【HND】财政预算OUTCOME0001

1、PartiTricol pic FlexedBudget For JuneOriginal Budgets2,000 unitsFlexed Budgets1,600 unitsActual results1,600 unitsVaria neeF/A££££Direct Material80,00064,00061,6002,400FDirect Labor36,00028,80035,2006,400AVariable overheads4,0003,2003,2000Depreciatio n1,5001,5001,5000Rent and Rat

2、es2,5002,5002,5000Admi nistrati onOverheads2,0002,0002,200200AIn sura nces2,2002,2002,400200ATotal128,200104,200108,6004,400A(2) The variances are calculated as followed:DIRECT MATERIAL TOTAL VARIANCE(STANDARD UNITS OF ACTUAL PRODUCTIOSTANDARD PRICE) (ACTUALQUANTITY ACTUAL PRICE)(4kg 水600)疼 10 £

3、; 61,600=£ 64,000- £ 61,600=£ 2,400 (F)DIRECT MATERIAL PRICE VARIANCEACTUAL QUANTITY (STANDARD PRICE ACTUAL PRICE)5,600kgs (£ 10£ 61,600/5,600kgs)=5,600kgs (£ 10 £ 11)= £ 5,600 (A)DIRECT MATERIAL USAGE VARIANCESTANDADR PRICEX (STANDARD UNITS OF ACTUAL PROCUTIO

4、N ACTUAL UNITS)£ 10X(4kg X,600) 5,600kgs= £ 8,000 (F)DIRECT LABOUR TOTAL VARIANCE(STANDARD HOURS OF ACTUAL PRODUCTIONSTANDARD RATE ph) (ACTUAL HOURS ACTUAL RATE ph)(2hours 1600) £ 9 £ 35,200=£ 2,8800- £ 35,200= £ 6,400 (A)DIRECT LABOUR RATE VARIANCEACTUAL HOURD(STA

5、NDARD RATE p.h. ACTUAL RATE ph)3,520hrs (£ 9 £ 35,200/3,520hrs)=3,520hrs (£ 9£ 10)= £ 3,520 (A)DIRECT LABOUR EFFICIENCY VARIANCEACTUAL HOURS (STANDARD HOURS OF ACTUAL PRODUCTION ACTUAL HOURS)£ 9X(2hours 1,600)3,520hrs= £ 9X320=£ 2,880 (A)OVERHEAD TOTAL VARIANC

6、ETotal Sta ndard Overhead for actual productioTotal Actual Overheads£ 2X1,600+ £ 2,000+ £ 2,500+ £ 1,500+ £ 2,200 ( £ 3,200+ £ 2,200+£ 2,500+ £ 1,500+£ 2,400)=400 (A)(3) In the first part, we have calculated cost varia nces for Tricol plc at Jun e. I

7、t totally produced 4,400 adverse varianee that include £ 2,400 favorable material varianee, £ 6,400 adverse labor varianee and £ 400 adverse overheads varianee. All these varia nces have exceeded the rate of sig nifica nee of 3%.Direct material total varia nee can be divided in to two

8、 comp onen ts: the direct material usage varia nee and the direct material price varia nee. Direct material total varia nee of Tricol pic in June is £ 2,400 (F) with the rate of significanee of 3.75%( The level of significance of Direct Material Total Variance=400/64,000=3.75%). The direct mate

9、rial usage varia nee is the favorable varia nces in£ 8,000, a rate of sig nifica nee is 12.5%( The level of significanee of Direct Material Usage Varianee =8,000/64,000=12.5%), the possible reasonsfor this varianee may be the company use higher quality raw material and higher grade workforce. t

10、he direct material price varianee is £ 5,600 (A), and a rate of significanee is 8.75%( The level of significanee of Direct Material Price Varian ce=5,600/64,000=8.75%). The reason is the compa ny has switched supplier and using higher-grade materials; and because the fluctuations of excha nge r

11、ate in the intern ati onal market react on price of the raw materials. Similar with direct material total varianee, the Direct Labour Total Varianee was made up by the Direct Labour Rate Varia nee and Direct Labour Efficie ncy Varia nee. It is a adverse varianee of Tricol plc in June (£ 6,400)

12、with the rate of significanee of 18.18% (The level of sig nifica nee of Direct Labour Total Varia nee =6,400/35,200=18.18%). The direct labor efficie ncy varia nee is the adverse varia nee in £ 2,880, and a rate of significanee is 8.18% (The level of significanee of Direct Labour Efficie ncy Va

