FREEAIR SKATE PTY LTD

Management Accountant Views

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OCTOBER 25, 2018

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Contents
Introduction ..................................................................................................................................... 2
Brief ................................................................................................................................................ 2
Factors to be considered in forecasting next year’s budget ...........Error! Bookmark not defined.
Boardlife’s proposal evaluation .....................................................Error! Bookmark not defined.
What is Activity Based Costing (ABC) and its Importance ..........Error! Bookmark not defined.
Variable Costing vs. Absorption Costing ......................................Error! Bookmark not defined.
Shifting of Maintenance Expenses and hike in Sales Commissions............ Error! Bookmark not
defined.

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Introduction
This paper highlights management accountant’s view with respect to several questions that

were noted while having a meeting of John Eustace, founder of Freeair Stake Pty Ltd, with Team.

Through this I, as Management Accountant at Freeair Skate, tried to answer the following:

1. Factors to be considered in forecasting next year’s budget

2. New prospective customer Boardlife proposal

3. Important of ABC analysis and if the same is suitable for Freeair

4. Importance of variable costing and absorption costing method

The report also give feedback with respect to views expressed regarding shifting of

maintenance expense to next year in order to save on costs. Further it also highlights

representations with respect to hike in sales commission for exceeding revenue target.

Brief
Preparation of budget lay down guidance for future strategy and performance of any

organization and thus it becomes essential that every organization spend considerable time, effort

and proper logic in preparation of budget. For preparation of budget Freeair Skate one need to

factor in assumptions around Australia’s economic growth, Government policy to impacting

(positive or negative) tourism in the country, and rise in level of wages and inflation. Sales target

should be set based on individual skillset; market intelligence should be captured by engaging with

ground sales Team in order to factor in customer feedback as well as competitive environment.

Past performance should be considered only after normalization to ignore abnormalities. Growth

expectation should be built-in by aligning it with production and labor capacity. Variance analysis

should be carried at regular interval in order to compare budget with actuals to accommodate

changes, if required, for subsequent period. Budget should also be built around different scenarios

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References
1. Linda Hanson, 2009, Six Factors For Effective Sales Forecasting, For Construcution
PROS.com
https://www.forconstructionpros.com/business/article/10292307/six-factors-for-
implementing-effective-sales-forecasting-methods
2. Miroslav Skoda, 2009, The Importance of ABC Models in Cost Management, Annals
of the University of Petrosani, Economics
https://www.upet.ro/annals/economics/pdf/2009/20090234.pdf
3. James Wilkinson, 2013, Absorption vs. Variable Costing, The Strategic CFO
https://strategiccfo.com/absorption-vs-variable-costing/

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