Ageing debtors budget
Review and Evaluate Financial Management
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Assessment Questions:
Consider the scenario with the background information and financial information contained in the appendices of this assessment task.
provide responses to the four scenario questions provided in this assessment task
submit answers on separate document.
knowledge of current requirements of the Australian Taxation Office with respect to GST
knowledge of principles and techniques involved in:
ledgers and financial statements
profit and loss statements.
After successful labour cost cutting measures and improved sales team performance, the company aims to generate a net profit before tax of $1,200,000 from Australian operations alone.
This year, in addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product.
Role
As you are aware, one risk to the strategic plans of Big Red Bicycle (BRB) is bad debt and poor cash flow due to large trade debtors balances. Consider the following:
according to its policies, Big Red Bicycles offers 30 day terms to debtors
You have the following information from the Statement of Financial Position and current ledger accounts in the electronic accounting system (MYOB AccountRight).
| Account | $ |
| Trade debtors | 362,500 |
| Trade creditors | 80,000 |
| Opening stock | 100,000 |
| Closing stock | 300,000 |
| Purchases | 1,000,000 |
Complete the following.
Question 2:
possibility exists for move to Indian plant with capacity for 10,000 units
market for bicycles is growing rapidly and BRB will be able to sell everything produced
| Bicycle price per unit | $500 (ex GST) |
| Current variable costs per unit | $250 |
| Fixed costs | $1,280,000 |
Complete the following.
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Question 4:
Choose one of the recommendations from Question 1 or 2 and develop an action plan to implement and monitor the recommendation. Ensure you include appropriate activities, monitoring, timelines and accountabilities.
Statement of Financial Performance
| Big Red Bicycle | ||
| Statement of Financial Performance | ||
| For the year ended 30 June 2012 | ||
| REVENUE | ||
| Sales | 2,900,000 | |
| Less direct wages and Commissions | 272,500 | |
| Opening stock | 100,000 | |
| Purchases | 300,000 | |
| Closing stock | 20,000 | |
| Less cost of goods sold | 380,000 | |
| Gross Profit | 2,247,500 | |
| EXPENSES | ||
| General & Administrative Expenses | ||
| Travel | 22,000 | |
| Legal fees | 4,500 | |
| Bank charges | 700 | |
| Office supplies | 4,000 | |
| Postage & printing | 500 | |
| Dues & subscriptions | 600 | |
| Telephone | 11,200 | |
| Repairs & maintenance | 45,000 | |
| Payroll tax | 25,000 | |
| Marketing Expenses | ||
| Advertising | 208,000 | |
| Employment Expenses | ||
| Superannuation | 45,000 | |
| Wages & salaries | 500,000 | |
| Staff amenities | 23,000 | |
| Occupancy Costs | ||
| Electricity | 38,000 | |
| Insurance | 100000 | |
| Rates | 100,000 | |
| Rent | 200,000 | |
| Water | 35,000 | |
| Waste Removal | 60,000 | |
| TOTAL EXPENSES | 1,422,500 | |
| NET PROFIT (BEFORE INTEREST & TAX) | 825,000 | |
| Income Tax Expense | 206,250 | |
| NET PROFIT AFTER TAX | 618,750 | |
