BSBFIM501 Manage Budgets And Financial Plans - Financial Management Approaches - Assignment Help

Introduction:

Big Red Cycle Pty Limited is a bicycle manufacturer in Bendigo, Victoria. It is currently led by the CEO Michelle Yeo it plans to enhance its profits to $1,000,000 Before Taxes to achieve these there are some risks attached to it firstly there are poor sales due to the economic conditions and secondly there is increase in wages expenses it is also known that by enhancing their global footprint and taking advantage of the low cost of production overseas and diversification of the product range to reduce the effect of the poor sales of one product can they reach their target profit. The Senior Accountant Mr. Pat Roberts has developed the budget which has to be analyzed and reported to Sam Gellar the Sales General Manager. Moreover, Tom Copeland the managing director has identified a risk that the sales volume will be below 20% of the target; to counter this and achieve a minimum of 10% variation in the sales forecast a risk assessment and contingency plan will be developed to manage the falling sales. The budget information is to be explained to all the team members and how the process of the budget would affect the overall organizational financial goals. Explain the company policies and procedure to keep a record of tracking expenses and petty cash throughout the financial year to the member who is responsible for it. The requirement to monitor and control finances will also be a part of this report where a budget variance report is to be made and within contingency plan and contingency implementation plan, lastly, this report has a part for review and evaluate financial management process. 

Assessment 1

Task A

The Budget Review for Cost Center A highlighted some critical issues which were not aligned with the centers work, agreements, obligations, and most importantly demand. The accountant has provided a budget which is unrealistic in nature and is not backed by any previous financial information of the cost center. The nature of the product and industry trends all points towards that the bicycle sales rise in the second quarter which is the summer season, this heavy demand effect is not seen in the presented budget, the sales forecast has been done by treating all quarters equally which is unrealistic. The expected sale in the second quarter alone is $1,000,000 with the rest of the quarter's sale is to be 70% of the second quarter sale this change should be reflected in the budget. This can be further effective if the organization should use historical data to report these demand factors of the product, the bicycle demand is already affected heavily by the ease of buying for the two-wheeler motorbike as well as the car. The accounts team failed to identify the sales forecast in the correct fashion Table 1 shows the adjustments budget needs to have in terms of sales.

Table 1

Winter and early spring have an impact on the sales that is why there is a reduction in sales in those quarters. This sales impact will have ripple effects on the cost of goods sold and commission which has been reported as 2% whereas the new terms with the sales personnel have been negotiated at 2.5%.  The cost of good sales is directly computed from the sales and is the variable factor, unlike direct wages which are a fixed cost. COGS is 13.33% of the sales (which can have a huge part of GST), it has to be adjusted accordingly.