Manage Finances within a Budget Projects-
Learning Outline - Within this resource, you will be covering the following key topics:
- Interpret and manage multiple budgets.
- Allocate budget resources.
- Monitor financial activities against budget.
- Identify and evaluate options for improved budget performance.
- Complete financial and statistical reports.
- Use correct budget terminology.
Using these key topics as a guide, you will work with your trainer/assessor to develop your skills and knowledge. The role of your trainer/assessor is to assist and guide you through your learning journey to achieve your goals.
Project 1 -
You work as a regional manager for a small travel agent, Happy Holidays who operate three stores.
Recently, the budget was prepared for the upcoming financial year by the owner and the accountant.
You and two of the store managers were also able to provide valuable input to each store's budget. Unfortunately, the manager of Store 1 was not able to participate due to being on leave at the time.
The budget has now been finalised (see over the page).
The owner and accountant feel that the anticipated net profit for each store should fall within the range of 10-15% of total budgeted revenue.
Review the budget (over the page) and complete the following questions and tasks:
a) Starting with Store 1, write a brief memo to the manager advising that the budget has been finalised. Include in your memo the desired budget outcomes for the store, as well as the importance of budget control for all employees and the importance of keeping detailed records of how money is spent throughout the year on resources.
All managers have now been advised that the budget has been finalised and have each received a copy of the budget.
b) You have received the following questions from the store managers regarding the annual budget (assuming that peak / non-peak periods are not being taken into account at this stage). Show your calculations for each query:
i) What is the total monthly sales budget for Store 1?
ii) How much has been allocated each quarter for training and seminars for Store 1?
iii) How much has been allocated for each month for advertising & promotions for Store 2?
iv) How much has been allocated for monthly commissions (payable to employees) for Store 3?
|
Happy Holidays - Annual Profit & Loss Budget for 1st July xx to 30th June xx
|
|
Details
|
Store 1
|
Store 2
|
Store 3
|
Total
|
|
Revenue
|
|
|
|
|
|
Airline Commission
|
150,000
|
100,000
|
75,000
|
325,000
|
|
Hotel Commission
|
150,000
|
100,000
|
75,000
|
325,000
|
|
Other Commission
|
100,000
|
50,000
|
37,500
|
187,500
|
|
Total Revenue
|
400,000
|
250,000
|
187,500
|
837,500
|
|
Operating Expenses
|
|
|
|
|
|
Accounting Fees
|
2,500
|
1,500
|
1,000
|
5,000
|
|
Advertising & Promotions
|
15,000
|
15,000
|
10,000
|
40,000
|
|
Bank Charges
|
1,200
|
720
|
480
|
2,400
|
|
Rent
|
25,000
|
15,000
|
9,600
|
49,600
|
|
Telephones
|
12,000
|
7,200
|
4,800
|
24,000
|
|
Training and Seminars
|
10,000
|
6,000
|
4,000
|
20,000
|
|
Wages - Base Salary
|
160,000
|
120,000
|
90,000
|
370,000
|
|
Wages - Commissions
|
60,000
|
37,500
|
28,125
|
125,625
|
|
Superannuation
|
20,350
|
14,570
|
10,927
|
45,847
|
|
Total Operating Expenses
|
306,050
|
217,490
|
158,932
|
682,472
|
|
NET PROFIT OR LOSS
|
93,950
|
32,510
|
28,568
|
155,028
|
|
% of Budgeted Revenue
|
23.49%
|
13.00%
|
15.24%
|
18.51%
|
Store 1 is the biggest out of the three stores with a full-time manager (paid a $50K base salary plus commission), two full-time sales consultants (paid a $40K base plus commission) and one part-time sales consultant (paid a $30K base plus commission).
Store 2 has a full-time manager (paid $50K as above), one full-time sales consultant (paid $40K as above) and one part-time sales consultant (paid $30K as above).
Store 3 has a full-time manager (paid $50K as above) and one full-time sales consultant (paid $40K as above).
i) According to the Budget P&L on the previous page, has enough been allocated for base salaries for all staff? (Show your calculations for each store)
Project 2 -
July (the first month of the financial year) is over and it is time to start checking actual income and expenditure against the budget.
