Please wait until you have received your feedback from Assessment 1 before submitting this assessment.
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.
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 20×3 the Finance Group commenced their budget compilation activities relating to 20×4. The following information relating to Sales Revenue for 20×3 has been produced by the Hot Motor Cycles Research Agency.
Extract from the Report from the Hot Motor Cycles Research Agency
The Market Research Agency has provided the following information to assist in preparing the budget for 20×4-
Required:
Part A
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
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 (20×4) 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 20×4. 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 Aâ€.
Part B – Expense Budget by Cost Centre
Required:
Based on the above forecast information for the current year – 20×3:
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.
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 20×4. 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.
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The DS Financial Services Group has provided the following data:
Part A
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?
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 20×4 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 20×4.
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:
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 20×4.
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 20×4 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.
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:
Indicator |
YTD Actual |
YTD Budget |
Variance (Actual –Budget) |
Possible causes of Variance |
Potential Countermeasures for the remaining period |
Gross Profit % to Sales. |
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Total Expenses % of Sales |
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Net Profit % of Sales Ratio |
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Return on Investment Net profit after tax divided by Capital injected |
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Current Ratio |
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Quick Ratio |
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Stock turnover |
|
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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.
Before submitting your assessment, please check that you have a WORD (or similar) document and your completed Excel template.
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