Southern Cross University ACC00714: Surf N Sea 2020 Budget Report

This report presents a comprehensive analysis of the Surf N Sea 2020 budget, focusing on the company's financial performance across various aspects. The analysis begins with an overview of expected results, highlighting total sales, cost of goods sold (COGS), profit margin, and net profit, indicating an efficient operational structure. Product analysis is then conducted to identify the contribution margin of each product (one-piece swimsuit, board shorts, towels, and beach umbrellas), revealing that beach umbrellas have the highest contribution margin. The report further examines the company's cash position through a monthly cash budget, detailing cash receipts, payments, and the resulting cash on hand. The cash flow analysis indicates initial negative cash performance followed by improved financial standing. The report also includes various budgets prepared by the accountant, such as sales, direct material, and production budgets, to measure the company's overall performance. The expenses are apportioned based on machine hours and direct materials, and an income statement is prepared to assess the business's efficiency.

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Surf N Sea
2020 Budget Report
Date of Board Meeting
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Author(s)
Approved by:
Surf N Sea: 2020 Budget
Board Report
Page 2

1. Overview of Expected Results
On the basis of overall analysis over the Surf and sea company, it has been
found that the company is mainly offering four products to its customers who include
one piece swimsuit, board shorts, towels (beach) and umbrella (beach). In order to
measure the overall performance of the company, different budgets have been
prepared by the accountant such as sales budget, direct material budget, production
budget, cash purchase budget, direct material budget and various other budgets to
identify the performance of the business.
The calculations explain that the total sales generated by the company would
be $ 2363800. On the other hand, the COGS of the company are $ 1789941. It further
explains that the profit margin of the company is 14.99%. The overall profitability
position of Surf and Sea Company is quite efficient and explains that the operations of
the company would be run smoothly. The total net profit of the company is $ 354259.
Further, the cash position of the company has been determined and it has been found
that the cash position of the company would be more effective and efficient. The cash
position of the company tends to be better day by day. The expenses of the business
have been apportioned on the basis of the machine hours and direct material used in
the business. All the expenses have been allotted on such a basis that each product’s
performance could be identified perfectly.
Income statement of the business has also been prepared to measure the
performance of the business and reach over a conclusion about the efficiency of the
business. On the basis of the study, it has been measured that the highest expense of
the business is insurance which have lowered the net profit of the business a lot.
Overall, the performance of the business would be quote better in the near future.
2. Product Analysis
After the evaluation over the overall profit and performance of the company,
performance of each product of the business has been studied to measure the
performance of each product and identify the most profitable and worst product of the
business in terms of profit making. Below is the table which describes about the
performance of each of the product of the business:
Particulars One-piece
Board
Shorts Towels
Beach
Umbrellas
Sales $ $ $ $
Surf N Sea: 2020 Budget
Board Report
Page 3

1,250,000 913,600 130,000 70,200
Variable costs
$
37,500
$
34,260
$
7,800
$
4,680
Contribution
$
1,212,500
$
879,340
$
122,200
$
65,520
Fixed costs
$
106,633
$
97,420
$
22,180
$
13,308
Contribution
Margin 9% 11% 18% 20%
Table 1: Contribution Margin by Product
The above tables represents about the contribution margin of each of the
product of the business in order to determine the profit potential and position of the
product. On the basis of above table, it has been found that the Contribution margin of
the Beach umbrella is highest which defines that the profit margin from umbrella is
higher. Contribution margin ratio basically defines the sales and variable difference in
an organization. In case of beach umbrella, it has been measured that the product
would be able to manage the expenses at fastest level. Also, it would be easier for the
business to reach over the breakeven point. In case of umbrella, the fixed cost of the
business is also lower. It explains that the potential future benefit of beach umbrella is
quite better. In case of other products, there contribution margin is lowest along with
higher fixed cost which would make it tough for the business to reach over the BEP
point (Flammer, 2015). This concludes that it becomes important for the businesses to
identify and calculate the contribution margin to reach over a conclusion.
3. Cash Position
Further, in order to measure the cash position of Surf and Sea, monthly cash
budget of the business has been prepared. Cash flow budget is a statement that is
prepared by the organizations to measure the total cash inflow and cash outflow
generated by the company in a period of time. The cash flow statement of a business
is basically prepared to analyze the future changes and movement in a business so that
proper decisions and strategies could be made accordingly. Below is the cash budget
position of Surf and Sea Company:
Ja
nu
Fe
br
M
arc
Ap
ril
M
ay
Ju
ne
Jul
y
Au
gu
Se
pte
Oc
tob
No
ve
De
ce
T
O
Surf N Sea: 2020 Budget
Board Report
Page 4

