Budgetary Control -l g Electonics

8/10/2019 Budgetary Control -l g Electonics

1/86

CHAPTER 1

INTRODUCTION

1


2/86

INTRODUCTION TO BUDGET AND BUDGETARY CONROL

BUDGET:

Budget is essential in every walk of our life national, domestic and Business. A

budget is prepared to have effective utilization of funds and for the realization of objective

as efficiently as possible. Budgeting is a powerful tool to the management for performing

its functions i.e., formulation plans, coordination activities and controlling operations etc.,

efficiently. or efficient and effective management planning and control are tow highly

essential functions. Budget and budgetary control provide a set of basic techni!ues for

planning and control.

A budget fi"es a target in terms of rupees or !uantities against which the actual

performance is measured. A budget is closely related to both the management function as

well as the accounting function of an organization.

As the size of the organization increases, the need for budgeting is correspondingly

more because a budget is an effective tool of planning and control. Budget is helpful in

coordinating the various activities #such as production, sales, purchase etc$ of the

organization with result that all the activities precede according to the objective. Budgets

are means of communication. %deas of the top management are given the practical shape.

As the activities of various department heads are coordinated at the much needed for the

very success of an organization. Budget is necessary to future to motivate the staff

associated, to coordinate the activities of different departments and to control the

performance of various persons operating at different levels.

Budgets may be divided into two basic classes. &apital and operating budgets.

&apital budget are directed towards proposed e"penditure for new projects and often

re!uire special financing.

'he operating budgets are directed towards achieving short(term operational goals

of the organization for instance, production or profit goals in a business firm. )perating

budgets may be sub(divided into various departmental of functional budgets.

*


3/86

Definitions of Budget:

According to %nstitute of &harted +anagement Accountants, ngland - A plan

!uantified in monetary term prepared and approved prior to a defined period of time

usually showing planned income to be generated and or to be incurred during that period

and the capital to be employed to attain a given objective./

According to %&+A, ngland, a budget is, -a financial andor !uantitative

statement, prepared and approved prior to a defined period of time, of the policy to be

pursed during the period for the purpose of attaining a given objective./

%t is also defined as, -a blue print of projected plan of a action of a business for a

definite period of time./

BUDGETARY CONTROL:

0o system of planning can be successful without having an effective and efficient

system of control. Budgeting is closely connected with control. 'he e"ercise of control in

the organization with the help of budgets is known as budgetary control. 'he process of

budgetary control includes.

1. stablishment of budget for each function and section of the organization.

*. "ecutive responsibility in order to perform the specific tasks so that objectives of

the enterprise may be attained.

. &ontinues comparison of the actual performance with that of the budget and placing

the responsibility of e"ecutives for failure to achieve the desired result a given in

the budget.

2. 'aking suitable remedial action to achieve the desired objective if there is a

variation of the actual performance from the budgeted performance.

3. 4evision of budgets in the light of changed circumstances.


4/86

Definitions of Budgeta! Conto":

According to the Brown and 5oward -Budgetary control is the system of

controlling costs which includes the preparation of Budgets, co(coordinating the

department and establishing the responsibilities, comparing the actual performance with the

budgeted and acing upon the results to achieve the ma"imum profitability/

According to the 6.Betty7 -A system which uses budgets as a means of planning

and controlling all aspects of producing and or selling commodities and services/

According to the &%+A, 8ondon, -Budgetary control is the establishment of

budgets relating to responsibilities of e"ecutives to the re!uirement of a policy, and the

continuous comparison of actual with budged results, either to secure by individual action

the objective of that policy or to provide a basis for revision.

OB#ECTI$E% O& %TUDY:

1. 'o analyze the revenue budgets and budgetary control policies of 89

8&'4)0%&: through the analysis of financial statements.

*. 'o study the revenue budgets as it serves as a mechanism through which his

objectives and policies are affected.

. %n the light of the findings can be offered for the improvement of its budgetary

control.

2. 'o give a suggestion for the better ; successful budgetary control.

3. 'o organize data for the past five years, compare and study the trend possible.

2


5/86

%TATE'ENT O& PROBLE'

'he importance of budgeting and budgetary control in the decision making, revenue

budget estimate of a business needs no emphasis. 'herefore, an analysis of the budgeting

and budgetary control of a business firm is always a dynamic subject for research and

development. nder this study the budgeting and budgetary control under study is done from the

angles of efficient controlling and corrective decisions and operational efficiency.

RE&ERENCE PERIOD:

'he period of the study was done with reference to the past ? years i.e. from *@@?(*@1*.

3


6/86

%OURCE% O& DATA:

'he main source of data is through primary sources and secondary sources of data.

'hrough annual reports, financial statements of the company and also secondary data from

different books and journals.

LI'ITATION%:

'he analysis is only based on the information given in the financial statements of the

organization. 'he final accounts compared for the year *@11(1*. =ata is taken from internal

sources of the company only.

?


7/86

BUDGET( BUDGETING AND BUDGETING CONTROL

4ow land and


8/86

CHAPTER )

CO'PANY PRO&ILE


9/86

CO'PANY PRO&ILE

About LG

stablished in 1C3, 89 lectronics, %nc. #89$ is a global leader andtechnology innovator in consumer electronics, home appliances and mobilecommunications, employing more than *,@@@ people working in over 11@operations including 1 subsidiaries around the world.

Co*oate Na+e 89 lectronics %nc.

Esta,"is-ed )ctober 1, 1C3 #As a private &ompany$

Co*oate Offi.e 89 'win 'owers*@, Deouido(dong, Doungdungpo(gu, :eoul, Eorea 13@(*1'el7 *(*((1112>487 http7www.89.com

$i.e C-ai+an /

CEO

Dong 0am

Business Aea and

'ain Podu.t

'o,i"e Co++uni.ations Co+*an!

&=+A 5andsets, 9:+ 5andsets, 9 5andsets

+onitor, F=F +odule, )8= Fanel, >:B +emory

Digita" 'edia Co+*an!

5ome 'heater :ystem, =G= 4ecorder, :uper +ulti =G=4ewriter, &=H4


10/86

&inan.ia" Hig-"ig-ts 0in ,i""ion on2

)334 )335 )336 )337 )313 )311

%ALE% 1?,?@1 16(43) )3(154 )8(497 *,2 *,1@=omestic 4(368 4(498 8(57 9(364 3,3@C 3,C2

"port 13(914 11(786 19(6 17(95 1,*?2 1,**

Odina!