You are ready to check Store 3.
Below is a copy Store 3's bank statement for July.
Review the bank statement and complete the tasks over the page
|
Happy Holidays - Store 3 Bank Statement - July xx
|
|
Date
|
Details
|
Deposit
|
Withdrawal
|
Balance
|
|
1/7/xx
|
Balance Bought Forward
|
|
|
22,135.00
|
|
|
Account Fee
|
|
40.00
|
22,095.00
|
|
|
Direct Debit: Monthly Rent*
|
|
880.00
|
21,215.00
|
|
5/7/xx
|
BPAY: Telephones*
|
|
550.00
|
20,665.00
|
|
10/7/xx
|
Newspaper Advertising*
|
|
1,100.00
|
19,565.00
|
|
15/7/xx
|
Monthly Net Wages**
|
|
6,000.00
|
13,565.00
|
|
25/7/xx
|
BAS: April-June quarter
|
|
2,228.00
|
11,337.00
|
|
30/7/xx
|
Airline Commission*
|
7,865.00
|
|
19,202.00
|
|
|
Hotel Commission*
|
5,500.00
|
|
24,702.00
|
|
|
Cruise Commission*
|
1,650.00
|
|
26,352.00
|
|
|
Car Rental Commission*
|
1,100.00
|
|
27,452.00
|
*These expenses include GST however ex-GST figures are report on P&L.
** Wages: $7,500 Gross less <1,500> PAYG = $6,000 Net
a) Using the annual budget from Project 1, calculate the monthly budget figures for expenses for Store 3 into the table below (at this stage, peak and non-peak periods have not been taken into account). Do not include cents.
b) Using the bank statement on the previous page, calculate the actual expense figures for Store 3 for July (remember to not include GST).
c) Calculate any variances (if any) between the actual and budgeted figures for July.
|
Operating Expenses
|
Actual
|
Budget
|
Variance $
|
Variance %
|
|
Accounting Fees
|
|
|
|
|
|
Advertising & Promotions
|
|
|
|
|
|
Bank Charges
|
|
|
|
|
|
Rent
|
|
|
|
|
|
Telephones
|
|
|
|
|
|
Training and Seminars
|
|
|
|
|
|
Wages - Base Salary
|
|
|
|
|
|
Wages - Commissions
|
|
|
|
|
|
Superannuation
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
|
d) What reason could you provide for having nil accounting and training and seminar expenses for the month of July?
e) Are there any withdrawals or deposits on the bank statement that do not get reported on the P&L? If yes, explain why the transaction/s are not reported on the P&L.
Project 3 -
You have been asked to prepare a cash flow forecast for the next three months (August, September and October) for Store 3 using the following anticipated transactions:
- Accountant's bill is due in August - Store 3's invoice is $1,100 (inc. GST). Do not account for any accounting fees in September or October.
- Advertising costs - $750 per month (inc. GST).
- Bank charges - $40 per month (GST Free).
- Rent costs - $880 per month (inc. GST).
- Telephone costs - $440 per month (inc. GST).
- Training and Seminars - all Store 3 staff are attending a training seminar in September costingthe business $2,200 (inc. GST). Do not account for and training and seminar costs for August or October.
- Wages - Base Salary - $7,500 gross per month.
- Wages - Commissions: $2,343.75 gross per month.
- Superannuation - paid quarterly and will be paid in October for an estimated amount of $2,731.75. Do not account for any super in August or September.
- BAS - paid quarterly and will be paid in October for an estimated amount of 6,850.00. Do not account for BAS in August or September.
a) Using the table on the next page, as well as the above expenses, calculate a cash flow forecast for the next three months. You must include GST in your figures as the GST inclusive price comes into and out of your bank account.
|
Happy Holidays - Cash Flow Forecast
|
|
Details
|
August
|
September
|
October
|
|
Balance Bought Forward:
|
27,452.00
|
|
|
|
Plus anticipated sales:
|
17,187.50
|
17,187.50
|
17,187.50
|
|
Less anticipated expenses:
|
|
Accounting Fees
|
|
|
|
|
Advertising
|
|
|
|
|
Bank Charges
|
|
|
|
|
Rent
|
|
|
|
|
Telephones
|
|
|
|
|
Training and Seminars
|
|
|
|
|
Wages - Base Salary
|
|
|
|
|
Wages - Commissions
|
|
|
|
|
Superannuation
|
|
|
|
|
BAS
|
|
|
|
|
Anticipated Bank Balance:
|
|
|
|
Project 4 -
It is now October and the first quarter of the financial year is over (being July to September). The accountant has prepared an actual P&L for this quarter for each store compared to budget. Variances have already been calculated.
