ASSESSMENT TASK 2
Assessment Details
Qualification code BSB51915 Qualification
Name Diploma of Leadership and Management
Unit Code BSBFIM501 Unit Name Manage Budget and Financial Plans
Assessment Type Report Term 1/2017 Due Date
Trainer / Assessor’s Details
Full Name: Date of
Submission
Student Details
Student Name Student ID
Instructions to the Candidates
Pre Requirement for this task
Student must review
• Lesson materials provided in class
• Examples used in lessons.
Instructions to Students:
• Please complete assessment task within the time frame given
• You must attempt all the requirements that are addressed within this assessment task.
• Copying or any kind of cheating is absolutely not permitted, if someone is found cheating or copying, will be debarred from the assessment and a disciplinary proceeding would begin.
• This assessment covers the following Performance Criteria PC’s Covered: 3.1., 3.2, 3.3, 3.4, 4.1, 4.2, 4.3
Assessment description
This is the second of two assessments. There are two parts in this assessment Part A and Part B.
In response to the scenario provided, you will create a simple spreadsheet budget to capture monitoring information. Using information provided to you by your assessor, you will then use the budget spreadsheet to produce a report on expenditure in accordance with organisational policies and procedures. You will also modify a contingency plan. Using the scenario information supplied, you will respond to a number of scenario tasks. You will collect and analyse financial data and make recommendations to improve existing processes. You will also create a plan to implement and monitor solutions.
Assessment Instructions
PART – A Task 1
1. Read through the scenario provided in Appendix 1 to this assessment task and complete tasks A and B.
2. Design and develop a spreadsheet to capture budgeted and actual figures to produce a variance report.
3. Access actual budget figures from relevant managers and accounting systems (assessor).
4. Monitor and record actual figures.
5. Consider feedback from team members.
6. Produce a variance report as per organisational requirements. (budgeted figures from assessment 1)
Task 2
1. Consider the scenario, tasks and financial information contained in the appendices 3 and 4 of this assessment task.
2. On a separate electronic document, explain the following:
a. budgeting
b. cash flow
c. basic accounting principles
d. GST
e. ledgers and financial statements
f. profit and loss statements.
Key Requirements
Task 1
Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.
Candidate must:
? a budget variance report (column to show actual accounts value, absolute variance, % variance, Improvements)
Your assessor will be looking for:
? numeracy skills to read and understand a budget and to produce a variance report
? technology skills to use software associated with financial recordkeeping
? knowledge of basic accounting principles to identify and use account balances
? knowledge of organisational requirements related to financial management
? knowledge of organisational requirements for records and reports
? knowledge of principles and techniques involved in budgeting, profit and loss statements, electronic spreadsheets.
Task 2
Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.
Candidate must:
? provide responses to the five tasks provided in this assessment task
? submit answers on an electronic document such as Microsoft Word.
Your assessor will be looking for:
? numeracy skills to read and understand a budget and perform cost accounting calculations
? knowledge of basic accounting principles to identify and use account balances
? knowledge of organisational requirements related to financial management
? knowledge of current requirements of the Australian Taxation Office with respect to GST
? knowledge of principles and techniques involved in:
? budgeting
? cash flow
? electronic spreadsheets
? GST
? ledgers and financial statements
? profit and loss statements.
Appendix 1 (for variance and improvements)
It has come to the attention of the Managing Director, Tom Copeland, that due to the current economic climate, sales volume may be 20% below target this financial year. Tom is worried that this may severely impact profit projections. The company can accept as much as a 10% variance in profit projections; however, more than this could severely affect the company’s ability to pay obligations and invest. Reliable data to determine whether the risk has eventuated should be available by midway through the second quarter (Q2), when sales data for the company’s product are in.
Consider the contingency plan and the implementation plan for the contingency below. You have already implemented a portion of the contingency plan, namely the monitoring of budget performance in the variance report you have prepared. You should now analyse the report to determine the effectiveness of the contingency plan and its implementation.
You have received the following feedback from team members:
? Full-time workers and sales people are resentful of time wasting and distracting contract employees.
? Overtime not used but employees resentful of suggestion it might not be approved if needed.
? Training suited the needs of many sales team members but was not relevant to about half the team members.
? Sales team members were happy with the incentives program and tried hard to make sales in the third quarter (Q3); however, they were also resentful at the threatening tone of emails and soon lost enthusiasm.
? Effect of one-day training wearing off.
? Fifty percent of direct wages costs are attributable to short-term contract employees whose contracts have expired and who are no longer needed.
? Employees concerned about lack of attention paid to wastage: water; electricity: paper; raw materials.