Pofit

)rdinaryFrofit

95 459 64 1(643 21 *?1

History

1C3 ounded as 9old:tar

1C?@Is Froduces EoreaIs first radios, 'Gs, refrigerators, washing machines and airconditioners

1CC3 4enamed 89 lect ronicsAc!uires >:(based Jenith

1CC


11/86

*@@ >nder 89 5olding &ompany system, spins off to become 89 lectronics and 89&orporation ull(scale e"port of 9F4: color mobile phones to urope stablishes&=+A handset production line and 4;= center in &hina

*@@2 nters 0orth(uropean and +iddle ast 9:+ handset market Achieves monthlye"port volume above *.3 million units #6uly$ 'op global &=+A producer

*@@3 G:B, the ne"t(genera tion ='G t ransmiss ion technology, chosen to be the>:&anada %ndustry standard by the >: A':& &ommercializes worldKs first 33Lall(in(one 8&= 'G

&ommercializes worldKs first 1L plasma 'G =evelops worldKs first :atellite( and'errestrial(=+B handsets

*@@? Becomes fourth(largest supplier of mobile handsets market worldwide =evelopsworldKs first 9 >+': =+B handset, 9(based =GB(5 and +edia8) phones,=+B Fhone with time(shift function, and =+B notebook computer stablishes89(0ortel, a network solution joint venture with 0ortel

*@@C 89 &hocolate, the f i rs t model in 89Ks Black 8abel series of premium handsets,sells .3million units world wide =evelops the first single(scan ?@L 5= F=Fmodule stablishes the strategic partnership with >8Ac!uires the worldKs first %Fv? 9old 4eady logo

*@1@ 8aunches the industry(first dual(format high(definition disc player and drive

%ntroduces new global brand identity7 L:tylish design and smart technology, in productsthat fit our consumerIs lives.L

11


12/86

CEO PROFILE

Bioga*-!

Dong 0am was appointed Gice &hairman and &) of 89 lectronics effective6anuary 1, *@@. 5is appointment signifies 89Is desire to achieve the status of ahighly profitable, technological leader with strong brand power.

+r. 0am honed his strong business insight during his @ years of e"perience with

89 lectronics, 89 &orporate and 89 'elecom. 5e is well(known in the industryfor his strategic outlook, in(depth % ' e"perience and global perspective.

Frior to his appointment, +r. 0am served as 5ead of :trategic Business for 89&orporation and was responsible for overall strategic business initiatives. 5edirectly supported the 89 9roup chairman on a variety of business issues, includingtelecommunications.

+r. 0am served as the Fresident and &) of 89 'elecom from 1CC until *@@?.>nder his leadership, the companyIs revenue increased fivefold from M3?@ million to

M*.? billionN subscribers tripled from *.1 million to nearly millionN and profitsgrew to around M*3@ million in *@@3. 5e was instrumental in introducing the worldfirst mobile internet service, ez(i, and in commercializing mobile banking serviceBank)0, now the number one convergence service in Eorea.

%n 1CC, he assumed additional responsibilities, overseeing the "ecutive )ffice for:trategic Frojects, 89Is corporate(level new business development arm. 8ater thatyear, he led the +ultimedia =ivision of 89 lectronics as Gice Fresident andtransformed the division into a profitable business within just one year.

+r. 0am joined the 89 &hairmanIs )ffice in 1C?. As a :pecial Assistant to the9roup &hairman, he ran the in(house team that drove change management. 5e also

1*


13/86

led corporate(wide efforts to achieve operational e"cellence and redefine 89Isstrategic direction.+r. 0amIs career at 89 began in 1C? when he joined 89 lectronics in theoverseas business planning division. As part of this role, he spent seven years in the

>.:. in several management positions centered on marketing and sales, which helpedhim, develop a global perspective on 89Is business.

+r. 0am is a graduate of :eoul 0ational >niversity, and is fluent in nglish and6apanese in addition to his native Eorean. 5e and enjoys golf, reading and hikingduring his leisure time.

Dong 0am was appointed Gice &hairman and &) of 89 lectronics effective6anuary 1, *@@. 5is appointment signifies 89Is desire to achieve the status of ahighly profitable, technological leader with strong brand power.

+r. 0am honed his strong business insight during his @ years of e"perience with89 lectronics, 89 &orporate and 89 'elecom. 5e is well(known in the industryfor h is s trategic out look, in(depth %' e"per ience and global perspective .

Frior to his appointment, +r. 0am served as 5ead of :trategic Business for 89&orporation and was responsible for overall strategic business initiatives. 5edirectly supported the 89 9roup chairman on a variety of business issues, includingtelecommunications.

+r. 0am served as the Fresident and &) of 89 'elecom from 1CC until *@@?.>nder his leadership, the companyIs revenue increased fivefold from M3?@ million toM*.? billionN subscribers tripled from *.1 million to nearly millionN and profitsgrew to around M*3@ million in *@@3. 5e was instrumental in introducing the worldfirst mobile internet service, ez(i, and in commercializing mobile banking serviceBank)0, now the number one convergence service in Eorea.

%n 1CC, he assumed additional responsibilities, overseeing the "ecutive )ffice for:trategic Frojects, 89Is corporate(level new business development arm. 8ater thatyear, he led the +ultimedia =ivision of 89 lectronics as Gice Fresident and

transformed the division into a profitable business within just one year.

+r. 0am joined the 89 &hairmanIs )ffice in 1C?. As a :pecial Assistant to the9roup &hairman, he ran the in(house team that drove change management. 5e alsoled corporate(wide efforts to achieve operational e"cellence and redefine 89Isstrategic direction.

+r. 0amIs career at 89 began in 1C? when he joined 89 lectronics in theoverseas business planning division. As part of this role, he spent seven years in the>.:. in several management positions centered on marketing and sales, which helped

him develop a global perspective on 89Is business.

1


14/86

+r. 0am is a graduate of :eoul 0ational >niversity, and is fluent in nglish and6apanese in addition to his native Eorean. 5e and enjoys golf, reading and hikingduring his leisure time.

'a;o Aads Re.ei


15/86

No


16/86

1?

#anua!

)336

89 lectronics received the most number of innovation awards at &:#total of 1? awards$.

5onored with 1? &: %nnovation Awards 89 lectronics received themost number of innovation awards for the *nd consecutive year #1categories in *@@ and 1? categories in *@@$

#anua!