Some concerns have been raised about Store 1 going over their advertising and marketing budget, as well as their sales commission being significantly lower than anticipated
These issues were bought to the attention of Store 1's manager who firstly advised the following facts:
-The % of the total sales target for each store is as follows:
- Store 1 - 47.76%
- Store 2 - 29.85%
- Store 3 - 22.39%
-The % of the total advertising and marketing budget for each store is as follows:
- Store 1 - 37.5%
- Store 2 - 37.5%
- Store 3 - 25%
-The owner and accountant feel that the anticipated net profit for each store should be between 10-15% of total budgeted revenue; the anticipated net profit for Store 1 is much higher at 23.49%
Store 1's manager raised the following concerns based off the above statistics:
-Regarding the advertising and marketing budget, Store 1 feel that they should be entitled to a minimum of 47% of the advertising and marketing budget, based on having the highest sales target to achieve of nearly 50% of the total sales budget. (At present, Store 1 has the same advertising and marketing budget as store 2, who has a much lower sales target of just under 30%).
-Regarding the sales target falling short, the store manager feels that they either need an additional full-time consultant to meet their high sales target, or that their sales target needs to be reviewed.
In light of the above suggestions, you have decided to calculate how the above changes would impact on the budget.
Using the Adjusted P&L Budget below, manually adjust the following figures:
a) Advertising and Promotions: 50% to Store 1, 30% to Store 2 and 20% to store 3.
b) Wages: add an additional $40K to Wages - Base Salary for Store 1 as well as an additional 9.25% (of $40K) to Superannuation for store 1.
c) Recalculate the total operating expenses for each store, as well as net profit or loss and % of budgeted revenue.
|
Happy Holidays - Adjusted Profit & Loss Budget for 1st July xx to 30th June xx
|
|
Details
|
Store 1
|
Store 2
|
Store 3
|
Total
|
|
Revenue
|
|
|
|
|
|
Airline Commission
|
150,000
|
100,000
|
75,000
|
325,000
|
|
Hotel Commission
|
150,000
|
100,000
|
75,000
|
325,000
|
|
Other Commission
|
100,000
|
50,000
|
37,500
|
187,500
|
|
Total Revenue
|
400,000
|
250,000
|
187,500
|
837,500
|
|
Operating Expenses
|
|
|
|
|
|
Accounting Fees
|
2,500
|
1,500
|
1,000
|
5,000
|
|
Advertising
|
|
|
|
40,000
|
|
Bank Charges
|
1,200
|
720
|
480
|
2,400
|
|
Rent
|
25,000
|
15,000
|
9,600
|
49,600
|
|
Telephones
|
12,000
|
7,200
|
4,800
|
24,000
|
|
Training and Seminars
|
10,000
|
6,000
|
4,000
|
20,000
|
|
Wages - Base Salary
|
|
120,000
|
90,000
|
|
|
Wages - Commissions
|
60,000
|
37,500
|
28,125
|
125,625
|
|
Superannuation
|
|
14,570
|
10,927
|
|
|
Total Operating Expenses
|
|
|
|
|
|
NET PROFIT OR LOSS
|
|
|
|
|
|
% of Budgeted Revenue
|
|
|
|
|
d) Write an email to the accountant explaining the proposed suggestions from the manager of Store 1, as well as how the changes will impact the net profit or loss for each store, and the overall business. Include whether the changes, in your opinion, would impact on service levels for the store.
e) Write an email to the manager of Store 2 advising them of the proposed changes to their advertising budget, and why this change is taking place.
Attachment:- Assignment.rar