SQAHND财政预算34.docx

SQAHND财政预算34.docx

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SQAHND财政预算34

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’smaterialtotalvarianceis2000（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

ForDecember2011

Originalbudget

5000units

Flexedbudget

4500units

Actualresults

4500units

Variance

F/A

₤

₤

₤

₤

DirectMaterial

180,000

162,000

160,000

2000（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%