BSBFIM501 Manage Budgets and Financial Plans

Task 3

Role

You are the Senior Accountant. As part of your role, you will need to complete the following four activities.

Activity 1

As you are aware, one risk to the strategic plans of Big Red Bicycle (BRB) is bad debt and poor cash flow due to large trade debtors balances. Consider the following:

• according to its policies, Big Red Bicycles offers 30 day terms to debtors
• currently, BRB does not train sales staff on credit terms
• there is currently no enforcement of credit terms
• warehousing of stock is expensive at current leased premises
• many bicycles need to be thrown out if parts rust; this problem exacerbates the problem of waste expense.

You have the following information from the Statement of Financial Position and current ledger accounts in the electronic accounting system (MYOB AccountRight).

Activity 2

In addition to its Australian business, Big Red Bicycles is considering manufacturing a new range of cheaper bicycles in Indonesia. The following information is available:

• the Indonesian plant has capacity to manufacture 8000 units
• Big Red Bicycle’s strategic goal is to generate a pretax profit of $1,000,000 for the next financial year for Indonesian operations
• clients will pay a maximum of $500 per bicycle
• possibility exists for move to Indian plant with capacity for 10,000 units
• market for bicycles is growing rapidly and BRB will be able to sell everything produced
• limited ability to renegotiate costs with suppliers
• pricing and cost information is as follows.

Activity 3

Soon you will need to prepare a business activity statement (BAS) for the first quarter on 2016/17.

Activity 4

Choose one of the recommendations from Activity 1 or 2 and develop an action plan to implement and monitor the recommendation. Ensure you include appropriate activities, monitoring, timelines and accountabilities.