You own a small services business.    Manage finances within a budget It is the middle of Month 2 of your financial year and your accountant has just given you the results for Month 1 – the latest revenue forecast for Month 3 (next month)

Assessment task 2:  Manage finances within a budget

Instructions to Students

Your assessor will break the class into groups. You are to discuss the case study and work through this assessment answering the questions using the information provided.

Activities:

  • Case Study
You own a small services business.  It is the middle of Month 2 of your financial year and your accountant has just given you the results for Month 1 – the latest revenue forecast for Month 3 (next month).

Months vs. Profit/Loss Month 1 Month1 Month 2 Month 3
Budget Actual Budget Budget
Revenue $50,000 $45,000 $50,000 $37,500
Purchases 22,000 20,000 22,000 16,700
Advertising 500 2,000

500

500 500
Cleaning costs 500 500 500                     500
Office supplies 2,000 1,750 2,000 1,050
Repairs & Maintenance 1,000 3,000 1,000 1,000
Telephone and postage 1,500 1,000 1,500 1,000
Wages & on-costs 10,000 10,000 10,000 10,000
Profit (or Loss) $12,500 $6,750 $12,500 6,750

 

  1. Refer to the table on the above page and discuss with your group the changes you feel might exist for the favourable or unfavourable variances for actual to budget for month 1?
 

Months vs. Profit/Loss Month 1 Month1 Variance Favourable/
Unfavourable
Budget Actual
Revenue $50,000 $45,000 $5,000 U
Purchases 22,000 20,000 $2,000 F
Advertising 500 2,000 -$1,500 U
Cleaning costs 500 500 $0 No
Office supplies 2,000 1,750 $250 F
Repairs & Maintenance 1,000 3,000 -$2,000 U
Telephone and postage 1,500 1,000 $500 F
Wages & on-costs 10,000 10,000 $0 No
   
   
Profit (or Loss) $12,500 $6,750 $5,750 U
  1. In what areas do you feel corrective action may be required?