Assignment Part A
Question1: Preparing budgets – sales budget and cash collection schedule
Xavier is the manager of a national soccer club and has been asked to assist in the preparation of their sales budget for the year 2011. A total of 26 matches are played during the season and five scratch matches are played in the off-season. The club charges a $15 entry fee per person for seasonal games and a $10 entry fee for scratch matches. They also offer a membership package for $200 which entitles holders to attend all games played over the year. Membership packages are only available for purchase at the start of the year.
The number of tickets sold the previous year were as follows:
As the team won the league, the following assumptions have been made for the upcoming year:
– Memberships will increase by 5%.
– Attendance at scratch matches will increase by 3% in the 1st quarter and 1.5% in the 4th quarter.
– Season ticket sales will increase by 20% in the 2nd quarter and 15% in the 3rd quarter.
– The club has also decided to offer merchandise at each of the games at a cost of $5. Assuming all members attend every game, they expect 2% of all attendees to purchase merchandise at each of the games.
– Due to the nature of the business, all tickets and merchandise are paid for immediately. Of all season memberships, 90% are paid for in the 1st quarter with the remaining being collected in the next period.
Required: Based on the above information, prepare the sales budget and cash collection schedule for Xavier.
Question 2: Budget equation
The budget equation is “data + assumptions = projections”
– Data is factual information on past results.
– An assumption is a belief about the future.
– Future projections are made by using the data available and assumptions made about the future.
Classify the statements below as data, an assumption or a projection.
a. Next year we should have an increase in sales as trends show demand for our product to be increasing.
b. Last year our financial reports show we made a loss of $2320.
c. The market will become more competitive next year.
d. My husband won’t mop the floors tomorrow as he hasn’t done them the past 5 times I’ve asked.
e. We employed 100 new workers last year.
f. In 2010, Collingwood won the premiership against St Kilda in a grand final replay and are the favourites to win this year.
g. Interest rates will increase.
h. Today is pay day, so my wife will probably go shopping this weekend.
i. The cost of living has increased.
j. Adrian has an average of 85% in all his exams this semester, so he should pass the units he is studying.
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