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Task 1 Prepare a budget Below is an extract from the strategic plan...
Task 1 Prepare a budget
Below is an extract from the strategic plan for Plan2go:
| Plan2go Pty Ltd - Strategic plan 20X1 - 20X3 |
Grow shareholder value by 20% over 3 years. This will be achieved by
TARGET: REDUCTION OF PER UNIT COSTS BY 15% OVER 3YEARS. |
Plan2go has observed the following relationships over the past 10 years:
- Economic conditions have an impact on sales revenue:
- When the economy is weak sales revenue tends to decrease by 2%, from average economic conditions.
- When the economy is experiencing average economic conditions sales revenue has increased by 4.5%.
- When the economy is strong sales revenue tends to increase by 9% from average economic conditions.
- The following costs have a direct relationship to sales volumes. This relationship is not expected to change with any change in economic conditions.
| Expense Item | Relationship |
| Sales commission | 1.2% of sales revenue |
| Delivery costs | 1% of sales revenue |
| Packaging costs | 1% of sales revenue |
| Energy Costs | 2.5% of sales revenue |
| Bad debts | 0.5% of sales revenue |
| Cost of sales | 30% of sales revenue |
- Other expenses are expected to change with changes in economic conditions.
| Expenses | Weak economic conditions | Average economic conditions | Strong economic conditions |
| Accounting Fees | Increase by 1% | Increase by 3% | Increase by 5% |
| Sales salaries | Increase by 0.5% | Increase by 3% | Increase by 6% |
| Advertising & marketing | Decrease by 2% | Remain the same | Increase by 3% |
| Bank fees | Remain the same | Remain the same | Remain the same |
| Rent of premises | Remain the same | Remain the same | Remain the same |
| Administration Wages | Increase by 0.5% | Increase by 3% | Increase by 6% |
| Depreciation Office Equip. | Remain the same | Remain the same | Remain the same |
| Other administration. | Decrease by 2% | Increase by 1% | Increase by 4% |
| Insurance | Remain the same | Remain the same | Remain the same |
| Interest | Decrease by 2% | Increase by 3% | Increase by 9% |
| Leases | Increase by 2% | Increase by 4% | Increase by 7% |
| Other financial expenses | Decrease by 2% | Increase by 3% | Increase by 8% |
REQUIRED
complete the worksheet 'Budget Plan2go'
The Chief Financial Officer is unsure of the direction of the economy for 20X2. You have been asked to prepare 3 budgeted income statements for 20X2, based on:
- Average economic conditions
- Poor economic conditions
- Strong economic conditions
- complete budget in the excel file to create your 3 budgets, based on the above information. The template contains the actual revenue and expense data for 20X1. 20X1 was a year of average economic conditions.
| % | ACTUALS 20X1 | % | WEAK ECONOMIC CONDITIONS 20X2 | % | AVERAGE ECONOMIC CONDITIONS 20X2 | % | STRONG ECONOMIC CONDITIONS 20X2 | |
| $ | $ | $ | $ | |||||
| Sales | $ 4,780,500 | |||||||
| Less Cost of Goods Sold: | $ 1,434,150 | |||||||
| Gross Profit | $ 3,346,350 | |||||||
| Less Expenses | ||||||||
| Packaging materials | $ 47,805 | |||||||
| Sales commissions | $ 57,366 | |||||||
| Delivery costs | $ 14,342 |
| Accounting Fees | $ 1,500 | ||||||||
| Sales salaries | $ 325,600 | ||||||||
| Advertising & marketing | $ 176,500 | ||||||||
| Bank fees | $ 1,260 | ||||||||
| Rent of premises | $ 56,000 | ||||||||
| Administration Wages | $ 275,000 | ||||||||
| Depreciation Office Equip. | $ 13,900 | ||||||||
| Other administration. | $ 6,230 | ||||||||
| Energy | $ 119,513 | ||||||||
| Insurance | $ 13,600 |
| Interest | $ 23,050 | ||||||||
| Leases | $ 85,120 | ||||||||
| Bad debts | $ 23,903 | ||||||||
| Other financial expenses | $ 4,390 | ||||||||
| Total Expenses | $ 1,245,078 | ||||||||
| Net Profit | $ 2,101,273 |
2. complete Budget Plan2go Unit Cost Table". Complete the table using the data you calculated from question 1 above.
| Variable | Actual 20X1 | Forecast Weak Economic Conditions | Forecast Average Economic Conditions | Strong Economic Conditions |
| Sales | ||||
| Cost of Goods Sold | ||||
| Gross Profit | ||||
| Total Expenses | ||||
| Net Profit | ||||
| Sales in units | 637,400 | 624,500 | 666,000 | 694,800 |
| Per unit costs (exps only) |
3. Review the statements from Plan2go's strategic plan 20X1 -20X3. Analyse the data in the tables completed in the worksheet for part 2 above and answer the following questions:
a. Assuming the economy experiences average economic conditions, is Plan2go on track to meet its strategic objectives for sales revenue? Provide some reasons for your opinion. Your response should be between 20 and 30 words
b. Assuming the economy experiences weak economic conditions, is Plan2go on track to meet its strategic objectives for control of cost? Provide some reasons for your opinion. Your response should be between 20 and 30 words
Answer & Explanation
Solved by verified expertAnswered by lian.m on coursehero.com
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