Review and evaluate financial management processes
You are the Senior Accountant. As part of your role, you will need to complete the following four activities.
Activity 1
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
- currently, BRB does not train sales staff on credit terms
- there is currently no enforcement of credit terms
- warehousing of stock is expensive at current leased premises
- many bicycles need to be thrown out if parts rust; this problem exacerbates the problem of waste expense.
You have the following information from the Statement of Financial Position and current ledger accounts in the electronic accounting system (MYOB AccountRight).
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Account
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$
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Trade debtors
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362,500
|
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Trade creditors
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80,000
|
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Opening stock
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100,000
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|
Closing stock
|
300,000
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Purchases
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1,000,000
|
Complete the following.
1. Review the Statement of Financial Performance in the appendices to calculate:
a. The average debtor days
b. The average creditor days
c. The average stock turnover
d. Show calculations and results on your response document for this assessment task.
2. Consider the existing BRB ageing debtor's budget. On your response document, make two written recommendations for improvement to existing financial management processes to improve cash flow. To support your recommendations, refer to data sources, organisational needs, and analytical techniques, for example:
a. statement of financial performance
b. ledger accounts
c. scenario information
d. ageing debtors budget
e. ratios.
3. On your response document, list three sources of information of use to complete this activity.
Activity 2
In addition to its Australian business, Big Red Bicycles is considering manufacturing a new range of cheaper bicycles in Indonesia. The following information is available:
- the Indonesian plant has capacity to manufacture 8000 units
- Big Red Bicycle's strategic goal is to generate a pretax profit of $1,000,000 for the next financial year for Indonesian operations
- clients will pay a maximum of $500 per bicycle
- 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
- limited ability to renegotiate costs with suppliers
- pricing and cost information is as follows.
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Bicycle price per unit
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$500 (ex GST)
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Current variable costs per unit
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$250
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Fixed costs
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$1,280,000
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Complete the following.
1. On your response document, work out:
a. how many units at current variable cost would need to be produced to achieve profit target (show calculations)
b. what the variable costs per unit would need to be to achieve profit target at current manufacturing capacity (show calculations).
2. On your response document, make one written recommendation based on your analysis. To support your recommendation ensure you refer to the organisational needs or situation, and any analytical techniques used. You may also suggest possible actions for BRB to take depending on possible future scenarios.
3. On your response document, list three sources of information of possible use to complete this activity.
Activity 3
Soon you will need to prepare a business activity statement (BAS) for the first quarter on 2012/13.
Complete the following.
1. State how many years you will need to keep GST records in order to satisfy ATO requirements.
2. Complete the GST budget on the following page to anticipate GST liability.
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July
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August
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September
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|
Budgeted cash receipts incurring GST:
|
|
|
|
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Cash sales
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20,000
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10,000
|
10,000
|
|
Cash revenue (besides sales)
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0
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0
|
0
|
|
Cash receipts from sale of assets (not stock)
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0
|
0
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0
|
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Total receipts for GST
|
20,000
|
10,000
|
10,000
|
|
Budgeted non-cash receipts incurring GST:
|
|
|
|
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Debtors sales
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180,000
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230,000
|
150,000
|
|
Total non-cash receipts:
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180,000
|
230,000
|
150,000
|
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Total budgeted receipts incurring GST
|
200,000
|
240,000
|
160,000
|
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Budgeted cash payments incurring GST
|
|
|
|
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Cash purchases of stock
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0
|
0
|
0
|
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Cash expenses
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4,300
|
5,200
|
5,250
|
|
Total cash receipts incurring GST
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4,300
|
5,200
|
5,250
|
|
Budgeted credit payments incurring GST
|
|
|
|
|
Credit purchases of stock incurring GST
|
25,000
|
30,000
|
25,000
|
|
Credit purchases of assets (besides stock)
|
4,300
|
5,200
|
5,250
|
|
Total cash payments incurring GST
|
29,300
|
35,200
|
30,250
|
|
Total budgeted cash payments incurring GST
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33,600
|
40,400
|
35,500
|
|
GST cash budget calculations
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|
|
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a) Cash receipts
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|
|
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b) Cash payments
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|
|
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c) GST liability
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|
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Activity 4
Choose one of the recommendations from Activity 1 or 2 and develop an action plan to implement and monitor the recommendation. Ensure you include appropriate activities, monitoring, timelines and accountabilities.
Attachment:- PART3.rar