financial plans and negotiation for changes

What are the potentially positive impacts of consultation and agreement on budget goals between management and staff responsible for achieving required budget goals in respect tonsuring budget goals are met?

Task 15: Risk management and Prepare Contingency Plan

Part a: What is risk management? Explain the various methods available for treating risk.

Part b: What is involved in selecting the appropriate contingency plan?

Task 16: Risk Management

Can risks be avoided in an organisation? Explain your answer.

Task 17: Succession planning

Describe the steps involved in 'Succession Planning'.

Task 18: GST Calculations

John is the owner of a fish and chips shop in Parramatta. His total sale for the month of February was $24,000 including GST. His purchase was $18,000 for the same month. Calculate the following.

(i) GST received

(ii) GST paid

(iii) Net GST payable

Task 19: GST and Cash Flow Statement

A company forecasts the following transactions during the next financial year which will affect its cash flow. (All ATO dues and ATO credits are expected to be settled during the year.)

Prepare a budgeted cash flow statement assuming that the opening bank balance was $30,200.

Task 20: Preparing Sales Budget

Gardening tools Pty Ltd manufacture and sell lawn mower and water pump. The production cost is as follows:

Lawn mower: $278

Water pump: $190

The company sells the products by adding a mark-up of 120% on lawn mower and 150% on water pump. Due to increased competition, the company has decided not to increase the unit sales price in next year's budget. The products are sold in Bunning warehouse and Your local Hardware Store. Actual sale (in no. of units) for both the products in those outlets from January to March 2013 is as follows:

		January	February	March	Total
Bunning Warehouse	Lawn mower	120	134	159	413
	Water pump	70	81	78	229
Your local Hardware Store	Lawn mower	105	123	111	339
	Water pump	51	67	68	186

For January to March 2014, Gardening tools Pty Ltd is estimating that the overall sales for their products will increase in Bunning warehouse but may decrease in Yourlocal Hardware Store. The marketing and sales team is making the following forecast:

a. Sales for both the product will increase by 15% over same period last year in Bunning warehouse in February and March. But due to late summer, only in January it will increase by 6% over last year sales in the same outlet.

b. Your local Hardware Store is facing significant competition from Bunning due to their aggressive pricing policy and losing customers. Therefore the sales team is estimating a 5% decrease in sales for lawn mower and 3% decrease in water pump sale in that outlet comparing to same period last year.

Based on the above facts the marketing team has requested you to calculate the estimated sales budget (in $) for January to March 2014 for both the product and area wise.

Task 21: Operating Expenses Budget

Parker and Company expects to spend $20,000 on general administration expenses in the month of January 20XX. In February, these will be 90% of the January expenses; in March, 105% of January's expenses. The selling and distribution expenses total is expected to be 5%, and financial expenses 1%, of each month's sales.

Prepare the operating expenses budget for the three months January to March.

Sales amount are in $150,000, $175,000 and $180,000 in January, February and March respectively.

Read the following statements and write if you agree or disagree with the statements. Your analysis must be supported by argument.

Cash flow management means managing the cash moving in and out of your business.

1. Cash outflows usually occur after cash inflows.

2. Two important benefits of cash flow management are to identify future cash flow problems and to reduce the amount of time between inflows and outflows.

3. Three of the following are some of the most important components of cash flow. Which one is not?

A. Stock

B. Trade creditors

C. Fixed assets

D. Trade debtors

4. Too much stock may negatively affect your sales ability and your relationship with customers.

Task 22: Part a: Accounts Receivable Collection Schedule and Cash Flow Statement.

Part b: Create an EXCEL file and complete the calculations through using formula.

Stock & Co., a manufacturing company, need to produce a cash flow budget as part of an overdraft application with their bank. The following are some of Stock's budgeted figures:

	Credit sales $	Purchases $	Wages $
November	39 000	26 975	3 185
December	41 600	31 200	3 900
January	23 400	52 650	3 600
February	37 700	53 300	3 470
March	27 300	58 175	3 380

Budgeted cash at bank on 1 January is $5590.

Though credit terms of sale are payment by the end of the month following the month of supply, Stock & Co. can expect half of the sales to be paid on the due date, with the other half being paid during the following month. Creditors are paid during the month following the month of supply. Wages are paid in the month they are owed.

Utilising the following tables for format, prepare a cash budget for the quarter 1 January to 31 March 20XX.

What went wrong?

What are the consequences of those wrongs?

What managerial actions can be taken to rectify the errors?

What organisational protocols should be followed for reporting if loss is inevitable?

