PACT 216

TOPIC 4
Question 4.1
4.1.a
List three tools for managing budgets
1. Rolling forecasts
2. Balance scorecard
3. EVA (economic value-added analysis)
4.1.b
Why are rolling forecasts valuable?

 Because forecasts enable us to anticipate market changes and trends. It allows us to

make plans, respond to changes in the business environment, and take immediate
action. Forecasting implies that the managers are prepared for any changes that the
environment may bring to the business. It also enables the company to adjust the
forecast to account for recent changes or trends, allowing you to better respond to
time-sensitive decisions. Because your outlook is regularly updated, you'll always have
long-term data available when your company needs to make an important business
decision.

Question 4.2
List 10 financial commitments that must be incorporated into the budget.
1. Operating costs (including wages and general overheads)
2. Capital expenditure requirements
3. Loan repayments and interest
4. Supplies/inputs
5. External contractors (e.g., accountants, debt collectors or printers etc.)
6. Debts
7. Rent/lease payments- building, machinery/equipment
8. GST and Taxation payments
9. General insurance and worker's compensation insurance payments
10. Legal Service & Council rates

Question 4.3
4.3.a
Explain the difference between a sales volume variance and a sales price variance.

 The actual and anticipated number of units sold are multiplied by the budgeted price
per unit to determine the sales volume variation. While sales price variance is the
difference between the predicted selling price and the price at which a company
actually sells its goods or services.
4.3.b
What is a materiality threshold, and how might the level set for negative deviations differ
between small and large business?

 The materiality threshold is typically expressed as a percent of a certain line item on the
financial statement. Materiality is an entity-specific aspect of relevance in the context of
an individual entity's financial report based on the nature or magnitude, or both, of the
items to which the information relates. Negative deviations have an adverse effect on
both small and large businesses. The larger the company, the greater the impact.
However, this is not always the case; it is dependent on the circumstances of the
business.

Question 4.4
4.4.a
Complete the table with an internal and an external variance affecting the different aspects of a
business. the variance can be either favorable or unfavorable. You cannot use examples from
the text.

Internal External
Sales Variance Promotion of goods and services Sales grow
Cost variance wrong budget computation Unexpected balance in
business
Materials variance The materials used in operation Poorly produced or finished
are insufficient. goods
Labour variance highly effective workers expansion of business
Overheads variance Scheduling that is not balanced Employee performance may
suffer as a result.
Profit variance New market expansion Product promotion and new
opportunity potential customers

4.4.b
Choose one aspect from the previous table and list five questions that could be asked to find a
solution.
Sales variance
1. How do you increase your sales?
2. Is your plan for increasing sales successful, or has it had a negative impact on sales?
3. How do you keep your sales going?
4. How do you know if your sales variance is increasing?
5. How much has your sales increased?

Question 4.5
What financial data might be collected and used to contribute to new budgets? List as many as
you can, at least 20 items.
1. Income and expenditure
2. Cash flow data
3. Job quotations
4. Files of paid purchase and service invoices
5. Employee timesheets and or labor hours –wagers/ salaries
6. Credit card receipts
7. Petty cash receipts
8. Incoming supply invoices
9. Outgoing products/ service sales invoices
10. Debts and debtors
11. Credit and creditors
12. Inventory
13. Bank account records-loans, cash at bank – deposits and withdrawals
14. Insurance reports
15. Taxation and GST records
16. Contracts
17. Process and products/service variation
18. Waste, mistakes and rework
19. General costs – overheads and indirect costs
20. Assets, asset maintenance and depreciation

Topic 5
Question 5.2
Define the budgetary terms.

Terminology Definition
Assets An asset is a resource with financial worth that an individual,
corporation, or country owns or controls with the expectation of
future benefit.
Capital expenditure Are funds used by a business to acquire, improve, and maintain
physical assets such as real estate, plants, buildings, technology,
or equipment. It is frequently used by businesses to fund new
projects or investments.
Cash inflows It’s a movement of money into and out of a business. Cash
received represents inflows, while cash spent represents
outflows. The cash flow statement is a financial statement that
details a company's cash sources and expenditures over time.
Cash outflows The process of moving cash outside the business due to the
various liabilities that a business has during the course of its
operations.
Cost of Goods Sold It is a line item on an income statement that typically includes
(COGS) money spent on raw materials and labor. It excludes coss related
to marketing, sales, or distribution. The direct cost of making a
company's products.
Direct labour costs Is the direct cost of producing the goods that a company sells.
This figure includes the cost of the materials and labor directly
used in the production of the item. It does not include indirect
expenses like distribution and sales force costs.
Expenses Is the cost of operations incurred by a company in order to
generate revenue. It is simply defined as the amount of money
required to obtain something.
Fixed costs A cost that does not change as the number of goods or services
produced or sold increases or decreases. Fixed costs are expenses
that must be paid by a company regardless of its specific business
activities.
Gross profit Is the amount of money a business keeps after paying all
expenses related to producing, distributing, and selling its goods
or rendering its services.
Liabilities Is a debt that a person or business has, typically in the form of
money.
Profit and loss report A financial statement that lists all of the income, outgoings, and
costs for a given time period, typically a quarter or fiscal year.
Revenue It is the entire revenue generated in by a company's sales of
products and services.
Sales forecast It is the process of predicting the amount of product or services
 that can be sold in an organization by estimating and calculating
future revenue.

Question 5.3
What financial reporting cycles can be used by an organization?

 The company uses the financial measure reporting cycle to evaluate its level of
performance and track the progress of its objectives. It is used to comprehend the
financial accounts of the company, which are compiled and examined by internal and
external parties to understand its state at a certain point in time.

Question 5.4
List seven internal and external factors that impact on budget development.
1. Organizational and Management Restructures
2. Organizational Objectives
3. Shift in Market Trends
4. New Legislation or Regulation
5. Scope of the Project
6. Human Resources Requirements
7. Venue Availability and Cost

Question 5.5
Summarize budget preparation and monitoring techniques.

 The process of selecting groups and people to carry out the activities that have been
given to them within a set timeframe is referred to as budget preparation. Normally,
this process would be supervised and controlled by the legal and regulatory framework.
Two steps in this process are setting goals and creating a plan to reach those goals. It
also helps with saving, keeping track of costs, and budgeting. The processes and
procedures that an organization and its personnel use to keep an eye on various areas
of its operations are known as monitoring techniques. Through surveys and computer-
generated reviews on social media, it is also a technique for getting feedback or replies
from staff members and clients in order to understand their viewpoints on the goods
and services offered.