? Employees feel left out of budgetary decision-making in general.
Part B
Task 3 Role
You are the Senior Accountant. As part of your role, you will need to complete the following tasks.
As you are aware, one risk to the strategic plans of Big Red Bicycle (BRB) is bad debt and poor cash flow due to large trade debtor balances. Consider the following:
? According to its policies, BRB offers 30 day terms to debtors.
? BRB does not currently train sales staff on credit terms.
? There is currently no enforcement of credit terms.
? Warehousing of stock is expensive at current leased premises.
? Many bicycles need to be thrown out if parts rust; this problem exacerbates the problem of waste expense.
You have the following information from the Statement of Financial Position and current ledger accounts in the electronic accounting system (MYOB AccountRight).
Account $
Trade debtors 362,500
Trade creditors 80,000
Opening stock 100,000
Closing stock 300,000
Purchases 1,000,000
Complete the following.
1. Review the Statement of Financial Performance in Appendix 2 to calculate:
a. The average debtor days _____________________
b. The average creditor days _____________________
c. The average stock turnover ____________________
d. Show calculations and results on your response document for this assessment task.
Task 4
In addition to its Australian business, Big Red Bicycle is considering manufacturing a new range of cheaper bicycles in Indonesia. The following information is available:
? The Indonesian plant has capacity to manufacture 8,000 units.
? Big Red Bicycle’s strategic goal is to generate a pretax profit of $1,000,000 for the next financial year for Indonesian operations.
? Clients will pay a maximum of $500 per bicycle
? Possibility exists for move to Indian plant with capacity for 10,000 units.
? Market for bicycles is growing rapidly and BRB will be able to sell all units produced.
? Limited ability to renegotiate costs with suppliers.
? Pricing and cost information is as follows.
Bicycle price per unit $500 (excl. GST)
Current variable costs per unit $250
Fixed costs $1,280,000
Complete the following.
1. State how many years you will need to keep GST records in order to satisfy ATO requirements.
2. Complete the GST budget on the following page to anticipate GST liability.
July August September
Budgeted cash receipts incurring GST:
Cash sales 20,000 10,000 10,000
Cash revenue (besides sales) 0 0 0
Cash receipts from sale of assets (not stock) 0 0 0
Total receipts for GST 20,000 10,000 10,000
Budgeted non-cash receipts incurring GST:
Debtors sales 180,000 230,000 150,000
Total non-cash receipts 180,000 230,000 150,000
Total budgeted receipts incurring GST 200,000 240,000 160,000
Budgeted cash payments incurring GST:
Cash purchases of stock 0 0 0
Cash expenses 4,300 5,200 5,250
Total cash receipts incurring GST 4,300 5,200 5,250
Budgeted credit payments incurring GST:
Credit purchases of stock incurring GST 25,000 30,000 25,000
Credit purchases of assets (besides stock) 4,300 5,200 5,250
Total cash payments incurring GST 29,300 35,200 30,250
Total budgeted cash payments incurring GST 33,600 40,400 35,500
GST cash budget calculations
a) Cash receipts
b) Cash payments
c) GST liability
Appendix 2 – Budgets and templates
Master budget with profit projections
Big Red Bicycle Pty Ltd
Master Budget FY 2011/2012
FY Q1 Q2 Q3 Q4
REVENUE
Commissions (2% sales) 60,000 15,000 15,000 15,000 15,000
Direct wages fixed 200,000 50,000 50,000 50,000 50,000
Sales 3,000,000 750,000 750,000 750,000 750,000
Cost of Goods Sold 400,000 100,000 100,000 100,000 100,000
Gross Profit 2,340,000 585,000 585,000 585,000 585,000
EXPENSES
General & Administrative Expenses
Accounting fees 20,000 5,000 5,000 5,000 5,000
Legal fees 5,000 1,250 1,250 1,250 1,250
Bank charges 600 150 150 150 150
Office supplies 5,000 1,250 1,250 1,250 1,250
Postage & printing 400 100 100 100 100
Dues & subscriptions 500 125 125 125 125
Telephone 10,000 2,500 2,500 2,500 2,500
Repairs & maintenance 50,000 12,500 12,500 12,500 12,500
Payroll tax 25,000 6,250 6,250 6,250 6,250
Marketing Expenses
Advertising 200,000 50,000 50,000 50,000 50,000
Employment Expenses
Superannuation 45,000 11,250 11,250 11,250 11,250
Wages & salaries 500,000 125,000 125,000 125,000 125,000
Staff amenities 20,000 5,000 5,000 5,000 5,000
Occupancy Costs
Electricity 40,000 10,000 10,000 10,000 10,000
Insurance 100,000 25,000 25,000 25,000 25,000
Rates 100,000 25,000 25,000 25,000 25,000
