MAA103 – Accounting for Decision Making
Trimester 3, 2018
Assessment 3 – Budgets
DUE DATE AND TIME: Thursday 24 January 2019, 05:00 PM
PERCENTAGE OF FINAL GRADE: A total of 10 marks will be converted to 15% of your final grade calculation.
Learning Outcome Details
Unit Learning Outcome (ULO) Graduate Learning Outcome (GLO)
ULO 3: Use visual and other technology such as spreadsheets to communicate researched information. GLO3: Digital literacy
ULO 4: Describe and justify the importance and use of Cost/Volume profit analysis and budgeting in the context of operating a business GLO4: Critical thinking
Assessment Feedback:
Students who submit their work by the due date will receive their marks and feedback on CloudDeakin by Thursday 21 January 2019, 11:00 PM.
Submission Instructions
1. This assessment is to be submitted ONLINE ONLY into the Assessment 3 Dropbox available on the MAA103 Cloud Deakin site.
2. The Assessment dropbox via CloudDeakin has been set up so that a new submission will replace the old one completely. Please note that you will be required to submit only ONE Microsoft Excel workbook in .XLSX or .XLS format. Submission in PDF or any other format incurs a 10% penalty.
3. Please do not rename the file after you download it.
4. Any work you submit may be checked by electronic or other means for the purposes of detecting collusion and/or plagiarism.
5. When you are required to submit an assignment through your CloudDeakin unit site, you will receive an email to your Deakin email address confirming that it has been submitted. You should check that you can see your assignment in the Submissions view of the Assignment dropbox folder after upload, and check for, and keep, the email receipt for the submission.
6. Only one member of each group needs to submit on behalf of the group.
Group Work/Individual Work
1. The assignment may be completed individually or as a group of two or three students. You will need to find your own group members and/or decide if you want to work on your own. We highly recommend you work together in groups!
2. Register your group in Cloud Deakin by enrolling yourself into a Group number which you and your group members nominate.
3. If you are working individually you still need to register yourself into a group number so that you can submit your work.
4. A group can be formed with any student regardless of mode of study as long as they are enrolled in the unit.
5. Once you find your group members you will need to register your group formally via the MAA103 Cloud Deakin Site - Tools - Groups.
6. You will need to register for a group for assignment 2 and assignment 3 separately. We recommend you stay with the same partners, although this is not required.
7. All individual/group registrations will close off by 11:00 pm Sunday 13 January 2019 after which you will need to contact the Unit Chair and Campus Coordinator and provide an appropriate reason for missing the deadline for registration. If the explanation is unsatisfactory or you fail to contact the teaching team before the due date you will receive no marks for the assignment task. A 10% penalty applies for failing to join a group.
8. Each member involved in the group must be included in the preparation of this work.
Description / Requirements
Scenario:
As a business advisor, your client James Romano operates a strawberry farm in the Dandenong mountains east of Melbourne and seeks your assistance in compiling monthly budgets for the 2020 financial year. He starts the year with $400,000 in the business bank account.
About the Strawberry Industry
Strawberries are grown in Queensland during the winter months, and in Victoria during the summer. Australian consumers can enjoy domestically grown produce all year round, even though strawberries are seasonal.
Victorian growers can harvest strawberries for eight months of the year, with the vast majority available during the summer months. James estimates the following distribution of sales:
Distribution of sales
Sep Oct Nov Dec Jan Feb Mar Apr
3% 08% 15% 22% 20% 15% 11% 6%
Victorian strawberry growers naturally budget according to the Australian financial year running from July 2019 to June 2020 as winter is their quiet season.
As a strawberry farmer, James only has one product – Strawberries. The unit of sale is a “box”. Each box of strawberries contains 15 punnets, and each punnet weighs 250 grams. Although the price of strawberries can vary between $20 to $65 per box, James instructs you to use an average price of $35 per box for all calculations.
While James is not a retailer/wholesaler, he nevertheless keeps track of his direct costs, and asks for help with a cost of sales budget. These costs include a) the cost of the boxes, punnets, and labels, b) the cost of contract labour to pick the strawberries and pack them into the boxes, and c) the freight to deliver the product to market. James estimates the cost of boxes is $2.80 per unit, contract labour averages $10 per box, and freight is $1.25 per box. James estimates that he will sell 40,000 boxes during the 2020 financial year.
