BANKING ACADEMY, HANOI BTEC HND IN BUSINESS (FINANCE) ASSIGNMENT COVER SHEET Lucky Star Group REGISTRATION NO UNIT TITLE ASSIGNMENT TITLE ASSIGNMENT NO NAME OF ASSESSOR ASSIGNMENT ISSUE DATE SUBMISSION DEADLINE Unit 9: Management Accounting: Costing and Budgeting Budgetary Planning and Control of Mr JUN ALEJO BATHAN 12th, Jun, 2013 12th, Jun, 2013 We, Star Group hereby confirm that this assignment is our own work and not copied or plagiarized from any source We have referenced the sources from which information is obtained by us for this assignment Members Full Name Lương Thái Hà Phạm Đức Anh English Name Julie Carlo Signature Date FOR OFFICIAL USE Assignment Received By: Date: Unit Outcomes Outcome Be able to prepare forecasts and budgets for a business (L03) Be able to monitor performance against budget within a business (L04) Evidence for the criteria Assessor’s decision Feedback Explain the purpose and nature of the budgeting process 3.1 Select appropriate budgeting methods for the organisation and its needs 3.2 Prepare budgets according to the chosen budgeting method 3.3 Prepare a cash budget 3.4 Calculate variances, identify possible causes and recommend corrective action 4.1 Prepare an operating statement reconciling budgeted and actual results 4.2 Report findings to management in accordance with identified responsibility centres 4.3 Merit grades awarded M1 M2 M3 Distinction grades awarded D1 D2 D3 Internal Verification Evidence for the criteria Outcome Feedback Assessor’s decision Internal Verification Assignment ( ) Well-structured; Reference is done properly / should be done (if any) Overall, you’ve Areas for improvement: ASSESSOR SIGNATURE DATE / / DATE / / NAME: (Oral feedback was also provided) STUDENT SIGNATURE NAME : FOR INTERNAL USE ONLY VERIFIED YES NO DATE : VERIFIED BY : NAME : SCENARIO You are the management accountants of a group of companies and your Managing Director has asked you to explore the possibilities of introducing appropriate budgeting and costing methods in the operating companies Based on information given below, you are required to compile a report to managing director which covers the following: Selected information concerning sales and production for Cabot Co for July 2006 are summarized as follows: a Estimated sales: Product K: 40,000 units at £30.00 per unit Product L: 20,000 units at £65.00 per unit b Estimated inventories, July 2006: Material A: 4,000 lbs Product K: 3,000 units at £17 per unit Material B: 3,500 lbs Product L: 2,700 units at £35 per unit Total £51,000 94,500 £145,500 There were no work in process inventories estimated for July 2006 c Desired inventories at 31 July 2006 Material A: 3,000 lbs Product K: 2,500 units at £17 per unit Material B: 2,500 lbs Product L: 2,000 units at £35 per unit Total £42,500 70,000 £112,500 There were no work in process inventories estimated for 31 July 2006 d Direct materials used in production Product K 0.7 lb per unit 1.2 lbs per unit Material A: Material B: e Unit costs for direct materials: Material A: £4.00 per lb Material B: £2.00 per lb Product L 3.5 lbs per unit 1.8 lbs per unit f Direct labor requirements Product K Product L: Department 0.4 hour per unit 0.6 hour per unit Department 0.15 hour per unit 0.25 hour per unit Department £12.00 per hour Department £16.00 per hour g Direct labor requirements Direct labor rate h Estimated factory overhead costs for July: £ 200,000 40,000 25,000 34,000 299,000 Indirect factory wages Depreciation of plant and equipment Power and light Indirect materials Total Task • • • Explain the purpose and nature of the budgeting process (3 1) Select appropriate budgeting methods for the organizations and its budgeting needs (3.2) Prepare budgets according to the chosen budgeting method (3.3) Hints: Prepare sales budget, production budget, direct materials purchases budgets and cost of goods sold budget for July Lowther Ltd is a wholesaling company Goods are purchased on credit from manufacturers and importers and sold on credit to retailers Its budget for the first months of Year 12 includes Month £‘000 £‘000 £‘000 £‘000 Sales Stocks at month end 120 62 130 68 140 70 130 73 Cost of sales consistently accounts for 60% of sales revenue Overheads are budgeted at £35,000 per month, which includes £6,000 per month depreciation Additional information a Sales invoices are sent to customers on the last day of the month in which a sale takes place Customers’ payment patters are expected to be 70% is paid after month 28% is paid after months 2% is never paid (bad debts) b Overheads will be paid as incurred c Purchases will be paid for in the month following purchase and a 1% discount will be taken on all invoices d Sales for the rest of year 11 are expected to be month 11, £110,000 and month 12,£115,000 e Purchases for month 12 of year 11 are expected to be £68,000 f Stocks at the end of month 12 of year 11 are expected to be £58,000 The company is