HND财政预算report.docx

HND财政预算report.docx

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HND财政预算report

Content

1.Introduction

ThisreportforTricolplcwhichisnowconsideringthedevelopmentofitsowndistributionarminvolvedtheinterrelatedissueabouttheinvestmentappraisal.Itincludes4parts,assumptions,applicationofpaybackperiodandNPV,evaluationandrecommendationandotherfactorstobeconsidered,whichcouldhasimportantsignificanceforassessingtherationalizationofinvestment.

2.TricolPlcFlexedbudged

ItshowstheAppendix1.

3.Thecalculationofthevariancesandthevariancerate

ItshowstheAppendix2.

4.Varianceanalysisandreport

ConsideringthepolicyofTricolplc,thecriterionthatneedtoanalysethevarianceismorethanarateofsignificanceof3%,asaresult,itneedtoanalyseallvariances.

Basedontheinformationabove,thevarianceofthiscompanyisadverseinJune,therearesomereasonswhichcausedofthissituation,includingthesebelow:

●BasedontheupgradedtheproductionmachineryofTricolplc,itimprovedthematerialusagewhichcansavinglargeamountofmaterialofabout800kg.Atthesametime,duetoemployeesofthecompanywhocannotoperatethenewmachinesmasterlytoproduceaproduct,thenthetimeofproduceaproductswillrequiremorethantheoriginalhoursfor12minutes,thetimechangesfrom3200hoursto3520hours.Thechangeableofthemachinehavemadesomeadverseresultforthecompany.

●AccordingtoswitchedsuppliersofTricolplccurrently,itisusingthehigher-gradematerialnow,moreoverthematerialpricemustincreasefromoriginal￡10perkgto￡11perkg.Butthehigher-gradematerialcansavetheamountforthisproducts,eventhepriceforontunitisincreased,thecostofdirectmaterialisstillfavorableforthiscompany.

●Withtheupdatedmachines,thiscompanyneedtoprovidethehighergradeworkforcesandemployeedhigher-gradeemployees.AlsoTricolplchasrecentlyconcludedahigher-than-expectedwagesettlementforproductionoperations.Thatmadethelabourratebecome￡10perhour,whichishigherthanstandardlabourratefor￡1perhour.Inaconclusion,thecostofdirectlabourisadverseforthiscompany.

●Seeingonoverhead,causedbythedifficulttradecondition,thiscompanyneedtopaymuchmoremoneyonproducts'promotion,andtheinsuranceisrising.Thesereasonsmustcausedinsurancecostandadministrationcostincreasedfor￡200,sothiscompanywillhas￡400adverse.

5.Recommendation

Tosumup,thecompany'sactualspendingismuchhigherthanthestandardspending,inordertochangethissituation,ithassomerecoomendationforTricolplc.

●Improvethelabourefficiencymaybeagoodsolutionfortheadversesituation.Becausethevarianceofdirectlabourismainproblem,andtheemployeesspendmuchmoretimetoproduceaproduct.Asaresultthiscompanycanprovidesometrainingclassesforthemtoimprovetheirskillandknowledgeaboutusingupgradedmachinesandmaterials,thentheycanoperatethenewmachinerieseasilytosavethetimeandmoney.

●Useinferiorqualitymaterials.Becausethehighpriceofthehighqualitymaterialwillleadthiscompanycannotachievethetargetstandardforthedifficulttradecondition,whichmayresultinalargenumberofstocksandthenthecashflowwillappearedsomeproblemtoo.

●Reducelabourrate,thiscompanycanemploysomelowergradeworkforce,sothiscompanycanpayalowersalary,andmakeaplanforovertime.Alsothecompanycanprovidesomemotivationsystemtomotivatethestaffwhoareworkhardandtheworkenthusiasticofthestaffwillincrease.

Beforecalculatetheanswerweshouldsupposetheperiodofthisprojectisfiveyearsandithasnoothercashflowsexceptthis.Thenwedonotneedtoconsidertheexchangeofthematerialsandthetaxationfromgovernment.Herebelow,itwillgettheanswerintwomethods.

6.Analysisoftwoinvestmentappraisaltechnique

Assumption

Duringtheprocessofusingnetpresentvalueandthepaybackperiodmethod,theassumptionshouldbetakenintoconsideration,sothatwecaneasilytounderstandtheunderlyingprinciple.

Theassumptionisasfollows:

●Thelifeofthisinvestmentiswithinfiveyears

●Thereisnootherincomeorexpenditureintheinvestmentprojects

●Theinflationanddeflationdoesn’texist,andthereisnochangeinexchangerate

●Taxationbygovernmentcanbeexcluded

●Allthemarketfactorsarestable

●Uncertaintydoesnotexist.

●Theappropriatediscountratetouseisknown,toavoidunnecessarycalculations,whenundertakingDCFquestions,thediscountrateshavebeencomputedforyouandaregiveninthediscounttablesprovidedattheendofthisunit.

●Unlimitedfundscanberaisedatacompetitiverate.

7.Calculationofnetpresentvalue

ItisshowedbyAppendix3.

8.Calculationofthepaybackperiodmethod

ItisshowedbyAppendix4.

9.Recommendationforinvestmentdecision

Theanalysisoftwoinvestmentappraisaltechniques

Disadvantagesofthepaybackmethod

·Itignorescashflowsafterinitialoutflowhasbeenmet

·Itignoresrisk

·Itignorestimevalueofmoney

·Itignoresthefactthatbenefitsfromdifferentprojectsmayaccrueatanunevenrate

·Noallowanceismadeforinterestontheinitialcapitalinvestment.

