Budgeting and Financial Analysis: A Managing Budgets Assignment

This homework assignment comprehensively addresses the principles of managing budgets, encompassing various aspects of financial planning and analysis. The assignment begins with questions on the importance of budgeting, desired budget formats, and labor hour calculations, including overtime considerations. It then delves into cash flow analysis under different scenarios, comparing options and recommending the most financially viable alternative. Further, the assignment includes a detailed budget vs. actual analysis, highlighting variations and proposing a revised contingency implementation plan to mitigate risks. It also covers working capital management, including calculations for average debtor days and creditor days, and offers recommendations for improving cash flow. Finally, the assignment explores break-even analysis, and examines the impact of manufacturing decisions on profitability and cash flow. The assignment concludes with a discussion on the requirements for maintaining financial records, as per ATO regulations.

MANAGING BUDGETS 1
MANAGING BUDGETS

MANAGING BUDGETS 2
Contents
Task 1:........................................................................................................................................3
Question 1:..............................................................................................................................3
Question 2:..............................................................................................................................3
Question 3:..............................................................................................................................4
Question 4:..............................................................................................................................5
Question 5:..............................................................................................................................5
Question 2:.................................................................................................................................6
Answer 1:................................................................................................................................6
Answer 2:................................................................................................................................6
Answer 3:................................................................................................................................6
Answer 4:................................................................................................................................8
Task 2:........................................................................................................................................9
Task A:...................................................................................................................................9
Revised contingency Implementation Plan for Task B:.......................................................10
Task 3:......................................................................................................................................11
Activity 1:.............................................................................................................................11
Question 1:........................................................................................................................11
Question 2:........................................................................................................................11
Question 3:........................................................................................................................11
Activity 2:.............................................................................................................................11

MANAGING BUDGETS 3
Question 1:........................................................................................................................11
Part a:................................................................................................................................11
Part b:................................................................................................................................12
Question 2:............................................................................................................................12
Question 3:........................................................................................................................13
Activity 3:.............................................................................................................................13
Question 1:........................................................................................................................13
Question 2:........................................................................................................................13
Activity 4:.............................................................................................................................14
References...........................................................................................................................16

MANAGING BUDGETS 4
Task 1:
Question 1:
Budgeting helps the business to estimate the revenues, expenses and also plans the various
expenses and avoid the expenses that do not form part of the plan. This helps the business in
the allocation of the resources in the utmost efficient way so that the strategic objectives of
the company could be achieved. It also helps the business in reviewing and comparing the
budget with the actual data since that would help the business sin providing information
which would highlight the various strengths and the weaknesses of the business (WLF,
2019).
Question 2:
The following is the desired budget:
Particulars Units
Price per
unit Value
Usual monthly production
Basic
150.0
0
250.
00
37,500.0
0
Standard
250.0
0
500.
00
1,25,000.0
0
Deluxe
200.0
0
750.
00
1,50,000.0
0
Super Deluxe 100.0 1,000. 1,00,000.0

MANAGING BUDGETS 5
0 00 0
Total monthly
production
700.0
0
2,500.
00
4,12,500.0
0
Special order
Basic
30.0
0
275.
00
8,250.0
0
Standard
50.0
0
550.
00
27,500.0
0
Deluxe
10.0
0
750.
00
7,500.0
0
Super Deluxe
5.0
0
900.
00
4,500.0
0
Total special order
95.0
0
2,475.
00
47,750.0
0
Total March
795.0
0
4,975.
00
4,60,250.0
0
Type of Screen Units
Basic 180.0 525. 45,750.0

MANAGING BUDGETS 6
0 00 0
Standard
300.0
0
1,050.
00
1,52,500.0
0
Deluxe
210.0
0
1,500.
00
1,57,500.0
0
Super Deluxe
105.0
0
1,900.
00
1,04,500.0
0
Total Units
795.0
0
4,975.
00
4,60,250.0
0
Question 3:
The following table shows the various calculations:
Particulars Units
Labou
r hours
per
unit
Total labour
hours
Usual monthly production
Basic
150.0
0 2 300
Standard
250.0
0 3 750

