BSBFIM501 Manage budgets and financial plans Assessment 4

Learner Instructions 4

(Review and evaluate financial management processes)

Performance objective

The candidate will demonstrate the ability to review and evaluate financial management processes.

Assessment description

Using the scenario information supplied, you will respond to a number of scenario tasks. You will collect and analyse financial data and make recommendations to improve existing processes. You will also create a plan to implement and monitor solutions.

Procedure

Consider the scenario, tasks and financial information contained in the appendices of this assessment task.
On a separate electronic document, provide written responses to the following five tasks (i.e. tasks A to E).
Submit a document containing your responses to your assessor as per the specifications outlined below. Ensure you keep a copy of all work submitted for your records.

Specifications

You must:

provide responses to the five tasks provided in this assessment task submit answers on an electronic document such as Microsoft Word.

Your assessor will be looking for:

numeracy skills to read and understand a budget and perform cost accounting calculations
knowledge of basic accounting principles to identify and use account balances
knowledge of organisational requirements related to financial management
knowledge of current requirements of the Australian Taxation Office with respect to GST
knowledge of principles and techniques involved in:

budgeting

cash flow

electronic spreadsheets

GST

ledgers and financial statements

profit and loss statements.

Appendix 1 – Scenario

Big Red Bicycle Pty Ltd is a bicycle manufacturer based in Bendigo, Victoria. The company produces bicycles which it sells to retailers in the domestic Australian market.

The senior management structure of the company appears below:

Person	Position
Michelle Yeo	Chief Executive Officer (CEO)
Tom Copeland	Managing Director
John Black	Chief Financial Officer (CFO)
Stuart LaRoux	Operations General Manager
Pat Roberts	Senior Accountant
Sam Gellar	Sales General Manager
Charles Pierce	Production Manager
Holly Burke	HR Manager

According to company strategic plans, the company had aimed to achieve a net profit before tax of $1,000,000. Actual figures showed the company fell short approximately $175,000 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 Big Red Bicycle feels that more cash will be needed to make investments to achieve strategic aims. One significant risk to plans is bad debt and poor cash flow due to large and unsustainable trade debtor balances quarter by quarter.

Note: Strategic plans dictate that Big Red Bicycle must reduce its debt levels and so additional financing to increase cash flow is not an option.

Role

You are the Senior Accountant. As part of your role, you will need to complete the following tasks.

Task A

As you are aware, one risk to the strategic plans of Big Red Bicycle (BRB) is bad debt and poor cash flow due to large trade debtor balances. Consider the following:

According to its policies, BRB offers 30 day terms to debtors.
BRB does not currently train sales staff on credit terms.
There is currently no enforcement of credit terms.
Warehousing of stock is expensive at current leased premises.
Many bicycles need 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 (MYOB AccountRight).

Account	$
Trade debtors	362,500
Trade creditors	80,000
Opening stock	100,000
Closing stock	300,000
Purchases	1,000,000

Complete the following.

1. Review the Statement of Financial Performance in Appendix 2 to calculate:

a. The average debtor days _____________

b. The average creditor days ____________

c. The average stock turnover ___________

d. Show calculations and results on your response document for this assessment task.

2. Consider the existing BRB ageing debtors budget in Appendix 2. On your response document, make two written recommendations for improvement to existing financial management processes to improve cash flow. To support your recommendations, refer to data sources, organisational needs, and analytical techniques, for example:

a. Statement of Financial Performance

b. ledger accounts

c. scenario information

d. ageing debtors budget

e. ratios.

3. On your response document, list three sources of information of use to complete this activity.

Task B

In addition to its Australian business, Big Red Bicycle is considering manufacturing a new range of cheaper bicycles in Indonesia. The following information is available:

The Indonesian plant has capacity to manufacture 8,000 units.
Big Red Bicycle’s strategic goal is to generate a pretax profit of $1,000,000 for the next financial year for Indonesian operations.
Clients will pay a maximum of $500 per bicycle
Possibility exists for move to Indian plant with capacity for 10,000 units.
Market for bicycles is growing rapidly and BRB will be able to sell all units produced.
Limited ability to renegotiate costs with suppliers.
Pricing and cost information is as follows.

Bicycle price per unit	$500 (excl. GST)
Current variable costs per unit	$250
Fixed costs	$1,280,000

Complete the following.

1. On your response document, work out:

a. how many units at current variable cost would need to be produced to achieve profit target (show calculations)

b. what the variable costs per unit would need to be to achieve profit target at current manufacturing capacity (show calculations).

