Assessment Task 2 ?Prepare Operational Budgets

Instructions to Student General instructions:

In an Excel spreadsheet templates provided you are required to:

? Create a budgeted profit and loss statement for a services business.

? Create a budgeted profit and loss statement for a manufacturing business.

? Compare and discuss the difference between the two profit and loss statements.

Information/materials provided: templates for budget are provided.

Assessment criteria: To achieve a satisfactory result, your assessor will be looking for your ability to demonstrate the following key skills/tasks/knowledge to an acceptable industry standard:

? Prepare a budgeted profit and loss statements for 2 types of business.

? Determine a budget KPI.

? Discuss the differences between the 2 types of business budgets.

Assessment 2

Task 1

Below you are provided with details of two companies and their budgets. Prepare the budgets and answer the following questions.

A. From the following information relating to Marmax Consulting Services, prepare a budgeted profit & loss statement for the month of December 2016, showing the profit level required by management:

a. The fees budget estimate is achieved at 100 per cent

b. Only 80 per cent of the fees budget estimate is achieved

c. Nominate at least 1 Key Performance Indicator (KPI) in this budget

The fees budget shows a budgeted level of 1000 consultancy hours at $100 per hour.

Expenses are as follows:

Advertising is a fixed amount of $4,500 per annum plus 1.25 per cent of fees

Office wages $2,000 per month

Office supplies 10 cents per consultancy hour

Staff salaries $8,500 per month Staff commission 4 per cent of budgeted fees

Vehicle expenses $15,300 per annum plus 0.25 per cent of fees

Interest expense 15.5% per annum of a loan of $20,000

Legal fees $1,000 per month

Rates $12,900 per annum

Income tax 33 cents in the dollar

Fixed costs include: Office wages; Staff salaries; Legal fees; Rates

B. From the following information relating to Bailey?s Manufacturing Pty Ltd:

a Prepare the budgeted profit and loss statement for the month of December 2016. Actuals for this budget have not been determined at this time.

b Nominate at least 1 Key Performance Indicator (KPI) in this budget

Baileys Manufacturing Pty Ltd Sales Budget
	Unit Sales	Unit Sales	Sales revenue
October	1,000	150	150,000
November	1,200	150	180,000
December	1,300	150	234,000

Baileys Manufacturing Pty Ltd Production Budget
	Unit Sales	Closing Stock	Total required	Opening Stock	Estimated Production
October	1,000	50	1,050	150	900
November	1,200	70	1,270	50	1,220
December	1,300	90	1,390	70	1,320

The cost of production budget shows the manufacturing cost per unit as follows:

October $88

November $90

December $95

Baileys Manufacturing Pty Ltd Operating expenses budget
	$	$	$	$
Expense	October	November	December	Total
Selling	9,000	9,500	9,000	27,500
Administration	1,000	2,000	1,500	4,500
Financial	2,000	2,000	3,000	7,000

Opening stock is valued at $88 per unit

The tax rate is 30per cent

Bailey?s Manufacturing Pty Ltd use Average cost for stock valuation

C. Examine the two budgeted profit and loss statement budgets and discuss the major differences between Budget A Marmax Consulting Services and Budget B Bailey?s Manufacturing Pty Ltd (Apart from the Actuals being presented for Budget A, and Budget B being over a quarter)

Task 2

In a word document answer the following the following budgeting theory questions.

A. Explain the principles of double-entry bookkeeping and how they affect the budgeting process.

Assessment Task 2 -Prepare Operational Budgets Instructions to Student General instructions: In an Excel spreadsheet templates provided you are required to: Create a budgeted profit and loss statement for a services business. Create a budgeted profit and loss statement for a manufacturing business. Compare and discuss the difference between the two profit and loss statements. Information/materials provided: templates for budget are provided. Assessment criteria: To achieve a satisfactory result, your assessor will be looking for your ability to demonstrate the following key skills/tasks/knowledge to an acceptable industry standard: Prepare a budgeted profit and loss statements for 2 types of business. Determine a budget KPI. Discuss the differences between the 2 types of business budgets. Assessment 2 Task 1 Below you are provided with details of two companies and their budgets. Prepare the budgets and answer the following questions. A. From the following information relating to Marmax Consulting Services, prepare a budgeted profit & loss statement for the month of December 2016, showing the profit level required by management: a. The fees budget estimate is achieved at 100 per cent b. Only 80 per cent of the fees budget estimate is achieved c. Nominate at least 1 Key Performance Indicator (KPI) in this budget The fees budget shows a budgeted level of 1000 consultancy hours at $100 per hour. Expenses are as follows: Advertising is a fixed amount of $4,500 per annum plus 1.25 per cent of fees Office wages $2,000 per month Office supplies 10 cents per consultancy hour Staff salaries $8,500 per month Staff commission 4 per cent of budgeted fees Vehicle expenses $15,300 per annum plus 0.25 per cent of fees Interest expense 15.5% per annum of a loan of $20,000 Legal fees $1,000 per month Rates $12,900 per annum Income tax 33 cents in the dollar Fixed costs include: Office wages; Staff salaries; Legal fees; Rates B. From the following information relating to Bailey's Manufacturing Pty Ltd: a Prepare the budgeted profit and loss statement for the month of December 2016. Actuals for this budget have not been determined at this time. b Nominate at least 1 Key Performance Indicator (KPI) in this budget October November December Baileys Manufacturing Pty Ltd Sales Budget Unit Sales Unit Sales 1,000 150 1,200 150 1,300 150 Sales revenue 150,000 180,000 234,000 Baileys Manufacturing Pty Ltd Production Budget Unit Sales Closing Stock Total required October November December 1,000 1,200 1,300 50 70 90 1,050 1,270 1,390 Opening Stock 150 50 70 Estimated Production 900 1,220 1,320 The cost of production budget shows the manufacturing cost per unit as follows: October $88 November $90 December $95 Expense Selling Administration Financial Baileys Manufacturing Pty Ltd Operating expenses budget $ $ $ October November December 9,000 9,500 9,000 1,000 2,000 1,500 2,000 2,000 3,000 $ Total 27,500 4,500 7,000 Opening stock is valued at $88 per unit The tax rate is 30per cent Bailey's Manufacturing Pty Ltd use Average cost for stock valuation C. Examine the two budgeted profit and loss statement budgets and discuss the major differences between Budget A Marmax Consulting Services and Budget B Bailey's Manufacturing Pty Ltd (Apart from the Actuals being presented for Budget A, and Budget B being over a quarter) Task 2 In a word document answer the following the following budgeting theory questions. A. Explain the principles of double-entry bookkeeping and how they affect the budgeting process. MARMAX CONSULTANCY SERVICES Budgeted Profit & Loss statement for the month of December 2016 100% INCOME Consultancy hours Consultancy fees received EXPENSES Advertising Office wages Office supplies Staff salaries Staff commission Vehicle expenses Interest expense Legal fees Rates TOTAL EXPENSES Profit before tax Tax Payable Net Profit after Tax 80% Bailey's Manufacturing Pty Ltd Budgeted Profit & Loss statement for the month of December 2016 Quarter October November December Sales Less: Cost of Goods Sold Opening stock Plus: Cost of production Subtotal Less: Closing Stock Total COGS: Gross Profit Less: Operating Expenses Selling Administration Financial Total Operating Expenses: Net Profit Before Tax Tax Payable Net Profit after Tax Closing Stock for November (114,200 /1270) x 70 = 6,294