BSB61015 Advance Diploma of Leadership and

Management

BSBFIM601 – Manage Finances

Assessment Template

Trainer Name
Student Name
Student ID

Assessment 1
Analysis of Financial statements and plan report
Business Context
 Write a detail description of the business
Financial Statements
 Insert Financial Statements such as Profit and Loss Statement and Balance
Sheet of the company you select. It is suggested to select a Listed Company
with Audited Accounts.
 You have to write a statement whether the company is following compliance
industry practice in term of making financial statements,
 Provide approval Evidence from the trainer assessor to work further on the
financial statements.
Ratio Calculations
Calculate the following ratios:
 Current Ratio 
 Quick Ratio 
 Net Working Capital Ratio 
 Receivables Turnover 
 Inventory Turnover 
 Debt Ratio 
 Debt‐to‐Equity Ratio 
 Gross Margin
 Operating Margin
 Net Margin 
 Return on Assets (ROA) 
 Return on Equity (ROE)
Business Financial Performance bases on Ratio Analysis
Interpret each calculated ratio
Business Financial Potential and Low Performance Areas
 Explain financial potential of the business base on the ratio calculated
 Explain the low performance areas reasons base on the ratio calculated
Business future funding requirement
  Explain if the business will need to borrow funds. If yes what will be business
source to get the funds.
 How much funds will be needing? Support your answer with realistic example
Business’s legal and statutory obligations
 Explain business legal and statutory obligation relevant to the industry its
operating.
 Attach those relevant legislation and guidelines or other reference
documents to support your answer.
Conclusion
 Write a brief conclusion of the task
(Student should use information provided in assessment instruction and excel sheet to
attempt the calculation for task 2-4. Calculation can be done in the excel sheet provided.)
Assessment 2
Cost of Production Budget – Hardwood Products
(for the quarter ending 30th September 2017)

The raw material cost is calculated based on the following cost:

Ash: $150/m
Redwood: $60/m
Pine 2-pack: $30/pack
Assuming Total Manufacturing Overhead is divided evenly between Dinner Table and Buffet
and the total cost ofPine 2‐pack is shared equally between the products each month.

July August September Total

Dinner Table
Raw Materials Ash 39,000 40,500 51,000 130,500
Pine-2 pack 5,070 5,175 5,850 16,095
Total Direct Labour cost 18,720 21,330 25,160 65,210
Total Manufacturing Overhead 828 955 911 2,963
Total 214,768
Buffet
Raw Materials Redwood 62,400 63,360 69,120 194,880
Pine-2 pack 5,070 5,175 5,850 16,095
Total Direct Labour cost 77,350 79,860 94,320 251,530
Total Manufacturing Overhead 828 955 911 2,963
Total 465,468
GRAND TOTAL 680,236

Cost of Goods Sold Budget – Hardwood Products (for the quarter ending 30 th September
2017)

The Opening and closing inventory of finished goods are calculated based on the following:

Opening July inventory of finished goods will be:

 Dining Tables: 12 @ $2,500
 Buffets: 60 @ $1,200

Closing Sept inventory of finished goods is estimated to be:

 Dining Tables: 24 @ $2,465
 Buffets: 96 @ $1,169

The opening and closing raw material inventory are calculated based on the following:
Opening July raw materials inventory will be:
  Ash: 6 m @ $150/m
 Redwood: 24 m @ $60/m
 Pine 2‐pack:  8 packs @ $30/pack

Estimated closing September raw materials inventory is expected to be:

 Ash: : 12 m @ $150/m
 Redwood: 40 m @ $60/m
 Pine 2‐pack: 12 packs @ $30/pack

Formula: beginning inventory + inventory purchases and expenses - ending inventory = cost
of sales, also known as cost of goods sold.
CoGS = Opening inventory of finished goods + Opening raw material inventory + Production
cost – Closing inventory of finished goods - Closing raw material inventory

Dining Table ($) Buffet ($) Total ($)

