BSBFIM501: Assessment 2- Managing Budgets.

I am so bad at this, and don't understand how to do any of this assessment.

BSBFIM501 - Assessment 2 Task 1 - Sales Budget Part A (1) The Black Helmet Motor Cycle Company Forecast Sales for the year ended 31 December 20x3 1st Qtr 20x3 Units $ 2nd Qtr 20x3 Units $ 3rd Qtr 20x3 Units $ Roadster Trailer Total Hint: Calculate the Total Forecast first i.e. Total Australian Market x Company's market share then x price to arrive at total R The Black Helmet Motor Cycle Company Proposed Budget for the year ended 31 December 20x4 1st Qtr 20x4 Units $ 2nd Qtr 20x4 Units $ 3rd Qtr 20x4 Units $ Roadster Trailer Total Hint: Calculate the Total Budget first i.e. Total Australian Market x Company's market share then x price to arrive at total Re Part A (2) The Black Helmet Motor Cycle Company Comparative Summary Forecast 20x3 vs Budget 20x4 Forecast 20x3 Units $ Budget 20x4 Units $ Variance Units $ Roadster Trailer Total Note: Ensure Excel formats are used to represent units and currency Example: 3,000, $50,000 or % to 1 decimal p This is a managemet report so where appropriate use formulas to minimise risk of error and to assist with the bu Company December 20x3 4th Qtr 20x3 Units $ Total Forecast Units $ n x price to arrive at total Revenue before allocating over the quarters. Company 1 December 20x4 4th Qtr 20x4 Units $ Total Budget Units $ x price to arrive at total Revenue before allocating over the quarters. x4 % Variance Units $ 0,000 or % to 1 decimal point. and to assist with the budget setting process Task 2 - Part A Purchases and Closing Inventory Budget for the year ending 31 December 20x4 Inventory Requirements Roadster Total Budget Unit Motor Cycle Sales (Refer Task 1 Part A) Add desired closing inventory at the end of budget period (Refer information supplied in question i.e.Total Sales for the budget year divided by 12 x factor) Equals Total Units Required for budget year Purchasing Budget Motor Cycle Units on hand at the start of the year Roadster 500 Add Budgeted Motor Cycle Units Purchases Equals Total Units Required for budget year Cost of Sales and Gross Profit Budget Budgeted Cost Per unit Total Cost of Sales Budget & Forecast (Budget Sales Units in line 5 x Budget Cost per unit) Total Gross Profit Budget (Total Sales Revenue from Task 1 less Cost of Goods Sold - line 17) Budget Gross Profit % of Revenue (Gross Profit line 18 divided by Sales Revenue from task 1) Roadster $3,250 ending 31 December 20x4 Trailer Total Trailer Total 2000 2500 Trailer Total Budget $2,000 Fcast 20x3 $2,200 Total forecast units from task 1 x F16 rom task 1 x F16 Task 2 - Part B - Expense Budget The Black Helmet Motor Cycle Company Expense Budget by Department for the year ended 31 December 20x4 Sales Wages & Salaries Employee Expenses Advertising Travel & Entertainment Consumables Motor Vehicle Expenses Warranty expense Stationary & Consumables Rent Rates & Taxes Telephone Computer expenses Total Note: Use excel functions to determine totals. Warehousing Purchasing Admin ompany ded 31 December 20x4 Finance Administration Management Total Task 2 - Part B - Master Budget The Black Helmet Motor Cycle Company Comparative Profit & Loss Budget for the year ending 31 December 20x4 Forecast 20x3 Budget 20x4 Variance Sales Less Cost of Goods Sold Gross Profit Less Expenses Wages & Salaries Employee Expenses Advertising Travel & Entertainment Consumables Motor Vehicle Expenses Warranty expense Stationary & Consumables Rent Rates & Taxes Telephone Computer expenses Total Expenses Net Profit before tax Note: Being a Management report formulas should be included to minimise risk of error. Included also should be borders and shading for presentation purposes.If the item is unfavourable (or worse off) the variance should be showing with brackets or a minus This is a master forecast & Budget comparison which is the summary from tasks 1 & task 2 Part A & B December 20x4 ask 2 Part A & B Part C - Risk Schedule - The Black Helmet Motor Cycle Company Category - Market, Operational and Financial The Risk - What Can Happen? Note: There is no limit to the number of risks i.e. The above is a template only. You should "wrap the text" or adjust columns accordingly. or Cycle Company Source - How Can it Happen? is a template only. Impact - If Risk Occurs Potential Treatment Options Task 5 - Monitoring Performance Indicator Actual Budget Gross Profit % of Sales Expenses as a % of Sales Net Profit % of Sales Ratio Return on Investment % Current Ratio show as ratio e.g 2:1 Quick Ratio show as a ratio e.g. 2:1 Stock Turnover Express as No. of times e.g 1.5 times Average Accounts Receivable Collection Period Express as no. of days outstanding * * This is the length of time it takes for customers/Accounts Receivable to pay their account from the da daily sales. Being an 8 month period assume 245 days when calculating the average daily sales. Round the calculation to the nearest day Notes: 1) There is no limit to your response i.e. You can expand the size rows and co 2) These ratios are KPIs which measure one variable as a relationship to anot 3) The variances to budget are due to one or both variables being measured Variance Impact and possible causes of Variance o pay their account from the date of invoice. Equation is Accounts Receivable Balance divided by the average g the average daily sales. nd the size rows and columns to fit. The objective is to establish the key recommendations or s a relationship to another e.g. If Sales revenue is high you would expect Gross profit to be hig ables being measured being higher or lower than budget. The impact and countermeasure