Management Accounting and Beyond Budgeting

This assignment delves into the realm of management accounting, exploring key concepts such as budgeting, cost calculation methods, and variance analysis. It examines traditional budgeting practices alongside emerging trends like beyond budgeting, highlighting their relevance in contemporary organizations. The text analyzes various perspectives on management accounting, drawing upon academic research and practical applications to provide a comprehensive understanding of its role in modern business decision-making.

DIPLOMA

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
QUESTION 1...................................................................................................................................1
Role of budget and its relation with strategic objectives........................................................1
Prepare sales budget for March..............................................................................................2
QUESTION 2.................................................................................................................................10
Budget development coordination and approval process.....................................................10
Reasons for adjust or methods of communication about budgets to employees..................10
Cash flow projections...........................................................................................................11
Provide feedback on Hugo consent......................................................................................14
APPENDIX 1.................................................................................................................................17
TASK A.........................................................................................................................................17
Budget variation report.........................................................................................................17
TASK B.........................................................................................................................................18
Contingency plan..................................................................................................................18
APPENDIX 2.................................................................................................................................19
Budget preparations..............................................................................................................19
CAPEX budget.....................................................................................................................20
Master budget.......................................................................................................................21
Budget notes.........................................................................................................................22
Apportionment of overheads................................................................................................22
CONCLUSION..............................................................................................................................22
REFERENCES..............................................................................................................................24

Index of Tables
Table 1: Sales budget.......................................................................................................................2
Table 2: Special order......................................................................................................................3
Table 3: Revised labour costs..........................................................................................................7
Table 4: Material cost......................................................................................................................9
Table 5: Labour costs.......................................................................................................................9
Table 6: Overhead costs...................................................................................................................9
Table 7: Actual cash flow..............................................................................................................11
Table 8: Projected cash flow under Option 1.................................................................................12
Table 9: Table 8: Projected cash flow under Option 2..................................................................13
Table 10: Discount under policy 1.................................................................................................14
Table 11: Discount under policy 2.................................................................................................15
Table 12: Budget variation report..................................................................................................17
Table 13: Revised Contingency plan.............................................................................................18
Table 14: Revised contingency implementation plan....................................................................18
Table 15: Master budget................................................................................................................21

Illustration Index
Illustration 1: CAPEX budget........................................................................................................20

INTRODUCTION
Role of an entity get increases with the passage of time as external market changes are
taken into considerations in improving current business performance. This report is all about
preparing various budgets such as sales, production and material usage in order to analyse the
current business performance. Cash flow projections are don that will be helpful for an entity in
order to get higher competitive advantage on the external business environment.
TASK 1
QUESTION 1
Role of budget and its relation with strategic objectives
Budget is regarded as one of the important approach in an organisation to manage all the
expenses incurred in a business. Budgets is a written statements of all the financial resources
incurred in a business for the betterment of the firm. Various kinds of budgets prepared in an
entity as this will help an enterprise in recording all the events appropriately. Budget will act like
a balancing approach in which expenses and income incurred in a business will get stabilise with
the passage of time. It is regarded as important process in an entity that will be helpful for the
business in order to capture higher market share. Expenditure and income incurred in a business
are properly analysed in relation to all the parameters set by an entity. Budget is important tool
used for predicting the future performance of an organisation (Bagliani and Martini, 2012).
Every individual uses budget in analysing its current resources in order to target higher resources
in the external business environment. Forecasting of all the resources is essential for an entity as
in this way they will grab higher opportunities. An entity will prioritize all its aims and targets
which will be helpful for an entity in order to gain higher competitive advantage over variety of
goals and the objectives. Quality of resources is important as the worth of money invested by a
firm in the business will in turn generates higher sales and the revenue for the business.
Frequency of sales need to be increases over a certain period as an entity will enhance its current
revenue by capturing higher market share in the external business environment (Ball, 2013).
It is important for an entity in order to prepare all its aims and the objectives according to
the desired aim of the business. Different kinds of budgets prepared by an entity is to overcome
all the complexities imposed on an entity as their main motive is to capture higher share in the
market. Financial resources currently available in the business need to be tracked by the business
1