Strawberries are highly sensitive to weather conditions, and a week of good weather can lead to up to three times the average expected yield, while a bout of hot weather or hail could destroy the entire crop for two weeks. To ensure that James always has enough boxes, punnets and labels, he will always end the month with enough stock to cover 80% next month’s sales. Boxes and freight must be paid for in cash, but contract labour for picking and packing is paid fortnightly in arrears. This means that on average, this month labour will be paid for half now, and half in the following month. 20% of strawberries are sold on the open market for a cash, with the remaining being sold on credit to two supermarkets Kolesworths and Oldies. Kolesworths is the preferred buyer since they purchase three times the volume of Oldies and Kolesworth always settles their bill within 30 days. Oldies settle their bill two months following the sale.
James splits his expenses into “Farm Operations” (equivalent to “selling expenses”), and “General & Administrative Expenses”.
Expenses and payments related to farm operations (selling)
Strawberry plants cannot be grown from seeds and must be replanted every year. The planting process occurs between April and July after the picking season winds down. The cost of purchasing plants and the contract labour to plant them costs $250,000 per annum, being spread evenly over the four months.
Each month he incurs $1,500 equipment repairs & maintenance, and $3,500 on motor vehicles (including fuel, oil and servicing), and $8000 depreciation on equipment.
Water, Gas & Electricity are combined into a single utility bill, which is paid quarterly. The utilities expense varies with volume of sales. Based on previous experience James provides you with the following table:
$ Paid during Applies to the months of
1,140 September Jul, Aug and Sep
7,220 December Oct, Nov and Dec
8,740 March Jan, Feb and Mar
1,900 June Apr, May and Jun
Last year James spend $100,000 on general farm supplies, but prices have increased 10% this year. He believes that the general farm supplies are spread evenly over the year. $8,100 of insurance is Paid in May.
James has several annual costs as well. Municipal rates cost $1,350 a paid in August.
James employs two family members as full-time staff with wages at $4,500 per month each. One of the family members acts as the Operations Supervisor and looks after the physical activity of farming. The other family member is hired as a General Administrator working in the office.
Expenses and payments related to General & Administration
In addition to the office administrator, James lists the following monthly payments:
Accounts $
Telephone & Internet, 300
Office Supplies 110
Subscriptions 350
During August the business pays an annual accounting fee of $1,350 to prepare and lodge the annual tax returns. This annual contract also allows James to call the accountant and ask for advice over the phone at any time during the year.
James has scheduled the office administrator to undertake staff training. In August they will take “Introduction to Xero”, and in June they will take “Advanced Xero”. Each short course cost $,1500 and is paid for during the month of study.
Other costs
In July James will purchase a new tractor costing $100,000 for cash. As the owner of the farm, he draws $80,000 per year, spread equally over each month. The farm also has a significant bank loan, and makes monthly payments of $5,000, which is comprised of $3,000 interest with the remainder being a repayment on the loan principal.
REQUIRED
You need to compile a set of operating and financial budgets. This should include:
1. a Sales budget
2. a Cost of Sales budget
3. a Purchases budget (for boxes, punnets and labels).
4. a Selling (farm operations) and General and Administrative expenses budget
5. a Cash budget, including:
5.1. schedule of expected collections from customers
5.2. schedule of expected payments to suppliers for direct costs this should include line items for the three main direct costs: a) boxes punnets and labels, b) freight, and c) picking and packing labour.
6. a Budgeted Income Statement.
Notes
• Penalties for late submission: The following marking penalties will apply if you submit an assessment task after the due date without an approved extension: 5% will be deducted from available marks for each day up to five days, and work that is submitted more than five days after the due date will not be marked. You will receive 0% for the task. 'Day' means working day for paper submissions and calendar day for electronic submissions. The Unit Chair may refuse to accept a late submission where it is unreasonable or impracticable to assess the task after the due date.
• For more information about academic misconduct, special consideration, extensions, and assessment feedback, please refer to the document Your rights and responsibilities as a student in this Unit in the first folder next to the Unit Guide of the Resources area in the CloudDeakin unit site.
• Building evidence of your experiences, skills and knowledge (Portfolio) - Building a portfolio that evidences your skills, knowledge and experience will provide you with a valuable tool to help you prepare for interviews and to showcase to potential employers. There are a number of tools that you can use to build a portfolio. You are provided with cloud space through OneDrive, or through the Portfolio tool in the Cloud Unit Site, but you can use any storage repository system that you like. Remember that a Portfolio is YOUR tool. You should be able to store your assessment work, reflections, achievements and artefacts in YOUR Portfolio. Once you have completed this assessment piece, add it to your personal Portfolio to use and showcase your learning later, when applying for jobs, or further studies. Curate your work by adding meaningful tags to your artefacts that describe what the artefact represents.