13、riance =2,880/35,200=8.18%). The reason for this varia nee may be the company lowers its workforce grade and also the morale. Possibly it is that the compa ny eon ducts the pay rise which is higher tha n expected for producti on operatives, or it lack qualified and skilled labor to operate the upgra

14、ded machinery lead a adverse varianee in the direct labor rate, a£ 3,520 , with a rate of significanee as 10% (The level of sig nifica nee of Direct Labour Rate Varia nee =3,520/35,200=10%).The overheads total varia nee in June was £ 400 which was a adverse varia nee. The level of sig ni f

15、ica nee of Overhead=400/12,200=3.3%. There are two factors cause this. First, the in sura nee fee exceed an ticipated budget. Second, there occur extra admi nistrati on overheads.For all the varia nee above, there are some recomme ndati ons prese nted in the follows: All the varia nces rate of sig n

16、ifica nee are more tha n 3%, so a detail an alysis of all the aspects should be take n, and find out a settleme nt for this problem, as to elim in ate the adverse variances and holding the favorable variances. The company has recently con cluded a higher-tha n-excepted wage, however, the labor effic

17、ie ncy decreased. The man ageme nt n eeds to do a farther research.Considering the adverse varianee of material price, the purchasing department en deavor to n egotiate with the supplier about the extra disco un t, if it sig ns a Ion g-term and large purchas ing con tract with the supplier; or searc

18、h for new supplier who can provide the same higher-grade material with relative lower price.Appendix1. Payback Period:Year Annual Cash Flow Cumulative0 (£ 1,000,000) (£ 1,000,000)1 £160,000(£ 840,000)2 £ 160,000(£ 680,000)3 £320,000(£ 360,000)4 £320,000(&

19、#163; 40,000)5 £ 320,000£ 280,000Payback period = 4 years and 1.5 mon ths (40,000/320,000)2. Disco un ted Cash Flow:Year PV factor - 10% Cash Flow NPV Cumulative0 1.000 (£ 1,000,000) (£ 1,000,000) (£ 1,000,000)10.909£ 160,000£ 145,440(£ 854,560)20.826£ 16

20、0,000£ 132,160(£ 722,400)30.751£ 320,000£ 240,320(£ 482,080)40.683£ 320,000£ 218,560(£ 263,520)50.621£ 320,000£ 198,720(£ 64,800)Net Prese nt Value for the Project =£ -64,800Part 21. There are some key assumptions should be clearly statedwi

21、ll no(1) The management should assume that the given market rate of returnvary.(2) Managers should ignore the impact of taxation and inflation on the above figures.(3) The figures of expect revenue which appear in this report are net cash flow, after paid off all releva nt costs.(4) Assu ming that t

22、he total cost of the project will be payable at the beg inning.2. The calculation and analysis of two investment appraisal technique. Payback Period:YearAnnual Cash FlowCumulative0(£ 1,000,000)(£ 1,000,000)1£ 160,000(£ 840,000)2£ 160,000(£ 680,000)3£ 320,000(£

23、 360,000)4£ 320,000(£ 40,000)5£ 320,000£ 280,000Payback period = 4 years and 1.5 months (40,000/320,000)Payback as a method of investment appraisal measuresthe number of years it is expected to take to recover the cost of the origi nal in vestme nt. Payback period is 4 years and

24、1.5 mon ths. In the 5 year after the in vestme nt, the huge inv estme nt will get a complete return, and obtain the net present value of the return at £ 280,000 from this project. So, the payback is applicable.(2) Discounted Cash Flow:YearPV factor -10%Cash FlowNPVCumulative01.000(£ 1,000,

25、000)(£ 1,000,000)(£ 1,000,000)10.909£ 160,000£ 145,440(£ 854,560)20.826£ 160,000£ 132,160(£ 722,400)30.751£ 320,000£ 240,320(£ 482,080)40.683£ 320,000£ 218,560(£ 263,520)50.621£ 320,000£ 198,720(£ 64,800)Net Present

26、 Value for the Project = £ -64,800With this technique, the company would not return their investment. The market rate of return on investment projects is 10%, the Tricol plc will not recover its in vestme nt over the n ext 5 years, the net prese nt value of the retur n i£ 935,200, and the

27、net present value for the project is a negative numerical that means a loss of £ 64,800. So the DCF technique indicted that this investment was not appeared to be profitable.3. On the basis of the above investment appraisal analysis, the management should be recomme nded that the pla nned in vestme nt should not go ahead. Because net present value for the Project is £ -64,800.