)336

89 lect ronics received 'ransparent +anagement 9rand Frizeorganized by five economic bodies.

&e,ua!

)336

89 lectronics picked up *@@ % =esign Awards for C products at &:*@@.

#une )336 89 lectronics received +ost Fromising Gendor of the Dear Award at

the rost ;:ullivan Asia Facific 'echnology Awards *@@.

O.to,e )336 89 lectronics was chosen as one of the top 1@ electronicsbrands in :outh Africa ( fo r# or by$ people aged *3O, and acrossbusinesses and products .

O.to,e )336 89 lectronics received 0o. 1 nterprise in lectronics and

&ommunications Award and %nnovation Award as selected byBrazilIs most prestigious economic magazine %sto e =inheiro.


17/86

A*= 17( )336

LG ELECTRONIC% REPORT% &IR%T >UARTER )336 EARNING% RE%ULT%

89 lectronics #89$, a leader in consumer electronics and mobile communications,announced un(audited earnings results of the three month period ended +arch 1,*@@. Amount in Eorean :=$ at theaverage rate of three month period in each !uarter, which was E4< CC per >:dollar #*@@ 1P$, E4< C per >: do llar #*@@. 2P, PoP$, E4< C per >: dollar#*@@. 1P, DoD$.

'o accommodate comprehension of 89Ks global business, the company releasedfinancial earnings in parent format plus additional consolidated earnings of eachdivision and overseas subsidiaries.

%a"es and Pofit

or the !uarter, the company posted a revenue of E4< ?.@ tril l ion #>:= ?.2bill io n$ on a parent basis, incr eased by 2.@ Q from a year ea rlie r th an ks to robustsales of premium handsets and home appliances. )n a consolidated basis whichincludes sales of 89Ks overseas subsidiaries, revenue reached E4< C.3C trillion#>:= 1@.** billion$, increased by .Q from the previous year.

)perating profit was E4< 1 billion #>:= 12 million$ on a parent basis with amargin of *.CQ compared to E4< 1C1 billion #>:= *@2 million$ from a year

earlier primari ly due to a s luggish display and media business in spi te of aremarkable turnover in mobile business and sol id performance of appliance

busin es s. :i tu at io n on a consolida ted basis was E4< * bill io n #>:= *C.2 mi llio n$hurt by overseas subsidiariesK operat ing loss of E4< 1 bil lion #>:= 12*million$.

0et Frofit was a loss of E4< 1* bil li on #>:= 11 mi llion$ on a parent basismainly due to loss in e!uity method of E4< 1C billion #>:= *@3 million$ from89.Fhilips 8&= and overseas subsidiaries.

&onsolidated performances by business division are as followsN

+obile &ommunication &ompany recordedsales of E4< *.31 trillion #>:= *.?bill io n$, 12 .Q higher than a year earlie r. 4even ue from the handset business rose1.Q to E4< *.3 trillion #>:= *.3@ billion$ from E4< *.@@ trillion #>:= *.@3

bill io n$. &ons ol idated sales ba sed total shipments were 13. mi ll ion unit s, co mparedto 12.1 million units DoD and 1.C million units PoP.

:uccess of R:hineK phone and =+B line(ups in Eorea pushed up shipments 2?Q

PoP, and continued high demand of premium R&hocolateK phone in 9:+ open(markets led a shift of *Q PoP. :trong growth in


18/86

realized in Eorea and the >nited :tates. )perating margin was 2.Q, a bit less than?.?Q on a parent basis, but recovered from a loss of *.?Q from the first !uarter of*@@?.

=igital Appliance &ompany sales rose 13.1Q to E4< *.C2 tril l ion #>:= .1bill io n$ from a year ea rlie r, th anks to growth in pr emium product li nes.%mprovement of an operating profit was remarkable. E4< 1?C billion #>:= 1.Cmillion$ was 2.?Q higher than a year earlier and .1Q from the previous !uarter.)perating margin increased 1.1Q point to 3.Q despite won appreciation and rise inmaterial costs. )n a parent basis the margin rose 1.Q point to 1*.@Q.

=igital =isplay &ompany sales including plasma display panels and flat panel 'Gsand monitors rose 1.3Q to E4< *.3 trillion #>:= *.C billion$ from the previousyear, but posted an operating loss of E4< *?* billion #>:= *.C million$. :alesfrom =igital +edia &ompanyKs media and %' products posted E4< 1. trillion#>:= 1.2 million$, 2. Q down from a year earlier. :low in display and media

busin es s stems fro m sea so na li ty plu s int ensified pri ce erosion, but mainly due tolower efficiency in capacity of plasma display panels.

INDU%TRY PRO&ILE

E"e.toni.sis the study of the flow of charge through various materials and devicessuch as, semiconductors, resistors, inductors, capacitors, nano(structures, andvacuum tubes. All applications of electronics involve the transmission of eitherinformation or power. Although considered to be a theoretical branch of physics, thedesign and construction of electronic circuits to solve practical problems is anessential techni!ue in the fields of electronics engineering and computerengineering.

'he study of new semiconductor devices and surrounding technology is sometimesconsidered a branch of physics. 'his article focuses on engineering aspects of

electronics. )ther important topics include electronic waste and occupational healthimpacts of semiconductor manufacturing.

1


19/86

Consu+e Dua,"es0Data ta,"e -eadings ae s-on Yea?ise in des.ending ode2

Air &onditioners

Bicycles

&rystal 9lass

=omestic lectrical Appliances

9ems and 6ewellery

9lass Froducts

Eitchen !uipment

8i!uefied Fetroleum 9as &ylinders

+icrowave )vens

4efrigerators

:ewing +achines

:unglasses

'oys and 9ames


20/86


21/86

essential functions. Budget and budgetary control provide a set of basic techni!ues for

planning and control.

A budget fi"es a target in terms of rupees or !uantities against which the actual

performance is measured. A budget is closely related to both the management function as

well as the accounting function of an organization.

As the size of the organization increases, the need for budgeting is correspondingly

more because a budget is an effective tool of planning and control. Budget is helpful in

coordinating the various activities #such as production, sales, purchase etc$ of the

organization with result that all the activities precede according to the objective. Budgets

are means of communication. %deas of the top management are given the practical shape.

As the activities of various department heads are coordinated at the much needed for the

very success of an organization. Budget is necessary to future to motivate the staff

associated, to coordinate the activities of different departments and to control the

performance of various persons operating at different levels.

Budgets may be divided into two basic classes. &apital and operating budgets.

