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Assessment Coversheet
Unit/s Assessed FNSACC412 Prepare Operational Budgets
Assessment Name FNSACC412 Assignment
Type of Assessment
This summative assessment will enable your assessor to make a judgement of competency based on the submission of your completed assessments against the requirements of the unit/s of competency in this module.
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Assessment Coding
Assessment of this course is based on competency-based principles.
S = Satisfactory
NS = Not Satisfactory
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Re-assessment
Your assessment can be submitted after you have reviewed the learning materials and practiced enough to feel confident in your resubmission. You have two weeks from your last submission feedback to resubmit. You are re-assessed in only the areas where your assessor has indicated you were initially assessed as NS. It is at the assessor’s discretion to re-assess the entire assessment should an overall understanding not be demonstrated. When you are re-assessed as ‘satisfactory’ after re-submission you will achieve competency for this assessment.
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Assessment Activities
Short Answer and Worked Answer Questions
FNSACC412 – Prepare operational budgets
The following questions are based on the material in the textbook “Prepare Operational Budgets”
by Richard Hughes & Tony Kirby, 6th Edition (January, 2016).
Activity instructions to candidates
• This is an open book assessment activity.
• You are required to read this assessment and answer all questions that follow.
• Please type your answers in the spaces provided.
• Please ensure you have read “Important assessment information” at the front of this assessment
• Estimated time for completion of this assessment activity: 2-3 hours

The following questions are based on the material in Chapter 1:
Q1. James Ltd produces a single product which it sells for $100.00 per unit.
The product requires $45.00 per unit in variable costs to produce and sell, and fixed costs per annum are $1,100,000.
Determine:
a) The dollar sales necessary to break even; and
b) The income statement if 18,000 (Pessimistic) or 22,000 (Optimistic) are sold.
a) Breakeven dollars. (Show your workings)
b) Income Statement
Projected Income Statement
18,000 Units 22,000 Units
Sales revenue
Less: Variable costs
Contribution Margin
Less Fixed costs
Profit (Loss) before tax
Q2. (a) Sharp View Software wish to produce an expenses budget for the year ending 30 June 2016 based on the previous year’s actual figures.
Expenses for Year ended 30 June 2015
Sales Commissions $ 350,000
Consultancy Fees 136,000
Wages 482,000
Telephone 16,000
Stationery 11,000
Repairs 9,600
The following assumptions are used to prepare the budget:
• Sales commissions and consultancy fees are expected to fall by 5% due to less demand within the industry.
• Wages will rise by 3%.
• Telephone costs will fall by 5% due to a new contract being negotiated.
• Stationery costs will rise by 5%.
• Repairs: no change.
Sharp View Software - Expenses Budget for Year ended 30 June 2016
Y/E 30 June 2015 % Change Y/E 30 June 2016
Sales commissions
Consultancy fees
Wages
Telephone
Stationery
Repairs
Total
(b) When would it be appropriate for a firm to use qualitative forecasting techniques instead of quantitative forecasting techniques?
The following questions are based on the material in Chapter 2:
Q3.
City Mowers Pty Ltd are wholesalers of two types of mowers. The sales for the quarter ending 31 December 2015 were as follows:
Units Selling Price
Mower X October 1,500 $149.00
November 1,300
December 1,400
Mower Y October 2,000 $185.00
November 2,500
December 2,700
Predictions are that the sales volume for mower X will increase by 7% in January and increase by
5% for both February and March. (Based on the figures for October, November and December respectively).
Sales for Mower Y are expected to decrease by 5% for January, February and March. (Based on the figures for October, November and December respectively.)
Required:
Using the format below, prepare separate Sales Budget for each of Mower X and Mower Y, for the three months ending 31 March 2016.

Mower X - Actual and Budgeted sales
ACTUAL BUDGETED
October November December January February March TOTAL
Expected change % % %
Selling price $
Unit sales
Sales revenue $
Mower Y - Actual and Budgeted sales
ACTUAL BUDGETED
October November December January February March TOTAL
Expected change % % %
Selling price $
Unit sales
Sales revenue $
Total Budgeted Sales Revenue (both products) $

Q4.
Hay and List is a firm of accountants. Between them, the two partners work 2,800 hours per annum. The current charge­out rate is $200 per hour.
Next year the charge out rate will increase by 10%. The firm’s current market share of billable hours is 10% and this is expected to grow to 15% next year.
Required: Prepare a fees income budget for the year. Use the layout below to show your workings.
Fee Income Budget:
Size of current total billable accounting market = _________________________ = ________ hours
Predicted hours for next year = _________% of total hours = ________x ________ = _______hours
New charge out rate =____________x ________ = $________ per hour
Budgeted fees income = __________hours at $ ___________per hour = $____________

The following questions are based on the material in Chapter 3:
Q5.
The company, Out­of­It’s, expected revenues and expenses for the quarter ended 31 December are:
October November December
Projected Sales $135,000 $160,000 $145,000
Monthly expenses:
Wages & Salaries (split Marketing 55%, Administration 45%) $ 20,000
Depreciation of Motor Vehicles for marketing activities 1,200
Depreciation of fixtures and fittings
(split Marketing 55% and Administration 45%) 1,500
Stationery for administration activities 900
Rent for administration activities 600
Interest on loan 500
General expenses (split Marketing 60% and Administration 40%) 1,000
Bank charges 75
Advertising $1,200 p.m. plus 3% of sales
Commission 4% of sales
Cartage 2% of sales
Discount Allowed 1.5% of sales
Payroll on costs being 5.0% of Wages and Salaries
Required:
Prepare a classified expenses budget for the quarter ending 31 December using the table below.
Tip: Ensure that all expenses are for the quarter, i.e. 3 months.

