FNSACC503A: Assessment 2 What you have to do This assessment will test your understanding of budgeting principles and the preparation of sales budgets, operational budgets and cash budgets for a Manufacturing company. For this particular assessment, you will need to be familiar in using excel. There are additional resources within your Learning Resources, Text Book & CD to assist you in learning spread sheeting skills. The purpose of using excel is to demonstrate that you are able to use a spreadsheet application to prepare various reports to meet organisational requirements. You will find two types of worksheets applicable for every question. The first will be labelled for example Data. This will contain the data required for each question. You will need to enter this information yourself from this Assessment document. The second and subsequent worksheets will be where you will do the calculations and show your answers, it will be labelled according to the particular budget you are preparing, for example Sales, Prod n, DM Purch on so forth. It is important that you use formulas where necessary and not manually calculate and enter the answer. The formulas should be linked to the Data sheet. Your text book will assist you as well as the additional information in your Learning Resources. In order to pass this assessment you need to demonstrate competency in the preparation of the budget, forecasting estimates, documenting the budget and monitoring budget outcomes. An overall pass mark is not sufficient. Ensure you refer to the OLS for any updates that may have been made since publication of this assessment. LA015659 - Assessment 2 FNSACC503A Ed 3&4 1
Tasks Part A You have recently been appointed as a budget analyst for Turnbull and Co a manufacturer of golf bags. The Balance Sheet as at 1 July 2014 is as follows: Turnbull and Co Balance Sheet as at 1 July 2014 Assets Current Assets Cash at Bank 32,500 Accounts Receivable 373,230 Inventory Raw materials (585 metres, at cost) 10,530 Inventory Finished Goods (2,800 units at cost) 59,500 475,760 Non Current Assets Plant and Equipment (at cost) 130,000 Less Accumulated Depreciation 39,000 91,000 Office Furniture (at cost) 32,500 Less Accumulated Depreciation 6,500 26,000 Land and Buildings 135,200 252,200 Total Assets 727,960 Liabilities Current Liabilities Accounts Payable Raw materials 75,537 2 LA015659 - Assessment 2 FNSACC503A Ed 3&4
GST Clearing 27,063 102,600 Non Current Liabilities Long Term Loan 260,000 Total Liabilities 362,600 Net Assets 365,360 Owners Equity Capital 365,360 Management wants you to prepare a budget for the first quarter of the coming financial year and provides you with the following information. Sales (in units): Actual May 6,000 Jun 8,000 Budgeted Jul 7,000 Aug 9,000 Sep 10,000 Oct 7,000 Nov 10,000 Each golf bag is expected to sell for $39.00 (ex GST). All sales are on credit. Discount is not offered for early payment. The sales collection is expected to follow previous months as follows: Current month of sale 25% 1st month following sale 30% 2nd month following sale 45% LA015659 - Assessment 2 FNSACC503A Ed 3&4 3
The accounts receivable balance at 1 July 2014 consists of: $115,830 owing from May Sales ($105,300 + GST $10,530) $257,400 owing from June Sales ($234,000 + GST $23,400) Finished Goods inventory It is the company s policy that each month s closing stock of finished golf bags is to cover 40% of the next month s sales units. Direct materials Turnbull and Co uses ½ metre of material to make each golf bag. The material costs $18.00 per metre. Management wants to hold sufficient material at the end of each month to meet 15% of the next month s production requirements. Raw materials are paid for in the month after the month of purchase. June s purchases are $68,670 (ex GST) Direct labour It takes ¼ hour of direct labour to produce each golf bag. Production staff are paid an average of $21.00 per hour. Direct Labour is paid for in the month incurred. Factory overhead Factory overhead is to be applied on the basis of golf bags produced. The application rate per unit is as follows: Factory overhead $7.00 Included in each month s factory overhead is depreciation of factory plant of $2,600. Factory overhead is paid for in the month incurred. Selling, administrative and finance expenses Fixed expenses per month are expected to be as follows: Wages $11,700 Administrative expenses $3,900 Selling expenses $8,500 4 LA015659 - Assessment 2 FNSACC503A Ed 3&4
Finance expenses $650 Depreciation office furniture $1,300 Variable selling expenses are $1.00 for each golf bag sold. The values above exclude GST GST needs to be added where appropriate into Budgets. Other information $117,000 of the loan principle is due to be repaid in September. New plant costing $156,000 (ex GST) will be purchased on credit, with payments to be made equally in July and August. Depreciation for this plant has already been considered in the allocation of fixed overhead. GST is to be applied to the Cash payments Budget for Turnbull and Co. Required Using the Excel Template for Assignment 2 from the OLS, complete the following tasks noting: Your spreadsheets must include a data sheet into which all data is entered. Worksheets need to contain formulae and/or links to the data sheet or a subsequent worksheet. There are to be no absolute numbers in budgets or reports. Use the number format and use the 1000 separator (,) for amounts over 1,000. Do not round unit costs in your calculations. Show unit costs in dollars and cents. Ensure each budget or report has the name of the business, the type of report or budget and specifies the period to which it applies. Prepare the following budgets for July, August and September. Sales budget (showing units and $) Production budget (in units) Direct material purchases budget Direct labour budget (showing hours and $) Factory overhead budget LA015659 - Assessment 2 FNSACC503A Ed 3&4 5
Schedule of collection from accounts receivable Cash Payments budget In addition, prepare: A schedule showing the cost of each golf bag A budgeted Income Statement for the quarter ended 30 Sept 2014 (month by month details are not required). Round all figures to the nearest dollar. 6 LA015659 - Assessment 2 FNSACC503A Ed 3&4
Part B It is now three months after the budget process, and actual figures are available. You have prepared the following Income Statement as at 30 Sept 2014. Turnbull and Co Income Statement as at 30 September 2014 Sales (28,000 bags) 1,036,000 Less Cost of Production Opening Stock (2,800 Bags) 59,500 Direct materials (14.030 metres) 266,570 Direct labour(9,800 hours) 134,300 Factory overhead (fixed & variable) 196,000 Closing stock (2,800 Bags) 59,500 Cost of Goods sold 596,870 Gross profit 439,130 Fixed expenses Wages 36,250 Administration expenses 11,775 Selling expenses 31,265 Finance expenses 1,755 Depreciation office furniture 4,750 85,795 Variable expenses Selling expenses 28,000 28,000 Net Profit 325,335 LA015659 - Assessment 2 FNSACC503A Ed 3&4 7
Whilst you are pleased that Sales Quantity increased to 28,000 units, you are curious as to the causes of the resulting variances and had expected to see a higher Net profit result after the effort put in by marketing to increase sales. Required Task 1 Prepare a performance report based on budgeted and actual results. You will need to separate some expenses into fixed and variable components. Ignore opening and closing stock. Use F or U to denote whether each variance in the reports is favourable or unfavourable. Expand the Performance report so you also have this in flexible budget format. Task 2 Comment on price and usage variances for direct materials and direct labour and include these in your answer and analysis. A detailed answer is required and you should refer to both the Performance report as well as the Flexible budget format. Task 3 Identify 2 Fixed expense items that have a significant variance. Suggest a possible reason the variances have occurred. 8 LA015659 - Assessment 2 FNSACC503A Ed 3&4
Part C The teacher will use this section to reflect back to Parts A & B and make an assessment to your overall competency and use of formulas including linking to the data or other worksheets. Note that Budgets should all be clearly labelled with the company name, type of budget and period to which the budget applies. LA015659 - Assessment 2 FNSACC503A Ed 3&4 9