Assessment Task 2

Prepare and monitor budgets

Written Test

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Performance objective:

You need to answer the entire questions using information given to you from class and from your course material.

Assessment description:

You must provide a response to all questions in assessment Questions section.

Assessment Questions:

Checkpoint 1
Question 1: Indicate whether the following statements in regards to budgets are true or false:
1. A budget is a financial document which anticipates the future earnings and expenditure of a business.		True False
2. Involving staff in the budgeting process means they will work harder to achieve the budget than they would if it were just handed down by management.		True False
3. Budget targets are set and these are analysed against actual results during a given period.		True False
4. Budgets must be compiled by a chartered accountant.		True False
5. Budgets are nominated for a financial year and then broken into quarters and monthly figures.		True False
6. To make the budget relevant, budgets are broken down further into revenue and expense categories.		True False
Question 2: List 4 benefits of budgeting?
Four benefits of budgeting are given below: 1. It helps to be prepared for uncertain emergencies 2. It helps in attracting relevant investors 3. It helps in setting objectives for sales 4. It helps in attaining financial objectives (Wildavsky, 2017).
Question 3: Indicate whether the following statements in regards to business budgets are true or false:
1. Budgets may contain Sales Revenue, Cost of Goods Sold (COGS), Wages, Rent, Electricity, and other components.		True False
2. Capital expenditure budgets must include superannuation, payroll tax, etc.		True False
3. Budgets can be managed through accountancy software programs such as Xero, MYOB and Cashwhiz.		True False
4. Large businesses may have a budget committee or external advisers to assist in compiling the total budget		True False
5. Master budget incorporates only the revenue generating departments of a business.		True False
6. Upcoming projects must be budgeted for to ensure the project is viable.		True False
Question 4: Provide a description for the following types of budgets?
Wage Budget – The budget is the amount of money that the individual for spending. Purchasing budgets – It contains the amount of stock that the organization should purchase mainly during each period of the budget. Sales budgets – It is the financial strategy that mainly estimates the sum of revenue of the organization at a particular time. Cashflow budget – It estimates the cash flow of a business over a particular time. Events budgets – It is the projection or forecast of entire revenues and expenses that will mainly incur at the event. Project budgets – It is the tool utilized by managers of the project for estimating the sum cost of the project (Wildavsky, 2017).
Question 5: What are captal expenditure budgets?
It is the formal plan that mainly states the timing and amounts of a fixed asset bought by the company (Yeboah, 2016).
Checkpoint 2
Question 6: Indicate whether the following statements in regard to factors impacting on budget are true or false:
1. Management restructures are internal factors that do not impact on budget.			True False
2. Human resource requirements will impact on budgets as each new staff member required will add additional expenditure to the budget.			True False
3. Projects will impact on budget and depending on size may best be assessed in a separate budget.			True False
4. External factors are outside the control of the business. Typical examples are legislation and regulation.			True False
5. Variances to budget must be checked regularly so that corrective measures can be put in place.			True False
6. Changes in commodity or service prices have no impact on budgets.			True False
7. Budgets may need to be adjusted when there are changes to suppliers and associated prices.			True False
Question 7: What are external factors? How could external factors affect a business?
External factors are things that are mainly outside the business that will have significant implications on the success of the business. External factors mainly include legal, environmental, technological, sociocultural, economic and political factors. These all are factors that mainly occur outside of the organization however still, implicate its capability of doing business (Yeboah, 2016).
Question 8: Indicate whether the following statements in regard to factors impacting on budget are true or false:
1. New projects and other business objectives will impact on budgets as funds will need to be allocated.		True False
2. Changes in legislation can affect the business both operationally and financially.		True False
3. External factors are outside the control of the business. Typical examples are legislation and regulation.		True False
4. Changes in the global economy cannot have a huge impact on turnover for TH&E businesses.		True False
