Reference no: EM132643778
ACC00724 Accounting for Managers - Southern Cross University
Scenario
You work for a management consulting firm and have 3 client jobs to complete:
1. Prepare a cash budget for XYZ Pty Ltd and provide associated advice on required financing;
2. Prepare and interpret a variance analysis for ABC Pty Ltd; and
3. Advise LMN Pty Ltd on sources of finance.
Job Details
Question 1. XYZ Pty Ltd operates in a seasonal industry with a sales peak in spring. Budgeted sales, along with budgeted raw materials and labour costs are shown in the table below.
Extract from budgeted income statement
|
Month
|
Sales
|
Labour and materials
|
|
May
|
$150,000
|
$105,000
|
|
June
|
$160,000
|
$112,000
|
|
July
|
$210,000
|
$147,000
|
|
Aug
|
$300,000
|
$210,000
|
|
Sep
|
$400,000
|
$280,000
|
|
Oct
|
$500,000
|
$350,000
|
|
Nov
|
$340,000
|
$238,000
|
|
Dec
|
$200,000
|
$140,000
|
All sales are on credit and past records indicate that collections are as follows: 20% in the month of sale, 55% in the month after sale and 25% in the second month after sale. Labour and materials are paid as follows: 60% in the month the expenses are incurred and 40% in the month following that.
Other budgeted expenses during the period July to December are as follows: selling, general and administration of $30,000 per month; rent of $10,000 per month; and depreciation of $20,000 per month. Where relevant, payments are made in the month the expenses are incurred.
Taxation payments of $33,000 each will be made at the end of September and end of December. In October, company motor vehicles will be traded-in for new models with an expected net cash payment of $80,000. The motor vehicles are expected to have an 8 year life.
The cash balance at 1 July is $10,000.
Required:
(a) prepare a cash budget for the company for July through to December (inclusive)
(b) advise the company on the debt financing that would best be used to deal with cash shortfalls and major payments in the cash budget. Your advice in this part should explain and provide reasons for your recommendations and be a maximum of 200 words.
Question 2. ABC Pty Ltd operates a no frills hairdressing salon with a single service offering: wash, cut and blow dry (WCD). The price of this service is $40.
The budget for September is shown below. Actual figures for September were: sales revenue of
$30,400 for 760 units; supplies $2,000, variable utilities $1,520; labour costs $16,000; and fixed overhead $9,000.
|
Sales (WCDs)
|
800
|
|
Sales Revenue
|
$32,000
|
|
Supplies
|
$1,600
|
|
Labour
|
$16,000
|
|
Variable utilities
|
$1,600
|
|
Fixed overheads
|
$9,000
|
|
Profit/(loss)
|
$3,800
|
Required:
(a) prepare a variance analysis for September. The analysis should show the original budget, a flexed budget, actuals and relevant variances.
(b) To assist the Managing Director of ABC Pty Ltd in controlling the business, briefly interpret and provide possible explanations for the variances. This part will be a maximum of 200 words.
Question 3. LMN Pty Ltd is a new company with an interesting new service that shows great potential. However, the company needs more long-term finance to grow. Its founder, Harpreet, is an expert in her area but she knows very little about business. She is currently the only shareholder of the company and has no family or friends that could provide further financing. You have been asked to meet her on a video call to explain sources of long-term financing.
You have decided to keep it simple and explain the difference between debt and equity, and provide an example of each that would apply to a start-up business such as LMN.
Due to technical problems at Harpreet's end, the video call has to be cancelled. Instead, you record a maximum 5 minute video on your phone to send to her, following your earlier plan on the content to cover.
Instructions for part 3:
For this part, you must upload a video file to the A4 Video submission link.
You must also include a written version of your presentation in your word document submission. This need not be exactly what you say in the video but should be a reasonably faithful representation of what you cover and in the order which you cover it.
You must also include a clear photo of your student ID card at the end of your written submission for this assignment.
For the first 15 seconds of the video:
• you must show your student ID card. Your name, student number and photo on your card must be clear in the video.
• At the same time, in the background, it must be obvious that you are holding this card.
You will then lower the card and start your explanation to Harpreet with no break in the video. Your face must be clear in the video at all times.
Failure to follow any of these instructions may result in zero marks for this part of the assignment.
Attachment:- Accounting for Managers.rar