BSBFIM601 Manage finances Sample Assignment

Assessor Notes: (inclusive of reassessment, reasonable adjustment, further opportunities for gap training etc): ______________

Administrative use only

ASSESSMENT 2 – STUDENT INFORMATION

This information is to be handed to each student to outline the assessment requirements

Students are required to compare their budgeted figures against actual figures located below:

Ed’s Whitegoods 1 year result:

Total Sales: $1,623,000

Total Purchases: $701,400

Total Expenses: $402,000

Students are to undertake the following:

• Prepare a variance analysis between budgeted and actual figures
• Ensure report demonstrates major differences
• What was the discrepancy?

- Is the discrepancy a positive or negative one?

- Locate the area and give at least 5 reasons why the discrepancy may have occurred

• Utilise the data provided to determine the effectiveness of the cost budgeting techniques used
• Lastly, students should give recommendations as to how their variance may be corrected for future budgets for the business.

The variance report should be submitted along with a written report detailing the student’s answers to the above questions.

Assessment Summary

You are to develop and submit the following:

• revised budget
• budget assessment report
• feasibility report

This assessment is due on: __________________________________

Result: Satisfactory | Not Satisfactory | Not Assessed

Variances report

Debtor ageing Ratio

Cash flow analysis

A cash flow budget helps to identify any shortcoming or excesses in cash forecast able future. Cash flow budget can be set for weekly, monthly or quarterly with the format usually determine by the organization’s policy and procedures.

Following budget cash flow analysis for Ed`s Whitegoods Pty Ltd is made for quarterly.

Issues and reasons

There are some issues are identified according to the information provided. Such as:

- It had been a tough quarter with the economy still in the recession and the impact this was having on the retail sector.

- Bank is raising interest rates in line with the increased upward international pressures and Ed has a significant part of their loan funds on a variable interest rate which change directly with market conditions.

- The sales seems to be holding up reasonably well as first quarter results are generally impacted by factors relating to public and school holidays but there was concerned about the discounts that had to be given to generate these sales.

Causes:

- Ed could not get into some national magazines this quarter to promote the store offers.

- It helps the Ed exceed the set budget.

- Wages and salaries running bit high.

Variances

Typical variance report will compare actual to budget and create a $ variances to the budget and a % variances to it as well. These two variances highlight areas that need to be investigated for corrective action.

Actual to budget

There are many differences between the set budget of first qtr. of the Ed and actual of the first qtr. Such as -6% differences in sales and 1% in cost of goods sold. Gross profit has a 1% if difference between in actual and budget that is a favourable. There are many things are same in the actual and budget such as - Accounting Fees, Depreciation, Insurance, Superannuation, Payroll and worker compensation etc. . The big difference is in the net profit and income tax.

The biggest reasons for variances are occurred because of the recitation hit to the economy and the bank interest rate is also increased. The one other factor is discount that had to be given to generate the sale

Performance

As per needs for future profit expectations budget is still low in margin as comparative

· Wages and salaries a little high with 12.2% at Ed as a 22% of sales, however the industry average is more like 11%.

· Average time for debtors to pay accounts is increasing; however, there should not be a concern to cash flow as yet as a majority of debtors remain within 30 days.

Response to board questions:

· Ed’s financial viability for profit on target for the first quarter which is the seasonally slowest quarter of the year.

· The variance report identifies the gross profit margin that the company was able to maintain its gross profit margin in line with the budget.

Recommendations

Analysing profitability and cash flows should be take over a series of past period to identify trends in the underlying data of this analysis should be on:

Growth , Stability, Sustainability:-

· The potential for the business and the way the growth is to be adequately managed. Such as the discount policy needs to review to protect the gross profit margin.

· Salaries and wages policy needs to review to manage the budget, extra reduce costs and improve viability.

Plan to revise the budget to include adjustments to the advertising budget with the $50,000 added to the next quarter.

· Salaries and wages policy needs to review to manage the budget, extra reduce costs and improve viability

· Apply more discounts on public holidays

Evaluation

· Budgets are prepared for all cost centres such as all cleaning and maintenance charges, bank interest rates, insurance and all taxes.

· Budget monitoring and reporting policy is shortened to monthly basis.

· Restructure loan into fixed interest rate to take out the volatility in result

Appendix 1 – Big Ed’s Whitegoods Ltd

Edward Tan owns a medium sized whitegoods retail store. He provides you with the following information which is current as of 1 October 2014. All sales and purchasing figures are inclusive of GST.