Opening inventory of finished goods 30,000 72,000 102,000

+ Opening raw material inventory 1,020 1,560 2,580
+ Production cost 214,768 465,468 680,236
- Closing inventory of finished goods (59,160) (112,224) (171,384)
- Closing raw material inventory (1,980) (2,580) (4,560)
CoGS ($) 184,648 424,224 608,872
Assessment task 3
The selling price is determined based on a mark‐up of 40% over Cost of Goods Sold.
Dining Table Buffet

CoGS ($) 184,468 424,224

No. of units produced (refer to Excel) 87 406
Cost per unit ($) 2,122 1,045
Selling price per unit after 40% mark-up ($) 2,971 1,463

Sales budget for Hardwood Products from July to September 2017

July August September Total

Dining Table
Sale forecast 20 30 25 75
Per Unit Selling Price ($) 2,971
Budgeted Sales ($) 59,420 89,130 74,275 222,825
Buffet
Sales forecast 100 150 120 370
Per Unit Selling Price ($) 1,463
Budgeted Sales ($) 146,300 219,450 175,560 541,310
GRAND TOTAL ($) 205,720 308,580 249,835 764,135
Cash Budget is based on the following policies;
 The Beginning cash in July is 121,000
 The Budgeted sale for May is _______; June is _______.
 Cash sales 80% in month of sale
 Credit sales 15% with cash received in the month after sale
 Credit sales 5% with cash received in the second month after sale
 Further, a 2% discount is allowed to debtors paying in the month after sale to
encourage them to pay promptly.

Cash Budget for Hardwood products from July to September 2017

($) July August September Total

Sources of Cash
Cash Sale 164,576 246,864 199,868 611,308
Credit Sale from last
month (Discount – 2%) 14,700 30,241 45,361 90,302
Credit Sale from 2months
1,050 5,000 10,286 16,336
prior
Total Cash 180,326 282,105 255,515 717,946
Assessment Task 4

Operating Expenses Budget for Hardwood Products for the period of July‐September
The variable costs for August and September are calculated based on the assumption that:
the variable cost rises by 20% in August and 25% in September to July each year.

Discounts are calculated based on the assumption that a 2% discount is allowed to debtors
paying in the month after sale to encourage them to pay promptly. Of those debtors who
pay in the second month after sale, 1% has traditionally been bad debts.

July August September Total

Fixed costs ($)
Selling
Depreciation on
330 330 330 990
sales truck
Telephone (Sales
120 120 120 360
dept.)
Salaries (Sales
2,500 2,500 2,500 7,500
dept.)
Administration
Depreciation on
150 150 150 450
office equip
Insurance (Office) 80 80 80 240
Salaries (Office) 2,500 2,500 2,500 7,500
Telephone (Office) 30 30 30 90
Total 5,710 5,710 5,710 17,130
Variable Costs ($)
Selling
Advertising 100 120 125 345
Telephone 500 600 625 1,725
Wages 1,000 1,200 1,250 3,450
Discount given 300 617 926 1,843
Bad debts 11 50 103 163
Administration
Telephone 325 390 406 1,121
Total 2,236 2,977 3,435 8,648
GRAND TOTAL 7,946 8,687 9,144 25,778

Master Operating Budget – Hardwood (Financial year of July 2017- June 2018)
The Master Operating Budget for the WHOLE FINANCIAL YEAR – July 2017 to June 2018
based on the following assumptions;
 Sales are likely to increase by 10% in quarter 2, 12% in quarter 3 and 16% quarter 4
(over quarter 1)
 Raw material costs are going to be increased by8 % across all raw materials each
quarter
 Direct labour costs will remain constant throughout the year
 Factory overheads are likely to increase by 20% each quarter
 Expenses are calculated with the assumption that fixed expenses remain constant
throughout 4 quarters; variable expenses have a 5% increase over each quarter;
Discounts remain constant throughout the year.
 Gross Profit= Total Sales – Cost of Goods Sold
 Net Profit = Gross Profit – Total Expenses

