Hello, this is my first help for the assignment, and I do not want to fail at any cost, the details are as follows:
Please, do not include the questions in your submission document. Instead, use part numbers as headings.
Marks for Parts 1(a) and 2(a) will be based on accuracy, correct approach and a concise, tidy and easy to follow presentation of the figures.
Marks for Parts 1(b) and 2(b) will be based on practical and applied answers that demonstrate understanding of the relevant unit content (referring to relevant concepts) and are appropriate for the given scenario. References should be kept to an absolute minimum in this applied context. References to journal papers, in particular, are unnecessary and will detract from your answer.
The Overall Scenario
You work for a management consulting firm and have 3 client jobs to complete:
1. Prepare a cash budget for XYZ Pty Ltd and provide associated advice on required financing;
2. Prepare and interpret a variance analysis for ABC Pty Ltd; and
3. Advise LMN Pty Ltd on sources of finance.
Job Details
1. XYZ Pty Ltd operates in a seasonal industry with a sales peak in spring. Budgeted sales, along with budgeted raw materials and labour costs are shown in the table below.
Extract from budgeted income statement
Month | Sales | Labour and materials |
May | $150,000 | $105,000 |
June | $160,000 | $112,000 |
July | $210,000 | $147,000 |
Aug | $300,000 | $210,000 |
Sep | $400,000 | $280,000 |
Oct | $500,000 | $350,000 |
Nov | $340,000 | $238,000 |
Dec | $200,000 | $140,000 |
All sales are on credit and past records indicate that collections are as follows: 20% in the month of sale, 55% in the month after sale and 25% in the second month after sale. Labour and materials are paid as follows: 60% in the month the expenses are incurred and 40% in the month following that.
Other budgeted expenses during the period July to December are as follows: selling, general and administration of $30,000 per month; rent of $10,000 per month; and depreciation of $20,000 per month. Where relevant, payments are made in the month the expenses are incurred.
Taxation payments of $33,000 each will be made at the end of September and end of December. In October, company motor vehicles will be traded-in for new models with an expected net cash payment of $80,000. The motor vehicles are expected to have an 8 year life.
The cash balance at 1 July is $10,000. Required:
(a) prepare a cash budget for the company for July through to December (inclusive) (9 marks)
(b) advise the company on the debt financing that would best be used to deal with cash shortfalls and major payments in the cash budget. Your advice in this part should explain and provide reasons for your recommendations and be a maximum of 200 words. (6 marks)
2. ABC Pty Ltd operates a no frills hairdressing salon with a single service offering: wash, cut and blow dry (WCD). The price of this service is $40.
The budget for September is shown below. Actual figures for September were: sales revenue of
$30,400 for 760 units; supplies $2,000, variable utilities $1,520; labour costs $16,000; and fixed overhead $9,000.
| Sales (WCDs) | 800 |
Sales Revenue | $32,000 |
Supplies | $1,600 |
Labour | $16,000 |
Variable utilities | $1,600 |
Fixed overheads | $9,000 |
Profit/(loss) | $3,800 |
Required: | | |
(a) prepare a variance analysis for September. The analysis should show the original budget, a flexed budget, actuals and relevant variances. (5 marks)
(b) To assist the Managing Director of ABC Pty Ltd in controlling the business, briefly interpret and provide possible explanations for the variances. This part will be a maximum of 200 words.
(5 marks)