BSB52415 Diploma of Marketing and Communication

BSBFIM501 Manage budgets and financial plans

Assessment 3: Portfolio of Activities

Name: Lukmanto Bong

Student ID:

You must submit:

For Part A:
 a budget variance report
 a modified contingency plan and modified implementation plan
 notes on procedures

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

Procedure:

Part A
1. Read through the scenario provided in Appendix 1 to this assessment
task and tasks A and B (refer to Appendix A below).

2. Design and develop a spreadsheet to capture budgeted and actual

figures to produce a variance report.

3. Access actual budget figures from relevant managers and accounting

systems (see example from additional file named as Assessment Task
3_Variation Report).
* Submit budget spreadsheet excel file as an additional file in your portal
Important: Spreadsheet must contain columns for each of four quarters of
the financial year as per scenario requirements.

4. Monitor and record actual figures.

5. Consider feedback from team members.

-

6. Produce a variance report as per organizational requirements. Create

your own report or you can complete the variance report sample provided
(see additional file named as Assessment Task 3_Variance Report-
Assessor sample)
*Submit budget variation report as an additional file in your portal

7. Consider the scenario information and contingency plan provided and

analyse the variance report.

8. Modify the contingency and implementation plan provided in the

scenario to improve effectiveness.

*Provide the modified contingency plan and implementation plan below.

Highlight in yellow the details that you have revised.
 Contingency plan for Task B

Contingency Plan
Company name: Big Red Bicycle Pty Ltd
Person developing the plan:
Name: Tom Copeland Position: Managing Director
Risk identified: Profit for FY more than 10% less than budgeted

Strategies/activities to minimise the risk By when By whom

Produce quarterly variance reports to identify Q2 PR

income/ expenditure and profit shortfalls over
10%.
Implement sales training/coaching. Q2 PR

Implement incentives program. Q2 PR

Reduce overtime. Q2 PR

Contingency implementation plan for Task B

Risk identified: Profit for FY more than 10% less than budgeted

Activity Monitoring activity Person/s

and date
Monitor variance. Completion of PR
variance
report: Q2.
Analysis of report to identify Management report: PR
issues. Q2.
Email to warn employees of risk to Monitoring of PR
jobs. variance
report results: Q4.
Email to announce rise of Monitoring of PR
commission from 2% to 2.5%. variance
report results: Q3.
Email to inform employees that Monitoring of PR
overtime will no longer be variance
approved. report results: Q3.
Email to inform employees of Monitoring of PR
mandatory sales skills training: variance
set program. report results: Q3.
Mandatory training conducted. Monitoring of PR
variance
report results: Q3.

9. Submit all documents required in the specifications below to your

assessor. Ensure you keep a copy of all work submitted for your records.

Part B

1. Consider the scenario, tasks and financial information contained in the

appendices of this assessment task.

2. Provide written responses to the following five tasks (see appendix 3

from the assessment pack).

Task A
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
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
2021/22.

Complete the following.

1. State how many years you will need to keep GST records in order to satisfy ATO
requirements?
2. 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 0 0 0

stock)

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 33,600 40,400 35,500

GST

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:

1. describe basic accounting principles

2. describe cash flows
3. describe ledgers and financial statements
4. 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:

1. Control – managers need to control and monitor the

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

What do you think?

Part A
Task A
Calculation of budget variances

Budgeted Actual Absolute variance Percentage variance

  ($) ($) ($) (%)

Sales 3000000 2400000 -600000 -20

Cost of goods sold 400000 320000 80000 20

Direct Wages 200000 100000 100000 50

Commission 60000 60000 0 0

Gross profit 2340000 1920000 420000 17.95

General & administrative

expenses 116500 58250 58250 50

Marketing expenses 200000 200000 0 0

Employment expenses 565000 600000 -35000 -6.19

Occupancy costs 520000 550000 -30000 -5.77

EBIT 938500 511750 426750 45.47

127937.
Income tax @25% 234625 5 106687.5 45.47

383812.
Net profit after tax 703875 5 320062.5 45.47

Variance Report

The sales variance is adverse due to changes in economic climate. This resulted in decline in
sales of business during the year by 20%. The change in sales volume also resulted inn
decline in direct cost of sales by 20%. The commission on sales was negotiated with the sales
team members to be 2. % on sales instead of 2% which resulted in no decline even after
decrease in sales. The direct wages reduced by 50% resulting in favourable variance since the
50% direct labour was short term contractors which were no longer needed for the business.
Due to decrease in sales by 20% the gross profit also declined but the rate of decline was less
which is 17.95%. The general and administration expenses reduced by 50% which is an
advantage for the business. The employee expenses increased substantially since the full time
workers and sales personnel were involved in time wasting and also distracted other
contracted employees. The objectives of training and incentive program were not achieved.
There were no variations in the marketing cost since the advertisement expense is the fixed
cost. The occupancy costs increased since less attention was paid by the employees towards
the reduction in cost of wastage, raw material, water, electricity and paper. He employees feel
dissatisfied due to lack of participation in decision making for budget. The net profit declined
substantially by 45% however the projected profits could be reduced only up to 10%. Thus
managers will have to adopt effective measures to improve efficiency and reduce costs (Reid,
2016).

Task B
Revised contingency plan
 
Contingency Plan
Company name: Big Red Bicycle Pty Ltd  

Person developing the plan:  

 
Name: Tom Copeland                    Position:Managing Director
 

Risk identified: Profit for FY more than 10% less than budgeted  
 
Strategies/activities to minimize the risk By when By whom
 
Produce quarterly variance reports to identify income/ Q2 PR
 
expenditure and profit shortfalls over 10%.
 
