Question 1Problems with setting up Sales Budget

Budgets are time consuming and expensive Budgets provide poor value to users Budgets fail to focus on shareholder value Budgets are too rigid and prevent fast response Budgets protect rather than reduce costs Budgets stifle product and strategy innovation Budgets are divorced from strategy Budgets reinforce a dependency culture Budgets lead to unethical behaviour

Problems with setting up a Production Budget:Production budget is not translating its production requirements into pound sterling. It only deals with unit volumes and cannot estimate the quantities’ of each product. In order to change this into pounds, the production budget would have to be moved into different parts such as direct labour budget and direct materials budget.

Question 2Explain the advantage and disadvantages of break-even analysis to a businessBreak-even analysis is crucial for people considering launching new products. If it is used correctly, it can help companies determine what products to develop and which to table. Doing a break-even analysis makes it possible for people to calculate their costs as accurately as possible, this can lead to helpful insights.

Advantages After break even you know you will start making a profit if your business continues to

improve. At break in you know your assets equal your expenses so you know your bills have been

paid. Disadvantages

Break even charts can be time consuming to prepare. It can only apply to a single product or single mix of products. However, after all breakeven point has no irreparable disadvantages, as it simply is the point

where a business breaks even.

1. 4000 units2. A. £30000 B.£600003. A. £18000 B.£810004. A. £9000 B.£18000 C.0

Question 4In total, there have not been significant changes, as the total cost per unit is still the same and the rest of the costs reduced by 5% at the same time. The reason of this is that the output catches up with the fixed cost while the fixed cost is decreasing, it will allow the fixed cost to spread.

Question 5

SeptemberIn September the company received 101,280 but the total payments were 204,000, because of the 10,000 balance before the company was in 92,720 in debt.

Assignment 3 – Tornike Khakhishvili

OctoberThe cash receipts went up to 124,720 and the payments went down to 148,000 but because of the debts from last month, their debts went up to 116,000.

NovemberIn November, cash receipts have increased to 183,360 and the expenses have dropped down to 142,000. The sales were more than the payments. This has helped the company to pay off their debts from the last two months but there still were 74,640 in debt.

DecemberIn December, the total receipts were very good. They made 214,240 and had only 130,000 of payments. The company could pay off the debts from the last months and also made a profit of 9,600.

How to improve Cash flowIn order to improve the cash flow of the business there are some essential actions to take; first thing that has to be done is to make it really simple for people to pay you, Bank transfers are often the preferred method, but don’t forget cash, cheques, debit and credit card payments and money transfer services. Also keep a very close eye on payments and be aware of when payments are coming into your business helps you stay on top of your cash flow. In addition to maximize the safety of the business you also should consider following tips: offer discounts for early payment, formalise and implement a proper credit policy, extend your payment times, get better at managing your stock. And always make sure you have a backup plan, sometimes businesses run into cash flow problems through no fault of their own, so it’s always wise to have a source of quick cash in case of emergency. Plan ahead and identify resources such as credit cards, factoring, loans and various other funding options.

Assignment 3 – Tornike Khakhishvili