BSBFIM501 Manage budgets and financial plans

Assessment task 3

Monitoring and controlling finances

Part A
Budget and Actual Performance

Revenue FY Q1 Q2 Q3 Q4
 
% Variance

Absolute%

Budget

Actual

Budget

Actual

Budget

Actual

Budget

Actual

Budget

Actual
Commission 5% 5%
-2% 60000 60300 15000 15075 15000 15075 15000 15075 15000 15075
Direct wages 0 0 200000 200000 50000 50000 50000 50000 50000 50000 50000 50000
fixed

Sales -1%  1% 3000000 29500000 750000 737500 750000 850600 750000 700500 750000 720735
0
Cost of goods 5% 5% 400000 420000 100000 110000 100000 105000 100000 102500 100000 102500
sold

Gross profit -8% 8% 2340000 20500000 585000 584666 585000 605000 585000 5704600 585000 467004

Total -4% 4% 1401500 1301500 350375 360375 350375 400675 350375 340567 350375 360375
expenses

Net -3% 3% 938500 930500 234625 250624 234625 230625 234625 234625 234625 230625
profit(Before
interest and
tax

Income Tax -6% 6% 234625 230625 58656 49625 58656 60656 58656 55657 58656 574535

-
Net profit 15% 703875 603875 175969 165695 175969 116069 175969 165695 175969 169650
15%
 BSBFIM501 Manage budgets and financial plans
Task B
Revised contingency plan

Company Name: Big Red Bicycle Pty Ltd

Person Developing:
Name: Pat Roberts Position: Senior Accountant

Risk Identified: Unfavorable economic climate reducing sales by 20% and profits by 10%.
Strategies or activities to By when By who
minimize risk
Adopt intermediary budgets Q2 PM and OM
for each quarter
Reduce training and coaching Q2 HR
activities
Withdrawing incentives to Q2 SM
sales agents
Reduce working hours Q2 PM

Contingency implementation plan

Risk Identified: Unfavorable economic climate reducing sales by 20% and profits by 10%.
Activity Monitoring and date Person/s
Monitor operations and Management report Q2 Production
production to reduce cost
Closure of training sections No sections proceeding Q3 Human resource manager
Announcement on removal of Monitoring sales report Q2 Sales Manager
selling incentive
Email informing employees Monitoring variance report. Production Manager
about reduced working hours Q3

Assessment 4
Part A
1. (A). average debtors days
Debtor days = Debtors/ (sales/ 365)
=362,500(2,900,000/365) =45 days

(B) Average creditor days

Creditor days = (trade payables/ cost of sales)*365
= (80,000/380,000)365
= 76days

(c) Average stock turnover

Stock turnover = cost of goods sold/ average inventory

 BSBFIM501 Manage budgets and financial plans
= 800,000/300,000
=2.7 or 8:3

2. Recommendations for the aging budget

I recommend that the debtor aging budget is restructured so that the percentages
allocated for debtor purchases be reduced to 40%. This will help achieve the
targeted amount of profit before tax since it will aim to mitigate the number of bad
debts. After the reduction of the allocated percentage for debtors, the total amount
reclaimed will total to 290,000 which when added to the profit realized before tax
(825,000) will have 1,115,000, thereby hitting the targeted profits.

Another recommendation is that the amount obtained because of reducing the

debtor’s percentage, part of it should be utilized in training the staff in the sales and
marketing department. The training will improve their selling skills, which will then
translate into more revenues being generated by the company. The training will go a
long way to ensure that the company realizes their targeted profits and surpass
them.
The sources of information used to build the recommendation include,
a) Statement of financial performance
b) Scenario information
c) Ageing debtors budget

Task B
1. number of units required to achieve the targeted profit amount

The amount of profit per unit= selling price less variable cost=$ 250
The targeted profit = 1,000,000

The number of units to cover the variable cost = 1,000,000/250=4,000 units

The number of units to cover the variable cost =1,280,000/250 =5,120
The plant requires to produce a total of (4,000 +5,120) = 9,120units to attain the
targeted profit of 1,000,000

(b) Current variable cost per unit required to achieve the targeted profit amount

Targeted profit 1,000,000

Current manufacturing capacity 8,000 units
Current fixed cost 1,280,000

Number of units required to cover fixed cost = 5,120 (from (a) above)
 BSBFIM501 Manage budgets and financial plans
Number of units remaining after covering the fixed cost= 8,000 less 5,120=2,880
units
Therefore the profit per unit required to hit the targeted profit =
1,000,000/2,880 =$347
Hence, the variable cost= price per unit less the profit per unit =$500-347= $153
The variable cost required at current capacity is $ 153.

2. The BRB Company will be better off if it manages to increase its production
capacity because the company has an Indian plant, which can manage to produce
10000 units. It is wise to shift to that plant as it matches the required production
of 9,120 units.
The other suggestion would be to pass the increased cost of production to the
consumer while using the current production capacity. The additional cost of $97
will increase the cost of the bike to $597 to attain the targeted profits.

3. The documents used to build the above suggestions include

a) Statement of financial performance

b) Scenario information
c) Calculations

Task C
Business activity (BAS) for the first quarter 2012-2013
1. The number of years required to maintain the GST records, to satisfy ATO
requirements is three. However, there are cases where the auditing process
might extend up to 6 years. Thus, it is correct to say that the records should
be kept until there is no more auditing required.
2. GST estimation

Budget cash July August September

receipt including
GST
Cash sale 20,000 10,000 10,000
GST Rate 10% 10% 10%
GST liable 2,000 1,000 1,000

Non-cash 180,000 230,000 150,000

receipts for GST
GST Rate 10% 10% 10%
GST liable 18,000 23,000 15,000

Cash payment 29,300 35,200 30,250

incurring GST
GST Rate 10% 10% 10%
GST liable 2,930 3,520 3,025
 BSBFIM501 Manage budgets and financial plans

a. Cash receipts

Cash sale 20,000 10,000 10,000

July August September

b. Cash payments

Cash payment 29,300 35,200 30,250

incurring GST
July August September

c. GST liability

July August September

Cash receipt GST $2,000 $1,000 $1,000
liable
Cash payment $2,930 $3,520 $3,025
GST liable
GST liable $-930 $-2520 $-2,025

Task D
Action plan for the recommendation in part B

Activity Person Position Timeline

Assessing the viability of Sam Geller Operations manager 2 months
shifting the production to Charles Sales general
India Pierce manager
Production manager
Approval of the relocation Michelle Yeo Chief executive 1 week
officer
Tom
 BSBFIM501 Manage budgets and financial plans
Copeland Managing director
Allocating the finances for Pat Robert Senior Accountant 1 week
the relocation
Relocation and Stuart Laruot Operations manager 6 months
implementation
Monitoring and John Black Chief financial On going
evaluation officer

Task E
1. Basic accounting principles
These principles and guidelines are founded under ten main principles including,
economic, monetary, time, and cost

2. Cash flow is the total amount of money that a business organization has entering
and leaving the entity and in most cases affect the liquidity of the business.

3. Ledgers and financial statements

Ledgers are financial records that hold the company financial information and
are used to prepare the financial statements; the financial statements consists
statement of financial position and profit and loss statement.

4. Profit and loss statements

This is a company financial record that shows the company’s earnings and
expenses over a period.

Organization profitability is determined by how well the management can keep

control of the organization finances as well as the activities. Having a good cost
benefit analysis ensures that the management decision-making process is
relevant and compatible with the accounting systems available as well as gives
room for flexibility.