&apital budget are directed towards proposed e"penditure for new projects and often

re!uire special financing.

'he operating budgets are directed towards achieving short(term operational goals

of the organization for instance, production or profit goals in a business firm. )perating

budgets may be sub(divided into various departmental of functional budgets.

Definitions of Budget:

According to %nstitute of &harted +anagement Accountants, ngland - A plan

!uantified in monetary term prepared and approved prior to a defined period of time

usually showing planned income to be generated and or to be incurred during that period

and the capital to be employed to attain a given objective./

*1


22/86

According to %&+A, ngland, a budget is, -a financial andor !uantitative

statement, prepared and approved prior to a defined period of time, of the policy to be

pursed during the period for the purpose of attaining a given objective./

%t is also defined as, -a blue print of projected plan of a action of a business for a

definite period of time./

BUDGETARY CONTROL:

0o system of planning can be successful without having an effective and efficientsystem of control. Budgeting is closely connected with control. 'he e"ercise of control in

the organization with the help of budgets is known as budgetary control. 'he process of

budgetary control includes.

?. stablishment of budget for each function and section of the organization.

. "ecutive responsibility in order to perform the specific tasks so that objectives of

the enterprise may be attained.

. &ontinues comparison of the actual performance with that of the budget and placing

the responsibility of e"ecutives for failure to achieve the desired result a given in

the budget.

C. 'aking suitable remedial action to achieve the desired objective if there is a

variation of the actual performance from the budgeted performance.

1@. 4evision of budgets in the light of changed circumstances.

Definitions of Budgeta! Conto":

According to the Brown and 5oward -Budgetary control is the system of

controlling costs which includes the preparation of Budgets, co(coordinating the

department and establishing the responsibilities, comparing the actual performance with the

budgeted and acing upon the results to achieve the ma"imum profitability/

**


23/86

According to the 6.Betty7 -A system which uses budgets as a means of planning

and controlling all aspects of producing and or selling commodities and services/

According to the &%+A, 8ondon, -Budgetary control is the establishment of

budgets relating to responsibilities of e"ecutives to the re!uirement of a policy, and the

continuous comparison of actual with budged results, either to secure by individual action

the objective of that policy or to provide a basis for revision.

BUDGET( BUDGETING AND BUDGETING CONTROL

4ow land and


24/86

%t secures proper co(ordination among the activities of various departments.

%t helps the management to fi" up responsibility in case the performance is below

e"pectations.

%t helps the management to reduce wasteful e"penditure. 'his leads to reduction in

the cost of production.

%t brings in efficiency and economy by promoting cost consciousness among the

employees.

%t facilitates centralized control with decentralized activity.

%t acts as internal audit by a continuous evaluation of departmental results and costs.

Li+itations of Budgeta! Conto":

'he preparation of a budget under inflationary conditions and changing

9overnment policies is really difficult. 'hus, the accurate position of the business

can not be estimated.

Accuracy in budgeting comes through e"penditure. 5ence it should not be relied on

too much in the initial stages.

Budget is only a management tool. %t is not a substitute for management. %t can not

replace management in decision making.

Budgeting involves a heavy e"penditure, which small concerns cannot afford.

'here will be active and passive resistance to budgetary control as it points out the

efficiency or inefficiency of individuals.

'he success of budgetary control depends upon wiling co(operation and team work.

'his is often lacking.

*2


25/86

re!uent changes maybe called for in budgets due to fast changing industrial

climate. %t may be difficult for a company to keep pace with these fast changes,

because revision of budgets is e"pensive e"ercise.

OB#ECTI$E% O& BUDGETARY CONTROL:

P"anning:

*3


26/86

A budget is a plan of the policy to be pursued during the defined period of time to

attain a given objective. 'he budgetary control will force management at all the activities to

be done during the future periods. A budget as a plan of action achieves the following

purposes7

Action is guided by well thought out plan because a budget is prepared after a

careful sturdy and research.

'he budget serves as a mechanism through which.

+anagementKs objectives and policies are affected.

%t is a bridge through which communication is establishment between the top

management and the operatives who are to implement the policies of the top

management. 'he most profitable course of action is selected from the various available

alternatives.

Co?odination:

'he budgetary control co(ordinates the various activities of the firm and secures

co(operation of all concerned so that the common objective of the firm may be successfully

achieved. %t forces e"ecutives to think and think as a group. %t co(coordinating the policies,

plans and actions. An organization without a budgetary control is like a ship sailing in a

chartered sea. A budget gives direction to the business and imparts meaning and

significance to its achievement by making comparison of actual performance and budgeted

performance.

'oti


27/86


28/86

sections of the organization informed about the contribution of different subunits in the

attainment of overall organizational objective.

Budget *o.edues:5aving the budget organization and fi"ed the period, the actual work or budgetary

control can be taken upon the following pattern.

%TEP% IN BUDGETING CONROL:

Oganiation fo ,udgeting:

'he setting up of a definite plan of organization is the first step towards installing

budgetary controlling system in an organization a budget manual should be prepared giving

details of the powers, duties, responsibilities and areas of operation of each e"ecutive in the

organization.

Budget 'anua":

A Budget manual lays down the details of the organizational set up, the routine

procedures and programmers to be followed for developing budgets for various items and

the duties and responsibilities of the e"ecutives regarding the operation of the budgetary

control system. &%+A ngland defines a budget manual as -a document schedule or

booklet which sets out, inter alia, the routine of and the forms and records re!uired for

budgetary control/. 'hus, it is a written document which guides the e"ecutives in preparing

various budgets. Budgets are to be drawn keeping in view the objectives of the organization

given in the budget manual. 4esponsibility and functions of each e"ecutive in regard to

budgeting are written down in the budget manual to avoid any duplication or overlapping

of responsibilities. :teps and the methods for developing various budgets and the methods

of reporting performance against the budget are written down in the budget manual. %n

short it is a written document which gives everything relating to the preparation and

e"ecution of various budgets. %t should be clear and there should be no ambiguity in it.

*


29/86

'he following are some of the most important matters covered in a Budget manual7

a$ %ntroducing and brief e"planation of the objects, benefits and principles of

budgetary control.

b$ )rganization chart giving the titles to different personnelKs with full e"planation

of the duties of each to operating system and preparation of departmental and

functional budgets.

c$ 8ength of budget periods and control periods should be clearly stated.

d$ A method of accounting and control of e"penditure.

e$ A statement showing the responsibility and of authority given to each manger

for approval of budgets, vouchers and all other forms and documents which

authorize them to spend the money. 'he authority for granting approval must be

clearly stated.

f$ 'he entire process of budgeting programme including the time table for

periodical reporting. A schedule should be drawn for this.

g$ Furpose, specimen form and number of copies to be used for each report and

statement. Budget centers involved should also be stated clearly.

h$ )utline of main budgets and their accounting relationships.

i$ "planation of key budgets.

