Introduction
For this assessment, you are required to provide evidence of your ability to:
- create a simple spreadsheet budget to capture and monitor information
- use the budget spreadsheet to produce a report on expenditure in accordance with organisational policies and procedures
- modify a contingency plan
- collect and analyse financial data; and make recommendations to improve existing processes
- create a plan to implement and monitor solutions.
Case Study
Company overview
Babies on the Go is a pram manufacturer based in Perth, Western Australia. The company produces prams which it sells to retailers in the domestic Australian market.
The senior management structure of the company appears below.
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Person
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Position
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Jan Goodwin
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CEO
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Henry George
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Managing Director
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Anita Tran
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CFO
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Anna Peters
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Operations General Manager
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George Floro
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Senior Accountant
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Sam Georges
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Sales General Manager
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Brett Price
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Production Manager
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Taylor Jones
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HR Manager
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According to company's strategic plans, the company aims to achieve a net profit before tax of $1,000,000. The main risks to this goal are:
1. poor sales due to economic downturn
2. increase in expenses such as wage expenses.
In addition, Babies on the Go is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product.
Part A
1. The Managing Director, Henry George, has asked you to implement a process to monitor expenditure and income.
Henry has asked you to prepare a spreadsheet to capture and compare actual income and expenditure tobudgeted figures.
Your spreadsheet must contain columns for each of the four quarters of the financial year. You are required to gather data from the relevant managers to complete a Budget Variation Report.
The report should meet the organisational requirements in policies and procedures
and contain:
- columns to show actual account values
- dollarvariation
- percentage variation
- favourable/unfavourable status.
a. Implement a budgetary tool that enables you to connect and collaborate with team members to monitor actual expenditure and control costs across the team.
Download the Excel template and label the columns so that it conforms to the organisational requirements.
b. Monitor the expenditure and cost data in Appendix 1 - Budget data - Actuals and identify cost variations and expenditure overruns.
c. Review and monitor the current Contingency Plan and modify and implement to maintain financial objectives in Appendix 2 - Case Study - Babies on the Go Pty Ltd.
d. Identify two major variances and potential causes and explain what changes they have made to the contingency plan and the reason(s) why. (150-250 words)
Part B
According to the company's strategic plans, the company had aimed to achieve a net profit before tax of $1,000,000. Actual figures showed the company fell about $175,000 short of this goal.
After successful labour cost-cutting measures and improved sales team performance, the company aims to generate a net profit before tax of $1,200,000 from Australian operations alone.
This year, in addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product.
The board of directors of Babies on the Go feels that more cash will be needed to make investments to achieve strategic aims. One chief risk to plans is bad debt and poor cashflow due to large and unsustainable trade debtor balances quarter-by-quarter.
Note: Strategic plans dictate that Babies on the Go must reduce its debt levels and so additional financing to increase cashflow is not an option.
As the Manager,you are aware thatone risk to the strategic plan of Babies on the Go is bad debt and poor cashflow due to large trade debtors balances.
You will need to consider the following:
- according to its policies, Babies on the Go offers 30-day payment terms to debtors
- currently, Babies on the Go does not train sales staff on credit terms
- there is currently no enforcement of credit terms
- warehousing of stock is expensive at its current leased premises
- manypramsneed to be thrown out if parts rust; this problem exacerbates the problem of waste expense.
You have the following information from the Statement of Financial Position and current ledger accounts in the electronic accounting system.
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Current ledger accounts
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Account
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$ |
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Trade debtors
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362,500 |
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Trade creditors
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80,000 |
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Opening stock
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100,000 |
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Closing stock
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300,000 |
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Purchases
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1,000,000 |
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Sales
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2,900,000 |
1. Review the Appendix 3- Statement of Financial Performanceto calculate:
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The average debtor days
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The average creditor days
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The average stock turnover
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Note:Show calculations and results on your response document for this assessment task.
2. Consider the existing Babies on the Go ageing debtor's budget Appendix 4 - Aging debtor's budget.
a. Make two written recommendations for improvement to existing financial management processes to improve cashflow( 250 words). To support your recommendations: refer to data sources, organisational needs, and analytical techniques, for example:
I. statement of financial performance
II. ledger accounts
III. Case Studyinformation
IV. ageing debtors
V. ratios.
b. List three sources of financial information which assisted in making your recommendations.
3. Soon, you will need to prepare a business activity statement (BAS) for the first quarter on 2014/15.
a. Using the figures below, complete the GST budget to anticipate the GST liability.Enter your calculation in the table below.
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GST Budget
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July
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August
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September
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Budgeted cash receipts incurring GST:
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|
|
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Cash sales
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20,000
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10,000
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10,000
|
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Cash revenue (besides sales)
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0
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0
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0
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Cash receipts from sale of assets (not stock)
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0
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0
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0
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Total receipts for GST
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20,000
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10,000
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10,000
|
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Budgeted non-cash receipts incurring GST:
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|
|
|
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Debtors sales
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180,000
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230,000
|
150,000
|
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Total non-cash receipts:
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180,000
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230,000
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150,000
|
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Total budgeted receipts incurring GST
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200,000
|
240,000
|
160,000
|
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Budgeted cash payments incurring GST
|
|
|
|
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Cash purchases of stock
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0
|
0
|
0
|
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Cash expenses
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4,300
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5,200
|
5,250
|
|
Total cash receipts incurring GST
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4,300
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5,200
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5,250
|
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Budgeted credit payments incurring GST
|
|
|
|
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Credit purchases of stock incurring GST
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25,000
|
30,000
|
25,000
|
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Credit purchases of assets (besides stock)
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4,300
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5,200
|
5,250
|
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Total cash payments incurring GST
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29,300
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35,200
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30,250
|
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Total budgeted cash payments incurring GST
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33,600
|
40,400
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35,500
|
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GST cash budget calculations
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|
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a) Cash receipts
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b) Cash payments
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c) GST liability
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4. Choose one of the recommendations you developed in ‘Part B, Question 2', and develop an implementation planusing the Appendix 5 - Implementation Plan template. You will need to include the relevant activities, monitoring tools, timelines and accountabilities.
a. Draft an email to your team members, requesting them to implement the attached implementation plan as per the specified timelines.
Attachment:- Appendix.rar