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
.364px;=”” collapse;=”” 12px=””>

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
.364px;=”” collapse;=”” 12px=””>

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
.364px;=”” collapse;=”” 12px=””>

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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