Apply the budget function
in a business unit
US IS 13941
Learner Formative Assessment Workbook
1|Page
Formative Assessment 1
Increase the amount of the sales for 2004 by 10% for every month
NO
MONTH
1.
March
2.
April
3.
May
4.
June
5.
July
6.
August
7.
September
8.
October
9.
November
10.
December
11.
January
12.
February
TOTAL
SALES
R
2|Page
Formative Assessment 2
Simon Ndlovu is going to open a small café near his home. His market research suggested that
there are two hundred families living near his shop. When he spoke to them, one hundred and
twenty families said they would buy from him. He will be open 7 days a week. He thinks that
in the first month, eighty families will buy. In the second month, one hundred families, and
from the third month, one hundred and twenty families will buy from him. Each family will
spend R10 per day at the shop. He will start his business on 1 March 2003.
What will his sales budget be for twelve months?
Month
No of Families
Amount per Day
Month
March
April
May
June
Formative Assessment 3
July
August
September
October
November
December
January
February
TOTAL
Listed on the following page are many of the expenses and payments that are found in most
business.



Tick the ones that you think you will have in your business.
Estimate how much per month you will spend.
Add them up to get a total monthly expense budget.
3|Page
Expenses and Payment Budget
Expenses
Tick (√) if in my
business
Monthly Amount
R
Advertising and promotions
Bank charges
Cleaning materials
Commission to sales people
Electricity/gas & water
Insurance: Vehicles equipment, stock
Interest on Loan/Lease: Vehicles
Interest on Loan/Lease: Equipment
Interest on Loan: Start-Up
Postage
Printing & Stationery
Refreshments
Repairs: Vehicles
Repairs: Equipment
Rent
Salaries: Owner
Salaries: Staff
Telephones
Vehicle Expenses: Petrol & Oil
Wages: Staff
Wrapping & Packaging
Other:
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Other:
Expenses Payable
Add Depreciation on Capital Goods
TOTAL RUNNING EXPENSES:
Payments
Loan / Lease Repayment: Vehicle
Loan / Lease Repayment: Equipment
Loan Repayments: Start-up
Owner’s Loans
Savings: Replacements Capital Goods
Income Tax
VAT
Other:
Other:
TOTAL PAYMENTS:
5|Page
Formative Assessment 4
Mr Sipho Dhlamini has a small hardware store. His budget for July is as follows:
Sales
R8 000
Purchases
R2 000
Expenses
R5 000
What profit does he expect?
Sales
R
Less: Purchases
R
Difference
R
Less: Expenses
R
Expected Profit
R
Formative Assessment 5
Refer to the completed budget management report for 2003 and answer the following
questions:













What were the budgeted sales
What were the actual sales
Were the sales over or under budget
By how much
What were the budgeted purchases
What were the actual purchases
Were the purchases over or under budget
By how much
What were the budgeted expenses
What were the actual expenses
Were the expenses over or under budget
By how much
Did the business still make a profit
6|Page
Budget Management Report
Month
Year
Sales
Purchases
Expenses
Budget
Actual
Over
Under
Budget
Actual
Over
Under
Budget
Actual
Over
Under
1
March
2003
4 000
3 600
-
400
2 000
2 100
100
-
1 500
1 800
300
-
2
April
2003
5 000
4 200
-
800
2 500
2 100
-
400
1 000
1 100
100
-
3
May
2003
6 000
5 100
-
900
3 000
3 000
-
-
1 000
1 100
100
-
4
June
2003
6 000
6 300
300
-
3 000
3 000
-
-
1 000
1 100
100
-
5
July
2003
6 000
7 000
1 000
-
3 000
3 000
-
-
1 000
1 200
200
-
6
August
2003
6 000
7 000
1 000
-
3 000
3 400
400
-
1 000
1 200
200
-
7
Sept
2003
7 000
7 500
500
-
3 500
4 000
500
-
1 000
1 200
200
-
8
October
2003
7 000
6 500
-
500
3 500
4 000
500
-
1 000
1 300
300
-
9
Nov
2003
7 000
8 000
1 000
-
3 500
4 000
500
-
1 200
1 500
300
-
10
Dec
2003
8 000
8 000
-
-
4 000
4 100
100
-
1 300
1 600
300
-