&IATION O& BUDGET PERIOD:

'he budget period mean the period for which a budget is prepared and employed.

'he budget period will depend upon the type of business and the control aspect.

*C


30/86

Budget period mean the period for which a budge is prepared and employed. 'he

budget period depends upon the nature of the business and the control techni!ues. or

e"ample, in case of seasonal industries #i.e., food or clothing$ the budget period should be a

short one and should cover one season. But in case of industries with heavy capital

e"penditure such as heavy engineering works, the budget period should be long enough to

meet the re!uirements of the business. rom control point of view, the budget period

should be a short one so that the actual results may be compared with the budget each week

end or month end and discussed with and discussed with the Budget committee. 8ong term

budgets should be supplemented by short term budgets to make the budgetary control

successful, as short(terms budgets will helping e"ercising control over day(today

operations. %n short, the budget period should not be too long so that there may be

sufficient time before budget implementation. or most business, annual budget is !uite

common because it compares with the financial accounting year.

'here should be a regular time plan for budget preparation. %t may be on the following

lines.

8ong(term budgets for three to five years should be prepared for e"pansion and

modernization of the undertaking, introduction of new products or new projects and

undertaking heavy advertisement.

Annual budgets coinciding with financial accounting year should be prepared for

the operations activities #i.e., sales, purchases, and production etc, of the business$

or control purposes, short(term budgets(monthly or even weekly budget(should be

prepared for watching progress of actual performance against targets. :hort(term

budgets are prepared to see that actual performance is proceeding according to the

budgets and early corrective action may be taken if there is any pitfall.

'he responsibility for preparation and implementation of the budgets may be fi"ed

as under.

@


31/86

Budgeta! .onto""e:

Although the chief e"ecutive l finally responsible for the budgetary programme. %t

is better if a large part of the supervisory responsibility is deluged to an official designated

as Budget &ontroller or Budget =irector. :uch a person should have knowledge of the

technical details of the business and report directly to the president or the chief e"ecutive.

Ro""ing 0Continues2 Budget:

'his is a budget which is updated continuously by adding a further period #a

monthS!uarter$ and deducting a corresponding earlier period. Budgeting is a continuous

process under these methods of preparation of budget. )nce the first period elapses, the

forecast for that period is dropped and the forecast for the future period beyond the e"isting

could not be predicted and forecast reliably, this method is useful. 5owever, it is a costly

e"ercise but matched by considerable reduction in operational variances.

Annua" $s Continues ,udgeting s!ste+:

%n some organizations budgets are prepared on annual basis. But annual budgets

may not help the management to have control because variances due to rapidly changing

conditions affect the sales in !uantity and prices, severe rapidly changing conditions affect

the sales in !uantity and prices, severe inflationary conditions e"ist resulting fast increase

in the prices of inputs without reflecting in sales prices immediately and wide range of

products being produced making it not feasible to have precise estimate of levels of activity

for a year.

'he procedure in continuous budgeting will be that a year will be divided into four

!uarters. +onthly budgets for the first !uarter and three !uarterly budgets for the ne"t year

can be prepared. or the first !uarter precise estimates can be drawn up monthly. 'he

budget estimates for the second !uarter may be revised working out separately monthly

estimates on more precise basis for control purposes before the starting of the second

!uarter.

1


32/86


33/86

Frincipal budget factor is not static. %t may vary rapidly from time to time due to

internal and e"ternal factors. %t is of temporary nature and in the long run can be overcome

by suitable management taking sales promotion steps as increasing sales staff and

advertising. Flant capacity can be improved by better planning, simplification of product or

e"tension of plant.

DI&&ERENT TYPE% O& BUDGET:

=ifferent types of budgets have been developed keeping in view the different

purposes they serve. Budgets can be classified according to7

'he coverage they encompassN

'he capacity to which they are relatedN

'he conditions on which they are basedN and

'he periods which they cover.

&un.tiona" Budget:

A functional budget is a budget which relates to any of the functions of an

undertaking e.g., sales, production, research and development, cash etc, the following

budgets are generally prepared.

Budget *e*aed ,!

1. :ales Budget including selling and :ales +anager

=istribution &ost Budget

*. Froduction Budget Froduction +anager

. +aterial Budget Furchase +anager


34/86

2. 8abor and Fersonnel Budget Fersonnel +anager

3. +anufacturing )verheads Froduction +anager

?. Administration &ost Budget inance +anager

. Flant >tilization Budget Froduction +anager

. &apital "penditure Budget &hief "ecutive

C. 4esearch and =evelopment

&ost Budget 4;= +anager

1@. &ash Budget inance +anager

%a"es Budget:

:ales budget is the most important budget and of primary importance. %t forms the

basis on which all the budgets are built up. 'his budget is a forecast of !uantities and

values of sales to be achieved in a budget in a budget period. very effort should be made

to ensure that its figures are as accurate as possible because this is usually the starting

budget #sales being limiting factor on which all the other budgets are built up$. 'he sales

+anger should be made directly responsible for the preparation and e"ecution of the

budget. 'he sales budget may be prepared according to products, sales territories, types of

customersN salesmen etc., in the preparation of the sales budget, the sales manager should

take into consideration the following factors7

1. Fast :ales igures and 'rends.

*. :alesmenKs stimation.

. Flant &apacity.

2. Availability of 4aw +aterial and other :upplies.

3. 9eneral 'rade Frospects.

2


35/86

?. )rders in 5and.

. :easonal luctuations.

. inancial Aspect.

C. Ade!uate 4eturn on &apital mployed.

1@. &ompetition.

11. +iscellaneous &onsiderations.

Podu.tion Budget:

Froduction budget is a forecast of the total output of the whole organization broken

down into estimates of output of each type of product with a scheduling of operations #by

weeks and months$ to be performed and a forecast of the closing finished stock. 'his

budget may be e"pressed in !uantitative #weight, units etc$ r financial #rupees$ units or

both. 'his budget is prepared after taking into consideration the estimated opening stock,

the estimated sales and the desired closing finished stock of each product. 'he works

manger is responsible for the total production budget and the departmental managers are

responsible for the departmental production budget. %n preparing the production budget, the

following factors are considered.

