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# InTech Institute of Technology – Manage Finances and Budgets

InTech Institute of Technology – Manage Finances and Budgets
? Identify reasons (operational variables) for a business to business sales person (eg.
manufacturer’s rep selling to retailers) not achieving sales targets.
? Commission paid to sales staff is a great way to minimise cost for any business, however
there is drawbacks, discuss the drawbacks of paying only commission.
? Explain if policies and procedures will assist a business (eg. suppliers and manufacturers) to
minimise operational costs such as staff expenses.
? Identify all the operational costs for a company (According to Federal legislation-for example
taxes) when employing staff members as casuals, part- timers or full time staff.
Calculate stockturn for a Pharmacy business if:
Total sales for the year = \$ 2 000 000
Average inventory at retail prices = \$ 250 000
Benchmark = 7- 8 (depends on the demographics of the market and the marketing
proposition of the pharmacy)
? If the stockturn of a business is very high for example the dairy with a stockturn of 95 x then
it means the dairy is a low-margin, high stockturn business. Discuss the advantages and the
? Develop strategies a business can implement to reduce stock that is not selling in a business.
(Reducing “creeper” cost).
©InTech Institute of Technology – Manage Finances and Budgets 2 | P a g e
? Give examples of types of businesses that stock un-productive products because their target
market expect them to have it in stock as part of their product range. If they do not stock
these products then the possibility is great that sales in the business might decrease. ( True a
business does not want to stock un-productive items(cost to the company) but if the
business does not have these products on their shelves then it might influence the image
Calculations:
Average stock at retail prices: \$500 000.00
Total sales: \$ 2 000 000.00
Calculate stock turn:
Calculate Monthly stock turn
Calculate: Ideal stock value for January – August
Month Stock Budget Sales
January \$ \$ 100 000
February \$ \$ 95 000
March \$ \$ 100 000
April \$ \$ 110 000
May \$ \$ 120 000
June \$ \$ 160 000
July \$ \$ 155 000
August \$ \$ 175 000
September \$ 606 061 \$
October \$ 621 212 \$ 167 000
November \$ 848 485 \$ 167 000
December \$ 909 091 \$ 167 000
\$
Average stock
\$
Total sales
*** Take into consideration rounding errors
?
?
©InTech Institute of Technology – Manage Finances and Budgets 3 | P a g e
Calculations:
Income statement of Pricewise Sports equipment
For the year ended 30 June 2007
Turnover (sales) \$ 2 000 000
Less: Cost of goods sold \$ 1 000 000
Gross profit \$ 1 000 000
Less: Operating expenses \$ 750 000
Net profit before interest and tax \$ 250 000
Less : Interest \$ 50 000
Net profit before tax \$ 200 000
Less: company tax \$ 96 000
Net profit after tax \$ 104 000
Less Dividends \$ 44 000
Retained income \$ 60 000
? Calculate the average mark-up of the goods in this business.
? Calculate the gross profit margin for Pricewise.
? Give some strategies the business can implement to reduce C-O-S ( cost of the goods)
? If the Gross Profit Benchmark for this type of business is 40 %, discuss if this business is in
trouble?
? Explain if it is more important to monitor and manage sales targets (turnover) or is it better
to monitor and manage costs of the goods/services you sell.
? If the business wants to change suppliers (decrease in cost) why is it important to have
business policies and procedures in place to assist with this process?
? Calculate the net profit margin before taxes for this business.
? Indentify internal variables in the business that can decrease the net profit margin of this
©InTech Institute of Technology – Manage Finances and Budgets 4 | P a g e
Written report:
? Explain how benchmarks or industry standards can help the business to keep expenditure
under control.
? Indentify and list procedures in a business that will assist the business to develop an
accurate income statement for the business. (You can go line per line)
Calculations and written report:
Budget: Pricewise sporting equipment supplying to retail business
Budget (forecasted) Actual Var Budget (forecast) Actual Var
2007 2008
SALES
Product 1 \$ 650,000 \$ 700,000 8% \$ \$ 700,000
Product 2 \$ 350,000 \$ 300,001 -14% \$ \$ 300,000
Product 3 \$ 555,000 \$ 650,000 17% \$ \$ 640,000
Total \$ 1,555,000 \$ 1,650,001 6% \$ 1,640,000
Cost of Goods \$ 700,000 \$ 810,000 16% \$ 990,000 \$ 1,000,000
Staff Cost
Salaries \$ 180,000 \$ 175,897 -2% \$ 190,000 \$ 200,000
Superannuation \$ 18,000 \$ 17,590 -2% \$ 19,000 \$ 20,000
Head Office charges \$ 15,000 \$ 15,000 0% \$ 15,000 \$ 18,000
Bonuses \$ 50,000 \$ 20,000 -60% \$ 50,000 \$ 45,000
Sub Total \$ 263,000 \$ 228,487 -13% \$ 274,000 \$ 283,000

Travel
Car Hire \$ 800 \$ 900 13% \$ 90 \$ 1000,00
Accommodation \$ 1,900 \$ 2,500 32% \$ 2,000 \$ 2,000
Flights \$ 21,000 \$ 22,530 7% \$ 25,000 \$ 30,000
Local taxi \$ 40 \$ 120 200% \$ 170 \$ 0
Sub Total \$ 23,740 \$ 26,050 10% \$ 27,260 \$ 33,000
Total operating costs
Net profit before taxes
©InTech Institute of Technology – Manage Finances and Budgets 5 | P a g e
*** Note: Rounding of variances.
Var = Variance or performance gap
Forecast the sales for: (budget for 2008- forecast the sales for this business)
? Given=Product A, B and C: Budgeted sales for 2008 are based on half the variances between
the budget- and the actual income (sales) for 2007. Use the budgeted sales of 2007 as the
base (starting point) to forecast sales for 2008.
? Calculate total sales. (forecast)
? Calculate gross profit.(Budget and actual for 2008)
? Calculate the gross profit margins (Budget and actual for 2008)
? Calculate the net profit before taxes (Budget and actual for 2008)
? Calculate the net profit margin for Pricewise (Budget and actual for 2008)

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