MANAGING BUDGETS 7
Deluxe
200.0
0 4 800
Super Deluxe
100.0
0 5 500
Total monthly labour hours
700.0
0
14.0
0
2,350.0
0
Basic
30.0
0 2 60
Standard
50.0
0 3 150
Deluxe
10.0
0 4 40
Super Deluxe
5.0
0 5 25
Total special order-labour hours
95.0
0
14.0
0
275.0
0
Total March
2,625.0
0
Labour hours available 2,400.0

MANAGING BUDGETS 8
0
IF over time allowed
16,875.0
0
The total number of hours required are 2625 but since only 2400 hours are available, the
company may have to give overtime to the workers which would result in extra wages of
$16,875. So, either Hasan could reduce the production of the monthly units or increase the
number of direct labour hours.
Question 4:
The following are some of the other issues that Hasan could face:
 The quality of the products suppled is the same or is better than what the company ash
been manufacturing. For this, he needs to ensure that the raw material used is not of
sub-standard quality.
 There could be an increase in the variable costs since the company has contract for
specified number of the raw material, and if the company buys more, it would have to
pay more. Hasan could go in for other vendors that supplies the same raw material.
 The fixed costs would also increase since if the labour overtimes, it would mean more
machine hours, hence an increase in lighting expenses etc. Hasan could look into this.
Question 5:
The following are some of the ways:
 Triggers must be kept in place
 Reasonable judgments must be exercised to ensure that the budget is achieved

MANAGING BUDGETS 9
 Any operational changes must be highlighted before hand
 There must be some key performance indicators

MANAGING BUDGETS 10
Question 2:
Answer 1:
A budget must be prepared by each and every departmental supervisor. He must take inputs
from the employees of the department since they are the exact persons who deal with the
expenses on day to day basis. Then the approval authority must be with the Chief Accounts
Officer of the company and then with the Chief Executive Officer.
Answer 2:
The format or the communication for the budget could be amended when it is felt that the
company is not following an adequate authority and responsibility when it comes to the
process of setting the budgets. And if these are not followed, then there are chances that the
main aim of setting the budgets would fail. This hence, must be followed with an utmost
diligence since the failure of a budget would mean failure of company as a whole.
Answer 3:
The following are the cash flows under different alternatives:
Option 1:
Particul
ars
Januar
y
Febru
ary March April May June
Sales:
Janua
ry
1,20,0
00.00
96,00
0.00
14,40
0.00
8,40
0.00

MANAGING BUDGETS 11
Febr
uary
1,25,0
00.00
1,00,00
0.00
15,00
0.00
8,75
0.00
Marc
h
1,25,0
00.00
1,00,00
0.00
15,00
0.00
8,75
0.00
April
1,20,0
00.00
96,00
0.00
14,40
0.00
8,40
0.00
May
1,20,0
00.00
96,00
0.00
14,40
0.00
June
1,10,0
00.00
88,00
0.00
Total
Sales
96,00
0.00
1,14,40
0.00
1,23,40
0.00
1,19,75
0.00
1,19,15
0.00
1,10,80
0.00
6,83,50
0.00
Option 2:
Particu
lars
Janua
ry
Februa
ry March April May June
Sales:
Janu
ary
1,20,
000.00
1,08,0
00.00
6,
000.00
3,
600.00
Febr
uary
1,25,
000.00
1,12,
500.00
6,
250.00
3,7
50.00

MANAGING BUDGETS 12
Mar
ch
1,25,
000.00
1,12,
500.00
6,2
50.00
3,
750.00
Apri
l
1,20,
000.00
1,08,0
00.00
18,
000.00
3,
600.00
May
1,20,
000.00
1,08,
000.00
6,
000.00
June
1,10,
000.00
99,
000.00
Total
Sales
1,08,0
00.00
1,18,
500.00
1,22,
350.00
1,18,0
00.00
1,29,
750.00
1,08,
600.00
7,05,2
00.00
Option 3:
Particul
ars
Januar
y
Febru
ary March April May June
Sales:
Janua
ry
1,20,0
00.00
1,05,60
0.00
12,00
0.00
Febr
uary
1,25,0
00.00
1,10,00
0.00
12,50
0.00
Marc
h
1,25,0
00.00
1,10,00
0.00
12,50
0.00