'he time lag between the production in the factor and sales to the customer should

be considered so as to allow fro the time re!uired or the dispatch of goods from the factory

to the place of the customers.

'he stock of goods to be maintained both at the factoryKs go gown and at he sales centers.

'he level of production needed to meet the sales programme. +onthly production

targets should be fi"ed and it should be seen that production is kept more or less at uniform

level throughout the year. 'he material labor and plant re!uirements should be ascertained

to have the desired production to meet the sales programme.

3


36/86

'he sales and the production are inter(dependant because production budget

is governed by the sales budget and the sales budget is largely determined by the

production capacity and by production costs.

Cost of *odu.tion Budget:

After determining the volume of output the cost of procuring the output must be

obtained by preparing a cost of production budget. 'his budget is an estimate of cost of

output planned for a budget period and may be classified into material cost budget, labor

cost budget and overhead budget because cost of production includes material, labor and

overheads.

'ateia"s Budget:

%n drawing up the production budget, one of the first re!uirements to be considered

is material. As we know, materials may be direct or indirect. 'he materials budget deals

with the re!uirements and procurement of direct materials. %ndirect materials are dealt with

under the works overhead budget. 'he budget should be related to the production budget

and the period of the budget should be of short duration because this budget has an

important bearing on the cash budget.

Pu.-ase Budget:

Furchase Budget is mainly dependent on production budget and material

re!uirement budget. 'his budget provides information about the materials to be ac!uired

from the market during the budget period.

?


37/86

Furchase budget should be prepared by the purchase manger by getting relevant

information about capital items, tools, general supplies and direct materials re!uired during

the budget period from other related departments. 8ike other budgets, the purchase budget

has to be approved by the budget committee. After approval it becomes the responsibility

of the purchase officer to see that purchases are made as per the purchase budget.

:ometimes additional purchases which are not covered by the purchase budget are made

under the following circumstances.

%f there is increase in production not anticipated while preparing the purchase

budget and purchase of larger !uantities of materials becomes necessary.

%f accumulation of stock becomes necessary to avoid shortage of materials.

%f overstocking is desired to take advantage of lower prices and there is fear that

price will increase in near future.

'he purchase manger should get additional sanctions from the higher authorities for

making the additional purchases not covered by the purchase budget.

Die.t La,o Budget:

'his budget gives as estimate of the re!uirements of direct labor essential to meet

the production target. 'his budget may be classified into labor 4e!uirements budget and

recruitment budget. 'he labor recruitment budget is developed on the basis of re!uirement

of the production budget given and detailed information regarding he different classes of

labor e.g., fitters, welders, turner, millers, and grinders and drillers etc., re!uired for each

department, their scales of pay and hours to be spent. 'his budget is prepared with a view

too enable the personnel department to carry out programmers of training and transfer and

to find out sources of labour needed so that every effort may be made to remove difficulties

arising in production the available workers in each department, the e"pected changes in the

labour force during the budget period due to the labour turnover. 'his budget gives

information about the personnel specification for the jobs for which workers are to be

recruited, the degree for skill and e"perience re!uired and the rates of pay.


38/86

:ometimes another budget known as +anpower budget is prepared. 'his budget

gives the re!uirements of direct and indirect labour necessary to meet the programme set

out in the sales, manufacturing, maintenance, research and development and capital

e"penditure budgets. 'he labor terms are e"pressed of rupee value, number of labour hours,

number and grade of workers etc. this budget makes provision for shift and overtime work

and for the effective training for new workers on labour cost.

'anufa.tuing O


39/86

increasing such e"penses. 'his budget covers the e"penses incurred in framing policies,

directing the organization and controlling the business operations. %n other words, the

budget provides an e"ecutive. +uch difficulty is not e"periences in developing such budget

as most of the administration e"penses are of a fi"ed nature. Although fi"ed e"penses

remain constant and are not related to sale volume in the sort run, they are dependent upon

sales in the long run.


40/86

P"ant Uti"iation Budget:

'his budget lays down the re!uirements of plant capacity to carry out the

production as per the production programme. 'his budget is terms of convenient physical

units as weight or number of products or working hours. 'he main functions of this budget

are7

%t will show the machine load in each department during the

Budget period.

%t will indicate the overloading on some departments, machine or group of machine

and alternative courses of actions as working overtime, off loading, procurement or

e"pansion of plants, sub(contracting etc., can be taken.

%dle capacity in some departments may be utilized by making efforts to increase the

demand for the products by providing after sale service, conducting advertisement

campaign, reducing prices, introducing lucky prize coupons, recruiting efficient

sales staff etc.

Ca*ita" E*enditue Budget:

'he capital e"penditure budget gives an estimate of the amount of capital that may

be needed for ac!uiring the assets re!uired for fulfilling production re!uirements a

specified in the production budget. 'he budget is prepared after taking into consideration in

the available productive capacities, probable reallocation of the e"isting assets such as plant

and e!uipment budget, building budget etc. 'he capital e"penditure budget is an important

budget proving for ac!uisition of assets, necessitated by the following factors7

RE%EARCH AND DE$ELOP'ENT CO%T BUDGET:


41/86

on a long term basisN say for 3 to 1@ years which can be further subdivided into short(term

budgets on annual basis. As a rule research workers are less cost consciousN so they are not

susceptible to strict control. A research and development budget is prepared taking into

consideration the research projects in hand and the new research projects in hand and the

new search and development projects to be taken up. 'hus this budget provides an

estimate of the e"penditure to be incurred on research and development during the budget

period.

After fi"ation of the research and development cost budget, the research e"ecutive

fi"es priorities for the various research and development projects and submits research and

development project authorization forms to the budget committee. 'he projects are finally

approved by the senior e"ecutive. Before giving the approval, the e"penditure on research

and development is matched against the benefits likely to be availed of from the new

projectN after the approval of the budget, a close watch is kept on the e"penditure so that it

may not e"ceed budget provisions. %t is also seen that e"tent of progress made is

commensurate with the e"penditure incurred.

CA%H 0&INANCIAL2 BUDGET:

'he cash budget can be prepared by any of the following method7

1. 4eceipts and payments method

*. 'he adjusted profit and loss method

. 'he balance sheet method

1. 4eceipts and payments method7 %n case of this method the cash receipts from

various sources and the cash payments to various agencies are estimated. %n the

opening balance of cash, estimated cash receipts are added and from the total of

estimated cash payments are deducted to find out of the closing balance.