11
Jan
2004
6 000
4 000
-
2 000
3 000
3 000
-
-
1 000
1 200
200
-
12
Feb
2004
7 000
6 000
-
1 000
3 500
3 000
-
500
1 000
1 200
200
-
75000
73200
-
1 800
37500
38700
1 200
-
13000
15500
2 500
-
Total
Budget Management Report (example)
Month
Year
Sales
Budget
1
2
3
4
5
6
7
8
9
10
11
12
Total
Actual
Purchases
Over
Under
Budget
Actual
Over
Expenses
Under
Budget
Actual
Over
Under
Budget Management Report: Monthly expense report
March 2003
Payments and
Expenses
Budget
Actual
Over
Under
1
Vehicle Licence
R54
R54
-
-
2
Vehicle Loan
R300
R300
-
-
3
Petrol
R200
R250
R50
-
4
Owner’s Salary
R600
R600
-
-
5
Wages
R346
R596
R250
-
1 500
1 800
300
-
6
Totals
Budget Management Report: Monthly expense report (example)
Payments and
Expenses
1
2
3
4
5
6
7
8
Totals
Budget
Actual
Over
Under
Formative Assessment 6
Description of issue:
A problem analysis was conducted on the low performance of officials in a Municipality.
The lack of effective performance management skills was selected out of many root
causes and symptoms from the problem analysis. Two solution strategies were identified
to address this root cause: performance management training by the Municipality or
performance management training by an external provider.
Task:
 Consider the cost-benefit analyses below. You are welcome to add or contest any of
the points reflected in the cost-benefit analysis.
 Determine which solution you would select. Justify your response.
Solution 1: In-house Performance Management training conducted by a Municipality
Tangible
Intangible
R2 000 for catering
Learning programme not accredited
Cost of printing the learning
materials (R1 000)
Staff reluctant to attend as might
perceive the Municipality’s facilitator
as not being sufficiently experienced
Time to develop learning materials
Costs
Costs /
Benefits
Availability of qualified staff to
develop the learning materials and
facilitate the learning programme
Benefits
Easier for participants can be called
out of training to attend to urgent
matters
No cost for venue and facilitator
Development of internal expertise
Internal facilitator understands the
needs and problems of the
Municipality
Staff consider it convenient to be
trained in the Municipality’s venue
Reduce reliance on external
providers
Solution 2: Performance Management training by an external provider
Costs /
Benefits
Tangible
Benefits
Costs
Cost of an external provider
(R4 000/participant including venue
and meals)
Intangible
External provider might not
understand the needs and problems
of the Municipality
Cost to travel to the venue
Learning programme is accredited
Staff might perceive the external
provider as being more of an ‘expert’
than a trainer from the Municipality
Learning materials are already
developed and can be customised
Participants cannot be as easily
distracted by colleagues if trained
off-site
External provider can share best
practice from other Municipalities
Formative Assessment 7
Work out a budget for an end of year function for your organisation.
 Find out how much money will be available
 Find out which items have to be included in the budget – what the expenses will be
 Find out what the actual cost of the items will be
 Complete a budget. Use the blank budget in the learner guide as a guide.
 Draw up a monthly expense report as per the example in the learner guide
Formative Assessment 8
 How will you know if you are over- or under spending on the budget for the end of
year function?
 What can you do about the possibility of over spending?
Formative Assessment 9
Define standard cost
Calculate the following variances:
 Material Price Variance: Timber
 Material Quantity Variance: Timber
 Material Price Variance: Steelplate
 Material Quantity Variance: Steelplate
 Wage Rate Variance
 Overhead Variances
Explain the variances