Assessment Task 2 –Prepare Operational Budgets 

Instructions to Student General instructions: 

In an  Excel spreadsheet templates provided you are required to: 

•  Create a budgeted profit and loss statement for a services business.

 • Create a budgeted profit and loss statement  for a manufacturing business. 

•  Compare and discuss the difference between the two profit and loss statements.  

Information/materials provided:  templates for budget are provided. 

Assessment criteria: To achieve a satisfactory result, your  assessor will be looking for your ability to demonstrate the following key  skills/tasks/knowledge to an acceptable industry standard:

 • Prepare a budgeted profit and  loss statements for 2 types of business. 

•  Determine a budget KPI. 

•  Discuss the differences between the 2 types of business budgets. 

Assessment 2 

Task 1 

Below  you are provided with details of two companies and their budgets. Prepare the  budgets and answer the following questions. 

A. From  the following information relating to Marmax Consulting Services, prepare a  budgeted profit & loss statement for the month of December 2016, showing  the profit level required by management: 

a. The  fees budget estimate is achieved at 100 per cent 

b. Only  80 per cent of the fees budget estimate is achieved 

c.  Nominate at least 1 Key Performance Indicator (KPI) in this budget 

The fees budget shows a budgeted level of 1000 consultancy  hours at $100 per hour.

 Expenses are as  follows: 

Advertising is a fixed amount of $4,500 per annum plus 1.25  per cent of fees 

Office wages $2,000 per month 

Office supplies 10 cents per consultancy hour 

Staff salaries $8,500 per month Staff commission 4 per cent  of budgeted fees

 Vehicle expenses  $15,300 per annum plus 0.25 per cent of fees

 Interest expense  15.5% per annum of a loan of $20,000 

Legal fees $1,000 per month 

Rates $12,900 per annum

Income tax 33 cents in the dollar   

Fixed costs include: Office wages; Staff salaries; Legal  fees; Rates 

B. From  the following information relating to Bailey’s Manufacturing Pty Ltd: 

a  Prepare the budgeted profit and loss statement for the month of December 2016.  Actuals for this budget have not been determined at this time. 

b  Nominate at least 1 Key Performance Indicator (KPI) in this budget 

Baileys    Manufacturing Pty Ltd  Sales    Budget
	Unit    Sales	Unit    Sales	Sales    revenue
October	1,000	150	150,000
November	1,200	150	180,000
December	1,300	150	234,000

Baileys    Manufacturing Pty Ltd  Production    Budget
	Unit    Sales	Closing    Stock	Total    required	Opening    Stock	Estimated    Production
October	1,000	50	1,050	150	900
November	1,200	70	1,270	50	1,220
December	1,300	90	1,390	70	1,320

The cost of production budget shows the manufacturing cost  per unit as follows: 

October $88 

November $90 

December $95 

Baileys    Manufacturing Pty Ltd Operating    expenses budget
	$	$	$	$
Expense	October	November	December	Total
Selling	9,000	9,500	9,000	27,500
Administration	1,000	2,000	1,500	4,500
Financial	2,000	2,000	3,000	7,000

Opening stock is valued at $88 per unit 

The tax rate is 30per cent 

Bailey’s Manufacturing Pty Ltd use Average cost for stock  valuation 

C.  Examine the  two budgeted profit and loss  statement budgets and discuss the major differences between Budget A Marmax Consulting Services and  Budget B Bailey’s Manufacturing Pty  Ltd (Apart from the Actuals being presented for Budget A, and Budget B being  over a quarter) 

Task 2

 In a word document answer the following the  following budgeting theory questions. 

A.  Explain the principles of double-entry bookkeeping and how they affect the  budgeting process.