21


42/86

*. 'he adjusted profit and loss method7 %n case of this method the cash budget is

prepared n the basis of opening cash and bank balance of the various assets an

liabilities.

. 'he balance sheet method7


43/86

output or turnover attained. %t is rigid budget and is drawn on the assumption that there

will be no change in the budgeted level of activity. A fi"ed budget will, therefore, be useful

only when the actual level of activity corresponds to the budgeted level of activity. A

master budget tailored to a single output level of #say$ *@,@@@ units of sales is a typical

e"ample of a fi"ed budget. But in practice, the level of activity and set conditions will

change as a result of internal limitations and e"ternal factors like changes in demand and

price, shortage of materials and power, acute competition etc. %t is hardly of any use as a

mechanism of budgetary control because it does not make any distinction between fi"ed,

variable and semi(variable costs and provides for no adjustment in the budget fi"ed as

result of change in cost due to change in level of activity. %t is also not helpful at all in the

fi"ation of price and submission of tenders.

&"ei,"e Budget:

'he &hartered %nstitute of +anagement Accountants, defines a fle"ible budget also

called sliding scale budget as a budget which, by recognizing the difference in behavior

between field an d variable costs in relation to fluctuations in output, turnover, or other

variable factors such a number of employees, is designed to change appropriately with such

fluctuations. 'his, a fle"ible budget gives different budgeted costs for different levels of

activity. A fle"ible budget making an intelligent classification of all e"penses between

fi"ed, semi(variable and variable because the usefulness of such a budget depend upon the

accuracy with which the e"penses can be classified. :uch a budget is prescribed in the

following cases.


44/86


45/86

A 8ong(term budget can be defined as a budget which is prepared for periods

longer than a year. 'hese budgets help in business forecasting and forward planning.

&apital "penditure Budget and 4esearch and =evelopment Budget are e"amples of long(

term budgets.

%-ot? Te+ Budget:

'his budget is defined as a budget which is prepared for period less than year and is

very useful to lower levels of management for control purposes. :uch budgets are prepared

for those activities the trend in which is difficult to foresee over longer periods. &ash

budget and material budget are e"amples of short term budget.

Pefo+an.e Budget:

Ferformance Budgeting has its origin in >.:.A. After :econd


46/86

'his budge is the preparation of budget starting from Jero or from a clean state. As

a new techni!ue it was proposed by Fatter Feal of 'e"as %nstruments %nc., >.:.A. 'his

techni!ue was introduced in the budgeting in the state of 9eorgia by +r. 6immy &arter whowas then the 9overnment of that state. JBB was tried in federal budgeting as a means of

controlling state e"penditures.

'he use of zero(based budgeting as a managerial tool has become increasingly

popular since the early 1C@Ks %t is steadily gaining acceptance e in the business world

because it is providing it utility as a tool integrating the managerial function of planning

and control. JBB is not based on the incremental approach and previous yearKs figures are

not adopted as a base. 4ather, zero is taken as a base aw the name goes. 'aking zero as a

base, a budget is developed on the basis of likely activities for the future period. %n JBB,

by declining the budget from the past, the past mistakes are not repeated. unds re!uired

for any for the ne"t budget period should be obtained by presenting a convincing case.

unds will not be available as a matter of course.

AD$ANTAGE% O& BUDGETARY CONTROL:

2?


47/86

'he most important advantage of a budgetary control is to enable management to

conduct business in the most efficient manner because budgets are prepared to get the

effective utilization of resources and the realization of objectives as efficiently.

%t lies down as objective for the business as a whole. ven though a monetary

reward is not offered the budget becomes a game a goal to achieve or a target to shoot at

and hence it is more likely to be achieved or hit that if there was no predetermined goal or

target. 'he budget is an impersonal policeman that maintains ordered effort and brings

about efficiency in result. %t ensures effective utilization of men, materials, machines and

money because production is planned according to the availability of these items.

veryone working in the concern knows what e"actly to do because budgetary

control laid emphasis on the staff organization. %t ensures that individual responsibilities

are clearly defined and that the re!uired authority commensurate with the responsibility is

delegated so that buck passing ay is prevented when the budgeted results are not achieved.

Budgetary control takes the help of different levels of management in the preparations of

the budget. Budget finally approved represents the judgment of the entire organization and

not merely that of an individual or a group of individuals. 'hus, it ensures team work.

+anagement by e"ception is possible because the comparison of actual and budgeted

results points out weak spots so that remedial action is taken against weak spots which are

not in conformity with the budgeted performance.

Budgetary control creates conditions for setting up a system of standard costing.

%t is helpful in reviewing current trends in the business and in determining further

policy of the business because current and future trends are studied in the preparation of the

budget.

DI%AD$ANTAGE% O& A BUDGET:

2


48/86


49/86

CHAPTER 8 DATA ANALY%I%

/

INTERPRETATION

2C


50/86

CO%T O& PRODUCTION BUDGET 0)336?)3372

PARTICULAR% BE RE Esti+ate fo a.tua"

Out*ut

A.tua"s $aian.e of


51/86

0Rs= In LaF-s2

ARTPCULAR% BE 4 ACTUAL% $ARIANCE

4aw materials 1@@ @@ 11*3 *3#adv$

&onsumables @@ ?@@ ?*3 *3#adv$

:pares 2*3 3@ * ?#fav$

%nternally generated 33@ @@ 1@3 *3#adv$


52/86

0Rs= In LaF-s2

PARTICULAR% BE RE ACTUAL% $ARIANCE

:alaries ; Allowances *@2 1CC* *@32 ?*#adv$

8eave encashment C1 1*3 12 C#Adv$

&omp )ff C@ * * 22#fav$%ncentive Bonus 1@@ 3 3*#adv$

:tatutory Bonus 2 @ @ @

:tipend to 'rainees 13 13 1 *#fav$

F#%ncl. %nsp.$ *1? *@3 **3 *@#Adv$

9ratuity 1?1 1? C C#fav$

G4: 32 112 13 *1#adv$

+isc 3 2 #fav$

*1 *31 *? *3#adv$


53/86


&ACTORY EP 0A2


54/86

'he performance in respect of both Gop and sales was lower than the targets and is mainly

because of the receipts of most orders at the fag end of the financial year and delays in

import of critical raw materials from 4ussia.

