BSBFIM601 Assessment –1 (1)

Manage budgets and financial plans

Assessment 1 – Part A

Develop a sales budget, profit budget, cash flow budget and debtor ageing summary.

Houzit prepares budgets to meet various company objectives. Budgets are prepared:

for a specific expansion of the business activities:

business case to be prepared covering a cost-benefit analysis, market research report and summary profit and investment expectations

to outline a specific debt reduction initiative:

company-wide summary of profit expectations, planned debt and equity funding arrangements, CAPEX plans summarized

annually to cover the next financial year:

for the 12 month period from the beginning to the end of the financial year

budget to include four quarter milestones in line with seasonal trends identified from prior year data

initial preparation includes a preliminary overview of the financial year ahead

sales budget for next year to be prepared by department by quarter

profit budget (including detailed expenses) for the next year to be prepared by quarter

cash flow effect of the GST payable per quarter to be prepared (scheduled compliance payment date is the 21st day after the end of the quarter)

To satisfy the statutory requirements relating to the current and short-term solvency of the company:

three monthly rolling forecast of cash flows to be prepared

To qualify the strategic plans for the next 3–5 years planning cycle:

Profit and CAPEX budget to be prepared.

Sales and profit budget for 2018/19 by department by quarter

The statutory requirements are:

superannuation is 9.5% of wages and salaries for each quarter

payroll tax is 5.45% of wages and salaries for each quarter

workers’ compensation is 2% of wages and salaries for each quarter

Company tax is 30% of net profit before tax for each quarter.

Assumptions:

Luxury car tax paid in quarter 1

Depreciation cost includes the depreciation of new luxury car and excludes old car that was sold

REVENUE

SALE

Sales Growth = (Sales – Previous Year Sales / Previous Year Sales) * 100

Sales Growth = ((15,714,108 – 14,550,100) / 14,550,100) * 100 = 8%

Sales = Previous Year Sales * 1.08 Growth

Rate = 15,714,108 * 1.08

Sales = 16,971,237

......

Sales = 16,971,237

COST OF SALES

Cost Of Sale = Sales * 56%

= 16,971,237 * 0.56

= 9,503,892

GROSS PROFIT

Gross Profit = Sales – Cost Of Sales

= 16,971,237 – 9,503,892

= 7,467,344

GROSS PROFIT %

Gross Profit% = (Gross Profit / Sales) * 100

= (7,467,344 / 16,971,237) * 100

= 44%

LUXURY CAR TAX

Financial Year: 2017 / 2018

Fuel Efficient Car Threshold = 75,375

Other Cars Threshold = 57,466

Luxury Car Tax Calculation

Step 1:

Cost-Threshold Cost = 97,466 – 57,466 = 40,000

Step 2:

Exclude GST = 40,000 / 1.1 = 36,363.6

Step 3:

Tax @ 33% = 36,363.64 * 33% = 12,000

Cash Flow Budget per quarter of the GST

A statutory requirement for GST is 10% of the recorded amounts in sales. The only capital purchase planned for the year is the luxury car for the chairman. Those expense payments on which 10% GST was paid include the following:

Cost of goods sold:

accounting fees

insurance

store supplies

advertising

cleaning

repairs and maintenance

rent

telephone

Electricity expense.

The GST amount payable each quarter is the difference between the GST collected from sales and the GST paid – format as per policy and procedures.

Assumptions:

Luxury car tax paid is exempt from the GST paid

GST COLLECTED

GST Collected = Sales * 10%

GST PAID

GST Paid = Total * 10%

GST PAYABLE

GST paid = GST collected – GST paid

Debtor Ageing Summary at the end of the each quarter

The historical records show that the debtors balance at the end of each quarter is usually about 20% of the quarter’s sales. At any time in the debtors balances 1% of the total debtors is overdue 90 days and over, 5% is 60 days overdue, 10%…

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