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1) List two source of information that may help a manager to estimate the cost for the coming year.
The manager can use accounts payable to estimate suppliers’ costs and staff payroll to estimate the cost of hourly rates, so you can create an estimate of costs for the coming year.
2) Identify and briefly describe three examples of external banking records which are used for the purpose of record keeping.
Deposit slips, Remittance Advices and Bank Statement.
3) List the relevant personnel you may communicate with in the organization to ensure that documented outcomes and information about customers, competitors and business operations.
Operations manager, Client relationship and Customer services.
4) What is a contingency plan? Explain the reasons for a contingency plan. What are the steps to follow to prepare and develop a contingency plan.List three specific areas to include in the plan.
The contingency plan and the preventive and alternative planning for the action during an event that affects the normal activities of the organization that aims to provide the organization of procedures and responsibilities, with orientation objectives during an undesired event.
The contingency plan describes in a clear, concise and complete manner the response or action that should be triggered in the face of adversity, loss or damage.
The contingency plan needs to identify the triggers for when it is activated. The three areas that need to be included in all contingency plans are Finance, Marketing, and Human Resources.
5) Whatis a financial plan? What should financial plans include?
Financial planning is a projection of entries and exits intended to indicate the general economic situation of a person, company or project. From financial planning, it is possible to define how much money is available and thus direct its use. It allows the business to identify how the operation tracking according to the plan.
6) What are the external and internal factors that may affect the financial planning?
Internal factors that can be direct costs of a company, such as labor and materials, indirect costs, such as corporate management. External factors to consider include the price level defined by competitors, company expenses, and government regulations.
7) What is a budget? What are the objectives of a budget and what is the role of the master budge
Budget is the part of a strategic financial plan that includes the forecast of future revenues and expenses for the administration of a certain period of time. Analysis of variations of actual revenue and expenditure against their budgets will provide insight into whether the business operating to expectations. Such analysis will allow for remedial action to be taken when the operation is not meeting financial targets contained in the budget
8) Scenario: You are an account for APC Bike, a manufacture of sturdy mountain bikes for intermediate-level bikers. The variable costs per bike include:
|Total cost per bike||$254.75|
You decide to create a budget variance analysis that reflects the actual volume of sales. The budgeted selling price is $800 (per bike). The budgeted fixed costs of manufacturing overhead are $20,200,000 and the budgeted support department cost is $32,956,430.
Using the following template to create a budget variance analysis including the calculation of variances.
|Flexible budget||Actual||Variance||Favourable/ Unfavourable|
-You are required to fill in the place with “?” only
.-Flexible budget is a budget that reflects a range of operations in which fixed and variable costs are separated to more accurately reflect the effects of activity levels on cost.
-Favorable variance is a variance in which actual revenues are larger than the budget, or actual costs are lower than the budget.
-Unfavorable variance is a variance in which actual costs are greater than budgeted, or actual revenues are less than budgeted.
Tasks for Question 8:
i.Complete the above flexible budget variance report
ii.Based on the schedule, what isyour opinion about the entity’s performance? (3 Marks)
iii.What actions are you going to take based on theflexiblebudget variance analysis?
|Flexible budget||Actual||Variance||Favourable/ Unfavourable|
The actual cost is higher than the budget. For the budget to improve and necessary to make some adjustments.
9) What is a good cash management?
The manager must know when it takes the salary, good relationship with the new sources if you need extra money and be prepared and maintain a good relationship with the bankers and other lenders.
10) What is cost-volume-profit (CVP) analysis and how is it used in decision making?
Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company’s operating income and net income. In performing this analysis, there are several assumptions made, including:
- Sales price per unit is constant.
- Variable costs per unit are constant.
- Total fixed costs are constant.
- Everything produced is sold.
- Costs are only affected because activity changes.
- If a company sells more than one product, they are sold in the same mix.
Other form to useis the companies is analysis to make informed decisions about the products or services they sell. The analysis gives the managers the benefit of being able to answer specific practical questions needed.