ca Possible Countermeasures for the remainder of the period vable Balance divided by the average establish the key recommendations or considerations for management review. you would expect Gross profit to be high get. The impact and countermeasure can be determined from this assessment BSBFIM501: Assessment 2 What you have to do This assessment has five tasks. Please wait until you have received your feedback from Assessment 1 before submitting this assessment. Assessment layout A spreadsheet template (in Excel format) has been provided and it will be required for completing tasks 1a, 2, and 5. You should create your own WORD or similar document and use that document for the remaining tasks. A note is included at the end of each task advising you of which one to use. For the tasks requiring a written response, ensure you present your work in a business style format clearly indicating the task number. Where a suggested length has been provided this is a guideline only. You will be assessed on the quality of your answer in terms of whether it satisfactorily addresses the requirements assessment. Task 1 - Operational budget - Sales revenue The Black Helmet Motor Cycle Company wholesales Motor Cycles. They have two models available being the Roadster and the Trailer. They have offices in each state of Australia and a Management team including representatives from Sales, Marketing, Purchasing, Warehousing, Human Resources, IT, Administration and Finance Divisions. In October 20x3 the Finance Group commenced their budget compilation activities relating to 20x4. The following information relating to Sales Revenue for 20x3 has been produced by the Hot Motor Cycles Research Agency. Extract from the Report from the Hot Motor Cycles Research Agency 1. Forecast Information for 20x3 a. The forecast of Total Sales for the Australian Market in 20x3 is as follows: b. On Road Bike (similar to the Roadster) - 20,000 cycles c. Off Road Bike (similar to the Trailer) - 30,000 cycles d. The Market Share of the Roadster & Trailer is expected to remain at 10% and 15% respectively. e. The Average Wholesale Price of the Roadster & Trailer Bikes is $5,000 & $3,500 respectively. f. Whilst 20x3 has not ended it is expected that sales for both products will be as follows - 20% of Black Helmet's total sales achieved in the first Quarter ended 31 March 20x3, 30% in the next Quarter ended 30 June 20x3, 30% in the Quarter ended 31 September 20x3 followed by 20% for December 20x3. LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 1 2. Budget assumptions - 20x4 The Market Research Agency has provided the following information to assist in preparing the budget for 20x4a. Economic data and analysis suggests the Total Australian Market for 20x4 is expected to increase in volume for the On Road Bikes by 10% compared to 20x3. The Market for the Off Road Bike is expected to be stable. b. Black Helmet's share of the On Road segment is expecting to remain stable at 10% whilst a strong market share for the Off Road bike is expected due to product enhancements with a lift to 20% of the total expected market in volume. c. The above volumes will be achieved with prices of $5,200 for the Roadster and $3,700 for the Trailer. d. It is anticipated that Quarterly sales revenue for both products will fluctuate from the current year. For the first quarter of 20x4 sales volume is expected to be 15% of total sales for calendar year 2014. 20% of sales are expected to be derived in the second quarter ending 30 June 20x4. An improvement to the company's products should see a market reaction where the September quarter should be 35% of total sales followed by 30% of the total for the last Quarter being period ending 31 December 20x4. Required: Part A 1 From the above information you are required to prepare a Sales Forecast for each Quarter of 20x3 and a Budget for each Quarter for the 20x4 year. This should show Sales Units and Total Revenue for each product. 2. Complete the Comparative Statement to be presented to Management showing Total Forecast Sales Revenue for 20x3, the Proposed Budget for 20x4 and the Variance in Units & Revenue in both dollar and percentage terms (The percentage should be set to 1 decimal point when formatting your cells) Complete the Excel template supplied. The use of formulas by creating a data range to the right of the spreadsheet would be useful for this task. Part B 1 As the Sales Manager you are required to prepare a brief report to senior management. This report should outline the assumptions made and expected outcomes relating to the 20X4 budget as compared to the same period in 20X3. They have specifically asked you to comment on the key factors you have considered in creating the Sales Revenue Budget and provide a brief explanation of each one. (Refer to factors in question and comparative summary - 1 or 2 paragraphs only 3. Who are the major internal and external stakeholders you have considered in preparing the budget? What interest do they have in the development of the budgets for the company? 