Manage budgets and forecasts Assessments
Case Study Assessment Task 1 - For this assessment, you are required to go through the case study and answer the questions that follow the case study.
Task:
You have been asked by the Owner of A2Z Pty Ltd to prepare the master budget. The owner who charges out at $68 per hour and the junior staff who are charged out at $42 per hour. The owner of A2Z has advised you that the following hours are forecast for each quarter.
The A2Z core business is consultancy providing to different RTO's. The A2Z has a credit system of payment with 60% of payment received the quarter in which they are earned and the remaining 40% earned the following month. The opening accounts receivable is $13200 incl GST. The GST is accounted for on an accrual basis.
Additional Information:
The Owner will purchase a new vehicle in the September quarter for $27,500. In March they will purchase photocopiers for $5500 and a computer system for $5500 with an upgrade in March for further $2750. Each item is inclusive of GST.
The information in the below table is based on sources documentation from A2Z Solutions' previous operations. GST Expenses are show. Use the information in the table to prepare the budget in Q2.
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2013
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September
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December
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March
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June
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Motor Vehicle
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1300
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1495
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300
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450
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Printing
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200
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50
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200
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50
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Electricity
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600
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555
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500
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500
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Rent
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4500
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4500
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4500
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4500
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Depreciation is $700 per quarter and tax payable at 30% of net profit per quarter. Wages for the senior staff are $8000 per quarter and Junior $5000
Q1. Prepare the revenue receipts forecast and cash collections forecast for the 2013-year.
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Hours
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Sept
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Dec
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March
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June
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Senior
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250
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230
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230
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230
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Junior
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210
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220
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210
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220
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Q2. Prepare the Capital Expense Budget for the 2013-Year.
Q3. Suppose the A2Z Pty Ltd. Has no n- current assets valued at $55000 with accumulated depreciation at the beginning of the year of 20,000. Use the depreciation expense for the forecast year and other relevant items to complete the budgeted statement of financial position as at 30.06.2013. Hint: assume no depreciation on new non - current assets and all equity is represented by retained profits.
Q4. What makes setting budget accounts assumptions time - consuming for A2Z Pty Ltd. And what must it consider?
Project Assessment Task 2 -
You need to answer all questions of the Project task.
Part 1: Defining Your Objectives
You're an accountant who's been brought in to manage the books of a small electronics store, Noob's Choice. Noob's Choice operates in the South Eastern area of Melbourne. Steve, the owner/manager has brought you in because up till now he has been the one handling the accounts and has noticed a few worrying trends:
- New competition has recently increased and Noob's Choice is losing market share
- They've been experiencing continuous cash flow issues, which means they have a shortage of cash when it comes to paying monthly and quarterly bills
Steve's long term goal is to take back their market share and bring the cash balance back to surplus. As part of the company's organisational aims and projects, Steve wants to regain their market share to become the number 1 computer store in the Southern Eastern area and have enough cash reserves to open up a proper online shop. Steve also has budget objectives, which are:
- Increasing sales by 10% over a 12-month period
- Increasing market share by 10%
- Bring back cash balance to surplus, so we can stop paying overdraft interest to the bank.
Questions:
1.1- What are Noob's Choice budget objectives?
1.2- Are the budget objectives in line with Noob's Choice's organisational aims and projects? Why?
Part 2: Organisational Sales Targets
Below is a table containing the 3 last year's best-selling models.
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Model name
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HP 3225C Student
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Asus 9560 Sport
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SONY 1000 Game
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Sales units
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Average selling price $
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Sales units
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Average selling price $
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Sales units
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Average selling price $
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2010
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20
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560
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22
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520
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15
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650
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2011
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18
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540
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21
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500
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14
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620
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2012
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17
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520
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20
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480
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13
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590
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Noob's Choice's sales staff have performance indicators for different quarters, for high season, set sales targets 25%-30% of annual sales, low season 20%-25%. They must reach these milestones in order to get their commission for each quarter.
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Average percentage % achieved in
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2010
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2011
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2012
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2013
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Quarter 1
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20
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21
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22
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Quarter 2
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25
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24
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23
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Quarter 3
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20
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21
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22
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Quarter 4
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24
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23
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22
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2.1. Which model sells the best and creates the most revenue in the last three years?
2.2 Steve wants all staff to be on board with budget implementation. He wants you to create a survey asking for their input. What are some goodwill-inducing strategies Noob's Choice could implement to ensure staff cooperation?