ar
y
ua
ry
h st mb
er
er mb
er
mb
er
TA
L
Openin
g
Balanc
e
$
32,
25
0
$
18
9,3
42
$
72,
36
4
-$
85,
37
6
-$
16,
74
2
$
15
7,4
19
$
30
8,1
91
$
32
7,8
22
$
22
9,7
70
$
19
3,7
01
$
15
0,2
79
$
13
2,7
23
$1
,69
1,7
42
Cash
Receipt
s:
Sales
revenu
e
$
42
0,2
10
$
31
3,7
06
$
28
3,3
93
$
22
1,4
77
$
12
2,4
60
$
10
3,0
87
$
95,
75
1
$
10
2,5
69
$
22
6,2
19
$
21
2,6
52
$
21
0,3
31
$
24
7,2
22
$2
,55
9,0
77
Total
Cash
Availa
ble
$
45
2,4
60
$
50
3,0
48
$
35
5,7
57
$
13
6,1
01
$
10
5,7
18
$
26
0,5
05
$
40
3,9
42
$
43
0,3
91
$
45
5,9
89
$
40
6,3
53
$
36
0,6
10
$
37
9,9
46
$4
,25
0,8
19
Cash
Payme
nts:
$
-
Direct
Materi
als
Purcha
ses
$
91,
04
6
$
32
6,9
08
$
34
4,5
88
$
80,
05
1
-$
10
7,3
03
-$
10
3,4
98
$
18,
16
9
$
12
2,6
65
$
16
2,4
12
$
15
9,5
42
$
12
4,8
25
$
99,
35
3
$1
,31
8,7
59
Direct
Labor
$
12
5,2
30
$
64,
55
4
$
56,
78
4
$
36,
96
0
$
21,
63
0
$
20,
58
0
$
24,
01
0
$
41,
52
4
$
59,
51
4
$
57,
82
0
$
63,
63
0
$
72,
94
0
$
64
5,1
76
Variabl
e
Overhe
ad
Costs:
<
xxxx>
$
15,
93
0
$
8,3
10
$
7,3
50
$
4,9
20
$
3,0
60
$
2,8
20
$
3,0
30
$
5,5
20
$
7,9
50
$
7,8
00
$
8,5
20
$
9,7
80
$1
,96
3,9
35
Fixed
Overhe
ad
Costs:
Factor
y
Superv
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
60,
00
Surf N Sea: 2020 Budget
Board Report
Page 5

isor’s
Salary
0
Repair
and
mainte
nance
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
6,0
00
Interes
t
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
13,
94
1
Rent $
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
55,
20
0
Utilitie
s
$
50
0
$
50
0
$
50
0
$
50
0
$
50
0
$
50
0
$
50
0
$
50
0
$
50
0
$
50
0
$
50
0
$
50
0
$
6,0
00
I
nsuran
ce
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
8,2
00
$
98,
40
0
Operati
ng
Costs:
Utilitie
s
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
60
0
I
nsuran
ce
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
6,0
00
$
72,
00
0
A
dminist
rative
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
30,
00
0
G
eneral
office
expens
es
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
18,
00
0
R
ent
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
16,
80
0
Total
Payme
nts
$
26
3,1
18
$
43
0,6
83
$
44
1,1
34
$
15
2,8
43
-$
51,
70
1
-$
47,
68
6
$
76,
12
1
$
20
0,6
21
$
26
2,2
88
$
25
6,0
74
$
22
7,8
87
$
21
4,4
85
$2
,34
0,8
76
Cash $ $ -$ -$ $ $ $ $ $ $ $ $ $1
Surf N Sea: 2020 Budget
Board Report
Page 6

on
Hand
18
9,3
42
72,
36
4
85,
37
6
16,
74
2
15
7,4
19
30
8,1
91
32
7,8
22
22
9,7
70
19
3,7
01
15
0,2
79
13
2,7
23
16
5,4
61
,90
9,9
43
On the basis of the study and calculations, it has been measured that the initial
cash performance of the company (March and April) were negative but eventually, the
performance of the company has been better after that. The reason behind negative
cash inflow of the company was because of the higher variable cost. But soon, the
changes done by the management have helped the company to grow further and
manage the cash inflow of the business. The fixed cost could not be managed by the
company whereas the variable cost management is in the hands of the business. Now,
the changes in the company have helped it to grow further (Ríos, Guillamón, Benito
and Bastida, 2018). Currently, enough cash balance is managed by the company to
maintain the solvency and liquidity level of the business. Currently, cash in hand of
the company is $ 165461. The company has taken the initiative to control the
expenses and manage the performance of the business.
4. Analysis of Market Conditions
On the basis of the above study, it has been measured that the clothing
industry of Australia is running smoothly. There is a good improvement in the
clothing performance of the business. It has also been found that currently the
performance of Surf and Sea has been improved and it would definitely help the
business to grow faster and achieve the targets of the business (Jensen, Barrett and
Mude, 2017).
Surf N Sea: 2020 Budget
Board Report
Page 7

Graph 1: Retail Clothing Trends, Source: Australian Bureau of Statistics [link to
source]
Surf N Sea: 2020 Budget
Board Report
Page 8

5. Summary of Recommendations
According to the overall study, it has been found that company is following
few issues to manage the operations and overall performance of the business.
Company should get rid of few assets and expenses which are not useful for the
business and can help the business to lower the expenses. Company should avoid the
liabilities to manage the gearing level and better liquidity position in the market to run
the business smoothly. The overall analysis concludes that in year 2020, the
performance of the company would be better and cash management level would also
be smoother. It is also recommended to the company to set primary and secondary
product list for the business to maintain the focus and profitable position of the
company. Customer centric policies would help Surf and sea to grab more profit and
performance of the business.
Surf N Sea: 2020 Budget
Board Report
Page 9