4. \"The Development of Budgets will often involve the collaboration of team members and negotiating with management and other stakeholders\". As Sales Manager what approach would you take to developing the budget with your team? What are the critical factors to consider when undertaking this process? Use your WORD (or similar) document 2 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 Task 2 - Operational Budgets The General Manager of the Black Helmet Motor Cycle Company has presented the proposed Revenue Budget based on market conditions and the advertising budget guidelines provided. The Finance team has held a meeting with the Managers from Sales, Purchasing and Warehousing to explain the need for a budgeted cost per Motor Cycle and the lead times for delivery. This will enable the Finance team to arrive at the Budget for Gross Profit, Purchases and Inventory. These KPIs are crucial for all responsible Managers and serve as a basis for establishing requirements in terms of planning for the acquisition of Human, Capital and Financial Resources. Information Supplied: The Total Desired Inventory on hand at the end of the budget year to cover abnormal demand should equal 1.8 average months of sales units for the Roadster and 1.5 months of average sales for the Trailer. Note: One month Average Sales is equal to the Total Annual Sales Budget divided by 12. Part A - Operational Budget - Inventory and Cost of Goods Sold The anticipated Inventory on hand at the start of the Budget year (20x4) has been provided by the Inventory manager. These numbers are outlined below. Likewise the purchasing manager has been negotiating with the supplier over the cost of the bikes for 20x4. The cost per unit for the two bikes have been included in the budget table. You are required to prepare an Operational Budget which includes Budgeted Motor Cycle Purchases for the year, Cost of Goods Sold and Gross Profit from trading by completing the designated cells of the budget summary. Use the Excel template supplied - Worksheet \"Task 2 Part A\". LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 3 Part B - Expense Budget by Cost Centre Required: Based on the above forecast information for the current year - 20x3: 1. Complete the Departmental Expense budget for the Year ending 31 December 20x4. 2. Complete a Comparative Profit and Loss Statement for the Management of the Black Helmet Motor Cycle Company showing forecast for 20x3 vs Proposed Budget for 20x4. Use the Excel template supplied. Part C - Risk Management Required: Once the Master Budget is complete it is prudent to understand the risk profile of the business. What Potential Market, Operational, and Financial Risks may exist to prevent the Black Helmet Motor Cycle Company in achieving the desired Financial Key Performance Indicators (KPIs). What are the implications of the risk occurring and outline a potential Contingency Plan to address these risks? Complete the Risk Management schedule on the Excel template supplied. 4 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 Task 3 - Budget - Service Business The DS Financial Services Group is a large company specialising in the provision of financial advice including Investments, Superannuation and Financial Planning. Management is currently working on their budget plan for the next 12 months being the period ending 30 June 20x4. The Sales Analysts in each core area are required to formulate their Budgeted Fee Income for the period. In the past they have adopted a method based on trend analysis and the projected economic and competitive environment. Total Fee Revenue projections were based on a percentage increase or decrease on the previous year. Likewise the Expense Budget has been created based on historical factors. The company allocates the budget amongst the many departments and cost centres that exist. This year the company has decided to adopt a 'Zero Based' approach by establishing the total charge out per productive hour per department which will enable the company to cover their expenses and the desired profit for shareholders. The DS Financial Services Group has provided the following data: 1 Chargeable time 52 weeks x 5 days (Mon-Friday) 10 public holidays 20 working days annual leave 6 hours a day are considered productive and chargeable. 5. There are 20 productive staff 6. Desired Profit before tax $400,000 7. Expenses have been reviewed and it has been determined that whilst some expenses are discretionary in nature, for the purposes of budgeting, management are treating all expenses as committed expenses. Part A 1 Calculate the Total Productive Hours Available to be charged out to Clients 8. Establish the average charge per hour to customers assuming the Directors would like to cover all Budgeted Expenses and generate a profit before tax of $400,000. 9. Complete a brief Profit and Loss Statement for the Business based on the information supplied. Submit on your WORD (or similar) document in a presentable format. Refer topic on Profit and Loss Statements if required. LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 5 10. Assuming all the expenses are either fixed, desired or committed calculate the productive hours to achieve a breakeven position (Zero Profit). Part B From Part A consider the variance between the Current Charge out Rate of $140 per hour and the proposed budget rate. What factors or opportunities need to be considered when reviewing the budget? Use your WORD (or similar) document. Task 4 - Monitoring Performance - Sales Variance The General Manager of the JH Shoe Company, Tina Brown has received a number of reports from the accountant relating to their financial performance for the first eight months of the 20x4 Financial Year. The First Report outlines the Sales Units and Revenue for the 3 products sold by the company. This report shows the Actual Year to Date Performance versus Budget and the Full Year Budget. Tina is concerned with the trend in Sales Revenue overall. She has therefore met with you as the Sales Manager to discuss the performance to date. From the discussions held and the information provided she has asked for an explanation of a number of items relating to the performance. The following is a Revenue Comparative Report for the eight month period ended February 20x4. 