HND财政预算报告

1、1. IntroductionThis report is about a company Tricol plc, which makes a range of furniture and kitchenware, is now considering the development of its own distribution arm. It is provided assumptions, application of pay back period and NPV, evaluation and recommendation and other factors to be consid

2、ered in this report. It could has important significance for assessing the rationalization of investment.2.0 Part AThe budget and calculation is showed on AppendixThere is a company policy to apply a rate of significance of 3% for any variance analysis. And the direct material variance can be analyz

3、ed in two aspects which are direct material volume and direct material price.The direct material price variance is adverse. The company has recently switched suppliers and it is now using high-grade materials. This may make the company lose the discount offered by original suppliers Direct labour va

4、riance is adverse. Reason may be that insurance is more than the budget insurance. The new machines use may result in this kind of situation, for the same reason overhead, including installation charges, staffing fees, maintenance increase and so on.There are two aspects what are weight of the direc

5、t materials and direct material price to analysis the total variance of direct material. From the weight of the direct materials, the budget for 6400 kg weight, the actual weight for 4600 kg, and the weight of each unit sent a 0.5 kg. The reasons are: the company changed suppliers, use the advanced

6、materials to reduce the material waste; the production of equipment get upgrades, improve the production efficiency; Raised salary for employees to keep the higher technology and reduce the error, improve the efficiency in the use of materialsOverhead variance: total overhead variance is caused by a

7、dministration and insurance. Each factor has £200 variance, so the total overhead variance is £ 400 and it is adverse. In addition, on side of insurance, Improving mechanical efficiency will need to pay more insurance cost, the employee of operate these equipment insurance costs also will

8、be increasedRecommendationThere are some Suggestions can make the situation improved. The first, Ensure the quality, the price is cheap, but use the material. Secondly, The Company can establish policies to control administrative costs. They can try to use material price discount. The variance of la

9、bor, for enterprise is a must for the long-term cost of place, and wage increase, and may continue to increase, but Labour had reduced rate. Also has some advice. The company can provide the plan of the training, in order to improve production efficiency. Can also make employees responsible for the

10、machine can be used a longer time.2.1 Part BAssumptions There are some views in the use of these data. l The effects of the tax and inflation are neglected. Second, a given market returns will not change. l In the initial outflows of cash flow is satisfied, the time value of money be ignored, not in

11、cluding interest is for the initial capital investment. l The expected return on the investment, here is to point to deduct the net cash flow from all the relevant costs.l Uncertainty does not existl All the market factors are stableNet Present Value (NPV): The NPV method calculates the present valu

12、es of cash inflows and outflows and establishes whether, in total, the present value of cash inflows is greater than the present value of cash outflows.Calculation of net present value, It is showed by Appendix. Payback: Those ways of in order to restore the original investment cost methods have to

13、investment and project evaluation have many years, in order to received effect in shortest time. (1) year 0 means now (2) year 1 means at the end of 12 months from now (3) year 2 at the end of 2 years from now.Calculation of the payback period method, It is showed by Appendix.Analyze The analysis of

14、 two investment appraisal techniquesDisadvantages of the payback method·It ignores cash flows after initial outflow has been met·It ignores risk·It ignores time value of money·It ignores the fact that benefits from different projects may accrue at an uneven rate·No allowance

15、 is made for interest on the initial capital investment.Advantages of the NPV method·Provides an objective basis for evaluating and selecting investment projects·Takes account of both magnitude and timing of expected cash flows in each period of a projects lifeInvestors can not use a singl

16、e formula to calculate the rate of return, they should consider the value of the time.In view of the data calculated above, payback will take four years and one-and-half month to complete, therefore, it seems to be reasonable to accept and invest this kind of project. However, in other method, it is

17、 impossible to fulfill a requirement of a 10% return. The actual rate of return must be less than 10%. Taking this two methods into consideration, firstly, net present value methods is more accurate than payback period method, secondly, although it cannot realize the expected return in 10% in the fi

18、rst 5 years, mainly basing on growing slowly and low return at beginning, it may bring a higher revenue and positive cash inflow in the future years.Personally, I think we can accept the new project for a period time.Recommendation There are some Suggestions to continue to do investment company. We

19、can from the financial factor analysis and the financial factors. The first. Form the economic factors. There are some Suggestions. The company must make sure that they have enough money to complete this investment. The company also need to consider budget control and the ability to solve problems.

20、And then sure need to move on this investment. The company should consider whether to profit the most for the company long-term interests. Then from non-financial aspects. Focus on the information about the change in the current social economic, political and legal. Whether can increase employment g

21、uidance. Clearly know people are willing to pay is suitable for this investment. Finally, the investment is in accordance with the company's strategy.3. ConclusionsThe company's consultants, this report can help the company bend of the budget and variance and use these two kinds of methods a

22、re analyzed, and help the company choose investment investment method. The company will make much profit.4. Appendix Tricol Plc Flexed budged Based on the all information about “Zupper” expendable table, I draw a table as following:Tricol PLC Flexed Budgetfor June 2009Original budget 2000 unitsFlexe

23、d budget 1600 unitsActual results 1600 unitsVariance F/ADirect material8000064000616002400 FDirect labour3600028800352006400 AVariable production overheads4000320032000Insurance220022002400200 ADepreciation1500150015000Rent and Rates2500250025000Administration Overheads200020002200200 ATotal10420010

24、86004400 AThe calculation of the variances and the variance rate1. Direct material total variance(standard units of actual production×standard price) (actual quantity×actual price)(4kg×1600)×10 61600= 64000 61600=2400 ( F )The rate for direct material total variances is £ 2,

25、400/£ 64,000×100%=3.75%2. Direct material price variance actual quantity×( standard priceactual price) =5600kg×( 10- 11) =5600kg×1 =5600 (A)The rate of direct material price variance is £ 5,600/£ 64,000×100%=8.75%3. Direct material usage variance standard pric

26、e×(standard units of actual production-actual units) =10×(4kg×1600-5600kg) =10×800kg =8000 (F) The rate of direct material usage variance is £ 8,000/£ 64,000×100%=12.5%Note: When adding the price and usage variances the result must equal the total variance. Therefo

27、re, 5600(A) (price)8000(F) (usage) = 2400(F) (total).4. Direct labour total variance ( standard hours of actual production×standard rate ph) (actual hours×actual rate ph) (2h×1600)×9 (3520h×10) =(3200h×9)35200 =28800 35200 =6400(A)The rate of diretc labour variance is 6

28、400/28800×100%=22.2%5. Direct labour rate variance actual hours×( standard rate phactual rate ph) 3520h×(910) =3520h×1 =3520(A)The rate of direct labour rate variance is £ 3,520/£ 28,800×100%=12.2%6. Direct labour efficiency variance standard rate ph ×( standa

29、rd hours of actual production actual hours) 9×2h×16003520h =9×(3200h3520h) =9×320h =2880(A)The rate of direct labour efficiency variance is £ 2,880/£ 28,000×100%=10%Note: When adding rate and efficiency variances the result must equal the total variance. Therefore, 3520(A) (rate)2880(A) (efficiency) = 6400(A) (total).7. Overhead total variance (standard insurance cos