Rent 200,000 50,000 50,000 50,000 50,000
Water 30,000 7,500 7,500 7,500 7,500
Waste removal 50,000 12,500 12,500 12,500 12,500
TOTAL EXPENSES 1,401,500 350,375 350,375 350,375 350,375
NET PROFIT (BEFORE INTEREST & TAX) 938,500 234,625 234,625 234,625 234,625
Income Tax Expense (25%Net) 234,625 58,656 58,656 58,656 58,656
NET PROFIT AFTER TAX 703,875 175,969 175,969 175,969 175,969
Appendix 3 – Financial information
Statement of Financial Performance
Big Red Bicycle Pty Ltd
Statement of Financial Performance
For the year ended 30 June 2012
REVENUE
Sales 2,900,000
Less direct wages and commissions 272,500
Opening stock 100,000
Purchases 300,000
Closing stock 20,000
Less cost of goods sold 380,000
Gross Profit 2,247,500
EXPENSES
General & Administrative Expenses
Travel 22,000
Legal fees 4,500
Bank charges 700
Office supplies 4,000
Postage & printing 500
Dues & subscriptions 600
Telephone 11,200
Repairs & maintenance 45,000
Payroll tax 25,000
Marketing Expenses
Advertising 208,000
Employment Expenses
Superannuation 45,000
Wages & salaries 500,000
Staff amenities 23,000
Occupancy Costs
Electricity 38,000
Insurance 100000
Rates 100,000
Rent 200,000
Water 35,000
Waste removal 60,000
TOTAL EXPENSES 1,422,500
NET PROFIT (BEFORE INTEREST & TAX) 825,000
Income Tax Expense 206,250
NET PROFIT AFTER TAX 618,750
Ageing debtors budget
Big Red Bicycle Pty Ltd
AGED DEBTORS BUDGET
2011/12 TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4
Sales 2,900,000 600,000 900,000 800,000 600,000
% Debtors Sales 50% 50% 50% 50%
Total Debtors 100% 300,000 450,000 400,000 300,000
Current 65% 195,000 292,500 260,000 195,000
30 Days 20% 60,000 90,000 80,000 60,000
60 Days 12% 36,000 54,000 48,000 36,000
90 Days 3% 9,000 13,500 12,000 9,000
Appendix 4 – Budgeting and finance policy Budget preparations
? The business plan will set the key parameters for all financial budgeting.
? Variations to the business plan must be approved by the CEO and senior management strategic committee.
? Prior period results are to be analysed to identify the profit level of cost centres, identify correlations between financial statistics and to set key performance indicators and benchmarks for future budgets.
? The budget planning committee will meet prior to budgets being developed and agree on budget parameters. The committee will consist of all department managers plus the CEO and Chief Financial Officer.
? A CAPEX budget will be developed from the approved business plan.
? A detailed sales budget must be completed before completing the profit budget for the year.
? A cash-flow budget covering the first three months will be prepared after the profit budget is completed.
? A master budget including profit projections will be completed from which cost centre allocations will be made.
? Budget notes that contain all the assumptions used in the budgets should accompany the master budget or be made available on a separate document. Where possible, the notes should justify the basis on which the estimates were made.
? Overheads (non-direct expenses) will be apportioned across the cost centres equally. Exceptions need to be negotiated with relevant authorities.
? All expenses and income will be spread equally throughout the year unless otherwise required by business needs or business environment.
? The financial cycle for budgeting purposes will be yearly ending 30 June.
Reporting requirements
Software applications to be used in reporting:
? Environment – MS Windows.
? Accounting information system – MYOB AccountRight.
? Data analysis – Microsoft Excel 2007.
Actual results will be produced monthly by the MYOB accounting system. Actual variances to budget will be produced using Excel with a report prepared for senior management for significant variances.
Financial delegations
? Each manager is responsible for achieving the revenue budgets agreed to in the budget committee.
? Each manager is responsible to approve, by signing the necessary paperwork, all expenditures that fall within their area of responsibility.
STRATHFIELD COLLEGE
Strathfield College Pty Ltd
? Expenditures must be within the budget guidelines for the individual departments.
Format for budgets and reports
All budgets must include the:
? name of the person who prepared it
? cost centre (if applicable)
? name of the budget/report, i.e. sales, expenses, CAPEX, cash flow, budget variance report
? period of the budget.
BSBFIM501 Manage Budgets and Financial Plans.AT2.Report.V4
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