DIPLOMA IN BUSINESS
WRITE TO DIPLOMA STANDARDS IN DETAIL
Case Study B. This case study relates to Task 4 Kolrat Pty Lid is concerned about two of its major expenditure items for the 2018 financial year. The manager, Lisa, of the company is a good friend of yours and has asked for your assistance The following information is given: Item Budget Amount Actual amount Stationery 500 600 Wages and salaries 160,000 154,000 Lisa mentions the following facts: 1. A double order of paper was made last month to ensure special discounts were taken for the end of the financial year 2. Two heavy duty staplers were purchased 3. In the last 2 months many workers have come down with the flu and as a result many casuals have been hired 4. A large order was made in the month of June and this required more overtime to be performed. TASK 4 Review and evaluate financial management processes Required: 1. Analyse the figures of budgeted to actual results and determine the variances for each item and whether it's favourable or unfavourable? 2. Briefly comment as a highly experienced Business Manager whether Lisa needs to be concerned about each item (e.g. will they have a significant impact on her profit) and whether they should be investigated further? 3. If Lisa mentioned to you that 5% variation is significant, would each item need to be investigated further? Give your reasons why or why not? Folder location: /Volumes/NMT/NMTAFE 2018/BSEFIM501 Budgjets & Plans/2018 $1 New/BSBFIM501 AM FT.docx Current Version V1.0 - 31.7.17 Last updated: Feb2018 F0483 Page 6 of 7Case Study A: Background information Case Study relates to Tasks 1-3 Snazzy IT Solutions is an IT consultant firm based in Perth. The company provides IT support on a fee for service basis to corporate entities throughout the Perth and extended area. The Management structure is provided below: John Nix Chief Executive Officer Ann Ling Company Accountant You (student) IT Service Manager Jo Sales Manager Key risks to achieving this goal are: . Economic downturn in WA may impact sales Rising expenses such as marketing/advertising, wages and contractor fees Your role You are the Business Manager for Snazzy IT Solutions. Management of the budget process (preparation, setup, implementation, monitoring and review) is part of the key responsibilities in your role. I CS Scanned with CamScannerTASK 1: Monitor expenditure and control costs Actual results for the first quarter have been finalized for Snazzy IT. The relevant Excel file can be downloaded from Blackboard. You have been asked to do the following: Prepare a performance report template that provides for a comparison of budget and actual expenditure. The spreadsheet must be set up to include columns for the quarter. As per organizational guidelines the template must include actual and budget numbers plus variance columns showing the variance for the quarter as both a dollar amount and a percentage. Actual figures have now been finished for quarter 1. Utilize the Excel workbook to prepare a performance report for quarter 1. Based on the performance report prepared for quarter 1, suggest areas you would investigate further and why. H TASK 2: Modify financial contingency plan As a result of the current economic climate there is a risk of sales being under projection by up to 20%. The firm can manage falling sales up to 12.5% which means that any further reduction could have a significant impact in the company's ability to meet debts as and when they fall due. Consider the contingency plan prepared below. One aspect of the plan has already been implemented being the monitoring of budget and actual expenditure via the quarterly performance report. RISK/CONTINGENCY LIKELIHOOD OF OCCURRENCE CONSEQUENCES POSSIBLE ACTION PLAN Monitor actual performance to Less cash flow budget quarterly Inability to meet Additional Sales volume debts as and marketing/advertising decreased 20% Medium when they fall Implement incentive