Assessment

Task –B: Short Answers

Section 1:
Ans 1:

Budget provides assistance in evaluation and planning various situations within an organization.
For eg:

1) Allocating resources: ABC Company has allocated resources for 100 million dollar for its
operation department. Actual expenditure, at the end of the year was 80 million dollar.
Therefore, the company allocated 90 million dollar budget for the upcoming year.

2) Improved Communication: Budget sets target and goals to be achieved by the management
and staff at all levels of the company.

Ans 2:

1) A calendar year: It starts from 1st January and ends at 31st December

2) A financial year: It starts from 1st July and ends at 30th June.

3) A corporate financial year: It starts from 1st October and ends at 30th September.

Ans 3:

Fixed budgets are prepared at the starting of budget period for specific area or the goals, which
do not have any concern with sales or production. This budget remains static throughout the
budget period, regardless of company’s actual revenue and sales.

For eg: A company has set targets for monthly and daily sales for the whole organization or for
particular products, based on customers. Whereas, the budget could be for fixed items such as
specific marketing campaigns, capital expenditure or for repair projects.

Ans 4:

Master budget is overall combination of all financial and operational budgets. Expenses and
project revenues from other forms of budgets are collected to give a real picture of the business’s
target of a specific period. Master budget is significant for future operations such as in
determining proper allocation of resources, evaluating the financial viability of business and
assessing whether the objectives defined in the strategy of business plan have been
accomplished. The purpose of master budget is to accumulate all other budgets such as cash flow
budget and income statement and these would be reported in financial documents of the
company.

Ans 5:

Revenue statement budget also known as income statement or profit and loss budget. A financial
statement sum up the revenue and expense for a particular budget period, usually a financial year
or quarter. It determines the amount of revenue or sales a company need to make a certain profit.
For this purpose, annual budget could be break down into monthly or weekly targets for
departments to achieve. Because short targets are more realistic to achieve and provide regular
feedback on performance. Revenue statement budget supports application for business loans and
grant funding because it is the ability to make profit.

Ans 6:

1) Data of performance from past budget periods.

2) Income and expense of previous budget.

3) Customer or supplier research.

4) Competitor research.

5) Policies and procedures of management.

Ans 7:

Fixed Cost: It is the cost associated with company’s business product that must be paid
regardless of how much company sale.

For eg: Salaries, lease payments, equipment depreciation.

Variable Cost: The cost is directly involved in the sales of company’s business.

For eg: Sales commission, food, delivery, or shipping charges.

Direct Cost: The cost is directly involved in the provision of products and services.

For eg: Direct material, Direct Labour, and direct wages.

Indirect cost: The cost is not directly involved in the production of sales item or operational
outlet. It is included in master and profit and loss budgets with a percentage of totals allocated to
individual budget.

For eg: Salary of supervisor, who looks after the production site.
Ans 8:

Sales budget predict the income or revenue targets to be achieved by the sale of business services
and goods. It is considered as an important budget as it is the initial point for all other budgets
and regarded as monthly, fiscal, quarterly or calendar year budgets.

Ans 9:

Labour budget is prepare by means of accurate data and required two types on information,
which includes:

1) Current pay rates.

2) Salaries and anticipated staffing levels.

Ans 10:

Master budget is a complete financial planning document, which is a combination of all lower
level budgets produced by company’s various departments and includes cash forecast, financial
statements, and financing plan.

Ans 11:

Cash flow budget aided business planning by determining the cash flow into and out of the
business. It is mostly used by the managers and can be prepared for all business levels.

Ans 12:

External factors that can affect budget planning are:

1) Competitors and their plans.

2) Technology in use.

3) New regulation or legislation developed by government.

Ans 13:

Competitors can affect budget planning by threatening company’s business strategy. For this
purpose, a company must be aware of its rivals and what are their strategies and plan of working.
It would enable the company to respond competitor’s marketing campaigns by setting company’s
own initiatives.

Ans 14:

Internal factors that can affect budget plans are:

1) Organizational management structures

2) Project or event scope

3) Service standards for customers.

Ans 15:

Customer Service standards are based on the demands of customers. It can affect budget
planning if a company wastes money on unused products or services or by changing service
standards in other outlets. In order to avoid such problems, a company must plan customer
service strategies.

Ans 16:

Colleagues are considered a part of team and motivated to take part in budget planning process.
This will allow to identify any problem arises with the changes. Colleagues must be aware of the
targets to be achieved by the staff so that they can help them in achieving those targets and
understand that their duties would have an impact on the budget.

Ans 17:

Information during analysis of previous variances and figures:

1) Previous forecast and what was the information behind those calculations

2) What was the actual figure achieved by the establishment and the reason behind achieving
those figures.

3) What was the trend of budget variances and where did these variances occur.

Ans 18:

1) Evaluating potential of sales

2) Evaluating quantity of sales.

3) Calculation of selling price

4) Calculation of revenue on each item.

5) Calculation of total sales.

Ans 19:

Dolphin tour passes per year = 3,685

Increment in next year = 3,685  10%= 368.5

Potential tour passes in next year = 3,685 + 368.5 = 4,054.

Ans 20:

No. of seats = 75

Turnover rate of seat = 0.75

Average spend on food = $13.90

Budget period days = 31

Total food sales = 75  0.75  13.90  31

Total food sales = $ 24, 238

Ans 21:

Last month Business spend on food = $23,379

Revenue on food = $73, 059

Total Food cost

Food percentage = × 100
Total Revenue

$ 23,379
Food percentage = ×100
$ 73,059

Food percentage = 32%

Ans 22:

Cost of 20 kg bags =$48.00

cost of bags
Unit cost of the item =
no of bags

$ 48.00
Unit cost of the item =
20

Cost of 1 kg flour = $2.40 per kg

Ans 23:

Labour cost includes:

1) Rates for Part time, casual time or full time pay

2) Holiday pay for all employees of part time and full time.