6 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 After your discussions with the General Manager you have decided to hold a meeting with your team to discuss the results for the eight month period. You released an agenda for the meeting outlining in clear and concise terms the requirements to be discussed. This includes specific details for each product such as Volume, Price per unit and/or the mixture of sales between products which have differing prices. These factors have had an impact on the year to date result and need to be discussed. Whilst you have knowledge of departmental activities and results for each month, you would like each manager to report on the key activities driving sales and how controllable and successful they were. You have also had concerns about the timing of the static budget and question whether it is accurate based on the assumptions made 9 months prior. There are 4 key points or requirements that you would like to cover at the meeting: 1 From the 'Revenue Comparative Statement' you will prepare a written report for your team summarising the results. This will include deviations in the variables outlined in the report which have contributed to the unfavorable year to date variance of $980,000. 11. Determine the key points or questions to raise in order to gain an understanding of the current performance vs budget and future action? 12. Having received an understanding of the variances and relevant points, explain to the group the concept of forecasting and why forecasting for the full 12 month period is important? What impact may competitor behaviour, economic data, advertising LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 7 expenditure and seasonal factors have in developing the forecast for the remaining 4 months. 13. How will you communicate, support, monitor and motivate staff towards achieving your countermeasure actions or achieving a revised KPI. Use your WORD (or similar) document Task 5 - Monitoring Performance - Financial Analysis The Budget for the JH Shoe Company Pty Ltd was formulated based on trends, desired profit targets and optimal levels of Assets and Liabilities to achieve short and long term goals. The following are the Comparative Financial Statements showing the Actual Performance versus Budget for the eight month period ended 28 February 20x4. 8 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 9 The above Profit and Loss has been prepared by consolidating all transactions from the respective accounts in various Revenue and Cost Centres. The final balances are compared with the predetermined (static) budget at all levels. Total Gross Profit is a function of 3 variables as follows: Total volume multiplied by the margin per unit being the selling price less the cost from the supplier. All three are important in measuring the profit contribution from selling these products. The Comparative Balance Sheet shows the company's financial position as at February 20x4 versus budget along with the 12 month budget. The Directors have asked you for a report on the Year to Date Performance and the forecast for the remainder of the year. They would like to understand if the variances are due to timing of actual expenditure, errors in the budget assumptions and/or performance related factors. 10 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 You have asked your managers to refer to Departmental and Cost Centre reports, gather information and report on the relevant Financial & Non-Financial KPIs they are responsible for. Once Gaps are determined, the major drivers of performance including sales performance and resource allocation can be reviewed. Based on the above Financial Statements, you are required to complete the table below which will be used as the basis for your report to management. It includes: 1 The Year to date actual vs budget and variance for each KPI. 14. Possible Explanation of the possible causes of each Variance. 15. Potential Contingency or Countermeasure actions for the remaining period. 16. Ensure you consider the possible implications for other departments or stakeholders. 17. Use the excel template provided. 18. Show figures to 1 decimal place. Indicator YTD Actual YTD Budget Variance (Actual -Budget) Possible causes of Variance Potential Countermeasures for the remaining period Gross Profit % to Sales. Total Expenses % of Sales Net Profit % of Sales Ratio Return on Investment Net profit after tax divided by Capital injected Current Ratio Quick Ratio Stock turnover Average Accounts Receivable Collection period. * LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 11 * This is the length of time it takes for customers/Accounts Receivable to pay their account from the date of invoice. Equation is Accounts Receivable balance divided by the average daily sales. Being an 8 month period assume 245 days when calculating the average daily sales. Round the days outstanding to the nearest whole figure. Checklist Before submitting your assessment, please check that you have a WORD (or similar) document and your completed Excel template. Use the list below to ensure you have included all the requirements. I have: Task 1 - Operational Budget - Sales - Your Word Document Task 2 - Operational Budget - Purchases, Inventory and Costs Use Excel Template Task 3 - Budget - Service Organisation - Your Word document Task 4 - Monitor Performance - Sales Revenue - Your Word document Task 5 - Monitor Performance - Variance Analysis - Use Excel template Completed ALL questions in this assessment task Included my name, student number, unit number, assessment number Reviewed and spell checked my document Saved a copy on my own computer. 