Learner Instructions 3
(Monitor and control finances)
The candidate will demonstrate the ability to monitor and control finances.
In response to the scenario provided, you will create a simple spreadsheet budget to capture monitoring information. Using information provided to you by your assessor, you will then use the budget spreadsheet to produce a report on expenditure in accordance with organisational policies and procedures. You will also modify a contingency plan.
You must provide:
Your assessor will be looking for:
Big Red Bicycle Pty Ltd is a bicycle manufacturer based in Bendigo, Victoria. The company produces bicycles which it sells to retailers in the domestic Australian market.
The senior management structure of the company appears below.
Person |
Position |
Michelle Yeo |
Chief Executive Officer (CEO) |
Tom Copeland |
Managing Director |
John Black |
Chief Financial Officer (CFO) |
Stuart LaRoux |
Operations General Manager |
Pat Roberts |
Senior Accountant |
Sam Gellar |
Sales General Manager |
Charles Pierce |
Production Manager |
Holly Burke |
HR Manager |
According to company strategic plans, the company aims to achieve a net profit before tax of $1,000,000. The chief risks to this goal are:
In addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product.
You are the Senior Accountant at Big Red Bicycle. A major component of your role is setting budgets and monitoring budgetary performance for the organisation.
The Managing Director, Tom Copeland, has asked you to implement a process to monitor expenditure and income. He has asked you to prepare a spreadsheet to capture and compare actual income and expenditure to budgeted figures. Your spreadsheet must contain columns for each of the four quarters of the financial year.
You are required to gather data from the relevant managers (your assessor) to complete a budget variance report.
The report should conform to organisational requirements in policies and procedures and contain:
It has come to the attention of the Managing Director, Tom Copeland, that due to the current economic climate, sales volume may be 20% below target this financial year. Tom is worried that this may severely impact profit projections. The company can accept as much as a 10% variance in profit projections; however, more than this could severely affect the company’s ability to pay obligations and invest. Reliable data to determine whether the risk has eventuated should be available by midway through the second quarter (Q2), when sales data for the company’s product are in.
Consider the contingency plan and the implementation plan for the contingency below. You have already implemented a portion of the contingency plan, namely the monitoring of budget performance in the variance report you have prepared. You should now analyse the report to determine the effectiveness of the contingency plan and its implementation.
You have received the following feedback from team members:
paper; raw materials.
The Managing Director would like you to submit a revised contingency plan and contingency implementation plan to bring income and expenses under more effective control.
Contingency Plan Company name: Big Red Bicycle Pty Ltd Person developing the plan: Name : Tom Copeland Position: Managing Director |
||
Risk identified: Profit for FY more than 10% less than budgeted |
||
Strategies/activities to minimise the risk |
By when |
By whom |
Produce quarterly variance reports to identify income/ expenditure and profit shortfalls over 10%. |
Q2 |
PR |
Implement sales training/coaching. |
Q2 |
PR |
Implement incentives program. |
Q2 |
PR |
Reduce overtime. |
Q2 |
PR |
Risk identified: Profit for FY more than 10% less than budgeted |
||
Activity |
Monitoring activity and date |
Person/s |
Monitor variance. |
Completion of variance report: Q2. |
PR |
Analysis of report to identify issues. |
Management report: Q2. |
PR |
Email to warn employees of risk to jobs. |
Monitoring of variance report results: Q4. |
PR |
Email to announce rise of commission from 2% to 2.5%. |
Monitoring of variance report results: Q3. |
PR |
Email to inform employees that overtime will no longer be approved. |
Monitoring of variance report results: Q3. |
PR |
Email to inform employees of mandatory sales skills training: set program. |
Monitoring of variance report results: Q3. |
PR |
Mandatory training conducted. |
Monitoring of variance report results: Q3. |
PR |
Software applications to be used in reporting:
Actual results will be produced monthly by the MYOB accounting system. Actual variances to budget will be produced using Excel with a report prepared for senior management for significant variances.
Format for budgets and reports All budgets must include the:
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