Prepare and Monitor Budgets Assignment -
ASSESSMENT 1 -
The owner of Cupcake Heaven, Sarah Winter, needs some assistance in preparing her budget and budget reports. She has gone through her past records thoroughly and has prepared a summary of what has happened and what is expected to happen. However she is unsure how to determine cash receipts from debtors and cash payments from creditors. She has provided the following for your information
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From balance sheet
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Actual 31 July 2017 $
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Predicted 31 August 2017 $
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Balance of stock control
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26000
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36400
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Balance of debtors control
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2400
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2800
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Balance of creditors control
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8600
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9600
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Balance of cash at bank
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3210
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?
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Cash at Bank (Creditors Control)
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16220
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Cash at Bank (Debtors Control)
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2460
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Stock control account for creditors
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15800
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From the profit and loss statement
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Actual 31 July 2017
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Predicted 31 August 2017
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|
Cash sales
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6500
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6600
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Credit sales
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2750
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2800
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Cost of sales
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4500
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4600
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Stock loss
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800
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800
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Wages
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1600
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1600
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Office expenses
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200
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200
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Discount expense
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110
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120
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Discount revenue
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150
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160
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Bad debts
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100
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100
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a) Reconstruct the following general ledger accounts to help Sarah with the preparation of her budgeted cash flow statement. Debtors Control, Stock Control and Creditors Control. Don't forget to allow for 10% GST on all sales and purchases.
b) Using the above information, plus your reconstructions from part a, prepare a budgeted cash flow statement for Cupcake Heaven for the month ending 31 August 2017.
c) Taking into consideration your budgeted cash flow statement from part b, comment on the likely future cash position of this business
d) Prepare a budgeted profit and loss for the month ending 31 August 2017.
e) Write a brief report on the future performance expectations of Cupcake Heaven in related to the expected profit or loss.
Assessment Summary - You are to submit the following
- 3 x reconstructed general ledger accounts
- Budgeted cash flow statement and report
- Budgeted Profit & Loss statement
- Overview report on future performance expectations
ASSESSMENT 2 -
Allan Smythe is the owner of Cakes-2-U, a specialist cake service that makes and delivers to wedding and celebratory cakes to customers. At the end of December 2016 there is only $260 in the company bank account. His other problem is that he would like to purchase a new vehicle (costing $25,000) for the business, but he doesn't know when he will have the $10,000 deposit required. One of Smythes friends has advised him that he should prepare a forecast of his future transactions, but he is unsure how to do so. He has asked for your assistance and has provided the following information in relation to his business. (You do not have to account for the GST in this question).
The quarter of January to March is Cakes-2-U's busiest quarter each year. In January 2016 he earned the following revenue: January $12,000, February $14,000, and March $15,000. After this the business slowed down a little. In the next quarter he earned the following revenue. April, $14,000, May $12,000 and June $10,000. Allan is confident that revenue will be higher in the early part of 2017. He has already signed contracts to complete the following jobs in January 2017.
- Piketon's - $1,900
- Fox's - $1,750
- Tan's - $1,800
- Singh's - $1,950
- Strong's - $1,850
- Ablert's - $1,950
- O'Conner's - $1,900
For the months of February and March, Allan expects to earn fees from about 10% higher than the previous year, but in the quarter April-June he doesn't expect the same level of business. In fact, he has stated that he expects his revenue to be about 5% lower than in the same quarter last year.
Allan purchases all ingredients and materials for jobs as they are required. When he is quoting for a job, he calculates the cost of materials and multiplies this by 4 to calculate the total cost of the job. Allan argues that this allows for labour costs, vehicle expenses and a profit margin for himself. The cost of materials is therefore 25% of the revenue expected to be earned.
The business employs 2 assistants who are each paid on Fridays. One is employed full time and is usually paid $550 per week. The other is employed on a casual basis. During the busiest months (January to March) the casual is probably paid around $500 per week. In the period April-June his wages will drop back to $400 per week.
The company has one vehicle which delivers all orders. Petrol expenses for the vehicle are usually around #200 per month, but in the January-March quarter this will go up to about $240 per month. The vehicle is due for a service in February, and this will cost about $320.
Insurance on the vehicle is due on 2 March each year, and is expected to cost $640 this year. Registration of the vehicle is due on 11 June and should be about $540.
Allan advertises his business in the local papers at a cost of $150 per month.
New equipment will have to be purchased during February at a cost of $3,800. Allan has arranged for a credit arrangement to help with this purchase. The supplier has agreed to take a $1,000 deposit on delivery of the equipment, and then $400 payments will have to be paid each month until it is fully paid off.
Allan does his office work from home. He usually incurs office expenses for the business at around $100 per month.
Loan repayments of $1500 are due on 15 February, 15 May, 15 August and 15 November.
Allan usually redraws $500 each Friday for personal use.
a) Prepare a cash budget for Cakes-2-U for the period January - June 2017. You budget should allow for the anticipated cash balance at the end of each month.
b) Provide a written report that states when Allan will be able to afford the $10,000 deposit for the new vehicle. Support your answer with reasons.
c) Arrange a time and present your budget to Allan (role-played by your assessor) and explain your proposed cash budget along with your recommendations. It is important that you have access to a soft-copy of your budget for this meeting.
ASSESSMENT 3 -
PART 1: The following comparison of budgeted cash flow and actual cash flows has been prepared for Donna's Diner for the quarter ending 30 September 2017
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Budget $
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Actual $
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Receipts
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|
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Cash fees
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24000
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32000
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Collections from debtors
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12000
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14500
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Loan from ABC Finance
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|
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Company
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5000
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GST Collected
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2400
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3200
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Payments
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|
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Wages
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6000
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6500
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Insurance
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800
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840
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Suppliers
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14000
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16400
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Postage and telephone
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400
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380
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Purchase of new equipment
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5000
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4600
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Cleaning of shop
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1200
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1200
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Drawings
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4500
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3800
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GST Paid
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2140
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2342
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The business had $500 in the bank on 1 July 2017
A. Prepare a budget variance report for the quarter ended 30 September 2017 to reveal the significant differences between the budgeted and actual data
B. What was the predicted cash balance on 30 September?
C. What was the actual cash balance on 30 September?
D. State, and explain, the major causes of the difference between the budgeted and actual bank balance
E. Do you think that the quarterly period is appropriate for cash budgeting? Give reasons for your answer
PART 2: Following from Part A, you are to arrange a time to talk with your assessor (who will role-play the manager for Donna's Diner) and identify the possible cause for any unfavourable variances. You are to take into consideration the information you obtain, and then develop a projected cash flow budget for the next 1 month.
Prior to meeting with the supervisor it is important that you are prepared. This means you must know what you need to ask, as you will need this information to complete the next cash flow budget.
After meeting with your assessor, you are to develop a cash flow budget (for October 2017), and submit it along with a written report outlining the variations made and reasons.
Attachment:- Assignment File.rar