HND财政预算报告outcome 1.docx

HND财政预算报告outcome 1.docx

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HND财政预算报告outcome1

BeijingInstituteofTechnology

SQAHNDAssignment

Tableofcontents

Introduction…………………………………………………………………….3

PartA…………………………………………………………………………….3

PartB…………………………………………………………………………….5

Conclusion………………………………………………………………………6

Reference…………………………………………………………………………6

Appendix…………………………………………………………………………7

Introduction

ThisreportisforTricolplcwhichmakesarangeoffurnitureandkitchenware.OneofthemostpopularproductsistheZupperexpandabletable.ItwilldosomevarianceanalysisinthePartA.Itwillincludesdirectmaterialusage,directmaterialprice,directlaborratedirect,laborefficiencyandtotaloverhead.Somesuggestionswillbegivenfollowingtheanalysis.InPartB,therewilltaketwomethodstoanalyzetheprojectthatiswhethertoaccept.Itwilldiscusstheadvantagesanddisadvantagesofthetwomethods,findingoutthebestmethodsthatissuitforthecompany.Atlast,someotherfactorssuchasenvironment,technology,legal,andcustomerswillbediscussedforthemanagers.Furthermore,someneededappendixeswillbefollowedthereport.

PartA

Varianceanalysisandreporting

Oncethevarianceshavebeencalculated,theyshouldbeanalyzedtofindwhattheproblemsare.Thecriterionthattherateofvarianceneedstobeanalyzedismorethan3%,andaccordingtotheAppendix3,asaresult,itneedstoanalyzeallthevariances.

Directmaterialusage:

AccordingtotheAppendix2,thevarianceofdirectmaterialusageisfavorable,whichisabout￡8000andtherateofdirectmaterialusagevariancereaches12.5%.Thisisahighlevelanditmayduetothetworeasonssuchashigherqualitymaterialsandhighergradeworkforce.Thecompanychoosesthehigherqualitymaterialscouldreducethespoilagesduringtheproducing.Anditcouldreducetheinferiorsinthefinishproducts.Toreducethematerialsisasaresult.Givingthelaborhigherworkforcemayreducethemistakesbylaborsduringtheproducingthatwillreducetherejectionrateandsavethematerials.

Directmaterialprice

AccordingtotheAppendix2,thevarianceofdirectmaterialpriceisadverse,whichisabout￡5600andattherateof8.75%.Theremaybetworeasonsforthisresult.Oneishigherqualitymaterials.Becauseofthehigherquality,thiskindofmaterialswillbemoreexpensivethanotherlowqualitymaterials.Itwillincreasethecostsofthematerials.Also,thelossofdiscountswillbeanotherreasontomakethematerialpriceincrease.Tricolmaycooperatewithanewsupplier;companymaynotgetthediscountsreceivedbecauseofthelowreliance.

Directlaborrate

AccordingtotheAppendix2,thevarianceofdirectlaborrateis￡3520inadverse,andattherateof12.2%.Theremaybealsotworeasonsforthisresult.Oneissalaryincreaseaward.Companymadethelaborratebecome￡10perhour,whichishigherthanstandardlaborratefor￡1perhour.Thiscouldencouragethestaffstoworkhardandimprovetheirefficiencyandreducethemistakes.Anotherreasonmaybetheunplannedovertime.Forthissituation,companymaypaymorewagestothestaffsfortheirovertimework.

Directlaborefficiency

AccordingtotheAppendix2,thevarianceofdirectlaborefficiencyisadversewith￡2880intherateof10%.Therearetworeasonsforthis.Oneismaybethelowmorale.Becausethecompanyletitslaborstoworkovertimefortheunplannedgoalsandthehighworkforcewillmakethestaffsunsatisfied.Thesecondreasonisthattheremaybeshortageofskilledlabor,whichresultsinmorelaborhoursandlaborstofinishthegoals.

Totaloverhead

AccordingtotheAppendix2,thevarianceoftotaloverheadis￡400inadverse,andattherateof3.51%.Itmayduetothehigherinsurance,andhigheradministration.Companymayspendtoomuchontheinsuranceofitsstaffs.Somewagesofthemanagersmaybehigher.

Recommendationforthemanagement

Thedirectmaterialusageisagoodsignforthecompany.Companyshouldcontinuetoreducethespoilagesduringitsproducing.However,thepriceofthematerialsarelittlehigher.Itisnotagoodsign.Companymaypurchasethelowerqualitymaterialsfromthenewsupplier.Andtrythebesttogetsomediscountreceived.Thepriceofmaterialsshouldbelowerthanbeforebutqualitycouldnotbetoolower.Thisactionwillreducethecostsinthematerialsandinsurancethelowrejectionrate.Accordingtothelabor,companyshouldnotraisetheemployees’wageseasilytomotivatethestaffsanditshouldnotdomuchtheunplannedovertime.Becauseofthemuchunplannedovertime,thestaffsmayagainstthisactionandbecomemorale.So,companyshouldreducetheunplannedovertimeandusetheotherwaystoencourageitsstaffsoften.However,inordertofinishtheunplannedovertime,thecompanymayhiresomenewemployeestowork.Butthereisshortageofskilledlabor.Companyshouldgivethemsometrainingtoimprovetheirskills.Thetotaloverheadisnotverygoodforthecompany.Theinsuranceandadministrationmaybehigherforthecompany.Companyshouldgotothegreatestextentofreducingthecostsintheinsurance.Itmaybepossibleforcompanygetsomediscountallowedformtheinsurancecompany.Andcontrolthespendinginthemanaging.

