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Family Name:

Sanchez Zambrano

Given Name:

Daniela

Student ID: Course:

S40058749 PROJECT MANAGEMENT

Subject: Trainer’s name:

FINANCIAL MANAGEMENT SHIRLY NARAYAN

Declaration: I certify that this assignment is entirely my own work. I have provided full
referencing to the work of others. The material in this paper has not been submitted before.

IMPORTANT – READ THIS FIRST

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TUTORIALS: Tutorials are run every week to help you answer the assessments. The schedule
for tutorials will be announced during the first week of term. You are urged to attend the
tutorial that pertains to your online subject.

Financial Management Assessment 2

1. List TWO sources of information that may help a manager to estimate the
cost for the coming year.

There are several important sources of information that may help a manager to
estimate the cost fort he coming year, such as:
 Expertise opinion.
 Market research and supplies websites.

2. Identify and briefly describe THREE examples of external banking records

which are used for the purpose of record keeping.
Three examples of external banking records:
- Bank statements: is a report released by banks that list deposits. Withdrawals,
checks paid, interest earned, and service charges or penalties incurred on an
account. It shows the cumulative effect of these transactions the account's
balance, up to the date the report was prepared.
- Bank reconciliation: in bookkeeping, bank reconciliation is a process that
explains the difference on a specified date between the bank balance shown
in an organization’s bank statement, as supplied by the bank, and the
corresponding amount shown in the organization's own accounting records.
- Deposit slip: A paper slip that banks use with customers for the purpose of
depositing funds into their accounts. Typically this form will have the bank's
customer's name and account number printed directly on it.

3. List the relevant personnel you may communicate with in the organisation
to ensure that documented outcomes and information about customers,
competitors and business operations.
- Operation manager: this individual is the leader for the operation and has
overall responsibility for the financial success of the business. The operations
manager handles external relations with lenders, community leaders and
vendors. Frequently, this individual also is in charge of either production or
marketing for the business. This person will set in motion the vision, strategic
plan and goals for the business.
- Office manager
 - Marketing manager
- Purchasing manager
- Accountant, bookkeepers, and controllers: This is another key function. The
individual filling this role has the responsibility for monthly income statements
and balance sheets, collection of receivables, payroll and managing the cash.
The key aspect here is managing the cash

4. What is a contingency plan? Explain the reasons for a contingency plan?

What are the steps to follow to prepare and develop a contingency plan?
List THREE specific areas to include in the plan.
   
A contingency plan is a course of action designed to help an organization respond
effectively to a significant future event or situation that may or may not happen. 

A contingency plan is sometimes referred to as "Plan B," because it can be also

used as an alternative for action if expected results fail to materialize. Contingency
planning is a component of business continuity, disaster recovery and risk
management.

7 Steps of contingency planning:

- Identify both the benefits and unfavourable events
- Specify trigger points
- Assess the impact and estimate the potential benefit or harm.
- Develop contingency plans
- Assess the counter-impacts
- Determine and monitor early warning signals
- Communicate and rehearse

5. What is a financial plan? What should financial plans include?

A financial plan is a comprehensive evaluation of an investor's current and future

financial state by using currently known variables to predict future cash flows, asset
values and withdrawal plans. Most individuals work in conjunction with a financial
planner and use current net worth, tax liabilities, asset allocation, and future
retirement and estate plans in developing financial plans. These metrics are used
along with estimates of asset growth to determine if a person's financial goals can be
met in the future, or what steps need to be taken to ensure that they are.
A financial plan should include three key financial statements: the income statement,
the balance sheet and the cash flow statement

6. What are the external and internal factors that may affect the financial
planning?

Personal Factors: External factors:

- Risk profile - Economic growth
- Age - Political issues
- Number of dependents - Interest rates
- Inflation
- Global issues

7. What is a budget? What are the objectives of a budget? What is the role of
the master budget?

A budget is an estimation of revenue and expenses over a specified future period of

time; it is compiled and re-evaluated on a periodic basis. Among companies and
organizations, a budget is an internal tool used by management and is often not
required for reporting by external parties.
The major objectives of budget systems include coordination, allocation of resources
and general planning for operations.

