Reference no: EM131636612

Prepare operational budgets Assignment

Assessment Information

This assessment tool is designed to gather evidence on your knowledge as well as abilities to prepare and document operational budgets for a variety of organisations.It applies to individuals who use specialised knowledge and systematic approaches to undertake strategic financial activity for an organisation.

This assessment has three parts:

Assessment activity 1: knowledge based questions and practical problems

Assessment activity 2: case study- Business Scenario

Assessment activity 3: A presentation

Assessment Activity 1- Knowledge Based Questions and Practical Problems

You need to answer following questions to get satisfactory grades for this assessment activity. Make sure to answer all task in all assessments activities to get overall competent results.

Task 1.1 -

• What is a budget?
• What are different types of budgets?
• Explain budgetary control principles?

Task 1.2 - It is very important to discuss the budget with colleagues and peers to determine and confirm scope and nature of budgetary planning, do you agree discuss.

Task 1.3 - You are given the following information for Hyped up research service for the coming financial year 2017. Prepare annual budgeted expense for coming year 2016

Expected fees	$350,000
Marketing expense:
Fixed Advertising	$6,800 per annum
Advertising	4 % of Expected fees
Financial expense
Interest paid	$1,400 per month
Bank charges	$200 per month
Administration expense:
Accounting staff cost	$8,000 per month
Stationary	$280 per month
Depreciation of office equipment	$8,500 per year
Depreciation of motor vehicles	$12,400 per year
Rent	$2,000 per month
Travelling expense	$22,000 per year
Work cover	3% of total salaries
Superannuation	9% of total salaries
Telecommunication	$1,000 per month

Task 1.4 - Luigi Domicile (registered for GST purposes) wants you to prepare monthly budgeted Profit and loss estimates for August 2015 from the data given below.

Luigi is also worried about her Goods and services tax lodgement dates, as she is confused with monthly and quarterly lodgement, suggest her.

Using the information below:

Revenues for July current year

• Hours charged to clients 2,000
• Charge rate used $99.00 (inc. 10% GST)
• August current year hours charged are expected to increase by 100%.
• August current year charge rate is expected to remain unchanged.

Expenses for July current year

• Salaries $52,500
• Long service leaves provision $1,050
• Telephone $5,500 (inc. 10% GST)
• Bank charges $1,000
• Insurance $2,200 (inc. 10% GST)
• Rent $11,000 (inc. 10% GST)

August current year expenses will remain unchanged, except for Telephone (increase of 4%) and Insurance (increase of 6%).

Task 1.5 - Alpha ltd want to prepare quarterly purchase budget. Alpha ltd has budgeted annual purchase 3900 unit. Finance manager wants to break down annual budget and wants to determine last quarter purchase budget. Following information is given

Additional data:

Selling price per unit is $39 per unit after a mark-up of 30%

Company policy to maintain closing stock is required to be 50% of the next month's sales in units, January sale will $320.

Company policy to maintain closing stock is required to be 50% of the next month's sales in units, January sale will $320. Projected sales are given below:

Month	October	November	December	Total
Projected Sales in units	200	280	450	930

Also, consider the opening stock for October to be 100 units.

You are required to prepare a Purchases budget in units and dollars for the next three months.

Task 1.6 - Beverly Hill Firm expects to make sales of $295,000(November), $360,000(December), $350,000(January) $365,000 (February) and $380,000(March).

Beverly Hill collection procedure: Sales average 40% cash and 60% credit sales. Credit sales are collected 80% in the month following sales and 20 % in the second following month.

Beverly Hill payment procedure The Company budgets on its purchase being 60 % of sales. All expense are incurred on credit and paid for in the month following purchase.

All sales and purchase are subject to GST (the figure above are exclusive of GST). The company has elected to use the cash method to account for GST and GST payable quarterly)

Prepare a worksheet to show cash receipt and payment expected for January to March and the Quarter ended 31st March.

Task 1.7 - Assume that Pan Pacific trading has estimated sales for the next four months.

Additional information: Organisation policy to maintain the closing inventory should be 20% of next month's cost of goods sold. Cost per unit is $80. Estimated January sales 18,200 units

Prepare purchase budget for the given quarter.