as their main motive is to improve the existing business performance of an enterprise with the
passage of time. Variety of budgets are prepared in a business is to improve the current
performance of an enterprise as major motive of the business owner is to achieve all the targets.
Goals and the objectives develop by an entity will be helpful for an organisation in order to
ascertain the overall performance of an enterprise. Role of an entity is to capture higher market
segment by extending the product share in the external market. Products features are added in a
particular product in order to attract large number of customers towards the services offered by
an entity to all its consumers located in the outside business (Ball, 2013). Getting higher level of
customers satisfaction s the primary goals of every enterprise as in this way their current goal
will get achieved. The current business performance of an entity will get increases with the
passage o time as majority of customers relied on the current aims and targets developed by the
business concern. Employees working in a business need to be satisfied by offering high quality
services. Affordable pricing will attract large number of customers located in the external
business environment as the main motive of the business concern is to steal the attention of most
of the clients towards their business. Budgets will cater all the objectives framed by an entity as
they emphasise on both qualitative and quantitative objectives. Financial performance of an
entity is one of the important factors covered in the monetary performance of an entity (Bagliani
and Martini, 2012).
Strategic objectives are linked by an entity with the budget prepared by the business as
the role of an enterprise is to grab the attention of most of the users located in the external
market. Proper segmentation of all the goals and the objectives of an entity will be done based on
the existing performance of an entity. Allocation of all the responsibilities will be based on the
budget prepared by an entity in their organisation. Nature of al the objectives of an entity will
determine the overall business performance of an entity (Ball, 2013). Qualitative aspects and
monetary aspects are linked with each other in order to ensure the overall success of the business
concern by achieving all the desired aims and targets of an entity.
Prepare sales budget for March
Table 1: Sales budget
Particulars Units Cost per unit Amount
2

Basic 150 250 32500
Standard plus 250 500 125000
Deluxe 200 750 150000
Super deluxe 100 100 100000
Total 700 2500 412500
Table 2: Special order
Particulars Units required Cost per unit Amount
Basic 30 275 8250
Standard plus 50 550 27500
Deluxe 10 750 7500
Super deluxe 5 900 4500
Total 95 2475 47750
Total March 795 4925 760250
Types of Screen Units Cost per unit Amount
Basic 180 525 45750
Standard plus 300 1050 152500
Deluxe 210 1500 157500
Super deluxe 105 1900 104500
Total 795 4975 460250
3

Labour hours required for Special order
Units Labour hr. per unit Total hrs.
180 2 360
300 3 900
210 4 840
105 5 525
Total hours required 2625 hours
Labour hours required in order to complete the special order of the clients for different
types of screen such as basic, standard plus, deluxe and super deluxe. These screens are provided
by an entity in order to facilitate all the external market clients as their desired am is to
accomplish all their orders by applying their skills and efforts (Bagliani and Martini, 2012).
Order will be completed by an entity in limited time as they emphasise on getting higher
customer satisfaction by meeting all their needs in less span of time. Labour hours required to
complete the special order is 2625 hours but the existing labour hours available is 2400 hours as
the extra hours will be compensated by treating the special order appropriately. Additional
requirement of the external market user by accomplishing the special order with the available
labour hours of 2400 hours instead of 2625 hours. The current process will get completed by
ranking method approach in which key factor method will be used in order to allocate the
existing labour hours among all kinds of screen type available in an entity. Contribution will be
generated that will be helpful for an entity in order to determine the actual allocation of all the
labour hours according to the current labour hours requirement of an entity whose major aim is
to achieve all the desired goals and the objectives of the business owner (Ball, 2013).
Calculation of Contribution
4

Particulars Amount
Sale
Basic 37500
Standard plus 125000
Deluxe 150000
Super deluxe 100000
Total sales 412500
Less: Variable costs
Material cost 233500
Labour costs 600
Overhead costs 17600
Total variable costs 251700
Contribution 160800
Allocation of labour hours
Contribution 160800 160800 160800 160800
Key factor 2 3 4 5
Contribution/Key
factor
80400 53600 40200 32160
Ranking 1 2 3 4
5

Allocation of
Labour hour of
2400 hours on
ranking basis
360
2400-360
=2040
900
2040-900
=1140
840
1140-840
=
300
In the above allocation of the available labour hours of 2400 is allocated appropriately
among all the products offered by an entity on the basis of ranking method used as the deciding
factor. In the above method every product get their required labour hours except super deluxe.
The required labour hour of super deluxe product is 525 hours but the labour hours allocated to
them is 300 hours as 225 hours are not allocated as there is limitation of labour hour in an entity.
On the priority basis the labour hours are allocated appropriately among all the products offered
by an entity to all its products located in their business (Bagliani and Martini, 2012).
Calculation of Contribution
Particulars Amount
Sale
Basic 37500
Standard plus 125000
Deluxe 150000
6

