sqahnd财政预算3

1、Contents1.0 Introduction 2 2.0The flexed budget 2 3.0 Calculate the Ma te ria Is variances, Labour variances and the Total overhead -2 3.1 Diiect the mate rials variances , labour variances and the total overhead 2 3.2 Variance analysis 3 4.0 The recommendations for management (variances)45.0 Using

2、four different methods to evaluate the financial 5 5.1 Identify the accounting rate of return5.2 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 decis ion6 7.0Conclusion 6 8.0 Appendices1.0 IntroductionThis re

3、port 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 Ma te ria Is variances, Labour variances and total overhead At the same time, I will identify a minimum of one possible cause of th

4、e each variance. Finally, according to data analysis, there have been some recommendations to management of Matte ck 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 flex

5、ed budgetFor Flex budged of Matteck PLC, we can see the Appendix 1.3.0 Calculate the Ma te ria Is variances, Labour variances and the Total overhead.3.1 Direct the materials variances , labour variances and thetotal overheadThis section shows the Appendix 2.3.2 Variance analysis.Material price varia

6、nce: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: frst, they could replace raw materials, using a lower grade material. Second, the supplier to provide some discount for this b

7、atch of raw materials. Finally, learn from the case, the company has managed to locate new mate rials fi*om an ove rseas Due to the product from ove rseas, according to different exchange rate, the mate rial will reduce the priceMaterial usage variance:The material usage variance is ?30,000(A). The

8、possible reasonsinclude 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 mate rials At the same time, the case shows that the companys new machinery can be fully used in the s

9、econd week. The delay time may have caused the machine to use more mate ria Is than plannedMateria 1 total variance:The material total variance is 2,000(F). Case shows that the companys raw mate rials are from overseas suppliers This will reduce some costs. Which leads to the material price variance

10、 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 73OOOO (A). Even if The company，s material total variance is 2000 (F). The companys management still should

11、pay attention to The utilization of raw mate rials Labour efficiency variance:The Labour efficiency variance is 10,000(F). The possible reasons could include the new machine to improve staff work efficiency. Us ing new machine can less labour hours. At the same time , the case shows that the company

12、 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 hig

13、her 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

14、, 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 syste m Atthe same time, through the difterent variance, t

15、he 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 va ria nee 3

16、. Management: the company can provide some motivation policies to motivate the staff that iswork 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 re tur

17、n.ARRAverage profit=3,300,000=660,000Accoundng rate of return 660-0002,500,000=26.4%The cases show that the company should have an accounting rate of re tu rn of at least 15%, through calculation, the ARR is 26.4% Therefore, the data has meet company standards5.2 Identify the paybackThe company hope

18、s to recover the cost of the investment within 4 four years In foct,they just use 3 years 341days. (see Appendix 3.)5.3 Identify the Net present valueThe NPV method calculates the present values of cash inflows and outflows and establishes whether. Basically, NPV provides an objective for evaluating

19、 and selecting investment projects Moreover, it takes into account required rate of re turn 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 Matteck s costof ca

20、pital is 10%. The NPV is (46200). The NPV valueless 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 n

21、ot invest this project.(see Appendix 5)6.0 Recommendations for investment decis io n.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 calcul

22、ates 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 hav

23、e 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 thethe best investment to gain the maximum profits.8.0 Appendices8.1

24、 Appendix 1Matteck PLC Flexed budgetFor December 2011Original budget5000 unitsFlexed budget4500 unitsActual results4500 unitsVarianceF/A?99?Direct Materia 1180,000162,000160,0002000(F)Direct Labour100,00090,00095,0005000(A)VariableOverheads50,00045,00047,5002500(A)Supervision Cost3,3003,3003,400100(

25、A)Rent and Rates1,0001,0001,200200(A)Admin is trationOverheads2,0002,0002,100100(A)Depreciation3,0003,0003,0000Total306,300312,2005,900(A)8.2 Appendix 2Material price variance:Actual usage should cost 192,000But did cost 160.00032,000(F)Material usage variance;Actual output should use 13300kgBut did use 16:000kg2500(A)1230:000(A)Material variance: 2:000(F)Total Overhead:Budget overhea止 54s300Labour rate variance:Actual hours should cost 80 000But did cost 95=00015,000( A)Labour efficiencv varian