Classified Expenses Budget - Quarter ending 31 December
Budgeted sales revenue for Dec quarter = $_____________________
Marketing Administration Financial TOTAL $
Wages and salaries
Depn of motor vehicles
Depn of fixtures & ftgs
Stationery
Rent
Interest on loan
General
Bank charges
Advertising
Commissions
Cartage
Discount allowed
Payroll on-costs
Total Budgeted Expenses

The following questions are based on the material in Chapter 4:
Q6.
The following information relates to the business of Sweet Idea.
Actual Credit Sales amount to:
March April May
$7,000 $5,000 $4,000
Customers normally pay their debts at the following rate:
• 60% in first month after sale • 40% in second month after sales
Estimated Credit Sales:
June July August
$3,000 $6,000 $8,000
Required:
Prepare an Accounts Receivable collections budget, for the months of June, July and August (no GST).
Sweet Idea Accounts Receivable Collections Budget
April May June July August

Credit Sales
Collections:
One Month after sale
Two Months after sale
Total Receipts

Q7.
From the information provided by Better Land below, prepare a cash payments budget for the quarter ended December 31 (no GST).
Expected purchases for the budget period are:
October November December
$6,500 12,000 15,000
Cash expenses to be incurred during the period:
• Rent, $6,600 per month
• Wages, $8,500 in October and November and $14,000 in December
• Marketing expenses $2,200 in October, increasing to $3,600 in November and December.
• Administration and general expenses $5,200 per month.
• Financial expenses $420 per month.
Other information:
• Inventory purchases are paid for in the month following purchase.
• The balance of Accounts Payable on September 30 is $4,840.
Required:
Prepare a cash payments budget for the quarter ended December 31 (no GST).
Cash Payments Budget
October November December
Purchases
Rent
Wages
Marketing Expenses
Admin & General Expenses
Financial Expenses
Total payments
Q8.
Prepare a cash budget for Messara for January, February and March.
All amounts below include GST where applicable. Expected receipts are:
Cash Sales Collections from A/cs Receivable
January 5,800 9,500
February 6,600 8,200
March 7,900 6,800
Budgeted purchases and wages are:
Purchases Wages
December 11,000 --
January 13,200 2,900
February 15,400 2,700
March 17,600 2,500
50% of purchases are paid in the month they are incurred. The rest are paid the following month.
Wages are paid in the month they are incurred.
The bank account balance at 31 December is $9,200.
Required:
Prepare the cash receipts, cash payments and cash budgets for Messara for January, February and March.
Receipts Budget January February March
Cash sales
Collections from Debtors
Total receipts
Payments Budget December January February March
Purchases
Payments:
Same month
One month
Wages
Total payments
Cash Budget January February March
Opening Cash Balance
Add: Receipts
= Cash Available
Less: Payments
= Ending Cash Balance
Q9.
Video role play task
You are the bookkeeper for Brad’s Vegan Ice Creamery. The business has had a bumper year in terms of sales volumes, but there are concerns about the fall in profits. Bradley Stanton, the owner of Brad’s Vegan Ice Creamery, has called a meeting with you (the bookkeeper) and the Melinda (sales manager) to discuss the results of operations for the year.
In your meeting, you’ll discuss:
- The information below
- Milestones and performance indicators
- The variances in the budget, and what they mean
- Brad and Melinda’s views and opinions on the budget information
- Plans to manage the budget for the coming year
Sales volumes: Budget 750,000 litres; Actual 795,000 litres
Profit & Loss Budget ($000) Actual ($000) Variance ($000)
Sales $12,000 $14,310 $ 2,310 Favourable
Less Cost of goods sold $ 6,750 $ 8,586 $ 1,836 Unfavourable
Gross profit $ 5,250 $ 5,724 $ 474 Favourable
Less operating expenses:
Wages & commission $ 1,800 $ 1,940 $ 140 Unfavourable
Rent $ 800 $ 800 $ 0
Advertising $ 650 $ 890 $ 240 Unfavourable
Insurance $ 240 $ 240 $ 0
Other $ 100 $ 230 $ 130 Unfavourable
Total expenses $ 3,590 $ 4,100 $ 510 Unfavourable
Net Profit $ 1,660 $ 1,624 $ 36 Unfavourable
General instructions:
• Students must perform with at least 1 other person. Using just 1 other person to play multiple roles is completely OK. Alternatively, you can use as many other persons as there are roles.
• The other person(s) can play multiple roles except for the role required to be played by the student.
• There is no requirement for the other person(s) to be visible in the video, so if your partner(s) would prefer not to be visible, that’s OK.
• The student must be visible throughout the video.
• All persons must be audible throughout the recording.
• Using a camera phone is often a quick and easy way to record the video.
Instructions
You will need at least one partner for this exercise, to read/play the parts of the other stakeholders. Give them the role play script titled ‘Budget meeting’. You only need one partner; they can read all the parts other than yours.
Note: You will need a calculator to perform some basic calculations before performing this role play. Read the script to determine what you’ll need to calculate and prepare yourself and the figures before you begin the role play.
Video record your meeting with Brad and Melinda at Brad’s Vegan Ice Creamery. Follow the video recording process you’ve used before (also on the LMS).
Upload the meeting video recording when you upload this written assignment document.
Please name your roleplay file with your surname followed by mod 4.2. For example, Smith Mod 4.2