Super deluxe 100000
Total sales 412500
Less: Variable costs
Material cost 233500
Labour costs 1050
Overhead costs 17600
Total variable costs 252150
Contribution 160350
Revised Allocation of labour hours
Contribution 160350 160350 160350 160350
Key factor 2 3 4 5
Contribution/Key
factor
80175 53450 40088 32070
Ranking 1 2 3 4
Allocation of
Labour hour of
2400 hours on
ranking basis
360
2400-360
=2040
900
2040-900 840
7

=1140
1140-840
=
300
It can be said that the revised allocation of labour hours of 2400 among al the current
products offered by an entity to all its customers exist in the external environment. In the revised
allocation of labour hours among all the products incurred in a business at new labour cost rate
of 75 per hour instead of 50 per hour. In the current case, 25 per hour value has increases which
in turn increases the overall variable costs by 450 as this produces 1050 labour costs (Bagliani
and Martini, 2012). Previous labour costs was 600 in the 50 per hour cost incurred in the
business. Increase in the variable cost changes the previous contribution which was 160800 that
reduces to 160350. The ranking method shows the individual contribution generated by
individual products in relation to the key factor that is singular labour hour per unit of all the
product are 2,3,4 and 5. It can be recommended to an entity as in the revised allocation of current
labours of 2400 on the cost rate of 75 per hour doesn't make any difference in the allocation as
all the rank remains the same for all the products (Ball, 2013).
Table 3: Revised labour costs
Particulars Labour hours Unit per cost Amount
Basic 2 75 150
Standard plus 3 75 225
Deluxe 4 75 300
Super Deluxe 5 75 375
Total 1050
8

Working notes
W.N.1
Table 4: Material cost
Particulars Unit Units Amount
Basic 100 150 15000
Standard plus 250 250 62500
Deluxe 480 200 96000
Super Deluxe 600 100 60000
Total 233500
W.N.2
Table 5: Labour costs
Particulars Labour hours Unit per cost Amount
Basic 2 50 100
Standard plus 3 50 150
Deluxe 4 50 200
Super Deluxe 5 50 250
Total 600
W.N.3
Table 6: Overhead costs
Particulars Unit Units Amount
Basic 150 10 1500
Standard plus 250 20 5000
Deluxe 200 34 6800
9

Super Deluxe 100 43 4300
Total 17600
QUESTION 2
Budget development coordination and approval process
An entity are required to follow a five step process of building a budget in order to
manage the existing financial resources in their business are given as below:
 Budget team- Assembling a team of preparing a budget is essential as with the help if all
the employees an entity will manage all its resources in the best possible manner. Various
team members play an important role while preparing a budget includes CEO, Human
resource director, treasurer, development director and mangers.
 Budget calendar- In the current stage monitoring will be based on all the activities
included in a budget as the appropriate time is allocated to all the activities to complete
the entire budget on time.
 Budget process- Procedures will be created by an entity owner that will be helpful for an
individual in achieving all the aims and targets on time. It emphasises on various aspects
such as setting financial goals and aims according to the existing performance of an
enterprise (Bagliani and Martini, 2012).
 Building budget- In the development of budget all the expenditures or revenues are
taken into consideration in order to reflect the current condition of an entity. Cash flow
will also be forecasted on the existing resources. The draft of the budget will be send to
management for approval.
 Monitoring of budget- After the preparation of budget, the close of monitoring of the
drafted budget is essential which can be done in monthly or quarterly. Projection and
forecasting of sales and cash flow is based on the current performance of an entity.
10

Reasons for adjust or methods of communication about budgets to employees
External changes are communicated by the business managers to all the employees
working in an entity. Financial performance of the business is conveyed to all the employees
working in the business concern in order to enhance the overall productivity of the firm. Sales
budgets are prepared in order to communicate sales units to be sold by the firm which in turn
setting targets for all the marketing department employees to generate higher sales and the
revenue in less period (Ball, 2013). Production budgets are prepared to increase the current
ability of the form as in this way they will expand their current production by considering the
external market shares in their business in order to get competitive advantage on the external
business environment (Bagliani and Martini, 2012).
Cash flow projections
Table 7: Actual cash flow
Partic
ulars July
Augus
t
Septe
mber
Octob
er
Nove
mber
Dece
mber
Januar
y
Febru
ary March April May June
Sales
10000
0
11500
0
11500
0
10000
0
12000
0
14000
0
12000
0
12500
0
12500
0
12000
0
12000
0
11000
0
Actual
receiv
ables
1
month
after
sale 60000 69000 69000 60000 72000 84000 72000 75000 75000 72000 72000
2nd
month
after
sale 25000 28750 28750 25000 30000 35000 30000 31250 31250 30000
3rd
month
14000 16100 16100 14000 16800 19600 16800 17500 17500
11

