Assessment Activity 2 - Case study- Business Scenario
Assume that you are working as assistant marketing manager with Johnson trading; it is small to medium size business. Business is involved in production, purchases and selling of different products. Read the below information and prepare all required operational budgets.
Actual unit sales for 2016 March April May June
20000 22000 25000 28000
Forecast unit sales for 2017 to increase by 10% of Actual 2016
Selling price based on cost price of $8 per unit
plus 60% mark up on that cost per unit
Management require that each month's stock of closing finished goods to be 20% of that month's sales units.
• The firm is GST registered and accounts for GST on a cash basis.
• Direct labour cost based on 'Production units required' @ 30 % of Cost Price paid in month incurred .
• Factory overhead is applied @ 100% of direct labour cost and paid in month incurred
• Estimated purchases for each month to be based on 'Production units required’. Purchase cost per unit to be 40% of cost price per unit
• Trade creditors to be paid in month of purchase
• Fixed expenses to be $8000 per month,100.00%
• Variable expenses to be 15% of each month's sales value.
• Expenses are to be paid in the month they are incurred.
• Bank balance 31 March 2017 in Overdraft.
Property plant & equipment 650000
Accumulated depreciation 130000
Mortgage on property 250000
Before you will start preparing the budgets for Johnson trading, your first job would be to confirm the budget with your manager /owner, (Trainer/ assessor). It is a very important step to make sure budget objectives are consistent with organisational aims, projects and forecasts.
Prepare your budget objectives, two to three and show it to your trainer to get the confirmation that those are as accordance with organisational vision, aims etc. (1.1)
Based on above information, prepare a sales budget. (PC-1.2, 2.2, 3.1, 3.2)
SALES BUDGET March April May June
Forecast sales units
Selling price per unit
Total sales in $
Based on above information, prepare a production budget. (PC-1.2, 2.2, 3.1, 3.2)
PRODUCTION BUDGET April May June
Forecast unit sales
Plus Finished goods stock closing
Total units required
less Finished goods stock opening
Equals production units required
Cost per unit in $
Cost of production in $
Prepare a cash budget. (PC-1.2, 2.2, 3.1, 3.2)
CASH BUDGET March April May June
Collections from Trade Debtors
40 % In month of sale
55% in month following sale
To trade creditors for purchases [100%]
Bank balance opening
Bank balance closing
Task 2.5 (PC-1.2, 2.2, 3.1, 3.2)
Based on task 2.2, 2.3 and 2.4, prepare Manufacturer’s Budgeted Income Statement for the period ending 30 June 2017. Use following template:
Less COST OF GOODS SOLD
Opening Finished Goods Stock
Plus Cost of production
Less Closing finished goods stock
Less Expenses from ordinary activities
Selling, administrative and financial
NET PROFIT from ordinary activities
Task 2.6 (PC-1.2, 2.2, 3.1, 3.2)
Based on all above tasks and information, prepare a budgeted balance sheet.
Budget Balance Sheet as at 30 June 2017
$ $ $
Add / Less Net profit / loss
Total owners' equity
This is represented by
Cash at bank
Finished goods stock
Total current assets
Property, plant & equipment
Less Accumulated depreciation
Other financial assets
Total non-current assets
Total current liabilities
Mortgage on property
Total non-current liabilities
Identify the stakeholders you will discuss and negotiate the budget before implementation, also explain consultation methods. (Pc-1.3)
While working as assistant marketing manager, what Key performance indicators and milestones you must keep in mind. How would you confirm them with owners or management? (PC-2.1)
How would you securely store and record budgetary reports?
Assessment activity 3: A presentation (1.3)
This assessment activity is based on assessment activity two. Prepare 4 to 5 slides to do a presentation in the class and in front of your trainer. You must present for maximum 5 minutes. Consider your classmates and trainer the management of Johnson trading.
Include the following points in your presentations:
1. Discuss budget objectives
2. Explain the importance of preparing budgets
3. Explain and discuss about budgets in such a way that it would create goodwill
4. Convince the stakeholders (Your classmates/ trainer), so that they cooperate with you about budgets and their implementation.
5. Does a small question answer session or discussion about budgets?
The objective of your presentation must be to:
? Communicate with the audience clearly, understandably and creatively
? Present your ideas, findings and recommendations credibly to convince the audience and gain support and agreement
? Satisfactorily answer questions and objections
? Organise material in an effective and logical sequence and format for the presentation
? Develop a range of support materials that can be used to present a variety of ideas and concepts for your presentation
? Adapt to the cultural requirements of the stakeholders as they are from diverse backgrounds with diverse abilities
? Apply techniques to control the flow of information
You must make this presentation professional, delivering the materials with confidence and being knowledgeable and flexible in responding to queries and feedback (see criteria in the checklist provided in the following page).
All resources must be provided to candidates in order to facilitate in delivering their presentation. This may include:
• Internet • Speakers • White board
• Training Room • Board markers • Printing facilities
• Overhead projector • Computer workstation • Microsoft PowerPoint (2007-2013)
(You only need to provide a USB with the downloaded presentation (in PowerPoint)