CVP analysis is built on statistical models, that way it can be split into probabilities that help with the decision-making process.
11) Scenario: APC Bikes, a manufacturer of Sturdy Mountain bikes for intermediate-level bikers. Due to the increasing popularity of cross-country cycling, the management of APC Bikes wants to produce a new mountain bike. After discussions with the sales and production teams, management has forecast the following information:
|Price per bike||$800|
|Variablecost per bike||$300|
|Fixed costs related to bike production||$5,500,000|
Breakeven in units = (Sales price per unit – Variable cost per unit) / Fixed costs
Breakeven in units = 11,000
Profit margin = Sales price per unit – Variable cost per unit
Profit margin = 500 11,000×500= $5,500,000 Total revenue
12) Goods and services tax (GST), which was introduced in July 2000, is a broad-based tax of 10% of most goods, services and other items sold or consumed in Australia. Describe the THREE types of supplies under the GST legislation.
-Must be registered;
-Must not be GST free or inputted taxed
-The supply must be connected to Australia
13) Scenario: Brian is running an ice cream shop. He paid $9.50 per hour for $3,950 hours of working in packing 40,000 buckets of ice cream. The standard labour rate is $8 per hour. How much is the direct labour price variance (i.e. the difference between the actual price for labour and the standard price)? Is the variance favourable or unfavourable? List the possible reasons forthis variance?
Per hour $9.50
$3,950hours packing 40,000 buckets Stander per hour $8 Labour variance: $9.50 – $8 = $1.50 variance is unfavorable the owner is paying more than the standard.
|Standar per hour||$8|
Labour variance: $9,50 – $8 = $1,50 Variance
Variance is unfavorable the owner is paying more than the standard.
14) When evaluating financial information systems, what factors will you need to consider?
The financial information systems should cover three levels in the company: strategic (considers the interaction between the information of the business environment – are outside the company – and the internal information of the company), tactical (considers the agglutination of information of a result area and not the company as a whole) and operational (it considers the formalization, mainly through written documents, of the various information established in the company).
1) A. The accounting procedures of most business involve basic steps that are carried out in a set order. The flow of date through these procedures is known as the accounting cycle. List five basic steps that are included in the accounting cycle.
- Funding: Collection of date of acts and facts that affect the equity of the entity. Funding involves the analysis of documents (law, contracts, invoices, receipts, awards, legal proceedings, etc.) as well as macroeconomic events that affect the entity.
- Recognition: It is the moment of questioning in relation to date of acts and facts, for example, the first question to be asked, is whether the data should be recognized.
- Accumulation process: After date recognition, these must be organized into database. To facilitate quick access to information companies have adopted computerized accounting systems.
- Summarization Is the act of turning all the date into accounting information useful to your users, such as creating statements and accounting reports.
- Evidence: Consists in the disclosure of accounting information to its users, either through newspapers of great circulation, the entity`s website or any other means.
B. The system used to process the information from source documents to the stage of financial reports is called the Double Entry System. One of the principles of double entry accounting is that each source document can be record in two parts: one debit and the other credit. What is the golden rule of double entry bookkeeping?
In a double-entry transaction, an equal amount of money is always transferred from one account (or group of accounts) to another account (or group of accounts). Accountants use the terms debt and credit to describe whether the money is being transferred to or from an account.
The amount is recorded in the debit column, which is the left column, when it is being transferred to an account. The amount is recorded in the credit column, which is the right column, when it is being transferred from an account. For any Transaction, the total debits (entries in the left column) must be equal the total credits column (entries in the right column).
Debit means to write down in the debt column of an account, to increase its value (whether the account represents a good or right), or to decrease its value (if the account represents an obligation).
Credited means to register an amount in the credit column of an account, to increase its value (if the account represents an obligation), or to decrease its value (if the account represents a good or Right.
