Budget Planning Assignment Brief

Budget Planning Assignment Brief

Budget Planning Assignment Brief

Q1

  1. Define and differentiate cash, revenue and expenditure items by providing an example of each category and which budget it is relevant to when preparing.
  2. Having implemented controls in ABC Co. on the printing, postage and stationery account, significant changes were noted by you resulting in monthly savings of $300. Use the first two columns to complete the worksheet.

ABC Co.

Budget Variance worksheet 30.6.2015

Month

Existing Estimate

Change to

Income

Effect on: Expenses

 

Cash Flow

July

700

 

 

 

 

Aug

750

 

 

 

 

Sept

800

 

 

 

 

Oct

900

 

 

 

 

Nov

950

 

 

 

 

Dec

800

 

 

 

 

Jan

800

 

 

 

 

Frb

800

 

 

 

 

Mar

800

 

 

 

 

Apr

800

 

 

 

 

May

800

 

 

 

 

June

800

 

 

 

 

Total

9,700

 

 

 

 

Q2

  1. How is the budget process affected by revenue forecasting? What are the limitations in the revenue forecasting technique and how the same can be countered?
  2. Assume in a company where you work there are several managers’ sales, production and transport and all of them understand the company’s budget objective. You as the accountant have been given last year’s master budget and told to use all sources of information in formulating objectives and assumptions for the following year’s expense budget. How would you go about attaining information for justifying the following year’s expense budget?

Q3. During the school term break you were approached by a finance company to assist in preparing the annual budget for their business. The CEO had been responsible for the previous period’s budget. You have been introduced to the three departmental managers (marketing, production and logistics) by the CEO to assist you with formulating the budget. The marketing manager has given you the sales forecast that he was very confident with.

  1. After being introduced by the CEO to the three departmental managers you will need to discuss the budget in a simulated workplace scenario with your Trainer & Assessor who will be playing the role or the three managers (marketing, production and logistics) in order to assist you in the formulation of the budget. You will need to ask the necessary questions in order to elicit responses and seek clarification. All recommendations received from the Trainer & Assessor should be well documented so they can assist in the sales forecasts. You will also provide advice on the required financial information that needs to be included in the budget.
  2. Besides the three departmental managers, who else would you communicate with in order to set the sales forecast and how would you document the process? How would you use the sales budget in order to draw out the other budgets?
  3. What are the five steps for building the master budget?
  4. When conducting budget meetings on discussion of budgets between managers and the CEO, who is responsible and what standard for negotiation should be set.

Q4

  1. As most organisations have a sales forecast spreadsheet in place, how could the same be used to show which period profit milestones occurred and how management could motivate staff to meet profit sales milestones.
  2. How are the expenditure milestones set up in an organisation?
  3. By using the breakeven formula listed below, calculate the number of units needed to break even.

Sales = Variable expenses + Fixed expenses + Profit

ABC Ltd Contribution Income Statement For the year ended 30 June 2015

 

Total

Per unit

Sales

$500,000

$200

Less variable expense

$300,000

$120

Contribution Margin

200,000

 

Less fixed expenses

$150,000

 

Net Income

$50,000

 

Q5

  1. Discuss the following: In all organisations, the bank account needs to be reconciled. What does reconciling the bank account reveal in regards to the cash flow budget? Which budgeted statement is the bank account reconciled to?
  2. Create a projected revenue budget from Jan 2016-Jun 2016

ABC Ltd Revenue Forecasts 1stJan 2016 – 30th June 2016

 

Nov credit

Dec credit

Jan

Feb

Mar

Apr

May

Jun

Cash

 

 

 

 

 

 

 

 

Total Credit

 

 

 

 

 

 

 

 

Credit Received

 

 

 

 

 

 

 

 

Total $

 

 

 

 

 

 

 

 

c. How do departments within an organisation compete for allocated funding for their projects? What role does the budgeted statement of financial performance play?

Q6

  1. Part of your responsibility is controlling cost in your new position. The CEO is trying to manage the level of increased motor vehicle costs, which is putting pressure on the business operation. You have completed the following year’s master budget, including motor vehicle expenses. Included in your notes will be suggested management controls would you suggest that will accompany the master budget. This needs to be sent to the CEO for approval.
  2. In your meeting with the CEO, he asked you for your input in establishing budget timelines. How could you use the concept of a budget calendar in describing reporting timelines when meeting with the CEO?

Q7

  1. In the long term, which specific two budgets are the most relevant to the governing board and for what reason?
  2. One of the governance board member is constantly asking the accountant questions about motor vehicle expenses that are constantly over budget. He blames one of the business managers who he dislikes and points to the fact that the manager has an unnecessary sports pack on his car. What type of budget does the motor vehicle expense belong to and who is responsible for this budget. What steps would you take if you were the accountant?
  3. Auditing of the budget process in any organisation is of great importance and needs to be conducted every two to three years. What does the budget audit examine and detect? What necessary corrective action that needs to be considered?