12 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 BSBFIM501: Assessment 2 What you have to do This assessment has five tasks. Please wait until you have received your feedback from Assessment 1 before submitting this assessment. Assessment layout A spreadsheet template (in Excel format) has been provided and it will be required for completing tasks 1a, 2, and 5. You should create your own WORD or similar document and use that document for the remaining tasks. A note is included at the end of each task advising you of which one to use. For the tasks requiring a written response, ensure you present your work in a business style format clearly indicating the task number. Where a suggested length has been provided this is a guideline only. You will be assessed on the quality of your answer in terms of whether it satisfactorily addresses the requirements assessment. Task 1 - Operational budget - Sales revenue The Black Helmet Motor Cycle Company wholesales Motor Cycles. They have two models available being the Roadster and the Trailer. They have offices in each state of Australia and a Management team including representatives from Sales, Marketing, Purchasing, Warehousing, Human Resources, IT, Administration and Finance Divisions. In October 20x3 the Finance Group commenced their budget compilation activities relating to 20x4. The following information relating to Sales Revenue for 20x3 has been produced by the Hot Motor Cycles Research Agency. Extract from the Report from the Hot Motor Cycles Research Agency 1. Forecast Information for 20x3 a. The forecast of Total Sales for the Australian Market in 20x3 is as follows: b. On Road Bike (similar to the Roadster) - 20,000 cycles c. Off Road Bike (similar to the Trailer) - 30,000 cycles d. The Market Share of the Roadster & Trailer is expected to remain at 10% and 15% respectively. e. The Average Wholesale Price of the Roadster & Trailer Bikes is $5,000 & $3,500 respectively. f. Whilst 20x3 has not ended it is expected that sales for both products will be as follows - 20% of Black Helmet's total sales achieved in the first Quarter ended 31 March 20x3, 30% in the next Quarter ended 30 June 20x3, 30% in the Quarter ended 31 September 20x3 followed by 20% for December 20x3. LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 1 2. Budget assumptions - 20x4 The Market Research Agency has provided the following information to assist in preparing the budget for 20x4a. Economic data and analysis suggests the Total Australian Market for 20x4 is expected to increase in volume for the On Road Bikes by 10% compared to 20x3. The Market for the Off Road Bike is expected to be stable. b. Black Helmet's share of the On Road segment is expecting to remain stable at 10% whilst a strong market share for the Off Road bike is expected due to product enhancements with a lift to 20% of the total expected market in volume. c. The above volumes will be achieved with prices of $5,200 for the Roadster and $3,700 for the Trailer. d. It is anticipated that Quarterly sales revenue for both products will fluctuate from the current year. For the first quarter of 20x4 sales volume is expected to be 15% of total sales for calendar year 2014. 20% of sales are expected to be derived in the second quarter ending 30 June 20x4. An improvement to the company's products should see a market reaction where the September quarter should be 35% of total sales followed by 30% of the total for the last Quarter being period ending 31 December 20x4. Required: Part A 1. From the above information you are required to prepare a Sales Forecast for each Quarter of 20x3 and a Budget for each Quarter for the 20x4 year. This should show Sales Units and Total Revenue for each product. 2. Complete the Comparative Statement to be presented to Management showing Total Forecast Sales Revenue for 20x3, the Proposed Budget for 20x4 and the Variance in Units & Revenue in both dollar and percentage terms (The percentage should be set to 1 decimal point when formatting your cells) Complete the Excel template supplied. The use of formulas by creating a data range to the right of the spreadsheet would be useful for this task. Part B 1. As the Sales Manager you are required to prepare a brief report to senior management. This report should outline the assumptions made and expected outcomes relating to the 20X4 budget as compared to the same period in 20X3. They have specifically asked you to comment on the key factors you have considered in creating the Sales Revenue Budget and provide a brief explanation of each one. (Refer to factors in question and comparative summary - 1 or 2 paragraphs only 2. Who are the major internal and external stakeholders you have considered in preparing the budget? What interest do they have in the development of the budgets for the company? 