Assessment Task 1 BSBFIM501 Manage budgets and financial plansChoice Business College Page 1 of 7RTO 41297 | CRICOS 03444CDec 2017 version: 2.0Plan financial management approachesSubmission detailsThe assessment task is due on the date specified by your assessor. Any variations to thisarrangement must be approved in writing by your assessor.Submit this document with any required evidence attached. See specifications belowfor details.Performance objectiveThe candidate will demonstrate the ability to plan financial management approaches.Assessment descriptionIn response to the scenario provided, you will clarify budget plans with your manager andnegotiate changes to the budget. You will then identify and analyse a risk to the budgetand prepare a contingency plan to prevent or minimise the risk.Procedure1. Read the scenario provided in Appendix 1 to this assessment task and tasks Aand B.2. Prepare to meet with your manager (assessor) to clarify budget and negotiatechanges:a. identify areas of the budget that are not achievable, inaccurate or unclearb. prepare to negotiate necessary changes to the budget3. set up a time with your manager to meet. Meet with your manager (assessor) toclarify budget and negotiate changes:a. identify at least two issues for clarificationb. negotiate at least two changesc. include discussion of basic accounting principlesd. refer to relevant legislation and ATO requirementse. refer to principles and techniques of managing budget itemsf. take and keep notes of agreed changes.4. Use the template provided in Appendix 3 to this assessment task to prepare acontingency plan document for persistent risks after budget changes5. Submit all documents required in the specifications below to your assessor. Ensureyou keep a copy of all work submitted for your records.Assessment Task 1 BSBFIM501 Manage budgets and financial plansChoice Business College Page 2 of 7RTO 41297 | CRICOS 03444CDec 2017 version: 2.0SpecificationsYou must:? meet with your assessor to clarify budget and negotiate changes? provide a contingency plan? submit your notes.Your assessor will be looking for:? numeracy skills to read and understand a budget and negotiate budget reallocations? knowledge of basic accounting principles to identify and use account balances? knowledge organisational requirements related to financial management such ascontained in organisational policies and procedures? knowledge of principles and techniques involved in budgeting.Adjustment for distance-based learners? No variation of the task is required.? Documentation can be submitted electronically or posted in the mail.Assessment Task 1 BSBFIM501 Manage budgets and financial plansChoice Business College Page 3 of 7RTO 41297 | CRICOS 03444CDec 2017 version: 2.0Appendix 1 ScenarioBig Red Bicycle Pty Ltd is a bicycle manufacturer based in Bendigo, Victoria. The companyproduces bicycles which it sells to retailers in the domestic Australian market.The senior management structure of the company appears below. PersonPositionMichelle YeoChief Executive Officer (CEO)Tom CopelandManaging DirectorJohn BlackChief Financial Officer (CFO)Stuart LaRouxOperations General ManagerPat RobertsSenior AccountantSam GellarSales General ManagerCharles PierceProduction ManagerHolly BurkeHR Manager According to company strategic plans, the company aims to achieve a net profit before taxof $1,000,000. The chief risks to this goal are:? poor sales due to economic downturn? increases in expenses such as wage expenses.In addition to Australian operations, the company is considering manufacturing overseasto take advantage of reduced costs. The company is also considering diversifying itsproduct range to reduce exposure to poor sales of one product.RoleYou are the manager of Sales Centre A, based in Adelaide. The centre has achieved greatsuccess over the last year and consistently outsells other sales centres. In fact, due to thelarge number of accounts managed by your sales team and larger staff, your centre isexpected to sell as much volume as the other two sales centres put together. Naturally,you expect cost allocations to reflect the both the needs and importance to the businessof Cost Centre A.Task AThe Sales General Manager, Sam Gellar, has asked you to review the master budget andcost centre budgets prepared by the Senior Accountant. She would like you to meet withher to discuss the whether the budget projections are achievable, accurate,understandable and fair.Assessment Task 1 BSBFIM501 Manage budgets and financial plansChoice Business College Page 4 of 7RTO 41297 | CRICOS 03444CDec 2017 version: 2.0She would like you to look closely at the budget for your cost centre, note any changesyou think are necessary, develop an argument for the changes and negotiate thosechanges with her.Information you are aware of includes:? Sales in the first quarter (Q1), third quarter (Q3), and the fourth quarter (Q4) aregenerally 30% less than the second quarter (Q2).? Sales in Q2 depend on completion of 90% of repair and maintenance.? Sales for Q2 have been estimated to be $1,000,000.? Commission negotiated with members of the sales team is now at 2.5%.Task BIt has come to the attention