Sales Budget Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Dining Table
Sales forecast
75 83 84 87 329
(unit)
Per Unit Selling 2,971
Price ($)
Budgeted Sales
222,851 245,136 249,593 258,507 976,088
($)
Buffet
Sales forecast
370 407 414 429 1,621
(unit)
Per Unit Selling 1,463
Price ($)
Budgeted Sales
541,251 595,376 606,201 627,852 2,370,681
($)
Grand Total ($) 764,102 840,513 855,795 886,359 3,346,768
COGS Budget Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Raw material
357,570 386,176 417,070 450,435 1,611,250
costs
Direct Labour
316,740 316,740 316,740 316,740 1,266,960
costs
Factory
5,386 6,463 7,756 9,307 28,912
overheads
Grand Total ($) 679,696 709,379 741,565 776,482 2,907,123
GROSS PROFIT
84,406 131,134 114,229 109,876 439,646
($)
Operating
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Expenses Budget
Fixed costs ($)
Selling
Depreciation on
sales truck 990 990 990 990 3,960
Telephone (Sales
dept.) 360 360 360 360 1,440
Salaries (Sales
dept.) 7,500 7,500 7,500 7,500 30,000
Administration
Depreciation on
office equipment 450 450 450 450 1,800
Insurance (Office) 240 240 240 240 960
Salaries (Office) 7,500 7,500 7,500 7,500 30,000
Telephone
(Office) 90 90 90 90 360
Total 17,130 17,130 17,130 17,130 68,520
Variable Costs ($)
Selling
Advertising 345 362 380 399 1,487
Telephone 1,725 1,811 1,902 1,997 7,435
Wages 3,450 3,623 3,804 3,994 14,870
Discount given 1,843 1,843 1,843 1,843 7,372
Bad debts 163 171 180 189 704

Administration
Telephone 1,121 1,177 1,236 1,298 4,833
Total 8,647 8,988 9,345 9,720 36,700
Grand Total 25,777 26,118 26,475 26,850 105,220
NET PROFIT ($) 58,629 105,016 87,754 83,027 334,426
Report

Budget Objectives

 Control:Hardwood Products would be able to use as a control tool by comparing

budgeted data with actual data to investigate the reasons of variances.

 Direction: It will provide the management of Hardwood Products with a clear

direction to where they want to go or where they are heading. It filters out
ambiguity.

 Appraisal: Hardwood products can also use it to appraise its own employee’s
performance and award them on basis of performance resulting in overall increased
motivation of employees to achieve organizational goals.

 Dynamic Management:It can help Hardwood products’ management to be

proactive in its approach in a way that its comparison with actual data during the
period will provide red flags for the management to act upon and prevent
unfavourable results from happening.

 Allocation of Resources: It would be easier for Hardwood Products to identify areas

where they are lacking or areas where they can improve or cash upon so they would
provide more to those departments which requires special attention.

Budget Components

 Sales Budget: One component of budget is “Sales Budget’. It includes sales of those
items for which an organization principally exists. It won’t include for instance, sale
of fixed assets. Budgeted sales for Hardwood Products are computed by multiplying
forecasted sales units with budgeted sales price. Sales forecast is determined by
techniques such as time series analysis.
 Production Budget: This budget is about how much Hardwood Products would
produce for theperiod. It is driven by the sales budget and levels of finished goods
Inventory Company expects to have at the period end.
 COGS Budget: In this budget, an assessment of the cost of goods to be sold is made.
Cost per unit for both products, Dinner Table and Buffets, were then determined.
Selling price was calculated using budgeted cost per unit by applying markup of 40
percent.
 Labour Budget: In this budget, numbers of units to be manufactured are multiplied
by number of labour hours required to produce a single unit. Total number of hours
 are then multiplied by budgeted cost per hour to compute total labour cost for the
period.
 Raw Material Usage Budget: This budget is about usage of Ash, Redwood and 2-
pack for the period. This budget is used in production budget to come at total
production cost of Dinner Tables and Buffets.
 Cash Budget: Cash Budget for Hardwood Products was based on receipts only. Cash
inflows recorded were based on assumptions using customers’ payment history with
adjustments for discounts taken by customers.
 Operating Expenses Budget: Fixed Costs remained static due to their nature while
increments were added in variable costs on the basis of quarterly increase assumed.