Master budget is a set of interconnected budgets of sales, production costs,

purchases, incomes, etc. and it also includes pro forma financial statements. A
budget is a plan of future financial transactions. A master budget serves as planning
and control tool to the management since they can plan the business activities
during the period on the basis of master budget. At the end of each period, actual
results can be compared with the master budget and necessary control actions can
be taken.

8. Scenario: you are an accountant for APC bikes, a manufacturer of sturdy

mountain bikes for intermediate-level bikers. The variable costs per bike
include:

Direct materials:
Wheel/tyres $20.00
Components $70.00
Frame $50.00
Total direct materials $140.00
Direct Labour $39.75
Variable overhead $75.00
Total cost per bike $254.75

You decide to create a budget variance analysis that reflects the actual volume
of sales. The budget selling price is $800 (per bike). The budgeted fixed cost of
manufacturing overhead is $20,200,000 and the budgeted support department
cost is $32,956,430.
Using the following template to create a budget variance analysis including the
calculation of variances.

i-
Flexible Actual Variance Favourable/
Budget Unfavourable
Bikes Sold 113,500 113,500 Favourable
Revenue $90,800,000 $90,500,000 $300,000 Unfavourable
Production
Costs:
Variable $28,914,125 $29,492,408 $578,283 Unfavourable
Fixed $20,200,000 $19,400,000 $800,000 Favourable
overhead
Support $32,856,430 $37,565,337 $4,708,907 Unfavourable
Department
costs
Net Income $8,829,445 $4,042,255 $4,787,190 Unfavourable
Total variance $11,174,380 Unfavourable
 ii- Opinion about the entity’s performance

The variance total between Actual and Flexible Budget is high number, the business
is running far off target.
iii- Actions
We can respond with one or both of these actions:
a) Adjust the forecast to reflect the new reality, which means we have to plan a
new flexible budgeting.
b) Control actual spending in the future (Cash management), so as bring the
annual variance closer to zero.
9. What is a good cash management?

Successful cash management involves not only avoiding insolvency, but also
reducing the length of account receivables (AR), increasing collection rates,
selecting appropriate short-term investment vehicles, and increasing cash on hand to
improve a company's cash position and profitability.

10. What is cost-volume-profit (CVP) analysis and how is it used in decision-

making?

Cost-volume profit (CVP) analysis is based upon determining the breakeven point of
cost and volume of goods and can be useful for managers making short-term
economic decisions. Cost-volume profit analysis makes several assumptions in order
to be relevant including that the sales price, fixed costs and variable cost per unit are
constant. Running this analysis involves using several equations using price, cost
and other variables and plotting them out on an economic graph.

CVP analysis provides managers with the advantage of being able to answer
specific pragmatic questions needed in business analysis. Questions such as what
the company's breakeven point is help managers project how future spending and
production will contribute to the success or failure of the company. For instance,
when a manager knows the breakeven point, he can tweak spending and increase
production efforts to increase profitability. Because CVP analysis is based on
statistical models, decisions can be broken down into probabilities that help with the
decision-making process.

11. Scenario: APC bikes, a manufacturer of sturdy mountain bikes for

intermediate-level bikers. Due to the increasing popularity of cross-country
cycling, the management of APC Bikes wants to produce a new mountain
bike. After Discussions with the sales and production teams, management
has forecast the following information:

Price per bike $800

Variable cost per bike $300
Fixed costs related to bike production $5,500,000
Targeted pre-tax profit $300,000
Targeted post-tax profit $210,000
Tax rate 30%

Required: calculate breakeven in units and total revenue.

a) Breakeven point in unit

Break Even Point in Units = Fixed Costs / (Sale price per unit – Variable Cost per
unit) = 5,500,000 / (800-300) = 11,000 Units

b) Revenue Total = Breakeven Point Units * Price Per Bike = 11,000 * 800 =
$8,800,000

12. Goods and services tax (GST), which was introduced in July 2000, is a
broad-based tax of 10% of most goods, services and other items sold or
consumed in Australia. Describe the THREE types of suppliers under the
GST legislation.