3. \"The Development of Budgets will often involve the collaboration of team members and negotiating with management and other stakeholders\". As Sales Manager what approach would you take to developing the budget with your team? What are the critical factors to consider when undertaking this process? Use your WORD (or similar) document 2 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 Task 2 - Operational Budgets The General Manager of the Black Helmet Motor Cycle Company has presented the proposed Revenue Budget based on market conditions and the advertising budget guidelines provided. The Finance team has held a meeting with the Managers from Sales, Purchasing and Warehousing to explain the need for a budgeted cost per Motor Cycle and the lead times for delivery. This will enable the Finance team to arrive at the Budget for Gross Profit, Purchases and Inventory. These KPIs are crucial for all responsible Managers and serve as a basis for establishing requirements in terms of planning for the acquisition of Human, Capital and Financial Resources. Information Supplied: The Total Desired Inventory on hand at the end of the budget year to cover abnormal demand should equal 1.8 average months of sales units for the Roadster and 1.5 months of average sales for the Trailer. Note: One month Average Sales is equal to the Total Annual Sales Budget divided by 12. Part A - Operational Budget - Inventory and Cost of Goods Sold The anticipated Inventory on hand at the start of the Budget year (20x4) has been provided by the Inventory manager. These numbers are outlined below. Likewise the purchasing manager has been negotiating with the supplier over the cost of the bikes for 20x4. The cost per unit for the two bikes have been included in the budget table. You are required to prepare an Operational Budget which includes Budgeted Motor Cycle Purchases for the year, Cost of Goods Sold and Gross Profit from trading by completing the designated cells of the budget summary. Use the Excel template supplied - Worksheet \"Task 2 Part A\". Inventory Requirements Roadster Trailer Total Roadster Trailer Total 500 2000 2500 Roadster Trailer Total Budget $3,250 $2,000 Total Budget Unit Motor Cycle Sales ( Refer Task 1 Part A) Add desired closing inventory at the end of budget period (Refer information supplied in question i.e.Total Sales for the budget year divided by 12 x factor) Equals Total Units Required for budget year Purchasing Budget Motor Cycle Units on hand at the start of the year Add Budgeted Motor Cycle Units Purchases Equals Total Units Required for budget year Cost of Sales and Gross Profit Budget Budgeted Cost Per unit Total Cost of Sales Budget & Forecast (Budget Sales Units in line 5 x Budget Cost per unit ) Fcast 20x3 $2,200 Total forecast units from task 1 x F16 Total Gross Profit Budget (Total Sales Revenue from Task 1 less Cost of Goods Sold - line 17 ) Budget Gross Profit % of Revenue (Gross Profit line 18 divided by Sales Revenue from task 1) LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 3 Part B - Expense Budget by Cost Centre The Black Helmet Motor Cycle Company Projected Expense summary by Department for the year ended 31 December 20x3 Sales Wages & Salaries Employee Expenses 600,000 120,000 Advertising 30,000 Travel & Entertainment Consumables Motor Vehicle Expenses Warranty expense Stationery & Consumables Rent Rates & Taxes Telephone Computer expenses Total 10,000 4,000 Warehousing Purchasing Admin Finance Administration Management 320,000 64,000 304,000 240,000 250,000 60,800 48,000 50,000 400,000 80,000 2,114,000 422,800 30,000 11,000 4,400 10,450 4,180 5,000 40,250 120,000 100,000 2,000 864,000 Total 399,400 379,430 295,000 300,000 5,000 60,000 40,000 20,000 60,000 825,250 76,700 12,580 120,000 100,000 7,000 60,000 40,000 20,000 60,000 3,063,080 Budget assumptions based on analysis Increase by 2% Increase by 2% Lift by 10% for Launch of Off Road program New model Launch - Lift by 5% Remain Stable Increase by 5% Provision to increase by 2% Remain Stable Landlord increasing by 5% Increase by 5% Remain stable Remain Stable Required: Based on the above forecast information for the current year - 20x3: 1. Complete the Departmental Expense budget for the Year ending 31 December 20x4. 2. Complete a Comparative Profit and Loss Statement for the Management of the Black Helmet Motor Cycle Company showing forecast for 20x3 vs Proposed Budget for 20x4. Use the Excel template supplied. Part C - Risk Management Required: Once the Master Budget is complete it is prudent to understand the risk profile of the business. What Potential Market, Operational, and Financial Risks may exist to prevent the Black Helmet Motor Cycle Company in achieving the desired Financial Key Performance Indicators (KPIs). What are the implications of the risk occurring and outline a potential Contingency Plan to address these risks? Complete the Risk Management schedule on the Excel template supplied. 4 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 Task 3 - Budget - Service Business The DS Financial Services Group is a large company specialising in the provision of financial advice including Investments, Superannuation and Financial Planning. Management is currently working on their budget plan for the next 12 months being the period ending 30 June 20x4. The Sales Analysts in each core area are required to formulate their Budgeted Fee Income for the period. In the past they have adopted a method based on trend analysis and the projected economic and competitive environment. Total Fee Revenue projections were based on a percentage increase or decrease on the previous year. Likewise the Expense Budget has been created based on historical factors. The company allocates the budget amongst the many departments and cost centres that exist. This year the company has decided to adopt a 'Zero Based' approach by establishing the total charge out per productive hour per department which will enable the company to cover their expenses and the desired profit for shareholders. The DS Financial Services Group has provided the following data: 1. Chargeable time 52 weeks x 5 days (Mon-Friday) 10 public holidays 20 working days annual leave 6 hours a day are considered productive and chargeable. 