Implement sales training/coaching. Q2 PR
 
Introduce customer reward program to increase sales Q2 PR  

Participation of employees in budgetary decision making Q2 PR  

 
Increase attention towards wastage, water and Q2 PR
electricity, paper and raw materials  

Modified contingency implementation plan

Risk identified: Profit for FY more than 10% less than budgeted

Activity Monitoring activity and Person/s

date

Monitor variance. Completion of P

variance report: Q2. R

Analysis of report to identify Management report: P

issues. Q2. R

Email to warn employees of risk Monitoring of P

to jobs. variance report R
results: Q4.

Email to announce rise of Monitoring of P

commission from 2% to 2.5%. variance report R
results: Q3.

Email to inform employees that Monitoring of P

overtime will no longer be variance report R
approved. results: Q3.
Part
Email to inform employees of Monitoring of P B
mandatory sales skills training: variance report R
set program. results: Q3.

Emails to customers and Monitoring of P

employees about the consumer variance report R
reward program results: Q4.

Voluntary training conducted. Monitoring of P

variance report R
results: Q3.

Modifying procedures to reduce Monitoring of P

occupancy costs variance report R
results: Q3.

Response document
Task A
From the data which relates to financial information of BRB the following ratios can be
calculated:

1. The average debtor days = Debtors/Average daily sales = $362,500*365/2,900,000

= 45.63 days

2. The average creditor days = Creditors/ Average daily purchases =

80,000*365/1,000,000 = 29.2 days
 3. The average stock turnover = Net sales/Average inventory =
$2,900,000*2/(100,000+300,000) = 14.5

On the basis of information gathered from data sources, needs and policies of the
organization and analytical techniques, the following recommendations could be made to
improve the cash flow:

1. Adopting the practices of working capital management by reducing debtors collection

period, increasing trade credit or creditors payment period, inventory management, cash
rotation etc. By performing these activities the company will be able to make optimum
utilisation of its cash funds and improve its cash position throughout the year.
2. `By adopting cash management and financial management practices the business will be
able to invest the cash funds properly and reinvest the returns into business operations.

The sources of information used in making the above calculations and recommendations
can be listed as follows:

1. Statement of financial performance

2. Scenario information
3. Ledger accounts

Task B
Calculation of number of units required

Price per bicycle = $500

Variable cost per unit = $250

Contribution per unit = Price per unit – Variable cost per unit

                                    = $500 - $250 = $250

Total fixed cost = $1,280,000

Target profit = $1,000,000

Total contribution required = Fixed cost + Profit

                                                = $1,280,000 + $1,000,000

                                                = $2,280,000

Number of units required to be produced = Total required contribution/Contribution per

unit

                                                            =$2,280,000/$250 = 9120 units

Calculation of variable cost

Total contribution required = $2,280,000

Current plant capacity = 8,000 units

Contribution per unit required = $2,280,000/8000

                                                = $285

Price per unit = $500

Variable cost per unit = $500-$285

                                    = $215

Recommendation– On the basis of above calculations made it can be observed that in order
to achieve the target profit the company will have to reduce its variable cost to $215 or
increase its production capacity to 9120 units. The current plant capacity is only 8000 units
therefore the company shall reduce its variable cost. If the variable costs could not be
reduced the business will have to shift to India plant.

The three sources of information to be used are as follows:

1. Cost and price information

2. Scenario information
3. Organizational policies

Task 3
As per the requirement of ATO, the GST records are required to be kept by a business for a
period of five years from the date of relevant transaction. The Business Activity Statement
for the first quarter of 2012/13 and GST budget to compute GST liability can be prepared as
follows:

GST cash budget calculations July Augus September  

(Amount $) t  
 
a. Cash receipts 2,000 1,000 1,000
 
 
 
b. Cash payments 430 520 525  
 
 

c. GST liability  
1,570 480 475
 

Task
D
Action Plan
Activity Monitoring Timelines Accountability
Working capital Reporting working At the end of every Senior Accountant
management capital ratios quarter

Cash Management Preparation of cash Monthly Senior Accountant

budget

Reduce variable costs Variable expense At the end of every Senior Accountant
budget and variance quarter
report

Task E
Basic accounting principles– The accounting principles are the fundamental policies and
guidelines in relation to accounting framework which is applicable on the accounting
records of the company. There are generally fc=vet fundamental accounting principles
which are required to be followed for the fair and relevant presentation of accounting and
financial information by an entity. The accounting principles include control, relevance,
compatibility, flexibility and cost benefit. These accounting principles ensure the quality and
fairness of reporting by the business. The control principle ensures that the business is
regularly monitored and controlled by the managers responsible for the management of
business. Relevance relates to the timely reporting of information, its usefulness, its
accuracy etc. compatibility relates to the accounting information which matches and
complies with the accounting and financial objectives of the organization. Flexibility ensures
the incorporation of business needs into the reporting mechanism. The cost-benefit
principle ensures that the benefits from reporting are higher than the cost incurred.
Cash Flows- The cash flows are the transactions in cash for receipts and payments with
regards to business operations and transactions. The cash inflows and cash outflows are
presented in the cash flow statement or cash budget to estimate the cash deficit or cash
surplus.
Ledgers and financial statements– The ledger statements are the specific accounts which
are prepared from the accounting entries and the account balance at the end of the period
are reported in the financial statements which include profit and loss statement and balance
sheet or statement of financial position.
Profit and loss statements– The profit or loss statement is the financial statement which
presents the details of incomes and expenses which relate to the period of profit or loss
statement. The net profit or loss for the period is calculated in this statement.

Resources:
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and-financial-plans-proof-reading-services
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