after
sale
4th
month
after
sale 1000 1150 1150 1000 1200 1400 1200 1250
Total
receiv
able
10000
0
17500
0
20900
0
21175
0
22585
0
25425
0
24915
0
24980
0
25080
0
24445
0
24195
0
23075
0
Total
cash
inflow
20000
0
29000
0
32400
0
31175
0
34585
0
39425
0
36915
0
37480
0
37580
0
36445
0
36195
0
34075
0
Table 8: Projected cash flow under Option 1
Partic
ulars July
Augus
t
Septe
mber
Octob
er
Nove
mber
Dece
mber
Januar
y
Febru
ary March April May June
Sales
10000
0
11500
0
11500
0
10000
0
12000
0
14000
0
12000
0
12500
0
12500
0
12000
0
12000
0
11000
0
Projec
ted
trade
receiv
able in
option
1
1
month
after
sale 80000 92000 92000 80000 96000
11200
0 96000
10000
0
10000
0 96000 96000
12

2nd
month
after
sale 12000 13800 13800 12000 14400 16800 14400 15000 15000 14400
3rd
month
after
sale 12000 13800 13800 12000 14400 16800 14400 15000 15000
4th
month
after
sale 1000 1150 1150 1000 1200 1400 1200 1250
Total
receiv
able
10000
0
19500
0
21900
0
21780
0
22860
0
26295
0
25955
0
25320
0
25740
0
25080
0
24720
0
23665
0
Total
cash
inflow
20000
0
31000
0
33400
0
31780
0
34860
0
40295
0
37955
0
37820
0
38240
0
37080
0
36720
0
34665
0
Table 9: Table 8: Projected cash flow under Option 2
Partic
ulars July
Augus
t
Septe
mber
Octob
er
Nove
mber
Dece
mber
Januar
y
Febru
ary March April May June
Sales
10000
0
11500
0
11500
0
10000
0
12000
0
14000
0
12000
0
12500
0
12500
0
12000
0
12000
0
11000
0
Projec
ted
trade
receiv
able in
option
13

2
1
month
after
sale 90000
10350
0
10350
0 90000
10800
0
12600
0
10800
0
11250
0
11250
0
10800
0
10800
0
2nd
month
after
sale 5000 5750 5750 5000 6000 7000 6000 6250 6250 6000
3rd
month
after
sale
4th
month
after
sale 2000 2300 2300 2000 2400 2800 2400 2500
Total
receiv
able
10000
0
20500
0
22350
0
20925
0
21775
0
25530
0
25430
0
24200
0
24590
0
24155
0
23665
0
22650
0
Total
cash
inflow
20000
0
41000
0
44700
0
41850
0
43550
0
51060
0
50860
0
48400
0
49180
0
48310
0
47330
0
45300
0
Above cash floe statements prepared by Hugo in order to reflect the existing position of
cash in the organisation depicts the actual position of an entity. Actual cash flow statements
shows that cash flow of an entity is gradually increases but ends at lower amount. The changes
take places in the business will be taken into consideration by an entity as two different policy
are evaluated by Hugo as a senior manager of an entity. Payment collected by the business from
14

all its customers under policy 1 has increases the cash flow in the firm as the cash inflow is
gradually increases in all the month. On the other hand, under policy 2 cash flow in the last
month is higher but the consistency of every month's cash flow is less than compared to the
previous policy. Current performance of an entity get stabilises with the passage of time by
adopting payment policy scheme under option 1 as in this case efficiency of an entity has
maintained (Ball, 2013).
Provide feedback on Hugo consent
Table 10: Discount under policy 1
Partic
ulars July
Augus
t
Septe
mber
Octob
er
Nove
mber
Dece
mber
Januar
y
Febru
ary March April May June
Sales
10000
0
11500
0
11500
0
10000
0
12000
0
14000
0
12000
0
12500
0
12500
0
12000
0
12000
0
11000
0
1st
month
after
sale@
60% 60000 69000 69000 60000 72000 84000 72000 75000 75000 72000 72000 66000
2nd
month
38% 38000 43700 43700 38000 45600 53200 45600 47500 47500 45600 45600
Openi
ng
cash 0
15800
0
22000
0
22570
0
20170
0
22800
0
26760
0
24320
0
24360
0
24550
0
23750
0
23560
0
Total
receiv
ables
16000
0
22200
0
22770
0
20370
0
23000
0
26960
0
24520
0
24560
0
24750
0
23950
0
23760
0
22160
0
Cash
outflo
w
Disco
unt
2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
15

