SQAHND财政预算34

DE3J 35 Outcome 3&4 Contents1.0 Introduction- 2 -2.0 The flexed budget- 2 -3.0 Calculate the Materials variances, Labour variances and the Total overhead.- 2 - 3.1 Direct the materials variances , labour variances and the total overhead.- 2 - 3.2 Variance analysis.- 3 -4.0 The recommendations for management (variances).- 4 -5.0 Using four different methods to evaluate the financial.- 5 -5.1 Identify the accounting rate of return.- 5 -5.2 Identify the payback.- 5 -5.3 Identify the Net present value.- 5 -5.4 Identify the Internal rate of return.- 6 -6.0 Recommendations for investment decision.- 6 -7.0 Conclusion- 7 -8.0 Appendices- 7 - 10 - 1.0 IntroductionThis report will divided into two parts. Part A and Part B. In Part A,First of all, I will prepare a flexed budget in line with actual activity. Second, this will including the Materials variances, Labour variances and total overhead. At the same time, I will identify a minimum of one possible cause of the each variance. Finally, according to data analysis, there have been some recommendations to management of Matteck PLC. In Part B, It will have four different ways to evaluate financial performance and give recommendations for Matteck PLC. These ways are ARR ,Payback, NPV and IRR. Part A2.0 The flexed budgetFor Flex budged of Matteck PLC, we can see the Appendix 1. 3.0 Calculate the Materials variances, Labour variances and the Total overhead. 3.1 Direct the materials variances , labour variances and the total overhead.This section shows the Appendix 2. 3.2 Variance analysis.Material price variance:The material price variance is 32,000(F). According to the data analysis, it is 2/kg less expensive than planned. The possible reasons can be divided into three points: first, they could replace raw materials, using a lower - grade material. Second, the supplier to provide some discount for this batch of raw materials. Finally, learn from the case, the company has managed to locate new materials from an overseas. Due to the product from overseas, according to different exchange rate, the material will reduce the price.Material usage variance:The material usage variance is 30,000(A). The possible reasons include the effects of raw materials and the influence of the machine. If the company using poor quality raw materials, it may be more difficult to work. This will increase the waste materials. At the same time, the case shows that the companys new machinery can be fully used in the second week. The delay time may have caused the machine to use more materials than planned. Material total variance:The material total variance is 2,000(F). Case shows that the companys raw materials are from overseas suppliers. This will reduce some costs. Which leads to the material price variance is 32,000 (F). On the other hand, the company has introduced a new machine, the influence of machine installed time, caused some wasted of materials. This makes the material usage variance is 30000 (A). Even if The companys material total variance is 2000 (F). The companys management still should pay attention to The utilization of raw materials.Labour efficiency variance:The Labour efficiency variance is 10,000(F). The possible reasons could include the new machine to improve staff work efficiency. Using new machine can less labour hours. At the same time , the case shows that the company has had to employ more highly qualified staff. They can increase the working efficiently through the higher skill. Labour Rate Variance:The Labour rate variance is 15,000(A). Through the calculation, the labour rate is 1.50 per hour higher than original. The possible reasons is 1.50 per hour higher than planned. The cost of direct labour is adverseness for this firm.Labour Total Variance:the Labour total variance is 5,000(A). The reasons of variance, the company has introduced the new machine, As the result the direct labor efficiency variance is favorable which is 10,000(F). On other hand, the labour rate is higher than standard labour rate. Finally, lead to the labour total variance is adverse, 4.0 The recommendations for management (variances).1. The company should be had a variety of data investigation to set up complete data system. At the same time, through the different variance, the company can know more about the market information.2. The company should intensify the performance monitor for staff because the lower performance will accelerate waste of material and then lead to the material usage is increase, the performance monitor can help the company shrink the variance.3. Management: the company can provide some motivation policies to motivate the staff that is work hard and enhance the work enthusiastic of the staff. This can improve the staff work efficiency.Part B5.0 Using four different methods to evaluate the financial. 5.1 Identify the accounting rate of return.ARRAverage profit= =660,000Accounting rate of return= =26.4%The cases show that the company should have an accounting rate of return of at least 15%, through calculation, the ARR is 26.4%. Therefore, the data has meet company standards. 5.2 Identify the payback. The company hopes to recover the cost of the investment within 4 four years. In fact, they just use 3 years 341days. (see Appendix 3.) 5.3 Identify the Net present value. The NPV method calculates the present values of cash inflows and outflows and establishes whether. Basically, NPV provides an objective for evaluating and selecting investment projects. Moreover, it takes into account required rate of return of company and then takes into account time value of money. But there are substantial uncertainly factors in our world. For instance the inflation and deflation, the exchange rate.When the Mattecks cost of capital is 10%. The NPV is (46200). The NPV value less than 0. The company should not invest this project. ( see Appendix 4.) 5.4 Identify the Internal rate of return.When the present value is 5%, the internal rate of return is 9.39%. Which less than 10% of company standard.therefore,the company should not invest this project.( see Appendix 5)6.0 Recommendations for investment decision.1. According the four method, The ARR and Payback are both implement for this project, but the NPV and IRR are not implemented for this Project. In this case ,the company should focus on the NPV and IRR.2. By calculates the net present values, it seems that the deficit, which means that the annual cash flows are not enough to allow more interest to be deducted and still repay the original investment. This investment is unworthy .3. Within five years. All the market factors are changeable. The information will have different change. And there are maybe some other situations occurred. So the Matteck PLC should not concern with the project.7.0 ConclusionThe report can help the company make the flex budget, and then by variances analysis and use the four methods to evaluate the financial. Through the recommendations can help the company choose the best investment to gain the maximum profits.8.0 Appendices 8.1 Appendix 1 Matteck PLC Flexed budget For December 2011Original budget 5000 units Flexed budget 4500 units Actual results 4500 units Variance F/A Direct Material 180,000 162,000 160,000 2000(F)Direct Labour 100,000 90,000 95,000 5000(A)Variable Overheads 50,000 45,000 47,500 2500(A)Supervision Cost 3,300 3,300 3,400 100(A)Rent