REQUIREMENTS FOR ASSIGNMENT ONE:
There are four parts to this assignment.
The first part requires you to prepare a basic master budget. The general description is
provided in Part A, in this document. However the data for the assignment is to be
obtained from the associated assignment data file. This file is in MS Excel format and
requires you to enter your student number to generate the assignment data. The data
generated is unique to each student. The basic format and requirements of the
assignment are the same for each student, however the different data sets will result in
a substantially different solution for each student.
The second part requires you to write a brief report on the Cost Structures identified in
the budget prepared for Part A and in the data provided in the data file for this
assignment. The answer for this part will not be affected by the accuracy or otherwise of
your answer to Part A. The appropriateness (or otherwise) of this report will be based
on the analysis you undertake using the data you produce in Part A and the additional
calculations you provide for this part.
The third part also requires you to write a brief report on the Budgeted versus Actual
Outcomes using the budget prepared for part A and the additional data provided in the
data file for this assignment. The answer for this part will not be affected by the
accuracy or otherwise of your answer to Part A. The appropriateness (or otherwise) of
this report will be based on the analysis you undertake using the data you produce in
Part A and the additional calculations you provide for this part.
The fourth part requires you to research a behavioural and communication issue
related to budgeting and performance evaluation. You are required to refer to the
outcomes of Part C to illustrate your essay/report. Details of the issue are provided in
Part D. You are to write a short essay or report, appropriately referenced. A short
concise answer is all that is required.
Part A - Prepare a Master Budget (30% of the assignment assessment marks)
All that is required for this part is the Budget Schedules. They can be provided in MS
Word, MS Excel or PDF format, accompanied by the Relevant Coversheet
(provided).(Word count for this part is not relevant)
Wittgenstein Pty Ltd produces propellers used in the production of wind-powered
electricity generating equipment. The propellers are sold to various engineering
companies that produce wind generators in Australia and Europe.
• Projected sales in units for the coming four months are provided in the assignment
data sheet.
The following data pertain to production policies and manufacturing specifications
followed by Wittgenstein Pty Ltd.
The following details are provided in the assignment data sheet
• Finished goods inventory on January 1.
• The full absorption cost of the opening finished goods inventory.
• The variable manufacturing cost of the opening finished goods inventory.
• The desired finished goods ending inventory for each month..
• The data on materials used.
• The amount of materials to be on hand at the beginning of the month
• This stipulated amount of materials to be on hand at the beginning of the month is
exactly the amount of material on hand on January 1. (Assume that the material costs
are the same as current quarter's production.)
• The direct labour used per unit of output.
• The average direct labour cost per hour.
Details of the Overheads for each month are provided in the data list. The Overheads
are estimated using a flexible budget formula. (Activity is measured in direct labour
hours.) You will have to determine the Maintenance cost and relevant statistical data
necessary for you to do so is provided in the data List
Monthly selling and administrative overhead expenses are also estimated using a
flexible budgeting formula. (Activity is measured in units sold.) Finance charges and bad
debts are included in the figures provided and do not need to be identified separately in
the selling and administrative overhead expenses. Details are provided in the data list.
Other information provided the assignment data list are:
• The unit selling price of the propeller.
• The cost of land to be purchased in February. The company plans to purchase the
land for future expansion.
• The value and timing of dividends paid to shareholders.
• Sales are on credit and the cash receipts pattern for each month is provided, as is the
level of Accounts Receivable as at January 1.
• The payment for labour and purchases of materials and other costs are for cash and
paid for in the month of acquisition. There is no Accounts Payable amount for this
assignment.
• The cash balance on January 1.
If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed
to cover the shortage (including any interest payments due). Any cash borrowed is
repaid one month later, as is the interest due. The annual interest rate is provided with
the assignment data.
Required:
Prepare an operating budget for the first quarter (showing each month and totals for the
quarter) with the following schedules:
a. Sales budget
b. Production budget
c. Direct materials purchases budget
d. Direct labour budget
e. Manufacturing Overhead budget
f. Ending finished goods inventory budget
g. Cost of goods sold budget
h. Budgeted income statement (ignore income taxes and GST)
i. Cash budget
Note that whilst the Selling and Administration expenses must be included, there is no
requirement to provide a Selling and Administration Expense budget schedule.
Part B - Report on the impact of Cost Structures (20% of the assignment
assessment marks)
You are required to provide a report of approx 500 words or less (excluding attachments
and references), accompanied by relevant calculations, in MS Word, MS Excel and/or
PDF format (or combination) with each document lodged accompanied by the Relevant
Coversheet (provided). Using a Report style is recommended but not compulsory.
Rita Arthurs, the sales manager is discussing the possible outcome of the forthcoming
election with Paulo Farmer, the production manager. She noted that if one of the major
political parties wins the election and forms government, there is a strong possibility that
alternative energy sources such as wind-generated electricity may no longer be as
actively supported by the new government as is the case under the current government.
