财政预算 张琳

The International College of Xiamen University10 SQA HND Business with AccountingPreparing Financial ForecastUnit Name: Preparing Financial ForecastsUnit Code: DE3J 35Name: Zhang, LinStudent ID No.: 115124722Supervisor: Li，LiSubmission Date: 10/12/12Word count: 931IntroductionThis report is to research the Tricol plc which is making a range of furniture and kitchenware. According to these variances I will give some possible reason and recommendations.Part APossible reasonsFrom the appendix 2, Direct Material Total Variance is ￡2,400(F), it is means actual direct material cost is lower than budget. The total material variance is favorable. The possible reason may the company uses a new expensive material with less wastage in the manufacturing process.From the appendix 2, Direct Material Usage Variance is ￡8,000 (F). The direct material budget volume is 6400kg，the actual volume is 5600kg. So there is 800kg variance which is favorable. The possible reason is the company updated to production equipment and the higher utilization ratio of raw materials now, so it reduce to the material wasted.Form the appendix 2, Direct Material Price Variance is ￡5,600 (A). The direct material budget price is ￡10 per kg and the actual price is ￡11per kg, this figure is adverse. The possible reason may the company bought a new higher grade materials increased unit price, it also change of suppliers, they lost their volume discount.Form the appendix 2, Direct Labor Total Variance is ￡6,400(A). The budget direct labor hours are 3,200hrs and the actual labor hours are 3,520hrs. There are more 320hrs needed than the budget, this is adverse. The labor cost is higher than expected. The possible reason is because of changing the new production equipment; workers are unskilled to use the machine.Form the appendix 2, Direct Labor Rate Variance is ￡3,520 (A). The budget direct labor hours rate is ￡9 per hour, the actual hours rate is ￡10 per hour. It is an adverse variance. The possible reason for it is that the workers work for a long time, the efficiency is not high.Form the appendix 2, Direct Labor Efficiency Variance is ￡2,880 (A). This is adverse. The reason may be that company's management is pay less attention to the workforce, so the workers will not work so hard. These unskilled workers waste more times.Form the appendix 2, Total Overhead Variance is ￡400 (A). It is adverse. The reason may be in order to maintain the new machinery, it lead to the administration overheads and insurance costs increased. It is also leading to the actual cost more than the budget.RecommendationsAccording to the above analysis that give some recommendations below.First, from the appendix 2, all the variances are above the 3% level of significance, so the company needs to take action to investigate this matter that to find out main reasons to solution the matter.Second, the company switched suppliers, so they have to negotiate with suppliers that make they get a discount with the appropriate purchase volume. Besides, spending less money to buy to better quality raw materials, thus reducing the cost of raw materials for production.Part BAssumptionsThere are some assumptions as follows:1.Taxation and inflation in materials prices could not be a factor.2.Assumed that the external pressure of competition will not vary.3.The market rate of return on investment will not be change.4.There are no uncertain factors.5.The time value of money has been ignored.Analysis of payback period and discounted cash flowFrom the appendix 3, as payback period analysis is 4 year and 1.5 months. The company will take 4 years to recover the cost. From the appendix 4, the net present value is negative 64800. We can see that it does not achieve the goal of this investment that the market rate of return on investment projects at 10%.Tricol plc is now considering the development of its own distribution arm. This operation would involve the purchase of several new motor vehicles, the acquisition of some adjacent land and a purpose- built loading unit. The estimated cost of the planned investment that in motor vehicles, land, loading unit total investment 900,000 pounds. The decision rule is to accept the project and shortest payback period. The company has been advised that the market rate of return on investment projects is currently 10%. It is also keen to recoup the cost of the investment within five years.RecommendationsI recommend the project should be rejected because the NPV and the cash flows will be negative. From the appendix 3, the company can not get the profit in the fifth year, since the figure is ￡64,800. Although the NPV is less than zero at present, but the company investment land may increase in the five years period. Investment project may bringmore market share for the company. Besides, for fixed-asset disposal also could bring to the company profits.Other factors that management should considerSometimes the government will by support to increase economic development. So the managers should pay attention to the government assistance policy. If the company has government's support, they can get some money to development. If the government reduce the taxes, this is very good opportunity to companies investment.Besides, Tricol plc invests on motor vehicles and on land. Motor vehicles may be used more than five years in the usual condition. The managers must take into consider that value of the land has been changed. After five years the land may rise.Tricol plc external competition has been ignored. Other investors will invest the same industry near to the company. They will have greater competition; it can affect Tricol plc profits, so manager should consider this factor.ReferencesPreparing Financial Forecast (2009) Business Accounting: An Introduction. 3rd ed. Beijing: China Morden Economic Publishing House.Tricol PLC Flexed Budget statement for JuneMaterial:1.Direct material total variance(standard units of actual production ×standard price)－(actual quantity ×actual price)[(4kg ×1,600)×￡10] －￡61,600= ￡2,400 (F)2.Direct material usage variancestandard price × (standard units of actual production－actual quantity)￡10×[(4kg ×1,600)-5,600kg]= ￡8,000 (F)3.Direct material price varianceactual quantity × (standard price－actual price)5,600kg× (￡10－￡11)= ￡5,600 (A)Labour:1.Direct labour total variance(standard hours of actual production×standard rate ph)－(actual hours×actual rate ph)[(2hr× 1,600) ×￡9] －(3,520hr×￡10)= ￡6,400 (A)2.Direct labour rate varianceactual hours× (standard rate ph－actual rate ph)3,520hr× (￡9－￡10)= ￡3,520 (A)3.Direct labour efficiency variancestandard rate ph× (standard hours of actual production－actual hours)￡9×[(2hr× 1,600) －3,520hr]= ￡2,880 (A)OverheadsOverhead Absorption Ratevariable + fixed budgeted overheadstotal budgeted activity= ￡3,200+￡2,500+￡2,000+￡2,200+￡1,5001,600 units= ￡7.125total overhead variance= total standard overhead for actual production －total actual overheads= (￡7.125× 1,600) －(￡3,200+￡2,500+￡2,200+￡2,400+￡1,500)= ￡11,400－￡11,800= ￡400 (A)Direct material total variance rate:￡2,400/￡64,000=3.75%> 3%Direct material usage variance rate:￡8,000/￡64,000=12.5%> 3%Direct material price variance rate: ￡5,600/￡64,000=8.75%> 3%Direct labour total variance rate: ￡6,400/￡28,800=22.2%> 3%Direct labour efficiency variance rate: ￡2,880/￡28,800=10%> 3%Direct labour rate variance rate: ￡3,520/￡28,800=12.2%> 3%Total overhead variance rate:￡400/￡11,400=3.5%> 3%PaybackPayback4+ 40000/320000=4year one and half months。