given
Total
cash
outflo
w 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Closin
g
balanc
e
15800
0
22000
0
22570
0
20170
0
22800
0
26760
0
24320
0
24360
0
24550
0
23750
0
23560
0
21960
0
Table 11: Discount under policy 2
Partic
ulars July
Augus
t
Septe
mber
Octob
er
Nove
mber
Dece
mber
Januar
y
Febru
ary March April May June
Sales
10000
0
11500
0
11500
0
10000
0
12000
0
14000
0
12000
0
12500
0
12500
0
12000
0
12000
0
11000
0
1st
month
after
sale@
80% 80000 92000 92000 80000 96000
11200
0 96000
10000
0
10000
0 96000 96000 88000
2nd
month
18% 18000 20700 20700 18000 21600 25200 21600 22500 22500 21600 21600
Openi
ng
cash 0
17800
0
17600
0
28670
0
38540
0
49740
0
62900
0
74820
0
86780
0
98830
0
11048
00
12204
00
Total
receiv
ables
18000
0
28800
0
28870
0
38740
0
49940
0
63100
0
75020
0
86980
0
99030
0
11068
00
12224
00
13300
00
Cash
16

outflo
w
Disco
unt
given 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Total
cash
outflo
w 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Closin
g
balanc
e
17800
0
17600
0
28670
0
38540
0
49740
0
62900
0
74820
0
86780
0
98830
0
11048
00
12204
00
13280
00
It can be evident from the above that due to 2% of discount given to all the customers in
order to collect higher payment from them the cash flow is decreasing. The answer of Hugo is
related in identifying the current performance of an entity with the impact created due to
discount given by them to all its customers. Two policy chosen y an entity is 60% in one month
and 38% in next month and on the other hand, 80% is first month and 18% in next month. The
results are decreasing in both of the option but less decreasing in the first policy (Ball, 2013).
APPENDIX 1
TASK A
Budget variation report
Table 12: Budget variation report
Particulars
Budget Actual Variance
%
Sales Revenue 2000000 2900000 -900000 -45
17

Less Cost of
Goods Sold
Stock as at Oct 1 110000 100000 0
Add purchases 350000 300000 50000 0
Sub total 460000 400000 0 0
Less stock as at
Dec 30 20000 20000 3000 60
Cost of Goods
Sold 440000 380000 60000 13.64%
Gross Profit 1560000 2520000 -960000 -61.54%
Less Operating
Expenses
Advertising 205000 208000 -3000 -0.0146341463
Office supplies 7500 4000 3500 0.4666666667
Bank fees 800 700 100 0.125
Postage 600 500 100 0.1666666667
Postage and
printing 750 500 250 0.3333333333
Repair and
maintenance 50000 45000 5000 0.1
Travel 23000 22000 1000 0.0434782609
Legal 5000 4500 500 0.1
Salary Costs
Wages 510000 500000 -10000 -25
Superannuation 48000 45000 -900 -25
Total Expenses 850650 830200 -3450 -48.68
Operating Profit* 709350 1689800 -956550
18

TASK B
Contingency plan
Table 13: Revised Contingency plan
Company name: Big Red Bicycle Pty Ltd
Person developing the plan:
Name : Tom Copeland Position: Managing Director
Risk identified: Lower income in firm
Activities planned Time scale By whom
Analysing sales budget Q2 Personal
relation
officer
Revised training to staff Q3 Instructor
Implement incentives program and voluntary work Q1 Departme
ntal
manager
Reduce overtime Q2 Employer
Setting dashboard to ensure employee's performance Q1 General
manager
Delegating responsibilities among all the employees Q3 General
manager
Grievance redress system for employees Q2 Assistant
manager
Table 14: Revised contingency implementation plan
19

