HNDPreparingFinancialForecast财政预算报告第二篇.doc

Preparing Financial ForecastAssessment Task 2Financial Analysis for Tricol plcContentsPART AIntroduction- 3Flex the Budget Figures- 3Calculate the Variances- 3Analysis- 4Recommendations- 5PART BPayback Analysis- 5The Net Present Value (NPV) Method- 5Assumptions of the above figures- 6Recommendation- 6Reference- 6Part AIntroductionThis report will show you the introduce the variances between Flexible Budget and Actual results.In Part A. After considering, we will see the overview of the organizations current situation,to find the problems and solve them.There are the detailed information about the materials variance, labor variance and overhead variance.in Part B, it evaluating the financial viability of the investment proposal. Flex the Budget FiguresOriginal Budget2000 unitsFlexed Budget1600 unitsActual results1600 unitsVariance F/ADirect material8000064000616002400FDirect labour3600028800352006400AVariable Production Overheads4000320032000Fixed overheadsDepreciation1500150015000Insurance costs220022002400200ARent and Rate2500250025000Administration Overheads200020002200200ATotal Fixed Overheads820082008600400ATotal1042001086004400ACalculate the VariancesMaterials Variance:Direct material total variance: (Standard units of actual production Standard price) (Actual quantity Actual price)=(4160010)- 5600 (616005600) =2400 (F)Percentage=240064000100%=3.75%Direct material price variance: Actual quantity (Standard price Actual price)=5600 (10-616005600) = -5600 (A)Percentage=560064000100%=8.75%Direct material usage variance: Standard price (Standard units of actual production Actual units)=10 (41600-5600) =8000 (F)Percentage=800064000100%=12.5%Labour Variances: Direct labour total variance: (Standard hours of actual production Standard rate ph) (Actual Hours Actual rate ph)=(216009) (352035200/3520) = -6400 (A)Percentage=640028800100%=22.22%Direct labour rate variance: Actual hours (Standard rate ph Actual rate ph)=3520 (9-35200/3520) = -3520 (A)Percentage=352028800100%=12.22%Direct labour efficiency variance: Standard rate ph (Standard hours of actual production Actual hours)=9 (21600-3520) = -2880 (A)Percentage=288028800100%=10.00%Total Overhead VarianceOverhead absorption rate = Variable +fixed budgeted overhead total budgeted activity level= (3200+8200) 1600=7.125 per unitTotal Overhead Variance =Total standard overhead for actual production Total actual overhead= (7.1251600)-(3200+8600)=11400-11800=-400(A)Overhead variance percentage=4008200100=4.88AnalyseGood signs for Tricol plc:1.Direct material total variance2.Direct material usage variance.This because,the company has recently changed suppliers and is now using higher-grade materials. Another reason is the company has recently upgraded the production machinery used for this product. It makes the efficiency of making productions become better,and saving the materials on each production.Bad signs for Tricol plc.1.Direct material price variance2.Total variance of direct labour3.Efficiency variance of direct labour4.Rate variance of direct labour5.Total overhead varianceIt is beacuse the company will spend more money than before on the some quantity of the material. The company has recently switched the suppliers and is now using new higher-grade materials.On the other hand,it will change the quality of the production. It will make the productions sell well.It will economize the material at the same time.RecommendationsThe variance for the Tricol plc is an adverse variance. Most of the variance is increase, and there are three main reasons for the increase. 1. The company has recently upgraded the production machinery used for this product. 2.The company has recently switched suppliers and is now using higher-grade materials. 3.The company has recently concluded a higher-than-expected wage settlement for production operatives.I advice the company must train the staffs,according to train the staff that can make the job effective,and it can save many materials.Part BPayback AnalysisThe payback period would be: Yearly Net Cumulative Cash Flow Cash Flow Cash outflow Year0 (1,000,000) (1,000,000)Cash inflows: Year1 160,000 (840,000) Year2 160,000 (680,000) Year3 320,000 (360,000) Year4 320,000 (40,000) Year5 40,000 NIL Year5 280000 280000In the year of 5: 40000/320000=1/8year=1.5monthSo the total payback period is 4 years and 1 and half a month.This method is on the assumption that:1. Ignores risk here.2. Ignores the time value of money.3. Ignores that the benefits from different projects may accrue at an uneven rate.4. No allowance is made for interest on the initial capital investment.The Net Present Value (NPV) MethodThe present value of cash inflows is greater than the present value of cash outflows.Annual Cash FlowPresent Value Factors at 10%PresentValueYear 0(1000000)1.000(1000000)11600000.90914544021600000.82613216033200000.75124032043200000.68321856053200000.621198720935200Net present value(64800)Assumptions of the above figuresl The tax is considered.l There is no inflation.l The market rate of return is currently 10% all the time.l The money paid for the first time possible.RecommendationThe payback method and NPV method shows the company 1. Needs to consider whether this investment is under its budget control.2. the company should not go ahead with this investment.3. The company must consider how many profits will get, and the profit is a long-term benefit for company.4. the company should not go ahead with this investment.5. The company should know about its own situation of busines