You are continuing your role working as an Assistant Accountant with Azure Beach Accountants and Financial Services. Your role has expanded to include the preparation of budgets for clients of medium-sized companies. You have received a new client. The business is a travel agent called Skyward Travel that has offices across New South Wales, Victoria and Queensland. Skyward specialises in packaged travel tours to eastern Asian countries. Nationally 30 permanent staff are employed with casual staff supporting the high-volume periods. The busiest time of the year is during the Australian winter when tourists from the east coast of Australia travel to Asia for holidays to escape the cold winters. The client wants you to prepare an annual budget for the business for 2023/24 broken down into quarters and presented to the Executive team before implementation. Since the COVID-19 restrictions were lifted across Asia, the Executive has requested forecasted budgets informed by market trends with the expectation of a 13.5% increase in sales over 2023/24. The client has requested the budget presentation be ready for the next Executive team meeting that is scheduled in 2 weeks.

Additional Information

Azure Beach conducted research on Australian Travel Agency and Tour Arrangement Services, providing valuable insights for budgeting. Refer to 2.9.2 of Azure Beach Accountants and Financial Services Budget Policy for market conditions and relevant information for your client.

• Seasonal breakdown of sales is generally:
  • January March: 15% Q3
  • April June: 30% Q4
  • July September: 35% Q1
  • October December: 20% Q2
• Cost of sales (variable costs) will move in line with the seasonal breakdown of sales with the following cost increases:
  • flights price increase by 20%
  • in-country tours and accommodation increase by 8%
  • in-country insurance increase by 25%
• Employee Costs (paid monthly):
  • permanent staff wages to increase by 6.5% FIXED
  • casual wage increases of 7.2% with the seasonal breakdown as per sales
  • increase of superannuation to be factored in according to ATO information 11%
  • Payroll Tax varies across states and territories so an average budget percentage of 5.02% is applied across all permanent and casual staff.
• Increase in expenses due to inflation and other factors as follows:
  • Annual cost of Azure Accountants and Financial Services budgeting services $20,000, (Paid monthly)
  • Electricity and Water: 8% (paid quarterly)
  • Insurance: 6.5% (Bill due and paid annually in December, with expense accrued monthly across the year)
  • Internet and Computer Systems: 3.5% (paid monthly)
  • Rent is paid monthly across all three states and is due to increase in 2023/24 as follows:
    • NSW 5.5%
    • QLD 4.2%
    • VIC 4.8%
  • Advertising 2.5% (paid quarterly)
  • Other operating expenses 2% (paid monthly).
  • Depreciation method is straight line and is the expense is expected to be the same as 2022/23 financial year. It reported monthly.

The finance department has also supplied the following actual data set from 2022/2023.

Further detail of Utilities per State is provided below:

	NSW	VIC	QLD	TOTAL
Electricity	5,626	4,218	2,598	12,442
Water	625	498	355	1,478
Internet/Phone	2,780	1,538	798	5,116
Database/Computer systems	9,587	7,299	3,489	20,375

Skyward Travel/excel
Cost of Goods Sold Budget
For the year ended 30 June 2024
	2022/23 Full Year Actual	% Increase	2023/24 Full Year Budget	1st Quarter Jul-Sep	2nd Quarter Oct-Dec	3rd Quarter Jan-Mar	4th Quarter Apr-Jun	Check Total
				35%	20%	15%	30%	100%
flights	1,225,897	20%	1,471,076	514,877	294,215	220,661	441,323	1,471,076
in-country tours	1,350,897	8%	1,458,969	510,639	291,794	218,845	437,691	1,458,969
in-country accommodation	402,395	8%	434,587	152,105	86,917	65,188	130,376	434,587
in-country tour insurance.	124,773	25%	155,966	54,588	31,193	23,395	46,790	155,966
Total Cost of Sales	3,103,962		3,520,598	1,232,209	704,120	528,090	1,056,179	3,520,598

Skyward Travel/excel
Employee Costs Budget
For the year ended 30 June 2024
	2022/23 Full Year Actual	% Increase	2023/24 Full Year Budget	1st Quarter Jul-Sep	2nd Quarter Oct-Dec	3rd Quarter Jan-Mar	4th Quarter Apr-Jun	Check Total
				35%	20%	15%	30%	100%
Permanent Staff - 30 FTE	781,266	6.5%	832,048	208,012	208,012	208,012	208,012	832,048
Casual Staff - Seasonal	1,085,800	7.2%	1,163,978	407,392	232,796	174,597	349,193	1,163,978
Superannuation	196,042	11%	219,563	67,694	48,489	42,087	61,293	219,563
Payroll Tax	93,727	5.02%	111,223	34,292	24,562.68	21,320	31,049	111,223
Total Employee Costs	2,156,835		2,326,811	717,390	513,859	446,015	649,547	2,326,811