Rita’s primary concern is that the current market for alternative power generation
equipment is already volatile and subject to significant uncertainty. Paulo is also
concerned about his plans to build the new highly automated manufacturing facility on
the land to be purchased in February. This new manufacturing facility will enable him to
manufacture, in-house, the major two parts he is now purchasing for assembly and to
significantly automate the assembly process that is currently somewhat labour
intensive. His projections for the new facility indicate a reduction in direct material and
direct labour costs of 25% but that his fixed manufacturing overheads are likely to
increase by 50%due to the increased investment in production capacity.
Required:
Write a brief report addressing Rita’s concerns, using some of the concepts
covered in chapters (15, 16, 17, 20, 22, 23) in this unit, AND the information
provided from the completion of Part A of this assignment, and any additional
calculations using the existing data that you feel are relevant. Your report should
also include a discussion of the impact of Paulo’s intended investment in new
manufacturing capacity. Support your report with relevant calculations.
Note that you should restrict your report to those concepts specifically covered in
chapters 16 and 17 and more generally in chapters 20, 22 and 23 , and not discuss the
current political situation, environmental issues, or the marketing of alternate energy
sources etc. or other interesting but otherwise irrelevant issues.
Part C - Report on the Budgeted versus Actual Outcomes (20% of the assignment
assessment marks)
You are required to provide a report of approx 500 words or less (excluding attachments
and references), accompanied by relevant calculations, in MS Word, MS Excel and/or
PDF format (or combination) with each document lodged accompanied by the Relevant
Coversheet (provided). Using a Report style is recommended but not compulsory.
At the end of the budgeting period, Paulo Farmer, the production manager is reviewing
the actual outcomes (in particular the direct materials and direct labour) and comparing
these to the budget that was originally produced (in Part A).
The following data related to the actual results recorded after the end of the quarter by
Wittgenstein Pty Ltd, and are provided in the assignment data sheet:
• Actual Sales Volume for the quarter.
• The actual volume of direct materials used during the quarter (for each part).
• The actual cost of the direct materials used during the quarter (for each part).
• The actual direct labour hours used during the quarter.
• The actual cost of direct labour used during the quarter.
Paulo is confused by the outcomes. He is aware that the budget that was created
before the start of the quarter was a well considered and constructed estimate, and he
did not expect that the actual outcomes would be exactly as forecast. However he is
finding it difficult to understand the reasons for the differences.
Required:
Prepare a brief report to assist Paulo determine what might have caused the
differences between the original budget and the final actual outcomes.
Speculations of the causes are sufficient, provided they are supported by
relevant calculations taken from the data provided, and the budget produced in
Part A,. These calculations should be included in, and referred to, in your report.
Restrict your discussion to the changes related to direct materials and direct
labour. As Paulo is aware that budget estimates may be inaccurate at the time of
budget preparation, do not include this particular cause of difference in your
report.
Part D - Discussion on Participative Budgeting (20% of the assignment
assessment marks)
You are required to provide an essay or report of approx 500 words or less (excluding
attachments and references), accompanied by relevant calculations, in MS Word orPDF
format accompanied by the Relevant Coversheet (provided). The style of your essay or
report is not important provided your ideas, arguments and/or recommendations etc are
clear and understandable and properly referenced using a accepted reference
technique3
An effective budget converts the goals and objectives of an organization into data. The
budget serves as a blueprint for management's plans. The budget is also the basis for
control. Management performance can be evaluated by comparing actual results with
the budget.
Thus, creating the budget is essential for the successful operation of an organization.
Finding the resources to implement the budget - that is, moving from a starting point to
the ultimate goal - requires the extensive use of human resources. How managers
perceive their roles in the process of budgeting is important to the successful use of the
budget as an effective tool for planning, communicating, and controlling.
Required:
Discuss the behavioural implications of planning and control when a company's
management employs:
i. An imposed budgetary approach
ii. A participative budgetary approach
Illustrate your discussion with reference to your report to Paulo Farmer in Part C,
discussing how Paulo might respond to the various outcomes of Part C if the
budget had been imposed and contrast that with how he might respond (if
differently) had the budget been prepared using a participative budgetary
approach.
Assignment Preparation and Presentation (10% of the assignment assessment
marks)
You are required to present and lodge your assignment in a manner that complies with
the requirements set out in the Assignment Details and on Learnline. Requirements
would include such elements as layout, grammar, referencing, and various lodgement
details. Reports should be easy to read and understand, demonstrating good writing
skills.
A word limit has been suggested4 for parts B, C and D The suggested length is
provided so that you can gauge the extent of the work required. Marks will not be
deducted if you exceed the recommended length, however essays that significantly
exceed the recommended length will not be given any additional marks. A concise clear
answer will attract more marks than a long rambling one.