Task 1.8 - Look at the following information

1. Calculate the differences, if any, between Actual and Budget results

2. Consider each variance and describe whether each variance is favourable or unfavourable

Task 1.9 -

• Explain three forecasting techniques
• What is double entry accounting
• Discuss variance analysis

Assessment Activity 2 - Case study- Business Scenario

Assume that you are working as assistant marketing manager with Johnson trading; it is small to medium size business. Business is involved in production, purchases and selling of different products. Read the below information and prepare all required operational budgets.

Actual unit sales for  2016		March	April	May	June
		20000	22000	25000	28000
Forecast unit sales for 2017 to increase by 10% of Actual 2016
Selling price based on cost price of  $8 per unit
plus 60% mark up on that cost per unit
Management require that each month's stock of closing finished goods to be 20% of that month's sales units.

• The firm is GST registered and accounts for GST on a cash basis.
• Direct labour cost based on 'Production units required' @ 30 % of Cost Price paid in month incurred.
• Factory overhead is applied @ 100% of direct labour cost and paid in month incurred.
• Estimated purchases for each month to be based on 'Production units required'. Purchase cost per unit to be 40% of cost price per unit.
• Trade creditors to be paid in month of purchase.
• Fixed expenses to be $8000 per month, 100.00%.
• Variable expenses to be 15% of each month's sales value.
• Expenses are to be paid in the month they are incurred.
• Bank balance 31 March 2017 in Overdraft. [40000].

Additional information -               

Capital	420080
Property plant & equipment	650000
Accumulated depreciation	130000
Mortgage on property	250000

Task 2.1 - Before you will start preparing the budgets for Johnson trading, your first job would be to confirm the budget with your manager /owner, (Trainer/ assessor). It is a very important step to make sure budget objectives are consistent with organisational aims, projects and forecasts.

Prepare your budget objectives, two to three and show it to your trainer to get the confirmation that those are as accordance with organisational vison, aims etc.

Task 2.2 - Based on above information, prepare a sales budget.

Task 2.3 - Based on above information, prepare a production budget.

Task 2.4 - Prepare a cash budget.

Task 2.5 - Based on task 2.2, 2.3 and 2.4, prepare Manufacturer's Budgeted Income Statement for the period ending 30 June 2017.

Task 2.6 - Based on all above tasks and information, prepare a budgeted balance sheet.

Task 2.7 - Identify the stakeholders you will discuss and negotiate the budget before implementation, also explain consultation methods.

Task 2.8 - While working as assistant marketing manager, what Key performance indicators and milestones you must keep in mind. How would you confirm them with owners or management?

Task 2.9 - How would you securely store and record budgetary reports?

Assessment activity 3: A presentation

This assessment activity is based on assessment activity two.  Prepare 4 to 5 slides to do a presentation in the class and in front of your trainer. You must present for maximum 5 minutes. Consider your classmates and trainer the management of Johnson trading.

Include the following points in your presentations:

1. Discuss budget objectives

2. Explain the importance of preparing budgets

3. Explain and discuss about budgets in such a way that it would create goodwill

4. Convince the stakeholders (Your classmates/ trainer), so that they cooperate with you about budgets and their implementation.

5. Do a small question answer session or discussion about budgets?

The objective of your presentation must be to:

• Communicate with the audience clearly, understandably and creatively
• Present your ideas, findings and recommendations credibly to convince the audience and gain support and agreement
• Satisfactorily answer questions and objections
• Organise material in an effective and logical sequence and format for the presentation
• Develop a range of support materials that can be used to present a variety of ideas and concepts for your presentation
• Adapt to the cultural requirements of the stakeholders as they are from diverse backgrounds with diverse abilities
• Apply techniques to control the flow of information

You must make this presentation professional, delivering the materials with confidence and being knowledgeable and flexible in responding to queries and feedback (see criteria in the checklist provided in the following page).

All resources must be provided to candidates in order to facilitate in delivering their presentation. This may include:

• Internet                            • Speakers                          • White board

• Training Room                   • Board markers                  • Printing facilities

• Overhead projector            • Computer workstation        • Microsoft PowerPoint (2007-2013)

(You only need to provide a USB with the downloaded presentation (in PowerPoint).

Assignment Files -

https://www.dropbox.com/s/jm99vixnpanz2wu/Operational%20Budgets%20Assignment.rar?dl=0