Subject: Business / Accounting
Assessment Task 2 –Prepare Operational Budgets
Instructions to Student General instructions:
In an Excel spreadsheet templates provided you are required to:
• Create a budgeted profit and loss statement for a services business.
• Create a budgeted profit and loss statement for a manufacturing business.
• Compare and discuss the difference between the two profit and loss statements.
Information/materials provided: templates for budget are provided.
Assessment criteria: To achieve a satisfactory result, your assessor will be looking for your ability to demonstrate the following key skills/tasks/knowledge to an acceptable industry standard:
• Prepare a budgeted profit and loss statements for 2 types of business.
• Determine a budget KPI.
• Discuss the differences between the 2 types of business budgets.
Assessment 2
Task 1
Below you are provided with details of two companies and their budgets. Prepare the budgets and answer the following questions.
A. From the following information relating to Marmax Consulting Services, prepare a budgeted profit & loss statement for the month of December 2016, showing the profit level required by management:
a. The fees budget estimate is achieved at 100 per cent
b. Only 80 per cent of the fees budget estimate is achieved
c. Nominate at least 1 Key Performance Indicator (KPI) in this budget
The fees budget shows a budgeted level of 1000 consultancy hours at $100 per hour.
Expenses are as follows:
Advertising is a fixed amount of $4,500 per annum plus 1.25 per cent of fees
Office wages $2,000 per month
Office supplies 10 cents per consultancy hour
Staff salaries $8,500 per month Staff commission 4 per cent of budgeted fees
Vehicle expenses $15,300 per annum plus 0.25 per cent of fees
Interest expense 15.5% per annum of a loan of $20,000
Legal fees $1,000 per month
Rates $12,900 per annum
Income tax 33 cents in the dollar
Fixed costs include: Office wages; Staff salaries; Legal fees; Rates
B. From the following information relating to Bailey’s Manufacturing Pty Ltd:
a Prepare the budgeted profit and loss statement for the month of December 2016. Actuals for this budget have not been determined at this time.
b Nominate at least 1 Key Performance Indicator (KPI) in this budget
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Baileys Manufacturing Pty Ltd
Sales Budget
Unit Sales
Unit Sales
Sales revenue
October
1,000
150
150,000
November
1,200
150
180,000
December
1,300
150
234,000
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Baileys Manufacturing Pty Ltd
Production Budget
Unit Sales
Closing Stock
Total required
Opening Stock
Estimated Production
October
1,000
50
1,050
150
900
November
1,200
70
1,270
50
1,220
December
1,300
90
1,390
70
1,320
The cost of production budget shows the manufacturing cost per unit as follows:
October $88
November $90
December $95
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Baileys Manufacturing Pty Ltd
Operating expenses budget
$
$
$
$
Expense
October
November
December
Total
Selling
9,000
9,500
9,000
27,500
Administration
1,000
2,000
1,500
4,500
Financial
2,000
2,000
3,000
7,000
Opening stock is valued at $88 per unit
The tax rate is 30per cent
Bailey’s Manufacturing Pty Ltd use Average cost for stock valuation
C. Examine the two budgeted profit and loss statement budgets and discuss the major differences between Budget A Marmax Consulting Services and Budget B Bailey’s Manufacturing Pty Ltd (Apart from the Actuals being presented for Budget A, and Budget B being over a quarter)
Task 2
In a word document answer the following the following budgeting theory questions.
A. Explain the principles of double-entry bookkeeping and how they affect the budgeting process.
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