due program for client referrals Reduce expenditure on overtime and staff CS amenities Permanent staff have given feedback on the following:Staff are resentful of expectations that they will continue to work overtime but 'unpaid'. There are no incentives for internal staff to drive sales as currently the firm does not offer an internal incentives program and does not pay any commissions. The overall opinion on contract employees is that they waste time and distract others. Two employed. contracts have already expired for contractors bought in on specific projects, yet they are still Other wastage areas such as postage and printing, stationery, electricity, subscriptions have not been factored as cost saving contingencies. General staff have been excluded from budgetary decisions. Required . Prepare a complete contingency plan provided using the table above as a guide. I TASK 3: Provide support to team members Next week a new staff member is starting in your area and to ensure he has been properly trained, you have decided to develop an assessment for him based on various aspects of accounting and tax. This documentation will be handed to the new employee, Jon Snow on his first day and you will explain also the following concepts: 1. Basic principles of accounting Relevant legislation related to GST 3. Key requirements for financial record keeping 4. Basic principles of budgeting, cashflows, spreadsheets (Excel), and financial statements CS Scanned with CamScannerBudget & Actuals(6).xlsx - Excel (Product Activation Failed) FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW 120 A B C D E F G W NH Snazzy IT Solutions Master Budget for the period ended 30 June 2018 Q1 Q2 Q3 Q4 Total FEE REVENUE 350,000 350,000 350,000 350,000 1,400,000 Expenses General and Admin 10 Accounting fees 3,000 3,000 3,000 3,000 12,000 11 Contractors 50,000 50,000 50,000 50,000 200,000 12 Electricity 1,750 1,750 1,750 1,750 7,000 13 Insurance 5,000 5,000 5,000 5,000 20,000 14 Legal fees 1,250 1,250 1,250 1,250 5,000 15 Office cleaning 1,000 1,000 1,000 1,000 4,000 16 Payroll tax 5,237 5,237 5,237 5,237 20,946 17 Postage and printing 500 500 500 500 2,000 18 Rent 25,000 25,000 25,000 25,000 100,000 19 Repairs and maintenance 2,000 2,000 2,000 2,000 8,000 20 Staff amenities 1,250 1,250 1,250 1,250 5,000 21 Subscriptions 250 250 250 250 1,000 22 Superannuateon 11,055 11,055 11,055 11,055 44,219 23 Telephone * 1,750 1,750 1,750 1,750 7,000 24 Wages & Salaries 117,233 117,233 117,233 117,233 468,930 25 226,274 226,274 226,274 226,274 905,095 26 27 Marketing 28. Advertising 3,750 3,750 3,750 3,750 15,000 29 30 Finance 31 Bank charges 125 125 125 125 500 32 33 TOTAL EXPENSES 230,149 230,149 230,149 0,149 920,595 34 NET PROFIT BEFORE TAX 119,851 119,851 119,851 119,851 479,405 35 Income tax expense (30%) 35,955 35,955 35,955 35,955 143,822 36 NET PROFIT AFTER TAX 83,896 83,896 83,896 33,896 335,584 37 38 39 40 41 42 43 CS Scanned-woh CamScanner Activate Windows Go to Settings to active Master Actual Q1 +Budget & Actuals(6) .xlsx - Excel (Product Activation Failed) FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW F13 A B C D E F G IN Snazzy IT Solutions Statement of Financial Performance For quarter ended 30 September 2017 Actual FEE REVENUE 339,000 10 Expenses 11 General and Admin 12 Accounting fees 3,000 13 Contractors 50,000 14 Electricity 1,750 15 Insurance 5,500 16 Legal fees 2,000 17 Office cleaning 3,000 18 Payroll tax 5,460 19 Postage and printing 300 20 Rent 28,000 21 Repairs and maintenance 880 22 Staff amenities 1,485 23 Subscriptions 250 24 Superannuateon 11,526 25 Telephone 2,470 26 Wages & Salaries 122,233 27 237,854 28 29 Marketing 30 Advertising * 3,750 31 32 Finance 33 Bank charges 104 34 35 TOTAL EXPENSES 241,708 36 NET PROFIT BEFORE TAX 97,293 37 Income tax expense (30%) 29,188 38 NET PROFIT AFTER TAX 68,105 39 40 + 41 42 43 CS Scanned with CamScanner Activate Win Master Actual Q1 Go to Settings
