HND 财政预算 report

1、Financial Services: Preparing Financial ForecastsContent1. Introduction22. Tricol Plc Flexed budged23. The calculation of the variances and the variance rate24. Variance analysis and report35. Recommendation46. Analysis of two investment appraisal technique5Assumption57. Calculation of net present v

2、alue58. Calculation of the payback period method69. Recommendation for investment decision610. Consideration of other factors that management should consider711. Conclusion71. IntroductionThis report for Tricol plc which is now considering the development of its own distribution arm involved the int

3、errelated issue about the investment appraisal. It includes 4 parts, assumptions, application of payback period and NPV, evaluation and recommendation and other factors to be considered, which could has important significance for assessing the rationalization of investment.2. Tricol Plc Flexed budge

4、d It shows the Appendix 1. 3. The calculation of the variances and the variance rateIt shows the Appendix 2. 4. Variance analysis and report Considering the policy of Tricol plc, the criterion that need to analyse the variance is more than a rate of significance of 3%, as a result, it need to analys

5、e all variances.Based on the information above, the variance of this company is adverse in June, there are some reasons which caused of this situation, including these below:l Based on the upgraded the production machinery of Tricol plc, it improved the material usage which can saving large amount o

6、f material of about 800kg. At the same time, due to employees of the company who can not operate the new machines masterly to produce a product, then the time of produce a products will require more than the original hours for 12 minutes, the time changes from 3200 hours to 3520 hours. The changeabl

7、e of the machine have made some adverse result for the company.l According to switched suppliers of Tricol plc currently, it is using the higher-grade material now, moreover the material price must increase from original 10 per kg to 11 per kg. But the higher-grade material can save the amount for t

8、his products, even the price for ont unit is increased, the cost of direct material is still favorable for this company.l With the updated machines, this company need to provide the higher grade workforces and employeed higher-grade employees. Also Tricol plc has recently concluded a higher-than-exp

9、ected wage settlement for production operations. That made the labour rate become 10 per hour, which is higher than standard labour rate for 1 per hour. In a conclusion, the cost of direct labour is adverse for this company.l Seeing on overhead, caused by the difficult trade condition, this company

10、need to pay much more money on products' promotion, and the insurance is rising. These reasons must caused insurance cost and administration cost increased for 200, so this company will has 400 adverse.5. RecommendationTo sum up, the company's actual spending is much higher than the standard

11、 spending, in order to change this situation, it has some recoomendation for Tricol plc.l Improve the labour efficiency may be a good solution for the adverse situation. Because the variance of direct labour is main problem, and the employees spend much more time to produce a product. As a result th

12、is company can provide some training classes for them to improve their skill and knowledge about using upgraded machines and materials, then they can operate the new machineries easily to save the time and money.l Use inferior quality materials. Because the high price of the high quality material wi

13、ll lead this company can not achieve the target standard for the difficult trade condition, which may result in a large number of stocks and then the cash flow will appeared some problem too.l Reduce labour rate, this company can employ some lower grade workforce, so this company can pay a lower sal

14、ary, and make a plan for overtime. Also the company can provide some motivation system to motivate the staff who are work hard and the work enthusiastic of the staff will increase. Before calculate the answer we should suppose the period of this project is five years and it has no other cash flows e

15、xcept this. Then we do not need to consider the exchange of the materials and the taxation from government. Here below, it will get the answer in two methods.6. Analysis of two investment appraisal techniqueAssumptionDuring the process of using net present value and the payback period method, the as

16、sumption should be taken into consideration, so that we can easily to understand the underlying principle. The assumption is as follows:l The life of this investment is within five yearsl There is no other income or expenditure in the investment projectsl The inflation and deflation doesnt exist, an

17、d there is no change in exchange ratel Taxation by government can be excludedl All the market factors are stablel Uncertainty does not exist. l The appropriate discount rate to use is known, to avoid unnecessary calculations, when undertaking DCF questions, the discount rates have been computed for

18、you and are given in the discount tables provided at the end of this unit. l Unlimited funds can be raised at a competitive rate.7. Calculation of net present valueIt is showed by Appendix 3.8. Calculation of the payback period methodIt is showed by Appendix 4.9. Recommendation for investment decisi

19、onThe analysis of 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&

20、#183;No allowance 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 ca

21、n not use a single 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 ot

22、her method, it is 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

23、 in 10% in the first 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.10. Consideration of other factors that management should consider

24、1. The investors belief in the future, based on forecasts of internal and external factors.2. Whether the capital is sufficient or not. If not, the cost of capital finance will influence the net present value.3. The investors attitude to risk, The profit of long term may be more positive.4. The cost

25、 of human resource management should be considered. Because the project of distribution arm need purchase of several new motor vehicles, and this need employee training arrangement and new department established.11. Conclusion As an advisor for the company, this report can help the company make the

26、flex budget and variances and use the two methods to analysis the investment and help the company choose the investment method. This will company make much profit.Appendix 1Tricol Plc Flexed budged Based on the all information about “Zupper” expendable table, I draw a table as following:Tricol PLC F

27、lexed Budgetfor June 2009Original budget 2000 unitsFlexed budget 1600 unitsActual results 1600 unitsVariance F/ADirect material8000064000616002400 FDirect labour3600028800352006400 AVariable production overheads4000320032000Insurance220022002400200 ADepreciation1500150015000Rent and Rates25002500250

28、00Administration Overheads200020002200200 ATotal1042001086004400 AAppendix 2The 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=2

29、400 ( F )The rate for direct material total variances is £ 2,400/£ 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,

30、000×100%=8.75%3. Direct material usage variance standard price×(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

31、 usage variances the result must equal the total variance. Therefore, 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)

32、35200 =28800 35200 =6400(A)The rate of diretc labour variance is 6400/28800×100%=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.

33、 Direct labour efficiency variance standard rate ph ×( standard 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)