What support can be provided to the team members to ensure that proper management of finances is in action?

Task 23: Asset Management - Managerial Decisions

You are the owner of a small business. In the new financial year you are planning for business expansion. As part of that you are required to acquire new equipment and IT equipment to increase your production level. You have approached this issue to your Chief Financial Officer (CFO). CFO advised that there are three options available to acquire new equipment: Buying, leasing or hire purchase. All have some advantages along with disadvantages. Identify the advantage and disadvantages of them and recommend which one is preferable if you are to buy new IT equipment.

Task 24: Cash flow analysis - Managerial Decision: Metropolitan Furniture

Peter works in the accounts unit of the Metropolitan Furniture Manufacturing.  He was asked to prepare a prop101028osed budget for the forthcoming quarter.  He consults with the sales manager and finds that:

Estimated sales are as follows:

February            :               $265,000

March                :               $255,000

April                  :               $290,000

May                   :               $250,000

June                  :               $280,000

In consultation with the production manager he estimates that the cost of goods sold is to be budgeted at 40% of the sales figure.  The salaries are expected to be $75,000 per month. When sales exceed $270,000 in any one month, the sales team is entitled to an additional 4% commission on the excess sales over this figure. Other expenses are estimated to be $25,000 per month.

The owner of the organisation is concerned about the cash flow which was not thought of before. The owner is of the opinion that the collection of cash from sales is slow and this could possibly lead to cash flow problems to the organisation.  As Peter has never forecasted cash flow before he sets about collecting information on this.

Peter estimates that 70% of the total sales are going to be cash sales where the bill is settled when the goods are purchased or delivered.  20% of the month's sales) settle the accounts owed in the month following sales.  Others (i.e. 10% of the month's sales) settle in the month after.

Additional information for Cash Flow Statement:

The organisation gets a month's credit on its purchases.  That is, the accounts for the purchases (COGS) made in one month is settled in the following month. 

All salaries are paid in the month as they are incurred.

The additional commission is paid in the month after the month in which it was earned. 

Other expenses are paid in the month they were incurred.

The bank balance at the beginning of the first month is estimated to be $30 000.

Required:

1. Show the profit and loss calculations for April, May and June of operations.

2. Show the cash flow projection calculations for April, May and June.

3. Show amended figures if sales were to increase by 10% in each month and the cost of goods fell from 40% to 35% through a better long-term purchasing agreement with the supplier.

4. Does Peter need to suggest any contingency plan at this stage?

Task 25: Constructing a Cash Flow Statement

Constructing a Cash flow statement:

Calculate the total cash inflows and cash outflows and the net cash position at the end of December from the following information:

Use the space provided and shows all line items.

XYZ Pty Ltd. December 2014

Particulars	Amount ($)
Cash receipts from customers	235,000
Cash paid to suppliers and employees	121,570
Interest paid	34,120
Income tax paid	29,910
Purchase of Subsidiary X, net of cash acquired	550000
Purchase of property, plant and equipment	450,100
Proceeds from sale of equipment	20,000
Interest received	12,550
Dividends received	35,654
Proceeds from issue of share capital	250,000
Proceeds from long-term borrowings	250,000
Payment of finance lease liabilities	90,000
Dividends paid	135,700
Cash and cash equivalents at beginning of period	430,750

Task 26: General knowledge: Manage your business cash flow

Read the following statements and write if you agree or disagree with the statements. Your analysis must be supported by argument.

1. The purpose of cash flow planning is to ensure that the cash balance is enough to meet current and future financial requirements.

2. When preparing a cash flow budget you will need to:

A. estimate  cash outflows for the period.

B. estimate cash inflows for the period.

C. estimate the future cash position of the business.

D. do all of the above.

3. The cash flow equation is as follows.

Beginning cash balance + estimated sales - estimated purchases = ending cash balance

4. The sales forecast is not important in the preparation of the cash flow budget.

5. In a retail business the largest cash outflow is generally the cost of goods to be sold?

6. After the financial plan is developed and implemented, it is important to communicate and distribute it to the relevant people to satisfy the legal requirements. List some examples of relevant people. Explain why it is critical.

7. "It is critical to obtain accountant/financial planner's advice to profitably operate and extend the business in accordance with the business plan" - Explain

Required: Prepare the Pretty Cash Book for the month of January by:

1. Recording the establishment of the petty cash float in the Petty Cash Book

2. Recording the payment vouchers in the Petty Cash Book

3. Balancing the Petty Cash Book on the dates indicated

4. Recording the reimbursement cheques in the Petty Cash Book.

Attachment:- Assignment File.rar