5. Market trends will affect the number of customers visiting your establishment.		True False
Question 9: List 6 sources of data for compiling a budget?
Six sources of data for mainly compiling the budget are given below: 1. The plan of business 2. Historical data or information from the accounting system of the organization 3. The skills and knowledge of mainly key personnel in the company 4. Expenditure of union budget 5. Receipts of union budget 6. Union budget at the glance
Checkpoint 3
Question 10: List 5 components of an Operating Budget?
Five components of the operating budget are given below: 1. Direct labour 2. Sales 3. Production 4. Overhead 5. Direct materials
Question 11: Indicate if the following statements relating to the budgeting process are true or false.
1. The process of preparing a draft budget usually involves entering all the projected income, expenses, purchases, staffing requirements, etc into a spreadsheet or accounting program.		True False
2. The budgeting process requires strong negotiation skills.		True False
3. It is important to convince staff of the achievability of the budget.		True False
4. Involving staff in the budgeting process can be a costly, time wasting process.		True False
5. If staff is positive about the budget, they are more likely to support it and do their best to work towards the targets that have been set.		True False
Question 12: List 5 examples of people (job roles) you would circulate the draft budget to for feedback or approval?
Five examples are given below: 1. Committee on budget 2. Top management 3. CEO 4. Managers 5. Employees
Question 13: Indicate if the following statements relating to reviewing feedback from the draft budget are true or false:
1. When a suggestion is received from a staff member it must be included in the final budget.		True False
2. Once the draft budget is created, suggestions cannot be included into the final budget.		True False
3. The budget preparation must include an analysis of the priorities of each request.		True False
4. Every department will feel that their request is the most urgent and important.		True False
5. The General Manager and owners may have a different opinion to staff about the importance of requests.		True False
6. Each change requested should be given a priority and the effects if implemented must be considered.		True False
7. If a high priority item is required, this may mean that many other requests cannot be granted.		True False
8. If the feedback is relevant and approved, it should be amended in the draft budget.		True False
Question 14: List 3 aspects you should consider when a staff member suggests a change or alteration to the budget?
Three aspects are given below: 1. Potential problems of service provision 2. The impacts of cost on the below line 3. Whether the supplementary cost is reasonable or not.
Checkpoint 4
Question 15: Indicate whether the following statements in regard to monitoring budget are true or false:
1. Monthly reviews of the budget against actuals are an important tool of budget management.		True False
2. In most businesses/industries the budget is completed by the end of the financial year, for the next financial year.		True False
3. Every revenue and expense item on the Profit and Loss Statement for every department should be compared to the budgeted figure.		True False
4. It is important to undertake further investigation into budget variances, whether they are over or under.		True False
5. Budget variances and impacts should be reviewed at the end of the financial year.		True False
6. Managers should include budget variances as well as an overall picture of the running of the department in their monthly report.		True False
Question 16: Briefly explain the following types of reports?
Cash flow Reports – in this report all the cash equivalents and cash are summarized. In the cash flow reports, all the cash management by the organization is highlighted. Occupancy reports – it is an interactive report which provides statistical insights on the occupational and occupancy revenue for the selected range of data. Sales reports – it is the metrics collection. In this report, all the qualitative and quantitative inputs are collected and its helps in sales performance evaluation within the region, team, or organization. Variance reports –is the document that compares the outcomes of financial planning with the actual financial outcomes. It also helps the management to identify the areas in which the organization can make improvements. Expenditure reports – it is the graphical representation of the percentages of the different kinds of expenditure which are made by candidates (Jadhav, 2019).
Question 17: Briefly explain the following types of reports?
Covers reports – is the printed piece stock that goes on the business reports. Stock reports –is a document which is information based. This document is issued by the various organization and to the various segments, it is directed at an investment pool. Wastage reports – in the document in which all the information is provided about the quantity wastage, the reason for waste, items wasted, etc. in the organization. Purchase summary report – this report shows the purchased items from a certain vendor or all the vendors.