AdvantagesoftheNPVmethod

·Providesanobjectivebasisforevaluatingandselectinginvestmentprojects

·Takesaccountofbothmagnitudeandtimingofexpectedcashflowsineachperiodofaproject’slife

Investorscannotuseasingleformulatocalculatetherateofreturn,theyshouldconsiderthevalueofthetime.

Inviewofthedatacalculatedabove,paybackwilltakefouryearsandone-and-halfmonthtocomplete,therefore,itseemstobereasonabletoacceptandinvestthiskindofproject.However,inothermethod,itisimpossibletofulfillarequirementofa10%return.Theactualrateofreturnmustbelessthan10%.

Takingthistwomethodsintoconsideration,firstly,netpresentvaluemethodsismoreaccuratethanpaybackperiodmethod,secondly,althoughitcannotrealizetheexpectedreturnin10%inthefirst5years,mainlybasingongrowingslowlyandlowreturnatbeginning,itmaybringahigherrevenueandpositivecashinflowinthefutureyears.

Personally,Ithinkwecanacceptthenewprojectforaperiodtime.

10.Considerationofotherfactorsthatmanagementshouldconsider

1.Theinvestor’sbeliefinthefuture,basedonforecastsofinternalandexternalfactors.

2.Whetherthecapitalissufficientornot.Ifnot,thecostofcapitalfinancewillinfluencethenetpresentvalue.

3.Theinvestor’sattitudetorisk,Theprofitoflongtermmaybemorepositive.

4.Thecostofhumanresourcemanagementshouldbeconsidered.Becausetheprojectofdistributionarmneedpurchaseofseveralnewmotorvehicles,andthisneedemployeetrainingarrangementandnewdepartmentestablished.

11.Conclusion

Asanadvisorforthecompany,thisreportcanhelpthecompanymaketheflexbudgetandvariancesandusethetwomethodstoanalysistheinvestmentandhelpthecompanychoosetheinvestmentmethod.Thiswillcompanymakemuchprofit.

Appendix1

TricolPlcFlexedbudged

Basedontheallinformationabout“Zupper”expendabletable,Idrawatableasfollowing:

TricolPLCFlexedBudget

forJune2009

Originalbudget2000units

Flexedbudget1600units

Actualresults1600units

VarianceF/A

￡

￡

￡

￡

Directmaterial

80000

64000

61600

2400F

Directlabour

36000

28800

35200

6400A

Variableproductionoverheads

4000

3200

3200

0

Insurance

2200

2200

2400

200A

Depreciation

1500

1500

1500

0

RentandRates

2500

2500

2500

0

AdministrationOverheads

2000

2000

2200

200A

Total

104200

108600

4400A

Appendix2

Thecalculationofthevariancesandthevariancerate

1.Directmaterialtotalvariance

（standardunitsofactualproduction×standardprice）–（actualquantity×actualprice）

[（4kg×1600）×￡10]–￡61600

=￡64000–￡61600

=￡2400（F）

Theratefordirectmaterialtotalvariancesis£2,400/£64,000×100%=3.75%

2.Directmaterialpricevariance

actualquantity×（standardprice－actualprice）

=5600kg×（￡10-￡11）

=5600kg×￡1

=5600（A）

Therateofdirectmaterialpricevarianceis£5,600/£64,000×100%=8.75%

3.Directmaterialusagevariance

standardprice×（standardunitsofactualproduction-actualunits）

=￡10×（4kg×1600-5600kg）

=￡10×800kg

=￡8000（F）

Therateofdirectmaterialusagevarianceis£8,000/£64,000×100%=12.5%

Note:

Whenaddingthepriceandusagevariancestheresultmustequalthetotalvariance.Therefore,￡5600（A）（price）＋￡8000（F）（usage）=￡2400（F）（total）.

4.Directlabourtotalvariance

（standardhoursofactualproduction×standardrateph）－（actualhours×actual

rateph）

[（2h×1600）×￡9]－（3520h×￡10）

=（3200h×￡9）－￡35200

=￡28800－￡35200

=￡6400（A）

Therateofdiretclabourvarianceis6400/28800×100%=22.2%

5.Directlabourratevariance

actualhours×（standardrateph－actualrateph）

3520h×（￡9－￡10）

=3520h×￡1

=￡3520（A）

Therateofdirectlabourratevarianceis£3,520/£28,800×100%=12.2%

6.Directlabourefficiencyvariance

standardrateph×（standardhoursofactualproduction－

actualhours）

￡9×[2h×1600－3520h]

=￡9×（3200h－3520h）

=￡9×320h

=￡2880（A）

Therateofdirectlabourefficiencyvarianceis£2,880/£28,000×100%=10%

Note:

Whenaddingrateandefficiencyvariancestheresultmustequalthetotalvariance.Therefore,￡3520（A）（rate）＋￡2880（A）（efficiency）=￡6400（A）（total）.

7.Overheadtotalvariance

（standardinsurancecost－actualinsurancecost）＋（standardadministration

overheads－actualadministrationoverheads）

（￡2200－￡2400）＋（￡2000－￡2200）

=￡200（A）＋￡200（A）

=￡400（A）

Therateofoverheadtotalvarianceis£400/£4,200×10