财政详细预算.docx
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财政详细预算
Contents
1.0Introduction
Thisreportwilldividedintotwoparts.PartAandPartB.InPartA,Firstofall，Iwillprepareaflexedbudgetinlinewithactualactivity.Second，thiswillincludingtheMaterialsvariances，Labourvariancesandtotaloverhead.Atthesametime，Iwillidentifyaminimumofonepossiblecauseoftheeachvariance.Finally，accordingtodataanalysis，therehavebeensomerecommendationstomanagementofMatteckPLC.InPartB，ItwillhavefourdifferentwaystoevaluatefinancialperformanceandgiverecommendationsforMatteckPLC.ThesewaysareARR,Payback，NPVandIRR.
PartA
2.0Theflexedbudget
ForFlexbudgedofMatteckPLC，wecanseetheAppendix1.
3.0CalculatetheMaterialsvariances，LabourvariancesandtheTotaloverhead.
3.1Directthematerialsvariances，labourvariancesandthetotaloverhead.
ThissectionshowstheAppendix2.
3.2Varianceanalysis.
Materialpricevariance:
Thematerialpricevarianceis₤32,000（F）.Accordingtothedataanalysis，itis₤2/kglessexpensivethanplanned.Thepossiblereasonscanbedividedintothreepoints：
first，theycouldreplacerawmaterials，usingalower-gradematerial.Second，thesuppliertoprovidesomediscountforthisbatchofrawmaterials.Finally，learnfromthecase，thecompanyhasmanagedtolocatenewmaterialsfromanoverseas.Duetotheproductfromoverseas，accordingtodifferentexchangerate，thematerialwillreducetheprice.
Materialusagevariance:
Thematerialusagevarianceis₤30,000（A）.Thepossiblereasonsincludetheeffectsofrawmaterialsandtheinfluenceofthemachine.Ifthecompanyusingpoorqualityrawmaterials，itmaybemoredifficulttowork.Thiswillincreasethewastematerials.Atthesametime，thecaseshowsthatthecompany'snewmachinerycanbefullyusedinthesecondweek.Thedelaytimemayhavecausedthemachinetousemorematerialsthanplanned.
Materialtotalvariance:
Thematerialtotalvarianceis2,000（F）.Caseshowsthatthecompany'srawmaterialsarefromoverseassuppliers.Thiswillreducesomecosts.Whichleadstothematerialpricevarianceis32,000（F）.Ontheotherhand，thecompanyhasintroducedanewmachine，theinfluenceofmachineinstalledtime，causedsomewastedofmaterials.Thismakesthematerialusagevarianceis₤30000（A）.EvenifThecompany’smaterialtotalvarianceis（F）.Thecompany'smanagementstillshouldpayattentiontoTheutilizationofrawmaterials.
Labourefficiencyvariance:
TheLabourefficiencyvarianceis10,000（F）.Thepossiblereasonscouldincludethenewmachinetoimprovestaffworkefficiency.Usingnewmachinecanlesslabourhours.Atthesametime，thecaseshowsthatthecompanyhashadtoemploymorehighlyqualifiedstaff.Theycanincreasetheworkingefficientlythroughthehigherskill.
LabourRateVariance:
TheLabourratevarianceis15,000（A）.Throughthecalculation，thelabourrateis₤1.50perhourhigherthanoriginal.Thepossiblereasonsis₤1.50perhourhigherthanplanned.Thecostofdirectlabourisadversenessforthisfirm.
LabourTotalVariance:
theLabourtotalvarianceis5,000（A）.Thereasonsofvariance，thecompanyhasintroducedthenewmachine，Astheresultthedirectlaborefficiencyvarianceisfavorablewhichis10,000（F）.Onotherhand，thelabourrateishigherthanstandardlabourrate.Finally，leadtothelabourtotalvarianceisadverse，
4.0Therecommendationsformanagement（variances）.
1.Thecompanyshouldbehadavarietyofdatainvestigationtosetupcompletedatasystem.Atthesametime，throughthedifferentvariance，thecompanycanknowmoreaboutthemarketinformation.
2.Thecompanyshouldintensifytheperformancemonitorforstaffbecausethelowerperformancewillacceleratewasteofmaterialandthenleadtothematerialusageisincrease，theperformancemonitorcanhelpthecompanyshrinkthevariance.
3.Management：
thecompanycanprovidesomemotivationpoliciestomotivatethestaffthatisworkhardandenhancetheworkenthusiasticofthestaff.Thiscanimprovethestaffworkefficiency.