2. On your response document, make one written recommendation based on your analysis. To support your recommendation ensure you refer to the organisational needs or situation, and any analytical techniques used. You may also suggest possible actions for BRB to take depending on possible future scenarios.

3. On your response document, list three sources of information of possible use to complete this activity.

Task C

Soon you will need to prepare a Business Activity Statement (BAS) for the first quarter on 2019/20.

Complete the following.

State how many years you will need to keep GST records in order to satisfy ATO requirements.
Complete the GST budget on the following page to anticipate GST liability.

July	August	September
Budgeted cash receipts incurring GST:
Cash sales	20,000	10,000	10,000
Cash revenue (besides sales)	0	0	0
Cash receipts from sale of assets (not stock)	0	0	0
Total receipts for GST	20,000	10,000	10,000
Budgeted non-cash receipts incurring GST:
Debtors sales	180,000	230,000	150,000
Total non-cash receipts	180,000	230,000	150,000
Total budgeted receipts incurring GST	200,000	240,000	160,000
Budgeted cash payments incurring GST:
Cash purchases of stock	0	0	0
Cash expenses	4,300	5,200	5,250
Total cash receipts incurring GST	4,300	5,200	5,250
Budgeted credit payments incurring GST:
Credit purchases of stock incurring GST	25,000	30,000	25,000
Credit purchases of assets (besides stock)	4,300	5,200	5,250
Total cash payments incurring GST	29,300	35,200	30,250
Total budgeted cash payments incurring GST	33,600	40,400	35,500
GST cash budget calculations
a) Cash receipts
b) Cash payments
c) GST liability

Task D

Choose one of the recommendations from Task A or B and develop an action plan to implement and monitor the recommendation. Ensure you include appropriate activities, monitoring, timelines and accountabilities.

Task E

Reflecting on the tasks you have undertaken and on your knowledge of financial management and planning principles:

describe basic accounting principles
describe cash flows
describe ledgers and financial statements
describe profit and loss statements.

Summarise your reflections in a short, written statement and submit this to your assessor.

You may revisit the five fundamental principles of accounting. For example, the list is said to be crucial to effective management decision-making:

Control – managers need to control and monitor the business.
Relevance – decision-makers need information that is timely, useful etc.
Compatibility – the accounting systems should match the aims of a company.
Flexibility – the accounting systems need to adapt to the company’s needs.
Cost-benefit – the benefits of the accounting information system need to outweigh the cost.

What do you think?

Appendix 2 – Financial information

Statement of Financial Performance

Big Red Bicycle Pty Ltd
Statement of Financial Performance
For the year ended 30 June 2019
REVENUE
Sales	2,900,000
Less direct wages and commissions	272,500
Opening stock	100,000
Purchases	300,000
Closing stock	20,000
Less cost of goods sold	380,000
Gross Profit	2,247,500
EXPENSES
General & Administrative Expenses
Travel	22,000
Legal fees	4,500
Bank charges	700
Office supplies	4,000
Postage & printing	500
Dues & subscriptions	600
Telephone	11,200
Repairs & maintenance	45,000
Payroll tax	0
Marketing Expenses
Advertising	208,000
Employment Expenses
Superannuation	47,500
Wages & salaries	500,000
Staff amenities	23,000
Occupancy Costs
Electricity	38,000
Insurance	100000
Rates	100,000
Rent	200,000
Water	35,000
Waste removal	60,000
TOTAL EXPENSES	1,400,000
NET PROFIT (BEFORE INTEREST & TAX)	847,500
Income Tax Expense	254,250
NET PROFIT AFTER TAX	593,250

Ageing debtors budget

Big Red Bicycle Pty Ltd
AGED DEBTORS BUDGET 2018/19	TOTAL	Qtr 1	Qtr 2	Qtr 3	Qtr 4
Sales	2,900,000	600,000	900,000	800,000	600,000
% Debtors Sales	50%	50%	50%	50%
Total Debtors	100%	300,000	450,000	400,000	300,000
Current	65%	195,000	292,500	260,000	195,000
30 Days	20%	60,000	90,000	80,000	60,000
60 Days	12%	36,000	54,000	48,000	36,000
90 Days	3%	9,000	13,500	12,000	9,000

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Year 11 - 12 Certification Assignment

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BSBFIM501 Manage budgets and financial plans Assessment 4

Performance objective

Assessment description

Procedure

Specifications

Appendix 1 – Scenario

Role

Task A

Task B

Task C

Task D

Task E

Appendix 2 – Financial information

Ageing debtors budget

Diploma Universities Assignments