Budgeting in Management Skills Accounting Assignment

Assignment Task

This task gives you the opportunity to analyze accounting transactions and develop and apply management accounting skills that are useful in the preparation of budgets, an important planning tool for business. The assessment will be marked out 60 and converted to a mark out of 20.

Background

Rachel is encouraged by the preliminary 2023-2024 results for RB Agronomy. However, because of the anticipated growth of her business, Rachel realised that a more formal budget needs to be prepared for the 2024-2025 financial year. She has decided to increase her minimum Annual Service Contract fee to $5,500 per year, the one-off planning consultations to $950 and the standard farm consultation to $300. Rachel anticipates that her Annual Service Contracts will treble from 10 to 30, 10 of those coming from non-contracted clients in 2024. The current number of non-contractual clients is expected to increase to 35, and other non-contract farm visits will increase to 105, with an average of 3 follow-up visits for each non-contract consultation. The additional farm visits covered under contract will increase to an average of 10 per client.

Potential business changes in the 2024-2025 financial year

Rachel would like to replace the vehicle that was part of her owner's contribution to the business, which is currently used by the casual agronomist, with a second-hand hybrid SUV for her use. The vehicle that was purchased in March 2024 will then be used by the casual agronomist. She can purchase a 2021 Toyota Kluger locally for $55,000.

Also, Rachel is contemplating employing a recent graduate, initially part-time for three days per week, so she can spend the next two years completing a Graduate Diploma of Environmental Management. Potentially, that could be extended by a year to complete the Master of Environmental Management. If this is the case, the existing vehicle will be kept for the casual agronomist, and the new agronomist will use the vehicle she currently uses. Since her initial request for budgeting help, Rachel has researched pay scales for a graduate agronomist and has decided to pay $42,000 to a graduate agronomist for 2024/2025, if she goes ahead with her plans.

Prepare the following static budgets for every month, from July 2024 to June 2025:

1. Sales budget

2. Operating expenses budget

3. Budgeted Income (Profit or Loss) Statement

4. Schedule of expected cash receipts

5. Schedule of expected cash payments (variable and fixed monthly expenses only)

6. Cash budget

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