3) Employee’s compensation.
4) Long service leave

5) Payroll tax

6) Superannuation

Ans 24:

1) Tax payments

2) Bank loan repayments

3) Creditor payments

Ans 25:

Organizations objectives are significant for budget because it make sure that the
recommendations of a company follow organizational values and goals. It also supports to
reduce unwanted impact on quality, safety, and customer service level.

Ans 26:

Presentation styles to present recommendations are:

1) Verbal Presentation

2) Graphical Presentation

Ans 27:

1) You should know your audience and communicate in an effective way that encourages their
input.

2) Options and recommendations should be clearly formatted and suitable to audience.

Ans 28:

After preparing a draft budget, it can be presented to the management with relevant information
and recommendations. Therefore, management can evaluate the information and identifies the
options, which could be achieved.

Ans 29:

Circulating draft budget is an effective way to present recommendation among management

team because it provides an opportunity to the managers or colleagues to give their suggestions,
feedback, or comments and evaluate the information. This would provide written documents and
recalculation of budget. It also helps to compare the goals set by the budget to the goals to
achieve.
Ans 30:

Discussing or negotiating budget prior to finalize it is helpful in refining the figures so that it generates
more accurate outcomes and also highlight information that is not considered previously and involve
management and staff actively in the budgeting procedure.

Ans 31:

Generally, the department or employee who developed the draft budget is responsible to revise
the document so that modifications could be incorporated and it would re-circulate for final
approval.

Ans 32:

Final budget could be accomplished within define timeline:

 Through effective management.

 By selecting, a clear format that is suitable for the user so that the user understand and
interpret the information presented in the budget.
 Organizing and prioritizing task.
 Using time saving technology or software programs.

Ans 33:
When the budget is finalized, circulate the information about the final budget among colleagues
and make sure that they have access to all skills and information required to achieve particular
targets.
Ans 34:
1) Budget targets that involves the colleague’s area of control such as revenue, sales, expenditure
and purchasing targets.
2) Information about the revenue and cash flow, which could affect other budgets.
3) Information about budget breakdown such as monthly budget breakdown into daily and
weekly targets.
Ans 35:
1) Assessment of actual performance.
2) Determine budget deviations.
3) Record financial commitments.
4) Preparation of financial reports.
5) Adjustment of budgets.
Ans 36:
1) Set goals were achieved or not?
2) The result was under or over budget?
3) Set targets were achieved or not?
4) Is there any effect on finances?
Ans 37:
Budget = $250,000
Actual sales = $235,200
Variance = Actual – budget
Variance = $235,200 - $250,000
Variance = (14,800)
Actual−Budget
Variance percentage =
Budget ×100
$ 235,200−$ 250,000
Variance Percentage =
$ 250,000 × 100
Variance Percentage = 0.000592%
Ans 38:
Financial commitment is funds that a company spends to operate its business for eg: wages,
costs, purchase of food and beverage, utilities, debts, insurance, loan repayments, council rates. It
is important to record financial statements in budget because funds are required to be assigned to
meet the commitments and it provides help in the calculation of business performance.

Ans 39:

i) Unfavorable

ii) Favourable

iii) Unfavorable

Ans 40:

1) Too high or too low.

2) Unforeseen circumstances.

3) Changed conditions.
Ans 41:

1) Rise of prices, which may not be calculated in the budget predictions.

2) Poor roster procedures, which results in poor management of staff or overstaffing during
operation.

Ans 42:

1) The variance rule, if it occurs only once or it is a conventional variance.

2) Size of the variance, whether it is different from the previous one.

3) The cost of survey.

Ans 43:

1) Board Reports.

2) Planning Reports.

3) Statistical Reports

4) Periodic Budget performance Reports.

Ans 44:

1) Changing in internal procedures and policies.

2) Restructure of management and staff, which could affect labor budgets.

3) Changing in the external factors such as customer holiday preferences, economic situation,
local events, and weather conditions.

Ans 45:

Report on budget performance records actual performance and reasons behind the deviations so
that measures preventive measures could be taken.

Ans 46:

Budget performance reports helps to understand current budget performance and it keeps the
record for future. This achieve record could be referred in making future budgets to attain
realistic and accurate targets for budget.

Ans 47:
Software programs assist in organizing and tracking financial data by giving an accurate and
realistic approach to business’s finance. It also saves time by automating accounting.

Task C:
Scenario 1:
Task 1:
Ans 1:

Aims and objectives of the organization’s charity are:

1) To hold a successful event.

2) To make profit from the auction and ball.

Ans 2:

1) Final selling price tickets.

2) All food and beverages.

3) Entertainment

Ans 3:

1) Planners need to identify hierarchy of the organization and define the functions of each
designation, in order to cut short the list of employees that do not have a well defined function.

2) Competition.

3) Productivity

4) Total budget allocation

Ans 4:

Information Sources
Personal and benefit experts Contract/Consultant
Materials and Supplies Control Materials
General Office Experts Office Supplier
Travel experts Tats
Actuary and Meeting Experts Outact Organization
Indirect Cost Budget Maintenance Cost
Contractual Source Experts Media ads
Ans 5:
Event committee can be involved by sharing plans for the evaluation of results and dissemination
of evaluation findings. This include broad overview of information about the methods for sharing
results with stakeholders.