HND财政预算答案

1、HND才政预算答案Part A(i)Tricol plci lexeMLuugei.For JuneOriginal Budget 2,000 unitsFlexedBudget 1,600 unitsActual results1,600 unitsVariance F/A££££ 1Direct Material80,00064,00061,6002,400FDirect Labour36,00028,80035,2006,400AVariable ProductionOverheads4,0003,2003,2000Insurance Costs2

2、,2002,2002,400200ADepreciation15,0001,5001,5000Rent and Rates2,5002,5002,5000Administration Overheads2,0002,0002,200200ATotal104,200108,6004,400A(ii)Direct material total variance(standard units of actual productionstandardprice) - (actual quantity actual price)(4kg 1600) >£ 10 -£ 61600

3、=£64000 -£ 61600=£ 2400 ( F )The rate for direct material total variances is £2,400/ 64,000 优0%=3.75% >3%Direct material price varianceactual quantity ( s tandard price actual price)=5600kgX £10- £11)=5600kg x£ 1=5600 (A)The rate of direct material price varianc

4、e is£5,600/ 64,000 优0%=8.75% >3%Direct material usage variancestandard price (standard units of actual production-actual units)= £10>(4kg X600-5600kg)= £l0>800kg= £8000 (F)The rate of direct material usage variance is £8,000/ 64,000 优0%=12.5% >3%Note: When adding

5、 the price and usage variances the result must equal the total variance. Therefore, £ 5600(A) (price) + £ 8000(F) (usage) = £ 2400(F) (total).Direct labour total variance(standard hours of actual production standard rate ph) (actual hours Actualrate ph)(2h 1600)浅 9 (3520h >£ 1

6、0) =(3200h >£ 9)£ 35200=£ 28800 3 35200=£ 6400(A)The rate of diretc labour variance is6400/28800 100%=22.2% >3%Direct labour rate varianceactual hours ( Standard rate ph actual ratePh)3520h>(£9£ 10)=3520h X£ 1=£ 3520(A)The rate of direct labour rate v

7、ariance is £3,520/ 28,800 优0%=12.2% >3%Direct labour efficiency variancestandard rate ph ( standard hours of actual production 一actual hours)£942h X6003520h= £9X3200h 3520h)= £9>320h=£ 2880(A)The rate of direct labour efficiency variance is £2,880/ 28,000 优0%=10%

8、>3%Note: When adding rate and efficiency variances the result must equal the total variance.Therefore, £ 3520(A) (rate) + 2 2880(A) (efficiency) = £ 6400(A) (total).Overhead total variance(standard insurance cost actual insurance cost)+ (standard administrationoverheadsactual administra

9、tion overheads)(£ 2200 2 2400)+ (£ 2000 2 2200)=£ 200(A) + 2 200(A)=£ 400(A)The rate of overhead total variance is £400/ 4,200 想0%=9.52%>3%(iii)AnalysisMaterial varianceFrom the actual budget, we can see that the direct material total variance is £ 2,400(F). The Dire

10、ct material usage variance is £ 8,000 (F),the Direct material price variance is £ (5,600)(A).The possible reasons variances are include: Use new machinery.Use higher qualityfor material usageThe possible reasons for material price variance:Change suppliers.Use higher quality material. Loss

11、 of discountLabour varianceThe direct labour total variance is £ (6,400) (A) ,the Direct labour efficiency variance is £ (2,880) (A) and the Direct labour rate variance is £ (6,400) (A).The possible reason for direct labour efficiency variance:Lower grade workforceShortage of skilled

12、laborThe possible reason for direct labour varianceHigher grade workforcesShortage of skilled labourOverhead variancerateTheareThe total overhead variance is £ (400)(A). Insurance and Administration variances £ (200)(A). The total overhead variance is £ (400)(A).The possible reasons f

13、or overhead variances:Using new machineryIncreased administration costTo conclude a higher-than-expected wage settlement for production operates.Difficult trading conditions Intensely competition RecommendationAccording to above analysis, we can easily understand the organization ' s current sit

14、uation. In order to achieve the lower costs and high profit here some recommendations divided in three sections which in clued material variances, labour variances as well as the overhead variances.The recommendation for material variances: Investigate the cheaper material.Hold a staff training prog

15、ram to increase their work efficiency.Negotiate with current supplier in order to achieve lower price.The recommendation for labour variances: Provide training program to staff for higher skill of operating the new material.Consider about the lower grade labourThe recommendation for overhead varianc

16、es: try to decrease the administration cost Teach the staffs scientifically use these overhead in order to make it longer-used. Part B Payback period method:YearAnuual cash flowCumulative0(1,000,000)(1,000,000)1160,000(840,000)2160,000(680,000)3320,000(360,000)4320,000(40,000)5(1/8 of 320,000)40,000

17、NIL5 (7/8 of 320,000)280,000240,000Payback will take 4 year 1.5months.Net present ValueAnnua lCashPresen t Value FactorPresen tValueFlows at 10%££££Year 0(1,000, 000)1.000(1,000, 000)1160,00 00.909145,44 02160,00 00.826132,16 03320,00 00.751240,32 04320,00 00.683218,56 05320,00 0

18、0.621198,72 0935,20 0Net Presen t Value£(64, 800)The premise of payback period methodsIdentify all of the costs of initial investment. Assume that they will be paid now.Find the cash inflow for each project. Add up cash flows each year until cost of project covered. Pick the project with the sh

19、ortest payback period. If the payback period is only one year then it should be compared with an internalfigureThe premise of discounted cash flow techniqueUncertainty does not exist. There is no inflation. The appropriate discount rate to use is known, to avoid unnecessary calculations. When undert

20、aking DCF questions, the discount rates have been computed for you, and are given in the discount tables .Unlimited funds can be raised at a competitive rate.Analyzing payback period methodAccording to the payback period method, the original capital that the company invest is £ 1,000,000 and th

21、ere are 5 years for the company to get the return that is the budgeted payback period. According to the program, 4 years and 1.5 months that the company will get its all investments. At the last year, company will get the return about £ 280,000. As a result, based on the period method, the proj

22、ect will be profitable and is worth to invest.Analyzing discounted cash flow techniqueIf the company uses the discounted cash flow technique, according to the peogram, the investment is £ 1,000,000, and the net present value is 10%. The budgeted payback period is 5 years. After 5 years, the NPV

23、 for the project will be £ -64,800. It shows that the return is less than the investment. It will be the loss of £ 64,800 to invest this project. So this project will not be profitable and is not worth to invest.RecommendationAccording to the two methods, it is not difficult to find that t

24、he company would better to choose the payback period method. The company chooses payback period method could get the profit of £ 280,000 and less 5 years could get the al investment. And for the discounted cash flow technique, it will cost 5 years and loss £ 64,800 at last of the project.

25、So, based on the profit, the company would better to choose the payback period method.Consideration of other factorsFirst, the environment is one factor that the managers should to consider. Tricol makes a range of furniture and kitchenware. It may make pollute during the producing. If the company does not pay attention to the environment, it may get some fine.Techno