Criteria
For this task, you’re being assessed on your ability to:
• Student makes an effort to build rapport with colleagues
• Student discusses budget variance with the owner
• Student clarifies budget results
• Student engages with the owner regarding costs
• Student elicits owner and sales managers’ opinions on budget targets/ideas
• Student answers question about reduced COGS impact on profit projection
Q9 Video role play task
Brad’s Vegan Ice Creamery
Budget meeting
Role Play Script
Notes:
? This role play has three different roles, including the student/bookkeeper. You: bookkeeper
? Brad: owner
? Melinda: sales manager
Instructions:
Remember what you’re being assessed on: your operational budget skills and your communication skills, as outlined in the instructions for Q9.
? If you only have one partner, they read/play all the roles except yours.
? You’ll need to have the answers to previous questions ready to guide you in this discussion.
? The parts are indicated with names in brackets, like this: [YOU] [BRAD]
? When something is written in bold, it’s just a guide – not a line you have to read word-for-word.
There’s often no script for what you say; just guidelines. That’s part of the challenge! Don’t read these lines out. Instead, answer in a way that fulfils the guidelines. For example, if the guideline for you were:
[YOU]: Name and describe a fruit. Say something good and something bad about the fruit.
…you might say “Apples. They’re red, juicy, and crunchy. They’re high in fibre, but you can’t eat the core.”
? Normal speech is written as follows. Read these parts out.
[MARY]: Let’s get this meeting started.
? Instructions for actions or body language are written in italics as follows. Don’t read these parts out.
[FRED]: Look angry and raise your hand.
- - - - - - -
[BRAD]: Thanks for coming to this meeting.
First things first: good work, everyone! It looks as if our sales this past year exceeded the budget.
We were expecting to sell 750,000 litres of ice cream, like last year, but it turns out we sold 795,000 litres.
Credit goes to our sales staff for their hard work!
[YOU]: Say something nice to Melinda about her sales result.
[MELINDA]: Smiling
[MELINDA]: Thanks! Our full range is now in more stores than ever before.
[BRAD]: I’m pretty happy about the sales volume. There’s just one thing I am concerned about: our costs.
Despite increased sales, actual net profit is down compared to the budgeted net profit figure.
[MELINDA]: Oh, that’s disappointing. Can you tell us the profit figures?
[YOU]: Confirm the Actual and Budgeted Net Profit and variance figures to Melinda and Brad.
[BRAD]: Given sales have increased, what could explain the fall in net profit?
[YOU]: Tell Brad and Melinda why you think profits are down.
Refer to the numbers in the budget information and highlight the unfavourable cost/expense variances, especially mention the largest unfavourable cost variance.
[BRAD]: OK, thanks for that. I know the volume of sales has increased, but has the per litre selling price changed?
[MELINDA]: Yes, good news! The selling price per litre actually increased slightly compared to budget.
[BRAD]: Turns to bookkeeper
[BRAD]: Can you tell us exactly how much was the actual and budget price per litre?
[YOU]: Tell Brad and Melinda the dollars per litre actual price per litre and budgeted price per litre (TIP: you’ll need to calculate this using Sales dollar amount divided by Sales volume for Actual and then for Budget. You can do this before commencing the role play).
[BRAD]: That’s awesome! So it seems costs are where we should focus our attention.
[BRAD]: Turns to bookkeeper
[BRAD]: So what can we do to control these costs?
[YOU]: Talk Brad and Melinda about one of your ideas for controlling costs. For example, you’ll try to reduce Cost of Goods Sold by 10% while maintaining the same sales volume.
[BRAD]: Sounds good!
Just based on that idea alone, how much of an increase in profit do you think we can make over the next year, assuming all other sales and expense amounts remain constant?
[YOU]: Explain how your idea would have an impact on profits.
Suggest some budget process and review milestones to implement your idea. For example, you’ll target reducing COGS by a small percentage each quarter to achieve a total 10% reduction for the year. You’ll plan to do the calculations and review each month to make sure you are on track to hit your quarterly milestone targets.
Ask Brad and Melinda what they think of the idea.
[BRAD]: Great, sounds like a good idea!
[MELINDA] Yeah, that’s definitely worth trying.
[BRAD]: OK, thanks everyone, that’ll do for now. Let’s get to work!
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