2. There are 20 productive staff 3. Desired Profit before tax $400,000 4. Expenses have been reviewed and it has been determined that whilst some expenses are discretionary in nature, for the purposes of budgeting, management are treating all expenses as committed expenses. Wages & Salaries Employee Expenses Commissions Travel Entertainment Motor Vehicle Expenses Stationery Rent Rates & Taxes Telephone Computer expenses Total Investment Financial Planning Superannuation Human Resources Finance Information Technology Administration Management Total 618,000 123,600 60,000 10,000 4,000 679,800 135,960 20,000 11,000 4,400 645,810 129,162 20,000 5,450 4,180 247,200 49,440 257,500 51,500 226,600 45,320 412,000 82,400 3,086,910 617,382 100,000 31,450 12,580 105,000 7,000 31,500 15,750 5,200 20,000 4,032,772 5,000 105,000 5,000 31,500 15,750 5,200 2,000 815,600 851,160 804,602 303,640 309,000 20,000 291,920 656,850 Part A 1. Calculate the Total Productive Hours Available to be charged out to Clients 2. Establish the average charge per hour to customers assuming the Directors would like to cover all Budgeted Expenses and generate a profit before tax of $400,000. 3. Complete a brief Profit and Loss Statement for the Business based on the information supplied. Submit on your WORD (or similar) document in a presentable format. Refer topic on Profit and Loss Statements if required. 4. Assuming all the expenses are either fixed, desired or committed calculate the productive hours to achieve a breakeven position (Zero Profit). LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 5 Part B From Part A consider the variance between the Current Charge out Rate of $140 per hour and the proposed budget rate. What factors or opportunities need to be considered when reviewing the budget? Use your WORD (or similar) document. Task 4 - Monitoring Performance - Sales Variance The General Manager of the JH Shoe Company, Tina Brown has received a number of reports from the accountant relating to their financial performance for the first eight months of the 20x4 Financial Year. The First Report outlines the Sales Units and Revenue for the 3 products sold by the company. This report shows the Actual Year to Date Performance versus Budget and the Full Year Budget. Tina is concerned with the trend in Sales Revenue overall. She has therefore met with you as the Sales Manager to discuss the performance to date. From the discussions held and the information provided she has asked for an explanation of a number of items relating to the performance. The following is a Revenue Comparative Report for the eight month period ended February 20x4. JH Shoe Company Revenue Comparative Statement For the 8 Months ended 28 February 20x4 Quantity Dress Shoe Casual Boot Total Quantitty Price Per Unit Dress Shoe Casual Boot Average Price Revenue Dress Shoe Casual Boot Total Revenue 6 Actual Budget Variance Full Yr Budget 40,000 32,000 12,000 84,000 37,500 30,000 20,000 87,500 2,500 2,000 -8,000 -3,500 53,900 43,125 28,750 125,775 Actual Budget Variance Full Yr Budget $85 $60 $100 $78 $80 $50 $150 $86 $5 $10 -$50 -$8 $80 $50 $150 $86 Actual $ 3,400,000 1,920,000 1,200,000 6,520,000 Budget $ 3,000,000 1,500,000 3,000,000 7,500,000 Variance $ 400,000 420,000 -1,800,000 -980,000 Full Yr Budget $ 4,312,000 2,156,250 4,312,500 10,780,750 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 After your discussions with the General Manager you have decided to hold a meeting with your team to discuss the results for the eight month period. You released an agenda for the meeting outlining in clear and concise terms the requirements to be discussed. This includes specific details for each product such as Volume, Price per unit and/or the mixture of sales between products which have differing prices. These factors have had an impact on the year to date result and need to be discussed. Whilst you have knowledge of departmental activities and results for each month, you would like each manager to report on the key activities driving sales and how controllable and successful they were. You have also had concerns about the timing of the static budget and question whether it is accurate based on the assumptions made 9 months prior. There are 4 key points or requirements that you would like to cover at the meeting: 1. From the 'Revenue Comparative Statement' you will prepare a written report for your team summarising the results. This will include deviations in the variables outlined in the report which have contributed to the unfavorable year to date variance of $980,000. 2. Determine the key points or questions to raise in order to gain an understanding of the current performance vs budget and future action? 3. Having received an understanding of the variances and relevant points, explain to the group the concept of forecasting and why forecasting for the full 12 month period is important? What impact may competitor behaviour, economic data, advertising expenditure and seasonal factors have in developing the forecast for the remaining 4 months. 