01 Jul BUDGETING INFORMATION
BUDGETING INFORMATION
The following information is provided to enable you to complete the above requirements.
Revenue
The following table shows a forecast of expected revenue
Month Expected Revenue
July-13 $8,000
August-13 $7,000
September-13 $8,500
October-13 $9,000
November-13 $12,000
December-13 $18,000
January-14 $20,000
February-14 $17,000
March-14 $15,000
April-14 $13,000
May-14 $12,000
June-14 $11,250
Revenue is collected COD. On average 1.8% or revenue is paid for merchant fees
Monthly costs and expenses
The expected average gross margin on sales is 35%.
Monthly cost and expenses change in accordance with the following functions:
Note, the cost of superannuation, workers compensation insurance and payroll tax is not included in the wages cost and expense functions presented below.
Item Fixed Variable
Wages $5,000 5% of sales revenue
Supplies $2,500 2% of sales revenue
Overhead $500 0.75% of sales revenue
Superannuation
Superannuation is nine percent of gross wages, salaries and commissions, paid quarterly in January, April, July and October and calculated over gross wages, salaries and commissions, incurred over the preceding three months.
Workers compensation
Workers compensation insurance is 3.5percent of gross wages, salaries and commissions, plus superannuation. The insurance is prepaid in January every year and estimated over expected wages for the full year.
Payroll tax
Payroll tax is 5.45 percent of gross wages, salaries and commissions plus superannuation., in excess of the below monthly threshold.
Days in month Threshold
29 $53,721
30 $55,574
31 $57,426
It is paid monthly on the 7th day of the month and calculated over gross wages, salaries and commissions, incurred over the previous month.
Depreciation
Depreciation on supplies of $380 per month and overhead of $600 per month is included as part of the above functions.
Other costs and expenses
Thirty percent of gross wages cost is for on-costs; the remainder is for the base rate, i.e. money paid to staff at the end of each week. Payments for labour on-costs are made during the month following that in which gross wages costs are incurred. Payments of thirty percent of supplies and fifteenpercent of overhead are made in the month of purchase. The remainder is paid during the following month.
It is expected that as from 1st January 2013, fixed cost and expenses (except for depreciation) will increase by 25percent.
Cash balances and bank interest
The minimum acceptable cash balance at the end of each month is $35,000. You may invest surplus cash in the short-term money market (for a minimum period of one month) earning 4.85percent interest per annum. Overdraft interest, instead, is 11.00percent per annum calculated monthly on the balance owing at the beginning of the month.
Loans and Lease payments
You currently have a loan for your workshop premises of $600,000. The loan for your premises ($600,000) is to be repaid in monthly instalments over a 10-year period on the last day of the month starting on 31stJuly 2013 at 8.00percent per year interest.
You decide to finance fit-out and equipment by hire purchase (the value of the HP is $70,000). The hire purchase facility requires monthly repayments of $2,200 over a period of 4 years (48 months) and a balloon payment of 20percent of the full costs and the end of the four-year period. The hire purchase facility will be drawn on 1st July 2013 and all payments are made on the last day of the month (the first repayment of $2,200 is due on 31st July 2013).
The fit-out and equipment will be depreciated on a straight line basis over a seven year period.
GST
The GST rate is ten percent. You charge GST on all revenue and pay GST on business inputs as follows:
• COGS: 100 percent of the cost incurred.
• Supplies: 80 percent of the cost incurred less depreciation
• Overhead: 95percentof the cost incurred less depreciation
• Merchant fees: 100percentof the cost incurred.
The difference between GST charged on goods sold and GST on business inputs (either paid or on credit) during any one month will be remitted to the taxation office (or claimed as a refund) by the 28th day of the following month. (NOTE: ignore the GST effect on the construction costs).
Dividends and proprietor drawings
Payments for dividends and/or proprietor drawings of $4,000 each will be made during the following months: August 2013, October2013, December 2013, February 2014, April2014, June 2014.
Tax
The business tax rate is thirty percent.
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