I. Taxable supplies
Most supplies made in Australia are taxable

II. GST-Free Supplies:

A GST-free supply differs from a taxable supply in one critical manner - the supplier
of a GST-free supply does not have any GST liability.  This means that there is no
need to charge GST to its customers.  The business making a GST-free supply is
still entitled to claim the GST back on costs as an input tax credits.
There are a range of specific supplies that may be GST-free under the GST
Act.  The following supplies made by the University will be GST-free if they satisfy all
of the legislative requirements:
- Health
- Education
- Certain charitable activities
- Exports of goods
- Other supplies made to entities who are outside of Australia

III. Input taxed supplies

Much like a GST-free supply, a business making an input taxed supply does not
have any GST liability. Accordingly, there is no need to charge its customers any
GST.  However unlike a taxable or GST-free supply, businesses that make input
taxed supplies are not entitled to claim the input tax credits on any of the related
acquisitions or costs.
This means that whilst there is no requirement to charge GST on input taxed
supplies, the increased costs means that there is a pressure to increase prices by
small margin.
13. Scenario: Brian is running an ice cream shop. He paid $9.50 per hour for
3,950 hours of working in packing 40,000 buckets of ice cream. The
standard labour rate is $8 per hour. How much is the direct labour and the
variance (i.e the difference between the actual price for labour and the
standard price)? Is the variance favourable or unfavourable? List the
possible reasons for this variance?
Direct Labour cost: $9.50
The direct labour cost of actual hours = $9.50 * 3950 = $37,525
The standard cost of actual hours = $8 * 3950 = $31,600
The Variance = $37,525 - $31,600 = $5925

This is favourable, the direct labour cost is higher than standard however, the
working hours is much higher than standard hours as well. 3950 hours per year
means nearly 75 hours per week. .

The possible reasons are:

- Increasing in popularity
- Higher learning curve than anticipated in the standard.
- Hiring of higher skilled labour.
- Use of better quality raw materials which are easier to handle

14. When evaluating financial information system, what factors will you need to
consider?
The core factors of Financial Information System are:
- General ledger
- Budgetary accounting
- Accounts payable
- Accounts receivable
- Payroll system
- Budget development
- Procurement
- Project ledger
- Asset module
PART B – Written or Oral Questions

1. a. The accounting procedures of most businesses involve basic steps that

are carried out in a set order. The flow of data through these procedures is
known as the accounting cycle. List FIVE (5) basic steps that are included in
the accounting cycle.
  Analyze and measure transactions.
 Record transactions in the journal.
 Post information from the journal to the ledger.
 Prepare an unadjusted trial balance.
 Preparing adjusting entries.
 Prepare an adjusted trial balance.
 Prepare financial statements.
 Prepare closing entries.

b. The system used to process the information from source documents to the
stage of financial reports is called the Double Entry System. One of the
principles of double entry accounting is that each source document can be
recorded in two parts: one debit and the other credit. What is the golden rule
of double entry bookkeeping?

“for every debit there must be a credit”

2. Depending on the size and complexity of the operation there can be many
stakeholders in the budget setting process. List and briefly explain TWO (2)
stakeholders who may be involved.

Owners/Director: They are focused on the organization performance . They are

capable of analysing strategies, goals, however, the budget will depend on the
objectives achieved.
Accountant or Financial Manager: One of the main person on the project because
with his knowledge and experience he could advise the managers based on the past
result analysis.

3. What is a cash flow? Give one example of how an organisation can control
its cash flow.
Cash flow is the money that is moving (flowing) in and out of your business in a
month. Although it does seem sometimes that cash flow only goes one way - out of
the business - it does flow both ways.

For an organisation to control cash flow, the best way is to create a cash flow
statement for the next 12 months.