Question 18: Which types of business must file a Business Activity Statement? What are the components of a Business Activity Statement?
Business activity statement must be filed by the organization which is registered for the GST. Business activity statement helps in reporting and paying the GST, installments of PAYG, PAYG withholdings tax, and other related taxes. For the period, GST activities are reported by the businesses.
Checkpoint 5
Question 19: What is meant by being “over” or “under” budget? Which type would represent a favourable variance?
when the budget is over it means that it involves more money than had been planned for the project completion and under budget means that less money has been planned for the completion of the project. The budget variance will represent the favorable variance (Jadhav, 2019).
Question 20: Indicate whether the following statements in regard to analysing budgets are true or false:
1. Wages can often vary from budget.		True False
2. The only way to meet budget targets and savings is to cut expenditure.		True False
3. Raising revenue will affect budget in a negative sense as expenses will increase more than the amount of revenue.		True False
4. Net profit is impacted negatively by an increase in revenue.		True False
5. Raising average spend by up-selling is an effective way to increase profitability.		True False
6. If the projected sales figures are $200,000 and the actual sales figure is $240,000 – this represents a favourable variance of 20%.		True False
7. If the projected sales figures are $150,000 and there is a favourable variance of 10%, the actual sales figures are $165,000.		True False
Question 21: What is the importance of communicating staff’s responsibilities to help achieve budget?
If a company’s mission and strategy are clearly defined and communicated, every department can align its work toward achieving the goals and determine the financial resources it requires. A company’s budget data is more accurate when all departments are involved in the budgeting process.
Question 22: List 3 occurrences which would result in achieving a favourable variance in profit?
Some of the occurrences are- Difference between the expected and actual product pricing. Differences between the expected and actual sales of units. Changes in the incurred overhead cost amount.
Checkpoint 6
Question 23:
1. All variances throughout the year must be collated to update the budget on an ongoing basis.	True False
2. The budget target cannot be amended and must be met regardless of changes in circumstances.	True False
3. Internal and external analysis is a must for assessing budget impacts.	True False
4. Management must assess factors such as price increases by suppliers to manage the budget.	True False
5. Future budgets are often based on last year’s budget.	True False
6. The department managers do not have to use numeracy and literary skills to interpret financial data as it is done by the Finance department.	True False
Question 24: Explain the process of updating budgets?
The process which is used for updating the budget is- Assumptions are updated Available funding will be noted Costing points will be stepped A budget package is created The revenue forecast is obtained Compensation is validated Bonus plans are validated Capital budget requests are obtained The budget model is updated The budget will be reviewed and approval will be taken The budget will be issued (Wen, & Siqin, 2020).
Question 25: In order to have a budget change approved, you must prepare a report. List 5 details that must be included in the report?
Details which are included in the report are- Project name Expenses incurred Future schedule Projected budget Details of changes made
Question 26: Often the staff on the front line will have more of an idea of the reasons for the variance than the manager will, and will be able to give suggestions for improvement?
True False
Question 27: List 6 factors that can cause variances in staff budgets?
Some of the factors which can cause the variances in the staff budgets are- Changing conditions of business Errors Unmet expectations Available facilities are not used efficiently Under and overutilization of services Changes in the methods of production (Wen, & Siqin, 2020).

Reference

Jadhav, M. S. V. (2019). Cash Flow Statement Analysis. Think India Journal, 22(4), 8418-8427.

Wen, X., & Siqin, T. (2020). How do product quality uncertainties affect the sharing economy platforms with risk considerations? A mean-variance analysis. International Journal of Production Economics, 224, 107544.

Wildavsky, A. (2017). Budgeting and governing. Routledge.

Yeboah, M. (2016). Impact of product branding on sales revenue of listed companies in Ghana. International Journal of Academic Research in Business and Social Sciences, 6(9), 112-124.

SITXFIN005A Prepare and monitor budgets