Skyward Travel/excel
Utilities and Rent Budget by State
For the year ended 30 June 2024
	% Increase	NSW	VIC	QLD	TOTAL
Electricity	8.0%	6,076	4,555	2,806	13,437
Water	8.0%	675	538	383	1,596
Internet/Phone	3.5%	2,877	1,592	826	5,295
Database/Computer systems	3.5%	9,923	7,554	3,611	21,088
TOTAL UTILITIES		19,551	14,240	7,626	41,417
Rent % Increase by State		5.5%	4.8%	4.2%
Rent		226,825	157,200	67,730	451,755
Skyward Travel
Actual Utilities and Rent Expenditure by State
For the year ended 30 June 2023
		NSW	VIC	QLD	TOTAL
Electricity		5,626	4,218	2,598	12,442
Water		625	498	355	1,478
Internet/Phone		2,780	1,538	798	5,116
Database/Computer systems		9,587	7,299	3,489	20,375
Rent		215,000	150,000	65,000	430,000
TOTAL		233,618	163,553	72,240	469,411

Quarterly Budgeted Income Statement
Year ___________
	2022/23 Full Year Actual	2023/24 Full Year Budget	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Comment/Assumption
			35%	20%	15%	30%
Sales	6,681,900	7,583,957	2,654,385	1,516,791	1,137,593	2,275,187
Less Cost of Sales	3,103,962	3,520,598	1,232,209	704,120	528,090	1,056,179
Gross profit	3,577,938	4,063,358	1,422,175	812,672	609,504	1,219,008
Gross Profit %	54%	54%	54%	54%	54%	54%
Less operating expenses:
Employee Expenses	2,156,835	2,326,811	717,390	513,859	446,015	649,547
Advertising	28,700	29,418	7,354	7,354	7,354	7,354
Rent	430,000	451,755	112,939	112,939	112,939	112,939
Other Operating Expenses	32,950	33,609	8,402	8,402	8,402	8,402
Utilities	39,411	41,417	10,354	10,354	10,354	10,354
Insurance	100,300	106,820	26,705	26,705	26,705	26,705
Depreciation of Office Equipment	25,800	25,800	6,450	6,450	6,450	6,450
Accounting Fees		20,000	5,000	5,000	5,000	5,000
Total operating expenses	2,813,996	3,035,629	894,595	691,064	623,220	826,751
Net profit	763,942	1,027,729	527,581	121,608	-13,716	392,257
Net Profit %	11%	14%	20%	8%	-1%	17%

1. Prepare Annual Budget Commentary

• Using the Skyward_Budget_Commentary_template found in document the budget ready for distribution.
• In your budget commentary, you will be able to assess whether the financial goals that were identified by Skyward are appropriate as follows:
  • Budget objectives are aligned to section 2.3 of Azure Beach Accountants and Financial Services Budget Policy
  • budgetary monitoring targets including relevant milestones and performance indicators are appropriately based on forecast data and market trends

To complete this task successfully, the student must submit:

• Completed EXCEL Spreadsheet for the Skyward_Budget_and Performance Report template found in including all relevant assumptions and calculations for the budget to be provided to the client

Completed WORD Document for the Skyward_Budget_Commentary_template found in including all relevant budget objectives, performance indicators and contingencies.

Appendix 2: Skyward Budget Commentary

1. Budget Objectives, Milestones and Performance Indicators

BUDGET OBJECTIVE	MILESTONE	PERFORMANCE INDICATORS (Include financial, non-financial, quantitative, and qualitative indicators)
1
2
3

2.Budget Assumptions and Parameters

ASSUMPTIONS	PARAMETERS

3.Potential changes to Circumstances impacting budget forecasts

4.Budget Risks and contingencies

RISKS (Describe 4 problems you anticipate e.g. underperformance by staff)	CONTINGENCY (Describe your risk management strategies e.g. train staff)

5.Budget Commentary - General

BUDGET COMMENTARY