HND财政预算报告outcome2

1、HND财政预算报告 outcome2 Introduction Tricol plc a company who makes a range of furniture and kitchenware. And one of its most popular products is the Zupper expandable table. The purpose of writing this report is to do the variance analysis, project evaluation and to compare the budget and actual data by

2、 using the technique. Findings Part A Possible Reason for Variances 1. Material Direct Material Total - 2,400 F made up: Direct Material Usage 20000 F (Level of significance usage/total budgeted Material costs = 8,000/64,000 = 12.5% 3%, should be reviewed) 2000 kg less materials are used than budget

3、ed for the actual level of production. Possible reason may be using the higher-grade material with less wastage. Or the new machinery use less materials and incurs less wstage. Direct Material Price 5,600 A (5,600/64,000=8.75% 3%) It is 1 per kg more expensive than planned Possible reason: New mater

4、ial supplier does not give discounts for materials. Hither-grade materials have been used which is more expensive. 2. Labour Direct Labour Total - 6,400A Direct Labour Rate 3,520A (3,520/28,800=12.2%3%) On average, the actual labour rate is 1/hour higher than budgeted Possible reason: The wage settl

5、ement is higher than expected The new machine requires trainings so that overtime required more than expected. Direct labour Efficiency - 2000 A3%)4.16% Actually, more than 200 labour hours have been used than budgeted. Possible reason: New machinery requires more hours for training. Human resource

6、issues the skilled operatives is not enough. 3Total Overhead - 600 F Rate is 4.70% Unpredicted increase in insurance and Administration costs Possible reason: New machinery brings more expensive insurance, higher maintenance and additional administrative costs. Part B 1. Key assumptions made: a) The

7、re is no taxation and inflation. b) Assumed that there is no vary given return market rate. c) The total cost of the project will be payable at the start d) The expected revenue from the investment this is the expected Net Cash Flow after deduction of all relevant costs 2. Payback Payback in this ca

8、se is 4.125 years (total investment-return period is five years). So the company can get back the investment. The Net Present Value is - 64， 800. It indicates that the project does not appear to be financially viable. Conclusion Part B This project is available because the payback is 4.125years. But

9、 the Net Present Value (NPV) is negative. So the project is not available. However, we should use the conclusion of the Net Present Value because the Net Present Value (NPV) considered the time value of money. Recommendations Part A Recommendations for management action: 1. All the variances should

10、be analysis because all of them are above 3%, the level of significance. 2. Particularly, the direct labour variances need further investigation why is the company paying a higher wage rate but the labour productivity is lower than planned. Part B 1. To consider the effect of the new facilities on c

11、ompany s own staff in terms of employment and redeployment opportunities. 2. To consider any changes in any other areas, like social, political, economic, legal and technological factors. 3. Whether it is possible for the company to raise the sufficient funds to consider if the current cash flow pos

12、ition can support such an investment. Appendix Part A 1. Table 1 Tricol plc Flexed Budget for June Tricol plc Flexed Budget For June Fixed Budget 2,000 units Flexed Budget 1,600 units Actual 1,600 units Variance A/F Direct Material 10*4*2,000= 80,000 10*4*1,600= 64,000 61,600 2,400 F Direct Labor 2*

13、9*2,000= 36,000 2*9*1,600= 28,800 35,200 6,400 A Variable Production Overheads 2*2,000= 4,000 2*1,600= 3,200 3,200 0 Insurance costs 2,200 2,200 2,400 200 A D epreciation 1,500 1,500 1,500 0 Rent and Rates 2,500 2,500 2,500 0 Administration Overheads 2,000 2,000 2,200 200 A Fixed Overheads 8,200 8,2

14、00 8,600 400 A Total 128,200 104,200 108,600 4,400 A 2. Further Variance Analysis The calculation of the variances a) Direct material total : (Budgeted Quantity*Budgeted Price) (Actual Quantity*Actual Price) =(4kg*1,600* 10per kg) - (5,600kg* 11 per kg)=64,000-61,600=2,400 F b) Direct material usage

15、 : Budgeted price* (Budgeted Quantity Actual Quantity) =10per kg * (4kg * 1,600-5,600kg)= 8,000 F c) Direct material price : Actual Quantity* (Budgeted price Actual price)=5,600kg*( 10 per kg -11 per kg) =5,600A d) Direct labor total : Budgeted Hours*Budgeted Rate Actual hours*Actual Rate =(2hours*1

16、600* 9)- 35200= 6,400A e) Direct labor rate : Actual Hours*(Budgeted Rate Actual Rate) =3,520hours*( 9- 10)= 3,520A f) Direct labor efficiency : Budgeted Rate*(Budgeted Hours Actual Hours) =9-(2hours*1600-3520hours)= 2,880A g) Total overhead : (Budget Variable Overhead + Budget Fixed Overhead) - (Ac

17、tual Variable Overhead + Actual Fixed Overhead) = ( 4000 + 8200) - ( 3200 + 8600) = 400 F Part B 1. Payback period method Year Yearly net cash flow Cumulative cash flow 0 (1,000,000) (1,000,000) 1 160,000 (840,000) 2 160,000 (680,000) 3 320,000 (360,000) 4 320,000 (40,000) 5 320,000 280,000 Net cash benefits 280,000 280,000 Payback = 4 + 40,000/320,000= 4.125 years 2. Discount cash flow technique(net present value) Calculation of Net Present