HND财政预算OUTCOME34报告.docx

HND财政预算OUTCOME34报告.docx

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HND财政预算OUTCOME34报告

AfinancialanalysisreportforTricolplc

Outcome3and4

Class;10E6

Name:

Maboda

SCN:

7

CandidateNum:

22

Introduction

Tooperatebetterinfinancialaspect,themanagementofTricolplcaskedmetoanalyzetheirfinancialconditionthenmakerecommendationsforthem.

Findings

PartA

（ⅰ）Flexbudgetinlinewithactualactivity

TricolplcFlexedBudgetforJune

Originalbudget

Flexedbudget

Actualresults

Variance

2000units

1600units

1600units

F/A

￡

￡

￡

￡

Directmaterial

80,000

64,000

61,600

2,400

F

Directlabor

36,000

28,800

35,200

6,400

A

Variableproductionoverhead

4,000

3,200

3,200

0

Fixedcost

Depreciation

1,500

1,500

1,500

0

Rentandrates

2,500

2,500

2,500

0

Administrationoverhead

2,000

2,000

2,200

200

A

Insurancecosts

2,200

2,200

2,400

200

A

Total

128,200

104,200

108,600

4,400

A

（ⅱ）Variancescalculation

Directmaterialtotalvariance

（Standardunitsofactualproduction*standardprice）－（actualquantity*actualprice）

（4kg*1,600*￡10）－￡61,600=￡2,400（F）

Rateofsignificance:

%）

Directmaterialusagevariance

Standardprice*（standardunitsofactualproduction－actualquantity）

￡10*[（4kgⅹ1,600）－5,600kg]=￡8,000（F）

Rateofsignificance%）

Directmaterialpricevariance

Actualquantity*（standardprice－actualprice）

5,600kg*[￡10－（￡61,600/5,600kg）]=￡（5,600）（A）

Rateofsignificance:

%）

Directlabourtotalvariance

（Standardhoursofactualproduction*standardrateph）-（actualhours*actualrateph）

[（2hrs*1,600）*￡9]－￡35,200=￡（6,400）（A）

Rateofsignificance:

%）

Directlabourefficiencyvariance

Standardrateph*（standardhoursofactualproduction－actualhours）

￡9*（2hrs*1,600－3,520hrs）=（2,880）（A）

Rateofsignificance:

（10%）

Directlabourratevariance

Actualhours*（standardrateph–actualrateph）

3,520hrs*（￡9*－￡35,200/3,520hrs）=￡（3,520）（A）

Rateofsignificance:

%）

Totaloverheadvariance

Totalstandardoverheadforactualproduction－totalactualoverheads

（￡18,000/12+￡2,500+￡2,200+￡2,000）-（￡1,500+￡2,500+￡2,200+￡2,400）=￡（400）（A）

Rateofsignificance:

%）

（ⅲ）Reportaboutvariances

Directmaterialvariance

Thedirectmaterialtotalvariancecanbeanalyzedintwoaspectswhicharedirectmaterialvolumeanddirectmaterialprice.

Forvolumeside,ascalculatedabove,thebudgetvolumeis6400kg;theactualvolumeis5600kg.Sothereis800kgvariancewhichisfavorableandeachunitvarianceis.Thelikelyreasoncausingthevariancecomesfromthreeaspects.Firstofall,thecompanyupgradedtheproductionmachineryrecently,andnewmachinemayusematerialsefficiently,soitreducedthewasteofmaterials.Secondly,thecompanyswitchedsuppliersandusinghigher-gradematerialscandecreasewasteofmaterialstoo.Finally,thecompanyhasconcludedahigher-than-expectedwagesettlementforproductionoperatives,whichwillmaintainemployeeswithhigherskillsaswellasdecreaseturnoverofemployees,anditalsocanincreaseefficiencyinusingmaterials.

Forpriceaspect,thebudgetpriceis￡10perkg,andtheactualpriceis￡11perkg,itisadversethatonepoundoverthebudgetprice.Thecompanyswitchingsuppliersmaycausetheincreaseofnegotiationcost.Theremaybealong-termrelationshipbetweenTricolplcanditsoldsuppliers,sothesuppliersmaytakelotsofdiscountstothefirm.Afterchangingsuppliers,thediscountmaydisappear.Furthermore,highergradematerialsincreasedunitprice.

Overall,thetotalmaterialvarianceisfavorable.￡8,000－￡5,600=￡2,400.

Directlabourvariance

Thedirectlabourtotalvarianceiscomposedofdirectlabourefficiencyvarianceanddirectlabourratevariance.

Thebudgetdirectlabourhoursare3,200hrsandtheactuallabourhoursare3,520hrs.Therearemore320hrsneededthanthebudget,andeachunitis,whichitisobviouslyadverse.Thecompanyupgradingtheproductionmachinerymayneedtimeforemployeestoadoptit.Also,employeesneedtrainingtime.Therebuildprocessofmachineryconsumedtimetoo.Inaword,thechargeablehourshaveincreased.

