Assessment Activity 1 - Knowledge gathering: Prepare Budgets, Forecast Estimates, documenting budgets and monitoring outcomes
To be deemed satisfactory, you must answer all of the below tasks.
Task 1.1
Define budgets. List and explain the expenditure and revenue items usually included in a budget.
Task 1.2
Define the following:
- Fixed and flexible budget
- Fixed cost and variable cost
- Breakeven point
- Types of budgets
Task 1.3
Explain double entry accounting. Explain the difference between cash accounting and accrual accounting.
Task 1.4
Explain the role of budgets in helping an organisation reach its objectives.
Task 1.5
List five controls that could be used to monitor an organisation's budget, also briefly explain the importance of variance analysis.
Task 1.6
List four steps associated with preparing and document budgets and forecasting estimates.
Task 1.7
Explain why stakeholders should be included in the discussion and negotiations of the budget. List stakeholders that have a stake in the outcome of the budget.
Task 1.8
What are budget performance indicators? In addition, explain their role of performance indicators in managing budgets.
Task 1.9
What are the reasons why Cash Flow Risk may occur? How can Cash Flow Risk be reduced?
Task 1.10
Every business needs to develop Budgets periodically, keeping this in mind, discuss what could be the budget objectives?
Assessment Activity 2 - Practical: prepare Budgets Forecast Estimates and Document budgets
This assessment task is about preparing budgets, forecasting estimates and documenting budgets. While preparing budgets and forecast make sure the following points:
- Budget Data are presented in a format that is easily understood and appropriate to budget reporting
- All budgetary Reports are completed within timelines provided by your trainer and distributed (Submitted ) for specified periods and projects
Task 2.1
Maan Snack Bar wishes to prepare a cash budget for July, August and September. Your job as the manager is to prepare this budget and the accompanying analysis and action plan for the owners.
1) Complete the cash budget below using the information following.
2) Analyse the two questions relating to Maan Snack Bar's cash position.
3) Prepare an action plan for the upcoming year.
Information provided to complete the cash budget. Use only whole dollars.
- The closing balance for June is $10,500.
- Cash sales for July are $11,000, August are $11,500 and September $12000.
- Cash receipts are 8% of the cash sales.
- Other income is from merchandise and is 2.5% of September sales only.
- Cash payments are made every month and are 27% of cash sales.
- Payments to creditors are made every month and are 13% of total receipts.
- Salaries and wages are paid every month and are $9,335.
- Interest payments are made every month and are $1,177.
- Operating expenses are $1,223 for July, $1223 for August and $1,322 for September. Loan repayments are made every month and are $3,335.
Analysis
1) What is the cash position of the Maan Snack Bar at the end of each month?
2) What is likely to happen if the cash position of the Maan Snack Bar continues on this path? Explain in detail.
3) What could be the objectives of preparing organisational budgets? How these are related with organisation's aims and objectives.
4) While preparing the budgets for Maan's snack bar, who can be other stakeholders, you will consult with to promote understanding, goodwill and ongoing cooperation. Also briefly list the consulting methods, you may use.
Action Plan
1) Complete a detailed written report (minimum half a page) that includes all your ideas to increase cash sales. This report must include evidence that supports and substantiates your future financial improvements.
2) How will you reduce the cash payments? Explain your methods in writing and include calculations that support your reductions.
3) How much can you save on the overall labour costs? Explain your methods.
4) Explain improvements that can be implemented with regard to the operating expenditure and provide a full written report. Include calculations and methodology that supports your financial outcomes.
Task 2.2
You are given the following information for Maan trading research service for the coming financial year 2016
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Expected fees
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$450,000
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Marketing expense:
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Fixed Advertising
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$7,800 per annum
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Advertising
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4 % of Expected fees
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Financial expense
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Interest paid
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$2,400 per month
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Bank charges
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$300 per month
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Administration expense:
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Accounting staff cost
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$9,000 per month
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Stationary
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$380 per month
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Depreciation of office equipment
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$9,500 per year
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Depreciation of motor vehicles
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$14,400 per year
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Rent
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$3,000 per month
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Travelling expense
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$30,000 per year
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Work cover
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4% of total salaries
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Superannuation
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9.5% of total salaries
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Telecommunication
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$2,000 per month
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A. Required: Prepare annual budgeted expense for coming year 2016.
B. How the expenditure milestones are set up?
C. Discuss what type of verifiable data and sources can provide information to prepare budgets and forecasts.
Task 2.3
Streama sells two products, Apple and Oranges.
- Sales for July were 2,000 units of Apple at $20 per unit.
- Sales for July were 8,000 units of Oranges at $40 per unit.
In August, the sales volume of Apple is expected to decrease by 4% and the sales volume of Oranges is expected to increase by 16%. The selling price of Apple is expected to increase by 10% and the price of Oranges is expected to decrease by 6%. Sales commissions paid are 2% for Apple and 4% for Oranges.