Assumptions used in various budgets

 Cash Budget:Cash sales are 80 percent of total sales. 20 percent are credit sales of
which proceeds from 15 percent are received in month after sale and remaining are
received in second month after sale. Two percent discount is also allowed to debtors
in the month after sale.
 Production Budget: Total cost of pine 2-pack is shared equally between two
products. Total Production Overhead is divided equally between the products.
 Operating Expenses Budget: Variable Costs increase by 20 and 25 percent in August
and September in comparison to July. Discount expense has been taken 2 percent of
after month sales and bad debts have been taken 1 percent of after second month
credit sales.
 The Master Operating Budget for the whole financial year – July 2017 to June
2018:
Sales figure has been increased by 10, 12 and 16 percent for Q1, Q2 and Q3
consecutively. Labour Cost remains constant throughout the year in master budget.
Raw material costs and factory overhead costs are increased by 8 and 20 percent
throughout the year. Variable Costs have been increased by 5 percent every quarter.
 Income Statement: Same assumptions as master budget.

Communicating the budget to the company

Communication of the budget inside the company should begin with a formal meeting
involving the heads of every department. Roles and responsibilities of different departments
should be identified and what is required of each department should be clarified to clear out
confusion. Inputs from managers of departments should also be considered and changes be
made if necessary otherwise the implementation of the budget won’t be successful and it
would face resistance internally.

Key milestones and performance indicators

Key Performance Indicators are used for assessment of performance in key areas in an
activity. KPIs for the budget of Hardwood Product are as follows:
 Gross Profit Margin
 Net Profit Margin
 Growth in Sales
 Labour Capacity Utilization
 Labour Hours taken per unit
 Percentage of cash sales in total sales
 Quantity of material used per unit
 Percentage of Overheads Cost in total cost

Monitoring of budget

For effective monitoring of budget, management of Hardwood Products would need full
year budgeted data and up to date actual data. Data should then be compared and variances
arising should be addressed. Meetings should be arranged at regular intervals between top
and low level management to make sure the actual results are in control. Actions taken
should be documented so that staff could fall upon on those actions whenever necessary.
Another way of monitoring budget is running of a forecast of actual till year end to
understand what the situation will be at year end. If it is indicative of better performance
then management may consider of not taking corrective action.

Analysis of budget variance

Variances are deviations from what was set as a target. They can be either favorable or
adverse. Analysis of budget variance involves understanding of the type of variance.
 Planning Variance: If a variance occurs due to the original budget being unrealistic
or made from false data then rectification or improvement will only be possible by
revisiting the original plan and modify it in accordance with the real situation of
Hardwood Products.
  Operational Variance: If a variance occurs due to staff being not efficient in
conducting its own duties and set goals being not achieved then such a variance is
called as operational variance. To address operational variance, management
needs to sit again with the concerned department to look for the reasons of
deviation and how can one improve worsening results. Management could offer
incentives at the communication phase of the budgeting to reduce chances of
operational variances arising.
Materiality for a variance should also be set. Management should also have an idea of what
should be investigated, improved and what should be ignored. Sometimes variances are also
interlinked. For example, an adverse direct labor price variance may not always be bad as
hiring skillful staff could also result in favorable efficiency variances resulting in overall
benefit for the company. Management should consider analysis from this viewpoint as well.

Conclusion
The purpose of this report is to explain budget objectives, components and assumptions
used in the budget. How should Hardwood Products communicate its budget and method
for its monitoring. How can Hardwood Products analyze variances in a meaningful way to get
better results of its budgeting and control process. In short, budgets require a co-ordinated
effort of all departments of an organization to be implemented successfully.