HND財(cái)政預(yù)算OUTCOME34報(bào)告

1、plcA financial analysis report for TricolOutcome 3and4Class;10E6Name:Ma bodaSCN:125099297Candidate Num:22word教育資料IntroductionTo operate better in financial aspect, the managementof Tricol plc askedme to analyze their financial condition then make recommendations forthem.FindingsPart A(i ) Flex budge

2、t in line with actual activityTricol plc Flexed Budget for JuneOriginalbudgetFlexedbudgetActualresultsVariance2000units1600 units1600unitsF/A££££Direct material80,00064,00061,6002,400FDirect labor36,00028,80035,2006,400AVariable productionoverhead4,0003,2003,2000Fixed costDepreci

3、ation1,5001,5001,5000Rent and rates2,5002,5002,5000Administration overhead2,0002,0002,200200AInsurance costs2,2002,2002,400200ATotal128,200104,200108,6004,400A(ii) Variances calculationDirect material total variance(Standard units of actual production*standard price) (actualquantity*actual price)(4

4、kg*1,600* £ 10) £ 61,600 = £ 2,400 (F)Rate of significance: (3.75%)Direct material usage varianceStandard price*(standard units of actual production actual quantity)£ 10* (4kg x 1,600) 5,600kg= £8,000 (F)Rate of significance (12.5%)Direct material price varianceActual quanti

5、ty * (standard price actual price)5,600kg* £ 10 (£61,600/ 5,600kg) =£ (5,600)(A)Rate of significance: (8.75%)Direct labour total variance(Standard hours of actual production*standard rate ph) - (actual hours*actual rate ph)(2hrs*1,600) *£ 9 £ 35,200= £ (6,400) (A)Rate o

6、f significance: (22.22%)Direct labour efficiency varianceStandard rate ph* (standard hours of actual production actual hours)£ 9*(2hrs*1,600 3,520hrs)=(2,880)(A)Rate of significance: (10%)Direct labour rate varianceActual hours*(standard rate ph - actual rate ph) 3,520hrs*( £ 9* £ 35,

7、200/3,520hrs)=£ (3,520) (A)Rate of significance: (12.22%)Total overhead varianceTotal standard overhead for actual production total actual overheads (£ 18,000/12+ £ 2,500+ £ 2,200+ £ 2,000)- ( £ 1,500+ £ 2,500+ £ 2,200+ £ 2,400)= £ (400) (A)Rate of s

8、ignificance: (3.5%)(iii) Report about variancesDirect material varianceThe direct material total variance can be analyzed in two aspects which are direct material volume and direct material price.For volume side, as calculated above, the budget volume is 6400kg; theactual volume is 5600kg. So there

9、is 800kg variance which is favorableand each unit variance is 0.5kg. The likely reason causing the variancecomes from three aspects. First of all, the company upgraded theproduction machinery recently, and new machine may use materialsefficiently, so it reduced the waste of materials. Secondly, the

10、company switched suppliers and using higher-grade materials can decrease wasteof materials too. Finally, the company has concluded ahigher-than-expected wage settlement for production operatives, whichwill maintain employees with higher skills as well as decrease turnover of employees, and it also c

11、an increase efficiency in using materials.For price aspect, the budget price is£ 10 per kg, and the actual priceis £ 11per kg, it is adverse that one pound over the budget price. Thecompany switching suppliers may cause the increase of negotiation cost.There may be a long-term relationship

12、 between Tricol plc and its oldsuppliers, so the suppliers maytake lots of discounts to the firm. After changing suppliers, the discount maydisappear. Furthermore, higher grade materials increased unit price.Overall, the total material variance is favorable.£ 8,000 5 5,600=£ 2,400.Direct l

13、abour varianceThe direct labour total variance is composed of direct labour efficiency variance and direct labour rate variance.The budget direct labour hours are 3,200hrs and the actual labour hoursare 3,520 hrs. There are more 320hrs needed than the budget, and each unitis 0.2hrs, which it is obvi

14、ously adverse. The company upgrading theproduction machinery may need time for employees to adopt it. Also, employees need training time. The rebuild process of machinery consumed time too. In a word, the chargeable hours have increased.The budget direct laour hours rate is £ 9 per hour, the ac

15、tual hours rateis £ 10 per hour. It is adverse that one pound higher than budgeted. Itis possible caused by both internal and external factors.Higher-than-expected wage settlement may be internal reason for the variance, and new machinery may be needed to recruit new employees to operate the ma

16、chinery, which also can increase the expense. For external factors, the changing of labour market may increase labour cost; the government legislation also can increase the labour cost, for example minimum pay.Both direct labour efficiency and direct labour rate variances are adverse, so the direct

17、labour total variance is adverse.Overhead varianceAs calculated above, total overhead variance is caused by administration and insurance. Each factor has £ 200 variance, so the total overhead variance is £ 400 and it is adverse. During the process of changing supplier, the company needed m

18、ore expense on public relationship or negotiation, in addition, in order to maintain the new machinery, administration cost will be increased too. For insurance aside, the improvement of machinery will need more insurance fees to cover, which also contributes to the increase of insurance fee of new

19、employees.Part BSelection and application of two investment appraisal techniquesAs the company is keen to recoup the cost of the investment within five years, I will choose Payback period and Net Present Value to help me complete the appraisal.In order to fulf川 the appraisal easily, there are some a

20、ssumptions listed below should be considered before the appraisal.(1) All revenue and inflow are assumed cash flow All investment cost incurred in year 0(3) No uncertainty is considered Do not consider inflation and taxation Market rate of return is expected rate of return(6) Rate of return is varyi

21、ng along with timeTricol plc Payback period for project distribution armYear Net cash flowCumulative Cash Flow££Cash FlowYear 0(1,000,000)(1,000,000)Cash InflowYear 1160,000(840,000)Year 2160,000(680,000)Year 3320,000(360,000)Year 4320,000(40,000)Year 5320,000280,000Net Cash BenefitYear 52

22、80.000Note: req uire 40,000/320,000 in year 5= 1/8*year=1.5 mothsPayback=4 years 1.5 mothsTricol plc Net Present Value for project distribution armAnnual cash flowPresent valuefactors at 10%PresentValue£££Year 0(1,000,000)1.000(1,000,000)Year 1160,0000.909145,440Year 2160,0000.826132,

23、160Year 3320,0000.751240,320Year 4320,0000.683218,560Year 5320,0000.621198,720935,200NPV(64,800)Recommendation about investmentAccording to Payback Period analysis, the investment cost can be recouped in year 4 and 1.5 moths. In other words, the period is under company' sexpectation. The project

24、 can be executed. However, according to NetPresent Value analysis, in terms of present value, within five years, what the NPV will bring net result is net cash loss but not net cash surplus.In general, the companyshould consider time value and other factors, so the project should not be executed.Fac

25、tors impact on the investment should be consideredVarious factors will impact on result of investment. I will outline factors should be considered when the management reviewing my recommendation in financial and non-financial factors.Financial factorAs distribution arm is financial long-term benefic

26、ial project, it can be used inlong-term period and bring benefits continuous. The investment cost is £ 1,000,000, which can be considered a large investment. So it more likely needs long period payback period. The management should focus on longer cash flows for longer period of future. On the other hand, Net PresentValue in year five is (28,000) only take 2.8% percents of the investment cost, it is more likely surplus in year six.