Assets:

Cash (Bank) $245,000

Computer equipment $16,400

Delivery Van $26,000

Phones $2,300

Office Equipment $4,500

Debtors $13,580

Stock $117,303

Expenses

Phone Service / Calls $780

Electricity $1590

Gas $600

Water $550

Insurance $1300

Payroll $465,000

Cleaning $850

Finance Costs $1650

Advertising $560

Rent $25,000

Petrol $560

Accountants Fees $370

Maintenance $1405

Bank Fees $210

Office Supplies $600

Creditors:

JRL Holdings $22,626

Innovating Technology Ltd $3,653

LMS Marketing $1,200

Rowlings & Sons $35,622

Ed has 3 customers that purchase a large quantity of stock through him which he delivers to their premises. To keep these customers happy, Ed is providing this service on credit to the customers listed below. The listed customers have a debt owing to Ed as listed:

Debtors:

P.L Farthings $1,323

J Smyth & Co $800

L.L Incorporated $356

National Appliances Direct $4,233

Appendix 2 – Big Ed’s Whitegoods Ltd Transactions October 2014

Ed sold the following items:

Each sold at:

12 fridges $1600

15 freezers $800

13 microwaves $470

11 Range hoods $190

6 ovens $2100

16 cook tops $560

18 dishwashers $990

22 Vacuums $390

14 Coffee makers $600

25 Toasters $99

5 Irons $156

16 Mixers $89

13 Deep fryers $99

4 Portable A/Cs $350

0 Hairdryers $35

14 Irons $45

14 Scale Sets $24

13 Kettles $78

15 Small Bins $40

7 Large Bins $60

9 Wine coolers $299

5 Washing Machines $340

4 Dryers $330

TOTAL $111837

All Sales for cash

Ed purchased the following items:

Each purchased for:

10 fridges $800 Purchased on credit from JRL

15 freezers $250 Purchased on Credit from JRL

10 microwaves $150

10 Range hoods $80

5 ovens $900

15 cook tops $200

15 dishwashers $450

20 Vacuums $130 Purchased on credit from Innovative Tech

10 Coffee makers $250 Purchased on credit from Innovative Tech

20 Toasters $35

5 Irons $78

15 Mixers $45

10 Deep fryers $45

0 Portable A/Cs $180

0 Hairdryers $9

10 Irons $19

10 Scale Sets $12

10 Kettles $34

10 Small Bins $13

5 Large Bins $22

15 Wine coolers $130

5 Washing Machines $220 Purchased on credit from Rowlings

5 Dryers $210

TOTAL $40605

All Invoices paid at time of purchase unless otherwise stated

The following amounts were paid to creditors:

JRL Holdings $5,000

Innovating Technology Ltd $2,000

Rowlings & Sons $5,000

Deliver services were provided on credit to the following:

P.L Farthings $300

J Smyth & Co $150

L.L Incorporated $362

National Appliances Direct $600 the following was paid in expenses

Phone Service / Calls $65

Electricity $132.50

Gas $50

Water $45.83

Insurance $108.33

Payroll $38750

Cleaning $70.83

Finance Costs $137.50

Advertising $46.67

Rent $2083.33

Petrol $46.67

Accountants Fees $30.83

Maintenance $117.08

Bank Fees $17.50

Office Supplies $ 50

TOTAL EXPENSES $41,752.08

Bank Statement October 2014

Appendix 3 – Ed’s Whitegoods Ltd Transactions November 2014

Ed sold the following items:

Each sold at:

8 fridges $1600

10 freezers $800

6 microwaves $470

15 Range hoods $190

5 ovens $2100

18 cook tops $560

18 dishwashers $990

26 Vacuums $390

18 Coffee makers $600

13 Toasters $99

7 Irons $156

11 Mixers $89

9 Deep fryers $99

6 Portable A/Cs $350

2 Hairdryers $35

16 Irons $45

18 Scale Sets $24

14 Kettles $78

14 Small Bins $40

17 Large Bins $60

10 Wine coolers $299

10 Washing Machines $340

4 Dryers $330

TOTAL $103136

All Sales for cash

Ed purchased the following items:

Each purchased for:

5 fridges $800 Purchased on credit from JRL

5 freezers $250 Purchased on Credit from JRL

5 microwaves $150

10 Range hoods $80

5 ovens $900

10 cook tops $200

10 dishwashers $450

20 Vacuums $130 Purchased on credit from Innovative Tech

10 Coffee makers $250 Purchased on credit from Innovative Tech

10 Toasters $35

5 Irons $78

10 Mixers $45

5 Deep fryers $45

5 Portable A/Cs $180

0 Hairdryers $9

15 Irons $19

15 Scale Sets $12

10 Kettles $34

10 Small Bins $13

5 Large Bins $22

5 Wine coolers $130

0 Washing Machines $220 Purchased on credit from Rowlings

0 Dryers $210

TOTAL $26910

All Invoices paid at time of purchase unless otherwise stated

The following amounts were paid to creditors:

JRL Holdings $5,000

Innovating Technology Ltd $2,000

LMS Marketing $1,200

Rowlings & Sons $5,000

Deliver services were provided on credit to the following:

P.L Farthings $200

J Smyth & Co $350

L.L Incorporated $462

National Appliances Direct $490

TTNT $336

As of December 2014, Ed gains another valuable customer, TTNT, who he sets up on the same credit delivery scheme as his other regular customers. The following was paid in expenses

Phone Service / Calls $65

Electricity $132.50

Gas $50

Water $45.83

Insurance $108.33

Payroll $38750

Cleaning $70.83

Finance Costs $137.50

Advertising $46.67

Rent $2083.33

Petrol $46.67

Accountants Fees $30.83

Maintenance $117.08

Bank Fees $17.50

Office Supplies $ 50

TOTAL EXPENSES $41,752.08

Bank Statement November 2014

Appendix 4 – Ed’s Whitegoods Ltd Transactions December 2014

Ed sold the following items:

Each sold at:

16 fridges $1600

15 freezers $800

6 microwaves $470

8 Range hoods $190

8 ovens $2100

14 cook tops $560

14 dishwashers $990

29 Vacuums $390

26 Coffee makers $600

19 Toasters $99

9 Irons $156

16 Mixers $89

13 Deep fryers $99

8 Portable A/Cs $350

1 Hairdryers $35

21 Irons $45

22 Scale Sets $24

19 Kettles $78

31 Small Bins $40

16 Large Bins $60

16 Wine coolers $299

15 Washing Machines $340

8 Dryers $330

TOTAL $133860

All Sales for cash

Ed purchased the following items:

Each purchased for:

10 fridges $800 Purchased on credit from JRL

10 freezers $250 Purchased on Credit from JRL

10 microwaves $150

15 Range hoods $80

10 ovens $900

15 cook tops $200

15 dishwashers $450

30 Vacuums $130 Purchased on credit from Innovative Tech

25 Coffee makers $250 Purchased on credit from Innovative Tech

20 Toasters $35

10 Irons $78

18 Mixers $45

15 Deep fryers $45

10 Portable A/Cs $180

5 Hairdryers $9

25 Irons $19

25 Scale Sets $12

20 Kettles $34

30 Small Bins $13

15 Large Bins $22

15 Wine coolers $130

10 Washing Machines $220 Purchased on credit from Rowlings

10 Dryers $210

TOTAL $55335

All Invoices paid at time of purchase unless otherwise stated

The following amounts were paid to creditors:

JRL Holdings $10,000

Innovating Technology Ltd $4,000

Rowlings & Sons $8,600

Deliver services were provided on credit to the following:

P.L Farthings $965

L.L Incorporated $332

National Appliances Direct $695 the following was paid in expenses

Phone Service / Calls $65

Electricity $132.50

Gas $50

Water $45.83

Insurance $108.33

Payroll $38750

Cleaning $70.83

Finance Costs $137.50

Advertising $46.67

Rent $2083.33

Petrol $46.67

Accountants Fees $30.83

Maintenance $117.08

Bank Fees $17.50

Office Supplies $ 50

TOTAL EXPENSES $41,752.08

Bank Statement December 2014

Appendix 5 – Ed’s Whitegoods Ltd Assumptions for 2015 financial year

Following research on market trends and consumer confidence, as well as inflation and other factors, Ed has provided you with the following set of assumptions for the 2015 business year.

1. Purchase cost of goods is set to rise by 5%

2. Decreased consumer confidence means that sales are expected to decrease by 12%

3. Ed believes he can increase his sale prices by 8% which should have minimal impact on overall sales, perhaps reducing total sales by a further 3%

4. Ed plans on reducing his expenses by laying off one of his part time staff members who has a yearly salary of $47,000. This is hoped to have only minimal impact on productivity

Appendix 6 – Ed’s Whitegoods Ltd Historic Data

2015 Business Year

Total Sales: 1366000

Total Purchases: 643000

Total Expenses: 186000

Jan - September 2014

Total Sales: 1080000

Total Purchases: 477000

Total Expenses: 378000