BTEC DIPLOMA IN BUSINESS
Unit 3 – Financial Forecasting for Business
Unit 3.1 Assignment
Investigating Financial
Control
BTEC Unit 3.1 Assignment
Getting started
To complete this assignment you need to read the case study below and complete the tasks
which follow.
Bright Sparks Limited is a private limited company which manufactures fireworks. They have
been trading now for one year (since January 2009). To begin trading they had many start up
costs including, machinery, office equipment and safety equipment. Now they have many
running costs, which are fixed and variable.
Bright Sparks produces fireworks all year round, but sales are only apparent in September,
October, November and December. They produce different boxes varying from the budget
“starter” box selling at £20.00 per box to the top of the range box called “the ultimate”
retailing at £100.00
Income
Sales only occur in a certain time of the year and are as follows:September £40,000, October £65,000, November £50,000 and December £45,000
Expenses are as follows:

Wages £5000 per month, but in July, August, September and October, seasonal
workers increase the wages bill to £10,000 per month

Heating lighting are £1000 per quarter, with the first instalment due in March

Advertising is £1500 per month payable September, October, November

Rent is £600 per month

Raw Materials are £500 per month, with the exception of June, July, August and
September which is £2000 per month

Insurance is £2500 for the year, payable every August

The company van needs taxing in December, this is currently £160 per year

Fuel and maintenance costs for the van, average out at approx £100 per month
There is no opening bank balance
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BTEC Unit 3.1 Assignment
Section One: Introduction
Describe, using examples, the importance of costs, revenue (different types) and profit
(different types) for a business organisation
(P1) (P2) (P3) (M1)
1.
Produce a detailed power point presentation with notes about Bright Sparks Limited
which will include:
A definition of start up and operating costs

A definition of fixed costs and variable costs

A list of start up costs which you think bright sparks may have incurred

A list of the operating costs which they now have (include fixed, and variable)

A definition of revenue and the possible sources of revenue

The formula to calculate total revenue

The formula to calculate gross profit and to calculate net profit

An explanation as to the difference between gross profit and net profit

An explanation of why it is important for bright sparks limited to monitor costs,
revenues and profit regularly
Due Date for Section 1: _______________________________________
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BTEC Unit 3.1 Assignment
Section Two: Break Even
Calculate break even using given data to show the level at which income equals
expenditure. (P4)
1. Define break even and show the formula which can be used to calculate the break
even point
2. Using MS Excel, produce a break even chart for bright sparks limited, you must clearly
show the break even point, area of profit, area of loss and the margin of safety
(P5)

Construct the chart to show the break even point for the sale of the ultimate box which
sells at £100 per box. Variable costs are £50 per box and fixed costs are £7000.

Assuming Bright Sparks produce and sell 250 boxes explain what their margin of safety
would be and label it on your chart.

Demonstrate the impact of changing cost and revenue data on the break even point of
a selected business
(M2)
3. Now change the selling price to be £80.00 per unit sold and reprint your chart, again,
clearly show the break even point, area of profit, area of loss and the margin of safety
on your chart. (Assuming Bright Sparks still produce and sell 250 boxes explain what
their margin of safety would now be and label it on your chart.)
4. Now change your fixed costs to be £7500 and variable costs to be £55.00 per box;
reprint your chart, again, clearly show the break even point, area of profit, area of loss
and the margin of safety on your chart. (Assuming Bright Sparks still produce and sell
250 boxes explain what their margin of safety would now be and label it on your chart.)
5. Write an explanation to say what happened when these changes were input and what
the result is now. Remember to mention how this will affect the business.
Evaluate in writing, the importance of Break Even Charts for effectively managing the finance
of a business.
(D1) - partial
You may wish to consider:
The strengths of the Break Even Chart (what does it show)
The limitations of the Break Even Chart (in reference to large multi-product companies
Due Date for Section 2: _______________________________________
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BTEC Unit 3.1 Assignment
Section Three - Cash Flow
Prepare an annual cash flow forecast using monthly data
(P6)
1.
Using information from the case study use MS Excel to construct a cash flow for Bright
Sparks for twelve months, starting from January 2009
Analyse the implications of regular and irregular cash inflows and outflows for a business
organisation
(M3)
2.
Look at the cash flow forecast you have produced and explain the impact that negative
cash flow could have on Bright Sparks and how a profitable business could easily go bankrupt
due to cash flow problems.
3.
Look at the cash flow forecast you have produced and discuss the irregular cash
inflows and outflows of Bright Sparks and how it will affect them.
Evaluate in writing, the importance of cash flow forecasts for effectively managing the finance
of a business.
(D1) - partial
You may wish to consider:
The usefulness of a cash flow forecast (what does it show?)
The limitations of the cash flow forecast
Due Date for Section 3: _______________________________________
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BTEC Unit 3.1 Assignment
Checklist
In order to make sure that you have included all of the evidence required in this assignment,
use the following checklists to identify areas that you think you have covered. You MUST
hand in all of the following evidence in order to complete the unit.

Evidence
Section 1 – Introduction
Case study
Section 2 – Break Even
Section 3 – Cash Flow
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