2) Depending on the size and complexity of the operation there can be many stakeholders in the budget setting process. List and briefly explain TWO stakeholders who may be involved.
Suppliers/ trading partners: Suppliers are vendors, suppliers of external companies who sign a contract to provide components or services necessary for the project being executed. Business partners provide expert advice to fill a specific role, such as installation, customization, training or support for those involved in the project.
Customers/ users: are those who use or will use the product, service or result of the project. There may be multiple customer tiers, where in some application areas the terms customers and users are synonymous, and in others, customers refers to the entity that purchases the product and user the ones that use the product.
3) What is a cash flow? Give one example of how an organization can control is cash flow.
Cash Flow is the movement of cash receipts and cash outflow from the company, this means what you get and that you pay for in your business. For good cash flow control, it is necessary to ensure detailed records of earnings and expenses, with discipline and without errors. In a daily, weekly or monthly view, it already offers verification and analysis tools for your business.
Example cash flow:
|MONDAYJUN 17||TUESDAY JUN 18||WEDNESDAY JUN 19|
|TOTAL OF ENTRIES||12,000||2,000||15,000|
4) A. The ABC Company collects cash from its sales as follows:
- 50% are cash sales, so collects is at time of sale.
- 40% is in the month after sale.
- 10% in the second month after sale.
Expected sales for the next six months are:
Required: Prepared cash receipts budget for the period from October to December
|The ABC Company Cash Receipts Budget For the period from October to December|
B. The XYZ Company purchases for the three months are expected to be as follows. All purchases are paid for in the same month. Ignore GST.
Operating expenses are forecasted as follows:
|Insurance (payable in March)||$1,200 per month|
|Telephone (payable in January)||$600 (for threemonths)|
|Electricity (payable in Januay)||$300 (for threemonths)|
|Genera Office Expenses||$100 per month plus 1% of ourchases|
General office expenses include $50 per month for depreciation.
Required: Prepare a cash payment budget for the period from January to March.
|THE XYZ COMPANY CASH PAYMENT BUDGET FOR THE PERIOD FROM JANUAY TO MARCH|
|GENERAL OFFICE EXPENSES||$150||$170||$190|
|TOTAL CASH PAYMENTS||$11,575||$13,783||$15781|
|Depreciation||$200 – 50 = $ 150||$220 – 50 = $170||$240 – 50 = $190|
5) When collecting data for analysis what are the two sources we can get data from?
Quantitative and qualitative data.
6) How can data collected help an organization determine the effectives of their financial management process?
Quantitative data is data expressing a certain quantity, amount or range. Usually, there are measurement units associated with the data, e.g. metres, in the case of the height of a person. It makes sense to set boundary limits to such data, and it is also meaningful to apply arithmetic operations to the data.
Qualitative data: it provides understanding into how members are experience the matter the company is addressing, obstacle and benefits they experience, and what the company may modify or add to promotes improvement.
7) What are some factors that could affect a budget?
External factors which influence the process of budgeting allow developing methodological techniques related to basic approaches to budgeting. Competition, scientific and technological progress, international relations, macro- and microeconomics, a political situation and the social segment are among such factors.
8) Budget/Financial Plan Exercise
Using the following information work out the answers for the questions bellow:
-160 seat restaurant
-Average spent at lunch $16.50
-Lunch seat turnover 80%
-Average spent at dinner $25.50
-Dinner seat turnover 70%
-Restaurant open for lunch 260 days a year
A. What are the projected sales for lunch?
Average spent at lunch $16.50
Lunch seat turnover 80% (128 seats)
Restaurant open for lunch 260 days a year = 260 days per year.
128 seats * $ 16, 50 * 260 days = $549,120
B. What are the projected sales for dinner?
Average spent at dinner $25.50
Dinner seat turnover 70% (112 seats)
For Dinner = 312 days per year.
112 seats * $25, 50 * 312 days = $891.072
C. What are the projected total annual sales for the restaurant?
$549.120 + $891.072 = $1.440.192