Required:
A. Prepare a Sales Budget for August, showing the expected sales and commissions paid by product and in total.
B. While preparing budgets or deciding budgeted sales, revenues, expenditure, selling prices etc., every business establish some assumptions and parameters to maintain accuracy, relevance and compliance. What can be those assumptions or parameters?
Task 2.4
Dandy Andy started business on 01 January with $20,000 in the bank account. During the next six months the business expects to earn revenues of $110,000 (including G.S.T.).
Budgeted payment (including G.S.T.) for the period are as follows:
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Advertising
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$ 5,500
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Courier
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1,100
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Office Supplies
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550
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Insurance
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1,650
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Rent
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5,500
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Wages
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20,000
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Additional information at 30 June:
Wages due but not paid $5,000
P.A.Y.G. paid to A.T.O. $2,000
Based on this information:
- Develop budgeted income statements
- Bank account and
- Balance sheet
You may use the templates provided
(a) Budgeted Income Statement for the 6 months ending 30 June
Task 2.5
Choose any organisation of your choice, it can be your workplace, if you do not work take Australis Institute of Business and Technology, list at least three financial risk for your chosen business. Now do some research and suggest how those financial risks can be controlled. You may choose following template:
Task 2.6
Work in-group of three to four students, do some research about following topics and write your answers to submit:
1. Ethics and code of practice related with budgets forecast and while establishing assumptions and parameters.
2. Importance of ethics, while establishing assumptions and parameters
3. Now discuss your finding with your trainer, your trainer will use following checklist to mark your work. You could present your ideas in front of your assessor, or you could prepare power point slides for this task.
Task 2.7
A. Give examples of Forecasting trends.
B. You have been asked to attend a board meeting for XYZ Pty Ltd to discuss how the company has been performing. Your boss has asked you to present comparing the company's net profits for the months of January through to March over the past 4 years. The company accountant has provided you with the following figures:
XYZ Pty Ltd
Net Profit Comparison
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Financial Year
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January
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February
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March
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April
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May
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June
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2007-2008
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$15.432.77
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55.319.35
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$8.87325
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$8.846.47
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($192.43)
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(58.006.29)
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2008-2009
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$5,197.38
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$5,960.08
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$10.479.02
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$4,901.35
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$8,225.31
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($1,263.19)
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2009.2010
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$17207.17
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-$8,301.66
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-$3.554.80
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$3.11
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$1,23028
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-$5,540.06
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2010-2011
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-59.18388
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$2,327.37
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-$4957.00
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-$10,641.82
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-$5,304.00
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$1,890.00
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How would you present this graphically?
Write a brief report comparing the company's net profits for the months of January through to March over the past 4 years. Use variance analysis technique. Using MS word or MS excel you are require to present this data graphically and submit to facilitator
Task 2.8
A. For each of the following financial ratios or "KPI's" (Key Performance Indicators), indicate how each is calculated and what specific information you can gather about your business' financial performance.
B. Along with briefly explain some other milestones and key performance indicators, which could be helpful to use while forecasting estimates.
C. Why feasibility study is important to compare projections with market growth and development
Assessment Activity 3 - Practical: Monitor budget outcomes
This task requires you to monitor budget outcomes by analysing budget variances and by implementing and reviewing budget processes.
Look at the following income statement of Zoomer's Auto and answer the following questions:
1. What are some potential areas for improvement for Zoomer's Auto Shop?
2. Are there any areas of concern?
3. Write down three key steps that Zoomer's Auto Shop could take to improve their financial performance.
4. What two options could you use for more effective management of deviations?
5. Presentation
After analysing this case study and working on these improvements, present your suggestions to your trainer and classmates assuming them as management of the business. Here your assessor will assess you for oral communication. In addition, how you can interact with others.
The objective of your presentation must be to:
- communicate with the audience clearly, understandably and creatively
- present your ideas, findings and recommendations credibly to convince the audience and gain support and agreement
- satisfactorily answer questions and objections
- Organise material in an effective and logical sequence and format for the presentation
- develop a range of support materials that can be used to present a variety of ideas and concepts for your presentation
- apply techniques to control the flow of information
Conditions of Presentation
You must make this presentation professional, delivering the materials with confidence and being knowledgeable and flexible in responding to queries and feedback (see criteria in the checklist provided in the following page).
All resources must be provided to candidates in order to facilitate in delivering their presentation. This may include:
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- Microsoft PowerPoint (2007-2013)
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Your presentation must cover all aspects of monitoring budget outcomes. In summarised form so that you can clearly communicate this material in a maximum time of twenty (10) minutes, including Question/Answer session.
Prepare a visual PowerPoint presentation to be presented to your class. Your assessor will be assessing you on your presentation and responses using the checklist given in the following page
During your presentation, your audience will give you a final feedback. Your Trainer/Assessor will give you the final deadline to make the necessary adjustments and submit the finalised version.
Print and include any documents you use from an external source and reference any other information for your Trainer/Assessor.
You must submit your work along with the slides to your Trainer/Assessor for approval on time without requesting extensions - this is a requirement of the assessment due to timely project delivery.