4. How will you communicate, support, monitor and motivate staff towards achieving your countermeasure actions or achieving a revised KPI. Use your WORD (or similar) document LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 7 Task 5 - Monitoring Performance - Financial Analysis The Budget for the JH Shoe Company Pty Ltd was formulated based on trends, desired profit targets and optimal levels of Assets and Liabilities to achieve short and long term goals. The following are the Comparative Financial Statements showing the Actual Performance versus Budget for the eight month period ended 28 February 20x4. JH Shoe Company Profit & Loss Comparative Statement For the 8 Months ended 28 February 20x4 Actual $ 3,400,000 1,920,000 1,200,000 6,520,000 Budget $ 3,000,000 1,500,000 3,000,000 7,500,000 Variance $ 400,000 420,000 -1,800,000 -980,000 Full Yr Budget $ 4,312,000 2,156,250 4,312,500 10,780,750 Actual Budget Variance 12 Mth Budget 1,360,000 384,000 240,000 1,984,000 1,469,100 450,000 642,900 2,562,000 -109,100 -66,000 -402,900 -578,000 2,156,000 754,688 905,625 3,816,313 Actual Budget Variance 12 Mth Budget Expenses Salaries Bonuses Travel Electricity Advertising Stationery Product Development Rent Total Expenses 500,000 40,000 20,000 10,000 50,000 5,000 50,000 20,000 695,000 555,000 60,000 15,000 6,000 150,000 6,000 10,000 10,000 812,000 55,000 20,000 -5,000 -4,000 100,000 1,000 -40,000 -10,000 117,000 832,500 90,000 22,500 9,000 233,313 9,000 15,000 15,000 1,226,313 Net Profit before tax 1,289,000 1,750,000 -695,000 2,590,000 Tax Expense @ 30% 386,700 525,000 138,300 777,000 Net Profit after tax 902,300 1,225,000 -322,700 1,813,000 Revenue Dress Shoe Casual Boot Total Revenue Gross Profit Dress Shoe Casual Boot Total Gross Profit 8 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 JH Shoe Company Comparative Balance Sheet as at 28 February 20x4 Actual Budget Variance Full Year Current Assets Stock Accounts Receivable Cash at Bank Total Current Assets 2,900,000 1,500,000 1,400,000 1,100,000 1,000,000 100,000 100,000 800,000 -700,000 4,100,000 3,300,000 800,000 1,600,000 1,200,000 713,000 3,513,000 Noncurrent Assets Land & Buildings Total Assets 1,000,000 1,000,000 5,100,000 4,300,000 0 800,000 1,000,000 4,513,000 Current Liabilities Accounts Payable GST Payable Accrued expenses Total Current Liabilities 1,400,000 800,000 260,000 275,000 137,700 1,797,700 1,075,000 -600,000 15,000 700,000 200,000 -585,000 900,000 Non-Current Liabilities Bank Loan Total Liabilities 800,000 500,000 -300,000 2,597,700 1,575,000 -1,022,700 500,000 1,400,000 Net Assets 2,502,300 2,725,000 -222,700 3,113,000 Shareholder's Funds Capital Add: Net Profit Less: Dividends Paid Total Shareholder's funds 1,600,000 1,500,000 902,300 1,225,000 0 0 2,502,300 2,725,000 100,000 -322,700 0 -222,700 1,500,000 1,813,000 -200,000 3,113,000 The above Profit and Loss has been prepared by consolidating all transactions from the respective accounts in various Revenue and Cost Centres. The final balances are compared with the predetermined (static) budget at all levels. Total Gross Profit is a function of 3 variables as follows: Total volume multiplied by the margin per unit being the selling price less the cost from the supplier. All three are important in measuring the profit contribution from selling these products. The Comparative Balance Sheet shows the company's financial position as at February 20x4 versus budget along with the 12 month budget. The Directors have asked you for a report on the Year to Date Performance and the forecast for the remainder of the year. They would like to understand if the variances are due to timing of actual expenditure, errors in the budget assumptions and/or performance related factors. LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 9 You have asked your managers to refer to Departmental and Cost Centre reports, gather information and report on the relevant Financial & Non-Financial KPIs they are responsible for. Once Gaps are determined, the major drivers of performance including sales performance and resource allocation can be reviewed. Based on the above Financial Statements, you are required to complete the table below which will be used as the basis for your report to management. It includes: 1. 2. 3. 4. 5. 6. The Year to date actual vs budget and variance for each KPI. Possible Explanation of the possible causes of each Variance. Potential Contingency or Countermeasure actions for the remaining period. Ensure you consider the possible implications for other departments or stakeholders. Use the excel template provided. Show figures to 1 decimal place. Indicator YTD Actual YTD Budget Variance (Actual -Budget) Possible causes of Variance Potential Countermeasures for the remaining period Gross Profit % to Sales. Total Expenses % of Sales Net Profit % of Sales Ratio Return on Investment Net profit after tax divided by Capital injected Current Ratio Quick Ratio Stock turnover Average Accounts Receivable Collection period. * * This is the length of time it takes for customers/Accounts Receivable to pay their account from the date of invoice. Equation is Accounts Receivable balance divided by the average daily sales. Being an 8 month period assume 245 days when calculating the average daily sales. Round the days outstanding to the nearest whole figure. 10 LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 Checklist Before submitting your assessment, please check that you have a WORD (or similar) document and your completed Excel template. Use the list below to ensure you have included all the requirements. I have: Task 1 - Operational Budget - Sales - Your Word Document Task 2 - Operational Budget - Purchases, Inventory and Costs Use Excel Template Task 3 - Budget - Service Organisation - Your Word document Task 4 - Monitor Performance - Sales Revenue - Your Word document Task 5 - Monitor Performance - Variance Analysis - Use Excel template Completed ALL questions in this assessment task Included my name, student number, unit number, assessment number Reviewed and spell checked my document Saved a copy on my own computer. LA019791 Assessment 2, BSBFIM501, Ed 1 New South Wales Technical and Further Education Commission, 2016 (TAFE NSW - WSI), Archive version 2, September 2016 11