PartB
5.0Usingfourdifferentmethodstoevaluatethefinancial.
5.1Identifytheaccountingrateofreturn.
ARR
Averageprofit=
=660,000
Accountingrateofreturn=
=26.4%
Thecasesshowthatthecompanyshouldhaveanaccountingrateofreturnofatleast15%，throughcalculation，theARRis26.4%.Therefore，thedatahasmeetcompanystandards.
5.2Identifythepayback.
Thecompanyhopestorecoverthecostoftheinvestmentwithin4fouryears.Infact，theyjustuse3years341days.（seeAppendix3.）
5.3IdentifytheNetpresentvalue.
TheNPVmethodcalculatesthepresentvaluesofcashinflowsandoutflowsandestablisheswhether.Basically，NPVprovidesanobjectiveforevaluatingandselectinginvestmentprojects.Moreover，ittakesintoaccountrequiredrateofreturnofcompanyandthentakesintoaccounttimevalueofmoney.Buttherearesubstantialuncertainlyfactorsinourworld.Forinstancetheinflationanddeflation，theexchangerate.
WhentheMatteck’scostofcapitalis10%.TheNPVis（46200）.TheNPVvaluelessthan0.Thecompanyshouldnotinvestthisproject.（seeAppendix4.）
5.4IdentifytheInternalrateofreturn.
Whenthepresentvalueis5%，theinternalrateofreturnis9.39%.Whichlessthan10%ofcompanystandard.therefore,thecompanyshouldnotinvestthisproject.
（seeAppendix5）
6.0Recommendationsforinvestmentdecision.
1.Accordingthefourmethod，TheARRandPaybackarebothimplementforthisproject，buttheNPVandIRRarenotimplementedforthisProject.Inthiscase,thecompanyshouldfocusontheNPVandIRR.
2.Bycalculatesthenetpresentvalues，itseemsthatthedeficit，whichmeansthattheannualcashflowsarenotenoughtoallowmoreinteresttobedeductedandstillrepaytheoriginalinvestment.Thisinvestmentisunworthy.
3.Withinfiveyears.Allthemarketfactorsarechangeable.Theinformationwillhavedifferentchange.Andtherearemaybesomeothersituationsoccurred.SotheMatteckPLCshouldnotconcernwiththeproject.
7.0Conclusion
Thereportcanhelpthecompanymaketheflexbudget，andthenbyvariancesanalysisandusethefourmethodstoevaluatethefinancial.Throughtherecommendationscanhelpthecompanychoosethebestinvestmenttogainthemaximumprofits.
8.0Appendices
8.1Appendix1
MatteckPLCFlexedbudget
ForDecember
Originalbudget
5000units
Flexedbudget
4500units
Actualresults
4500units
Variance
F/A
₤
₤
₤
₤
DirectMaterial
180,000
162,000
160,000
（F）
DirectLabour
100,000
90,000
95,000
5000（A）
VariableOverheads
50,000
45,000
47,500
2500（A）
SupervisionCost
3,300
3,300
3,400
100（A）
RentandRates
1,000
1,000
1,200
200（A）
AdministrationOverheads
2,000
2,000
2,100
100（A）
Depreciation
3,000
3,000
3,000
0
Total
306,300
312,200
5,900（A）
8.2Appendix2
8.3Appendix3
Payback
Capitalcost₤2,500,00
Year1₤500,000
Year2₤600,000
Year3₤700,000
Year4₤750,000
Year5₤750,000
Total₤3,300,000
Payback=3year+
×365days
=3year341days
8.4Appendix4
Year
Annualcashflow
Presentvalue
Factorsat10%
Present
Value
₤
₤
₤
₤
0
（2,500,000）
1,000
（2,500,000）
1
500,000
0.909
454,500
2
600,000
0.826
495,600
3
700,000
0.751
525,700
4
750,000
0.683
512,250
5
750,000
0.621
465,750
2,453,800
NPV
（46,200）
8.5Appendix5
Year
Annualcashflow
Presentvalue
Factorsat5%
Present
Value
₤
₤
₤
₤
0
（2,500,000）
（2,500,000）
1
500,000
0.952
476,000
2
600,000
0.907
544,200
3
700,000
0.864
604,800
4
750,000
0.823
617,256
5
750,000
0.874
588,000
2,830,256
NPV
330,256
R=10%NPV=（46200）
R=5%NPV=330256
IRR=5%+
×5%=9.39%
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