considering a change in the basis of payment to supplier Purchases would be paid for, 50% in the month following the month of purchase and 50% in the next month The change would apply from the month purchases The 1% discount would continue to apply but only to that part of the purchase invoice settled in the month following purchase Task Prepare a cash budget (3.4) Hints: • Prepare a cash budget for Lowther Limited for the first months of year 12 It should be presented in columnar format and should be based upon the existing terms of payment Byford Limited manufactures and sells one product In Year 7, the company planned to manufacture 220 units and to sell 200 units at £130 each No stocks existed at the start of Year The unit standard cost of production for the Year was: £ Materials 10 Direct labour 12 Variable overhead Fixed overhead 50 76 Fixed administration, selling and distribution overhead was budgeted at £8,800 The actual production for year was 230 units and 190 units were sold at £136 per unit The actual production costs per unit of output were £ Materials 11 Direct labour 10 Variable overhead Fixed overhead 52 78 The actual administration, selling and distribution overhead amounted to £8,650 Task • Calculate variances, identify possible causes and recommend corrective actions (4.1) Hints Prepare a statement that reconciles the budgeted to the actual profit of the business for Year 7, through variances Your statement should analyze the differences between the two profit figures in as much detail as you are able • Prepare operating statements reconciling budgeted and actual results (4.2) • Report findings to management in accordance with identified responsibility centres (4.3) GRADING Pass is achieved by meeting all the requirements defined in the assessment criteria (Refer page of the assignment brief) Merit Select and apply appropriate techniques (M2) Characteristics / Possible Evidence – appropriate techniques (e.g incremental, zero-based, fixed and flexible etc) have apply and showing a good depth of knowledge in practical understanding of budgets for a business and performance against budgets Present and communicate appropriate findings (M3) Characteristics / Possible Evidence – An appropriate structure and approach has been used and a range of methods of presentation has been used to prepare budgets and monitor performance against budgets for a given situation e.g charts, tables, graphs & diagrams etc Distinction Use critical reflection to evaluate own work and justify valid conclusions (D1) Characteristics / Possible Evidence – creation has been used to generate and recommend corrective action to monitor performance against budgets Take responsibility for managing and organizing activities (D2) Characteristics / Possible Evidence – independence demonstrated and substantial activities have been planned, managed and organized related to responsibility centres and also identification of responsibility for variances Demonstrate convergent, lateral and creative thinking (D3) Characteristics / Possible Evidence – problem have solved with evidence of good understanding of operating statement reconciling budgeted and actual results PRESENTATION The assignment should have a cover page that includes the assignment title, assignment number, course title, module title, Lecturer/tutor name and student’s name Attach all the pages of assignment brief/cover sheet with your report and leave them blank for official use Ensure that authenticity declaration has been signed This is a group assignment Content sheet with a list of all headings and page numbers A fully typed up professionally presented report document Use 12 point Arial or Times New Roman script Your assignment should be word-processed and should not exceed 3,000 words in length Use the Harvard referencing system Exhibits/appendices are outside this limit The assignment should be not contain a bibliography – but should contain a list of any references used in the assignment NOTES TO STUDENTS FOR SUMMISSION • Check carefully the submission date and the instructions given with the assignment Late assignments will not be accepted • Ensure that you give yourself enough time to complete the assignment by the due date • Do not leave things such as printing to the last minute – excuses of this nature will not be accepted for failure to hand-in the work on time • You must take responsibility for managing your own time effectively • If you are unable to hand in your assignment on time and have valid reasons such as illness, you may apply (in writing) for an extension • Failure to achieve a PASS grade will results in a REFERRAL grade being given • Take great care that if you use other people’s work or ideas in your assignment, you properly reference them in your text and any bibliography • NOTE: If you are caught plagiarizing, you could have your grade reduced to zero, or at worst, you could be excluded from the course 10