Thebudgetdirectlaourhoursrateis￡9perhour,theactualhoursrateis￡10perhour.Itisadversethatonepoundhigherthanbudgeted.Itispossiblecausedbybothinternalandexternalfactors.Higher-than-expectedwagesettlementmaybeinternalreasonforthevariance,andnewmachinerymaybeneededtorecruitnewemployeestooperatethemachinery,whichalsocanincreasetheexpense.Forexternalfactors,thechangingoflabourmarketmayincreaselabourcost;thegovernmentlegislationalsocanincreasethelabourcost,forexampleminimumpay.

Bothdirectlabourefficiencyanddirectlabourratevariancesareadverse,sothedirectlabourtotalvarianceisadverse.

Overheadvariance

Ascalculatedabove,totaloverheadvarianceiscausedbyadministrationandinsurance.Eachfactorhas￡200variance,sothetotaloverheadvarianceis￡400anditisadverse.Duringtheprocessofchangingsupplier,thecompanyneededmoreexpenseonpublicrelationshipornegotiation,inaddition,inordertomaintainthenewmachinery,administrationcostwillbeincreasedtoo.Forinsuranceaside,theimprovementofmachinerywillneedmoreinsurancefeestocover,whichalsocontributestotheincreaseofinsurancefeeofnewemployees.

PartB

Selectionandapplicationoftwoinvestmentappraisaltechniques

Asthecompanyiskeentorecoupthecostoftheinvestmentwithinfiveyears,IwillchoosePaybackperiodandNetPresentValuetohelpmecompletetheappraisal.

Inordertofulfilltheappraisaleasily,therearesomeassumptionslistedbelowshouldbeconsideredbeforetheappraisal.

⑴Allrevenueandinflowareassumedcashflow

⑵Allinvestmentcostincurredinyear0

⑶Nouncertaintyisconsidered

⑷Donotconsiderinflationandtaxation

⑸Marketrateofreturnisexpectedrateofreturn

⑹Rateofreturnisvaryingalongwithtime

TricolplcPaybackperiodforprojectdistributionarm

YearNetcashflow

CumulativeCashFlow

￡

￡

CashFlow

Year0

（1,000,000）

（1,000,000）

CashInflow

Year1

160,000

（840,000）

Year2

160,000

（680,000）

Year3

320,000

（360,000）

Year4

320,000

（40,000）

Year5

320,000

280,000

NetCashBenefit

Year5

Note:

require40,000/320,000inyear5=1/8*year=moths

Payback=4yearsmoths

TricolplcNetPresentValueforprojectdistributionarm

Annualcashflow

Presentvaluefactorsat10%

Present

Value

￡

￡

￡

Year0

（1,000,000）

（1,000,000）

Year1

160,000

145,440

Year2

160,000

132,160

Year3

320,000

240,320

Year4

320,000

218,560

Year5

320,000

198,720

935,200

NPV

（64,800）

Recommendationaboutinvestment

AccordingtoPaybackPeriodanalysis,theinvestmentcostcanberecoupedinyear4andmoths.Inotherwords,theperiodisundercompany’sexpectation.Theprojectcanbeexecuted.However,accordingtoNetPresentValueanalysis,intermsofpresentvalue,withinfiveyears,whattheNPVwillbringnetresultisnetcashlossbutnotnetcashsurplus.Ingeneral,thecompanyshouldconsidertimevalueandotherfactors,sotheprojectshouldnotbeexecuted.

Factorsimpactontheinvestmentshouldbeconsidered

Variousfactorswillimpactonresultofinvestment.Iwilloutlinefactorsshouldbeconsideredwhenthemanagementreviewingmyrecommendationinfinancialandnon-financialfactors.

Financialfactor

Asdistributionarmisfinanciallong-termbeneficialproject,itcanbeusedin

long-termperiodandbringbenefitscontinuous.Theinvestmentcostis￡1,000,000,whichcanbeconsideredalargeinvestment.Soitmorelikelyneedslongperiodpaybackperiod.Themanagementshouldfocusonlongercashflowsforlongerperiodoffuture.Ontheotherhand,NetPresentValueinyearfiveis（28,000）onlytake%percentsoftheinvestmentcost,itismorelikelysurplusinyearsix.Anotherfinancialfactorissourceofmillionpounds.Ifitisinternalsource,themanagementmainlyconcentrateonopportunitiescost.Ifitiscostofcapitalorcostofcapitaltakingmuchweightofthesource,themanagementmustpaycostofthesourcefirstly,themarketingrateofreturnlikelylowforthecompany,inaddition,themanagementshouldusehigherdiscountedcashflow.

Non-financialfactor

Theinvestmentmustbeconsistencewithcompany’sstrategicplan.AsTricolisaplc,itmusttakesocialresponsibilitysuchasobeyinggovernmentpolicy,minimizingimpactonenvironmentandminimizingimpactonnatives.

Conclusion

Forrealcompetitionismorecomplexandfierce,inordertomakeaccuratedecisions,managementshouldconsidermorefactorsduringthedecision-making;furthermore,themanagementshouldusemoretoolstohelpthemsuchasIRR,DCF.