of the Managing Director, Tom Copeland, that due to thecurrent economic climate, sales volume may be 20% below target this financial year. Tomis worried that this may severely impact profit projections. The company can accept asmuch as a 10% variance in profit projections; however, more than this could severelyaffect the companys ability to pay obligations and invest. Reliable data to determinewhether the risk has eventuated should be available by mid Q2, when sales data for thecompanys product are in.As a special project, the Managing Director has asked you to perform a risk assessmentand develop a contingency plan to manage the risk of sales falling 20%.As per organisational policy you should use the contingency plan template provided.Assessment Task 1 BSBFIM501 Manage budgets and financial plansChoice Business College Page 5 of 7RTO 41297 | CRICOS 03444CDec 2017 version: 2.0Appendix 2 Budgeting and finance policyBudget preparations? The business plan will set the key parameters for all financial budgeting.? Variations to the business plan must be approved by the CEO and seniormanagement strategic committee.? Prior period results are to be analysed to identify the profit level of cost centres,identify correlations between financial statistics and to set key performanceindicators and benchmarks for future budgets.? The budget planning committee will meet prior to budgets being developed andagree on budget parameters. The committee will consist of all departmentmanagers plus the CEO and CFO.? A CAPEX budget will be developed from the approved business plan.? A detailed sales budget must be completed before completing the profit budget forthe year.? A cash flow budget covering the first three months will be prepared after the profitbudget is completed.? A master budget including profit projections will be completed from which costcentre allocations will be made.? Budget notes that contain all the assumptions used in the budgets shouldaccompany the master budget or be made available as a separate document.Where possible, the notes should justify the basis on which the estimates weremade.? Overheads (non-direct expenses) will be apportioned across the cost centresequally. Exceptions need to be negotiated with relevant authorities.? All expenses and income will be spread equally throughout the year unlessotherwise required by business needs or business environment.? The financial cycle for budgeting purposes will be yearly ending 30 June.Financial delegations? Each manager is responsible for achieving the revenue budgets agreed to by thebudget committee.? Each manager is responsible to approve, by signing the necessary paperwork, allexpenditures that fall within their area of responsibility.? Expenditures must be within the budget guidelines for the individual departments.Format for budgets and reportsAll budgets must include the following details:? name of the person who prepared it? cost centre (if applicable)? name of the budget/report, i.e. sales, expenses, CAPEX, cash flow, budget variationreport? period of the budget.Assessment Task 1 BSBFIM501 Manage budgets and financial plansChoice Business College Page 6 of 7RTO 41297 | CRICOS 03444CDec 2017 version: 2.0Appendix 3 Budgets and templatesMaster budget with profit projections Big Red Bicycle Pty LtdMaster Budget FY 2011/2012FYQ1Q2Q3Q4REVENUECommissions (2% sales)60,00015,00015,00015,00015,000Direct wages fixed200,00050,00050,00050,00050,000Sales3,000,000750,000750,000750,000750,000Cost of Goods Sold400,000100,000100,000100,000100,000Gross Profit2,340,000585,000585,000585,000585,000EXPENSESGeneral & Administrative ExpensesAccounting fees20,0005,0005,0005,0005,000Legal fees5,0001,2501,2501,2501,250Bank charges600150150150150Office supplies5,0001,2501,2501,2501,250Postage & printing400100100100100Dues & subscriptions500125125125125Telephone10,0002,5002,5002,5002,500Repairs & maintenance50,00012,50012,50012,50012,500Payroll tax25,0006,2506,2506,2506,250Marketing ExpensesAdvertising200,00050,00050,00050,00050,000Employment ExpensesSuperannuation45,00011,25011,25011,25011,250Wages & salaries500,000125,000125,000125,000125,000Staff amenities20,0005,0005,0005,0005,000Occupancy CostsElectricity40,00010,00010,00010,00010,000Insurance100,00025,00025,00025,00025,000Rates100,00025,00025,00025,00025,000Rent200,00050,00050,00050,00050,000Water30,0007,5007,5007,5007,500Waste removal50,00012,50012,50012,50012,500TOTAL EXPENSES1,401,500350,375350,375350,375350,375NET PROFIT (BEFORE INTEREST & TAX)938,500234,625234,625234,625234,625Income Tax Expense (25%Net)234,62558,65658,65658,65658,656NET PROFIT AFTER TAX703,875175,969175,969175,969175,969 Assessment Task 1 BSBFIM501 Manage budgets and financial plansChoice Business College Page 7 of 7RTO 41297 | CRICOS 03444CDec 2017 version: 2.0Sales cost centre expense budget Sales Centre ASales Centre BSales Centre CCommissions$20,000$20,000$20,000Wages$100,000$100,000$100,000Telephone$3,000$3,000$3,000Office supplies$1,000$1,000$1,000 Contingency plan template Contingency PlanCompany name: Big Red Bicycle Pty LtdPerson developing the plan:Name: Position:Risk identified:Strategies/activities to minimise the riskBy whenBy whom