财政预算outcome3.4

Preparing Financial Forecasts

Assessment task 2 Outcome 3&4

Name:Yao qi zhen(Robert)姚琦臻

Class:Year1 Business3 Student ID:085073354 Date:June 16, 2009

Appendix 1

Tricol plc

For Jun

Per

Percentage of normal activity Unit

Original Flexed Actual

Budget Budget results 2,000 Unit 1,600 Unit 1,600 Units

Variance

100% ￡ ￡ Direct Material 40 80,000 Direct Labour 18 36,000 Variable Production Overhead 2 4,000 Prima Cost 60 120,000 Insurance Cost 2,200 Depreciation 1,500 Rent and Rates 2,500 Administration Overhead 2,000 Total cost

128,200

PartA:

Materials:

Direct material price variance: AQ: actual quantity of material purchased SQ:standard quantity of material allowed AP :actual price per unit of material SP:standard price per unit of direct material Materials price:AP=61600/5600=11 SP=10

Material price variance=(AP-SP)*AQ Price=AP*AQ=5600*11=61600 AQ*SP=5600*10=56000 MPV=(￡11-￡10)= (5600/64000)*100%=8.75%＞3%

80% ￡ 64,000 28,800 3,200 96,000 2,200 1,500 2,500 2,000 104,200 ￡ 61,600 35,200 3,200 100,000 1,500 2,500 2,200 2,400 108,600

F/A

￡

2,400 F 6,400 A

0 4,000 A 700 F 1,000 A 300 F 400 A 4,400 A

Direct material usage variance: Material usage:AQ=5600

SQ=8000*80%=6400 Material usage variance=(AQ-SQ)*SP Usage=AQ*AP=5600*10=56000 SQ*SP=6400*10=64000 MUV=(￡5600-￡(8000/6400)*100%=12.5%＞3% Labour:

Direct labour rate variable:

AH=Actual number (quantity)labor hours AR= Actual wage rate SR= Standard wage rate Labor rate:AR=35200/3520=10 SR=9

Labor rate variable:(AR-SR)*AH Rate:AH*AR=3520*10=35200 AH*SR=3520*9=31680

LRV=(￡10-￡(3520/28800)*100%=12%＞3%

Direct labour efficiency variable: AH=Actual number of hours worked SH=Standard number of hours worked SK=Standard labour wage rate Labor efficiency: AH=3520

SH=28800/9=3200

Labor efficiency variance=(AH-SH)*SK Efficiency: AH*SR=3,520*9=31,680 SH*SR=3,300*9=28,800 LEV=(3,520- 3,200)*￡(320/3200)*100%=10%＞3%

Overhead variances:

Overhead absorption rate=total budget overhead/total budget activity level

Total overhead variance=total standard overhead for actual production-total actual overhead

Total budget overhead=￡2,200+￡1,500+￡2,500+￡2,000+￡4,000

=￡12,200

Overhead absorption rate =￡12,200/2,000=￡6.1 per unit Total overhead variance=￡6.1*1,600-￡(2040/12200)*100%=16.72＞3%

Recommendations:

To increase the company's machinery products, it can make procedures more effective. They also make use of good materials and switch suppliers, it can reduce the quality of their products. Higher than - expected to pay, you can encourage employees to have more enthusiasm and energy to do their jobs.

Some of the recommendations, the company: the repeated use of low grade material, in order to save costs and materials. Managers can provide staff training and development to enhance their capabilities.

Part B:

Traditional investment appraisal techniques and projects. Two special methods of investment and project evaluation has become a so-called traditional techniques. These are the investment return and accounting rate of return, which are described below.

Payback period

It is very popular investment and project evaluation techniques. This method of investment and project evaluation measures the number of years, is expected to be taken to recover the cost of the original investment. Calculated to calculate the proportion of the investment recovery period: the initial fixed asset investment /

annual cash flow. encourage the employees to have more enthusiasm and energy to do their jobs.

Some advices for the company: reuse the lower grade materials to save the cost and materials. The manager could give some training and development for employees to increase their capacities.

It has the advantages and disadvantages:

Advantage: Technology was considered easy to operate, easy to understand

1. Use of cash flow rather than accounting profit, which is a more objective basis. 2. It is believed that the investment recovery period is short, low-risk projects in 3.Shows how the cost of procurement of assets as soon as possible to be resumed 4.Short-term ways to reduce the risk of loss, through the elimination 5. As a measure to compare the profitability of the project

6.Useful as a measure of liquidity, a more direct return of cash is preferred.

Disadvantages: lose sight of the cash flow of outflow, has reached a preliminary 1.Ignores risk

2.Ignore time value of money

3. Benefit from ignoring the fact that different projects may have an imbalance in the rate of

4.There is no allowance for interest and the initial capital investment According to the case: PBP is four years and one point five months

Accounting rate of return

Our second traditional investment and project appraisal method is the accounting rate return, commonly referred to as ARR. This is the ratio of average annual profits to the capital investment.