Risk identified: Lower
income of the firm
Activity Monitoring activity and date Person/s
Monitor variance Completion of report: Q2. PR
Analysis of report to identify issues. Management report: Q2. PR
Email to warn employees of risk to jobs. Monitoring of variation
report results: Q4.
PR
Email to announce rise of commission
from 2% to 2.5%.
Monitoring of variation
report results: Q3.
PR
Email to inform employees that overtime
will no longer be approved.
Monitoring of variation
report results: Q3.
PR
Email to inform employees of mandatory
sales skills training: set program.
Monitoring of variation
report results: Q3.
PR
Mandatory training conducted. Monitoring of variation
report results: Q3.
PR
Setting dashboard to ensure employee's
performance
Monitoring regular
performance
GM
Delegating responsibilities among all the
employees
Checking accountabilities of
authorised person
GM
Grievance redress system for employees Removing complaints of
employees
Owner
APPENDIX 2
Budget preparations
Preparation of a particular budget is regarded as the best important aspect for an entity in
order to cater the variety of needs and expectations of all the external market users. A budget will
forecast the future performance of an entity by analysing all the present resources included in a
20

business entity. A person who prepare budget will be held responsible for the overall
performance of the budget as each and every information included in a budget will be linked
with the current performance of an entity (Ball, 2013). Key parameters are required to be
analysed by the business concern such as setting sales target which will be achieved in the
preparation of all the budget. Current performance of an entity will get increases with the
passage of time. Changes takes places in a budget will be ensured by an entity as clear link will
be created among past and the present budget that will be helpful for a person in order to
consider all the positive changes takes places in their business. Budget planning committee will
participate in the procedure and developing budget as their main motive is to ensue higher
productivity of the business concern (Bagliani and Martini, 2012).
21

CAPEX budget
Illustration 1: CAPEX budget
A capex budget shows the relationship among al the capital expenditures incurred in a
business in relation to the income generated by them in a particular tie period. Capital invested
by an entity need to be reported to the end user in order to improve the existing business
performance of an entity.
Master budget
Table 15: Master budget
22

Big Red Bicycle Pty Ltd
Master Budget FY 2011/2012
FY Q1 Q2 Q3
REVENUE
Commissions (2% sales) 60,000 15,000 15,000 15,000
Direct wages fixed 200,000 50,000 50,000 50,000
Sales 3,000,000 750,000 750,000 750,000
Cost of Goods Sold 400,000 100,000 100,000 100,000
Gross Profit 2,340,000 585,000 585,000 585,000
EXPENSES
General & Administrative Expenses
Accounting fees 20,000 5,000 5,000 5,000
Legal fees 5,000 1,250 1,250 1,250
Bank charges 600 150 150 150
Office supplies 5,000 1,250 1,250 1,250
Postage & printing 400 100 100 100
Dues & subscriptions 500 125 125 125
Telephone 10,000 2,500 2,500 2,500
Repairs & maintenance 50,000 12,500 12,500 12,500
Payroll tax 25,000 6,250 6,250 6,250
Marketing Expenses
Advertising 200,000 50,000 50,000 50,000
Employment Expenses
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Superannuation 45,000 11,250 11,250 11,250
Wages & salaries 500,000 125,000 125,000 125,000
Staff amenities 20,000 5,000 5,000 5,000
Occupancy Costs
Electricity 40,000 10,000 10,000 10,000
Insurance 100,000 25,000 25,000 25,000
Rates 100,000 25,000 25,000 25,000
Rent 200,000 50,000 50,000 50,000
Water 30,000 7,500 7,500 7,500
Waste removal 50,000 12,500 12,500 12,500
TOTAL EXPENSES 1,401,500 350,375 350,375 350,375
NET PROFIT (BEFORE
INTEREST & TAX)
938,500 234,625 234,625 234,625
Income Tax Expense (25%Net) 234,625 58,656 58,656 58,656
NET PROFIT AFTER TAX 703,875 175,969 175,969 175,969
Budget notes
Budget notes are attached in the end of every budget as it will include all the assumptions
which a user has taken. The assumptions are regarded as base for preparing budget in order to
ascertain the financial performance of an entity. External changes are considered by an entity in
order to steal the attention of mots of the users located in the external business environment
(Bagliani and Martini, 2012).
Apportionment of overheads
Overheads are appropriately allocated among all the activities included in a business as
the desired aim of an entity is to achieve all the targets in less span of time. Different quarter
performance of the business concern will be easily ascertained by focuses on the desired aim of
the business concern (Ball, 2013).
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CONCLUSION
It can be concluded from the above assignment that deficiency lies in the Big red bicycle
will be easily rectified with the help of contingency plan. Lower income generated by an entity is
due to higher imposition of costs incurred in a business. This report also emphasises on the
financial performance of an entity which will be determined with the help of various budgets ad
variances reports.
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