2.3 For the first quarter of this year in the budget, what percentage of annual sales should be achieved for each quarter in 2013?
Part 3: After you have prepared the survey, Steve (micromanaging) totally ignores their suggestions and decides to stick to his personal assumptions in improving sales turnover:
- More budget for marketing campaigns - tap into a new market, promotions
- Clean the shop more!
- Audit of where the money is going (further on into the case study they discover the staff are buying stationary for themselves, staff accounts ore ticking up)
3.1 Steve has informed you that Noob's Choice is going to have some cash outflow in paying bills, such as electricity every month $340, staff monthly wages $3000 and mortgage interest $1200 in the first month of each quarter and decreasing revenue of 10% from last year's total cash sales of $ 87,400 as a result of new competitors. Use average percentage achieved in each quarter from Part 2 and work out the cash balance on the end of each quarter based on all these factors. Use relevant data to help support your budget. Opening cash balance in quarter 1 is -$13,000.
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Quarter 1
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Quarter 2
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Quarter 3
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Quarter 4
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Cash receipts
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Cash payments
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Electricity
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Mortgage Interest
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Staff wages
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Total Cash payments
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Net cash surplus/deficit
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Opening cash balance
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Closing cash balance
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3.2 The internal policy is that staff must pay for their purchases within 7 days. After checking the account, you discover they haven't paid at all! You look at the sales data and notice something funny going on with the staff accounts; they seem to be in the red. What do you think is most likely to happen to the business within the next 6 months if this trend continues? Comment on Steve's assumptions and give recommendations.
Part 4: Steve prepares sales report by himself (He does accounting too!) and has shown you a sales report sample below:
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Monthly sales report
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ASUS 9150
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SONY 6520
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ACER 5460
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Steve
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2
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3
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5
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Jake
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5
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6
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6
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Charlie
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6
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2
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2
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Allen
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2
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3
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3
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Q1. Do you think this report shows necessary details for monthly sales? What other information could be added to give an understandable and appropriate report?
Q2. Steve likes to leave monthly sales report after he finishes everything (he never finishes) and that has caused a few problems in remuneration, stock purchase and marketing campaign. How often do you suggest that Steve should distribute the report to staff members? What suggestion do you give him to stick to the timeline?
Q3. Some changes have happened to Steve's business territory:
A new store opened a few weeks ago, attracting a lot of attention from households and businesses;
Existing customers are moving to other suburbs;
A lot of retirees have just moved into this suburb;
A primary school is on schedule to be built later this year;
Identify the positive and negative impacts of those events to Steve's business. What issues should Steve take into consideration for those changes? Provide detail analysis.
Q4. Due to an increasing competition from new stores on the same street, Steve has decided to relocate his shop to another suburb which is further away from CBD. The new suburb is still undergoing constructions in infrastructure including setting up optical cables and exchange portals. The new suburb has a lot of young families with low to medium income. The shopping centre where Steve wants to open the shop has a lot of vacancy with affordable rent.
Please discuss the feasibility for Steve to relocate his shop to this new suburb. You may include different scenarios in your analysis.
Written Questions Assessment Task 3 -
1. A2Z has an organisational policy saying variance in office expense must be no more than 5% compared to budget. As a Finance Officer at A2Z Training Solutions, you have noticed a constant variance in stationery purchases of 10%. Please list three reasons behind the variance.
2. After investigation, you believe the high usage of stationery is due to a high turnover of casual staff members who deliver training on XXXXX. It is possible that they have taken some stationery for personal use. What do you recommend to management in order to prevent/reduce their personal possession?
3. Knifepoint Hideout Hotel is undergoing a budget process for next year. The finance officer simply takes the figures from last year and increases all revenue and expenses by 2-3%. However you have a feeling that some expenses will increase by up to 10%. What recommendations do you give to the finance officer in order to review the unusual increase in those expenses?
4. Due to environmental groups' constant lobbying, the government has decided to charge a tax on non-recycling paper, which is the main print resource for your business. What measures could you take to implement the tightly budgeted office expense to minimize the impact?
5. Briefly describe what quantitative and qualitative data are in regard to budgeting?
6. What does the budget audit examine?
7. What corrective action does the budget audit consider?
8. How should budget assumptions be dealt with to guard against unethical assumptions?
9. To be able to complete budget reporting on time, how should accountants approach new project reporting in a manufacturing business?
10. In order to be effective, which type of executions should make up the majority of the audit committee members?
Attachment:- Assignment File.rar