FNSACC412 Prepare Operational Budgets Assessment

Task 1

Management of Staples Pty Ltd operating in Retail business have provided you with the following information for the period 1 April - 31 July 2020. You are required to use the information to prepare a Budgeted Income Statement and Cash Budget.

Following a meeting with management and the business owners the following budget milestones were established.

(Note: Please refer to the Extract of Policies & Procedures in Appendix A on page 7)

Budgeted Sales:

April 25,000

May 27,000

June 20,000

July 23,500

• Cash Sales account for 50% of sales.  Credit sales are collected 40% in the month of sale and 60% in the following month.
• Purchases are expected to be made at the rate of 55% of expected sales for each month and are purchased on credit. The company requires the monthly ending inventory balance to be $20,000 plus 25% of the next month’s purchases.
• Creditors are paid 20% in the month of purchase and 80% in the next month.
• Dividends are paid by the business at the rate of $4,000 per quarter.
• Rent on premises is $3,000 per quarter, paid on the last day of the first month of each quarter.
• Wages are normally paid as incurred and this will occur in the quarter ended 30 June.  In the quarter ended 31 March, pay day fell on 25th March so 6 days wages were outstanding at 31 March and are yet to be paid.  Wages are normally incurred at the rate of $5,000 per month.
• The following are paid as incurred: electricity $400 per month, interest on loan $180 per month and cleaning contractor $200 per month.  The loan principal is paid at the rate of $2,000 per quarter.
• Depreciation is charged at 10% per annum on the cost of the furniture and equipment and 15% per annum on the cost of the plant and machinery.
• New machinery will be purchased for cash on 30th June for $10,000

Requirements:

a. In an Excel spreadsheet template provided you are required to:

Complete the schedules required to:

• Prepare a Budgeted Income Statement
• Prepare a Cash Budget

(All other budgets and schedules provided in the template must be completed).

b. Suggest 2 (two) ways to the management of Staples Pty Ltd. where the business is sensitive (prone) to changes in input data and provide 4 (four) KPIs.

Sensitivity:

• Sales may fall short of expectations.
• If accounts receivable recovery does not go as expected, the cash budget created may collapse, and possible benefits may decrease.

KPI’s:

• Index of Quality Of financial reporting.
• Workforce Contentment.
• Service fulfillment.
• Internal Business processes Excellence.

Task 2 Research task: 

(All answers to be typed in a word document)

Please use supplementary resources and other accredited library and internet tools

You are required to provide detailed responses including examples to support your explanations to questions below. One or two line responses will not be acceptable.  

Instruction:

1. Explain what is meant by the term ‘Budget’ 

2. Assume you are employed by a white goods distributor and have been asked to prepare a list of controllable (those things that the business can directly influence) and uncontrollable (those things that the business can’t directly influence) factors that might affect the sales of refrigerators in the coming year. Supply a list for the next management meeting. You must supply at least 3 controllable and 3 uncontrollable factors.

3. Explain the principles of double-entry bookkeeping and how they affect the budgeting process. (approx..100 words).

4. With reference to Staples Pty Ltd ‘s Policies and Procedure (Appendix A), what are the key features of organisational policies and procedures. In your response provide 4 critical procedures to be followed in preparing budgets for this organisation.