PartB

Assumption

Thepremiseofpaybackperiodmethods

Identifyallofthecostsofinitialinvestment.Assumethattheywillbepaidnow.Findthecashinflowforeachproject.Addupcashflowseachyearuntilcostofprojectcovered.Picktheprojectwiththeshortestpaybackperiod.Ifthepaybackperiodisonlyoneyearthenitshouldbecomparedwithaninternalfigure

Thepremiseofdiscountedcashflowtechnique

Uncertaintydoesnotexist.Thereisnoinflation.Theappropriatediscountratetouseisknown,toavoidunnecessarycalculations.WhenundertakingDCFquestions,thediscountrateshavebeencomputedforyou,andaregiveninthediscounttables.Unlimitedfundscanberaisedatacompetitiverate.

Analyzingpaybackperiodmethod

Accordingtothepaybackperiodmethod,theoriginalcapitalthatthecompanyinvestis￡1,000,000andthereare5yearsforthecompanytogetthereturnthatisthebudgetedpaybackperiod.Accordingtotheprogram,4yearsand1.5monthsthatthecompanywillgetitsallinvestments.Atthelastyear,companywillgetthereturnabout￡280,000.Asaresult,basedontheperiodmethod,theprojectwillbeprofitableandisworthtoinvest.

Analyzingdiscountedcashflowtechnique

Ifthecompanyusesthediscountedcashflowtechnique,accordingtothepeogram,theinvestmentis￡1,000,000,andthenetpresentvalueis10%.Thebudgetedpaybackperiodis5years.After5years,theNPVfortheprojectwillbe￡-64,800.Itshowsthatthereturnislessthantheinvestment.Itwillbethelossof￡64,800toinvestthisproject.Sothisprojectwillnotbeprofitableandisnotworthtoinvest.

Recommendation

Accordingtothetwomethods,itisnotdifficulttofindthatthecompanywouldbettertochoosethepaybackperiodmethod.Thecompanychoosespaybackperiodmethodcouldgettheprofitof￡280,000andless5yearscouldgettheallinvestment.Andforthediscountedcashflowtechnique,itwillcost5yearsandloss￡64,800atlastoftheproject.So,basedontheprofit,thecompanywouldbettertochoosethepaybackperiodmethod.

Considerationofotherfactors

First,theenvironmentisonefactorthatthemanagersshouldtoconsider.Tricolmakesarangeoffurnitureandkitchenware.Itmaymakepolluteduringtheproducing.Ifthecompanydoesnotpayattentiontotheenvironment,itmaygetsomefine.

Technologyisonefactorthatthemanagersshouldtoconsiderabout.Ifthecompanyusesthenewtechnologyandequipmentintheproject,itcouldimproveitsproductivity.Andimproveitsprofitability.

Thecompanyshouldalsothinkaboutthelegal.Thecompanyshouldinsurethattheprojectisnotagainstthelegal.Ifnot,companymaybepunishedbythegovernmentandevenbebanded.

Atlast,companyshouldconsideritscustomers.Itshouldconsiderthatitsproducts,makingbytheproject,willbeattractedbythecustomers.Ifnocustomerslikeit,theymaygetlittleprofitfortheproject.

Conclusion

Asanadvisorforthecompany,thisreportcanhelpthecompanymaketheflexbudgetandvariancesandusethetwomethodstoanalysistheinvestmentandhelpthecompanychoosethebestmethod.Thiswillhelpcompanymakemuchprofit.

Reference

SQA,preparingFinancialForecast（version3）,ChinaModernEconomicPublishingHouse,2004.

http:

//en.wikipedia.org/wiki/Payback_period

Appendix1

TricolplcFlexedBudget

FixedBudget

2000Units

FlexedBudget

1600Units

Actual

1600Units

VarianceF/A

￡

￡

￡

￡

Directmaterial

80000

64000

61600

2400F

Directlabor

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

0

104200

108600

4400A

Appendix2

Thecalculationofthevarianceswouldbe:

1.Directmaterialtotalvariance

（standardunitsofactualproduction×standardprice）–（actualquantity×actualprice）

[（4kg×1600）×￡10]–￡61600

=￡64000–￡61600

=￡2400（F）

2.Directmaterialusagevariance

standardprice×（standardunitsofactualproduction－actualunits）

=￡10×（4kg×1600－5600kg）

=￡10×800kg

=￡8000（F）

3.Directmaterialpricevariance

actualquantity×（standardprice－actualprice）

=5600kg×（￡10－￡11）

=5600kg×￡1

=￡5600（A）

4.Directlabortotalvariance