 Opening balance (in the first month this will be your opening bank balance.
In subsequent months this figure will be the closing balance from the previous
month)
 Cash incoming
o Sales
o Asset sales
o Debtor receipts
o Other income
 Total incoming (Add up all cash incoming items above)
 Cash outgoing
o Purchases (Stock etc)
o Accountant fees
o Solicitor fees
o Advertising & marketing
o Bank fees & charges
o Interest paid
o Credit card fees
o Utilities (electricity, gas, water)
o Telephone
o Lease/loan payments
o Rent & rates
o Motor vehicle expenses
o Repairs & maintenance
o Stationery & printing
o Membership & affiliation fees
o Licensing
 o Insurance
o Superannuation
o Income tax
o Wages (including PAYG)
 Total outgoing (Add up all cash outgoing items above)
 Monthly cash balance (Calculate Total incoming minus Total outgoing)
 Closing balance (Calculate Opening balance plus Total incoming minus
Total outgoing)

4. Cash flow budget

Prepare a cash flow statement for months 1-6 using the following forecast
details:

Mth 1 $ Mth 2 $ Mth 3 $ Mth 4 $ Mth 5 $ Mth 6 $

Cash position - start of month $ 5.228,00 $ 10.156,00 $ 8.974,00 $ 8.232,00 $ 9.720,00
Cash Receipts
Cash Sales $ 9.000,00 $ 10.800,00 $ 12.600,00 $ 19.800,00 $ 21.600,00 $ 25.200,00
Cash from Sales Debtors $ 30.000,00 $ 1.000,00 $ 1.200,00 $ 1.400,00 $ 2.200,00 $ 2.400,00
Proceeds from asset sales
Capital contributions
Borrowings
Total cash receipts $ 39.000,00 $ 11.800,00 $ 13.800,00 $ 21.200,00 $ 23.800,00 $ 27.600,00
Less Cash Payments
Advertising $ -3.000,00 $ -1.000,00 $ -1.000,00 $ -1.000,00 $ - $ -
Stock Purchases $ -17.000,00 $ - $ -7.660,00 $ -15.070,00 $ -16.440,00 $ -19.180,00
Wages $ -1.933,00 $ -1.933,00 $ -1.933,00 $ -1.933,00 $ -1.933,00 $ -1.933,00
Rent $ -1.733,00 $ -1.733,00 $ -1.733,00 $ -1.733,00 $ -1.733,00 $ -1.733,00
Loan Repayments
Other Expenses $ -5.106,00 $ -606,00 $ -1.056,00 $ -606,00 $ -606,00 $ -1.056,00
Asset Purchases $ -3.400,00 $ - $ - $ - $ - $ -
Drawings $ -1.600,00 $ -1.600,00 $ -1.600,00 $ -1.600,00 $ -1.600,00 $ -1.600,00
Total cash Payments $ -33.772,00 $ -6.872,00 $ -14.982,00 $ -21.942,00 $ -22.312,00 $ -25.502,00
Net Cash Flow $ 5.228,00 $ 4.928,00 $ -1.182,00 $ -742,00 $ 1.488,00 $ 2.098,00
Cash position - end of month $ 5.228,00 $ 10.156,00 $ 8.974,00 $ 8.232,00 $ 9.720,00 $ 11.818,00

5. When collecting data for analysis what are the two sources we can get data
from?

a. Financial reports
b. Accounting reports
c. Internet sources
d. Reports regarding inventory, production, and employment

6. How can data collected help an organisation determine the effectiveness of

their financial management processes?

It help the financial manager understands what is happing inside and outside of the
organisation. If the data collect is well analysed then the financial management
process could run smoothly. In fact, helps organisation to avoid losses as much as
possible.

7. What are some factors that could affect a budget?

 Previous sales figures
 The economy
 Competitors' actions
 Market research
 Government legislation

8 Budget/ financial plan exercise

a) What are the projected sales for lunch?

Lunch seat turnover is 80% which is 128 seats per lunch
So total sales per lunch = 128 * $16.5 = $2,112
Projected Sales for lunch = $2112 * 260 = $549,120

b) What are the projected sales for dinners?

Dinner Seat turnover 70% which is 112 seats per dinner
So total sales per dinner = 112 * $25.50 = $2,856
Projected sales for Dinner = $2,856 * 312 = $891,072

c) What are the projected total annual sales for the restaurant?
Projected total annual sales = Projected Lunch Sales + Projected Dinner Sales =
$549,120 + $891,072 = $1,440,192