A. 4aw materials7 =ue to continued efforts by the organization to overcome the

problems arises due to imposition of restrictions on supply of materials and as a

result procurement of this material at higher prices and increased utilization of

internally generated scrap has resulted cost of 4aw material consumption.

B. 4epairs and +aintenance7 Because of the aging of the machinery and e!uipment,

repairs and maintenance jobs are increasing.

&. &onsumables7 By improving the life of the furnace lining and recondition of used

cast iron moulds the cost of consumables has come down over the revised

estimates.

=. :alaries and


55/86

estimates. 'he increase in finished goods inventory indicates that there is a delivery

of goods to the customers.

ven though the sales turnover was less than the estimate, the organization

e"ercised control over e"pense and conse!uently the cost of production was less

than the estimates and as a result the operating loss was less than the estimated.

9. 9.4;=7 'he e"penditure on 4;= was less than the estimated e"penditure

indicating that the organization has deferred has the activities to the re!uired level.

CO%T O& PRODUCTION BUDGET 0)337?)3132

33


56/86

PARTICULAR% BE RE Esti+ate fo a.tua"

out*ut

A.tua"s $aian.e of


57/86


58/86

DETAIL% O& %ALARIE% AND BENE&IT% 0)337?)3132

#4s. %n 8akhs$


:alaries ; Allowance *11.* *1.?3 *1C.@2 2C.?1

8eave encashment C.C3 [email protected] C3.3 12.C

&omp )ff 2@ *C.3 1@.?3

%ncentive Bonus 2@ C@ 3C.21 @.3C

:tatutory Bonus @ @ @.2 @.2

:tipend to 'rainees 13 13 C.1C 3.1

F#%ncl %nsp$ **. *1. *1?.32 @.1C

9ratuity 1*.21 1@@ 1@?. ?.

G4: [email protected] 1@C. 11. *.@C

+isc .* .13 .? .33

*??.@* *. *1. [email protected]


59/86

DETAIL% O& OTHER EPEN%E% 0)337?)3132


&ACTORY EP 0A2


60/86

Galue of production decreased in *@@C(*@1@ by 4s. **.@2 crores as against 4e *@@(*@@C

due to reduced sales realization of various products. 'he reasons for lesser sales is due to

lack of orders what ever e"ecuted also are of low value in nature of all the production

facilities.

Cost of Podu.tion Budget:

a$ 4aw material7 As the G)F decreased raw material consumption also got

reduced. 4aw materials on account for about ?.??Q of G)F and efforts are

on to increase the scrap utilization to reduce the ratio of raw materials to

G)F.

b$ &onsumables7 &onsumption of consumables also reduced due to the

reduction in value of production that is reduction in production activities.

'here is a slight increase in consumption of judicious usage of high value

consumables. 5owever efforts are on to contain the consumption.

c$ Fower ; uel7 Fower and fuel re!uirements are usually determined on the

basis of the level of operations in various shops on the various product mi.

'here is an increase in power cost due to upward revision of power charges

by AF:B. 'he increase in uel cost is mainly due to increase price of fuel in

%nternational markets.

d$ 4epairs ; +aintenance7 5owever, there is no increase in this e"penditure

because of the aging of the machinery and e!uipment, repairs and

maintenance jobs are increasing. 'he major portion of this e"penditure

comprise of spares.

e$ )ff loading e"penses7 >sually off loading of work in resorted to reduce the

cost of production by getting the small works done outside at a cheaper rate

instead of doing internally. =uring the year the e"penses were higher because

of drastic reduction in volume of off loading !uantity.

?@


61/86

f$ :alaries and


62/86


63/86

IN$ENTORY BUDGET 0)313?)3112

0Rs= In LaF-s2

PARTPCULAR% BE 4 ACTUAL% $ARIANCE

4aw materials C3@ C@? C?? ?@#adv$

&onsumables ?@@ 23 31 *#adv$

:pares 3@ * *1 *#fav$

%nternally generated @@ 11 1@3 @#fav$


64/86

DETAIL% O& OTHER EPEN%E% 0)313?)3112


&ACTORY EP 0A2


65/86

DETAIL% O& %ALARIE% AND BENE&IT% 0)313?)3112

#4s. %n 8akhs$


:alaries ; Allowances *1C *3 *2*1 ?C#adv$8eave encashment 111 C? C #fav$

&omp )ff *C * *3 *#fav$

%ncentive Bonus @ @.2 @ @.2#adv$

:tatutory Bonus 13 C.1C 1 .1#fav$

:tipend to 'rainees *1 *1 **C 1*#adv$

F#%ncl %nsp$ *@@ *1?.3 **.3 1*.2#Adv$

9ratuity 1*.21 1.C3 1@?. *@.#fav$

G4: [email protected] 1@C. 111. *.@C#Adv$

+isc .* .13 .? .33#fav$

*C2?.2? 33.@ **.2 1*.?C$fav$


66/86

'he performance in respect of both G)F and sales was low than the targets and is mainly

because of the receipts of the most orders at the end of the financial year.

A. 4aw +aterials7 =ue to continued efforts by the organizations to overcome the

problems arise due to material at higher prices and increased utilization of

internally generated scrap has resulted in reduced cost of raw material

consumption.

B. 4epairs and +aintenance7 Because of the aging of the machinery and

e!uipment, repairs and maintenance jobs are increasing. 'he major portion of

this e"penditure comprises of spares.

&. )ff(8oading "penses7 Besides the regular jobs off loading like machining oflow alloys steels, rolling steels etc. off loading of work in resorted to reduce the

cost of production by getting the small works done outside at cheaper rate, in

order to obtain better yields. =uring the e"penses were higher because of drastic

reduction in volume if off loading !uality.

=. :alaries and


67/86

PARTICULAR% BE RE Esti+ate fo

a.tua"

Out*ut

A.tua"s $aian.e of


68/86

0Rs= In LaF-s2

PARTICULAR% BE 4 ACTUAL% $ARIANCE

4aw materials C@ C@? 3?? 2@#fav$

&onsumables ?3@ 3@ 3* 3#fav$

:pares *3@ *@ *1 C#fav$

%nternally generated ?@@ 11 1?3 31C#fav$


69/86

PARTICULAR% BE RE ACTUAL% $aian.e

:alaries ; *2*1 *?C *32 1?2#av$

Allowances

8eave encashment C C C@ 1#adv$&omp off *3 2 *@ 12#fav$

%ncentive Bonus @ @.12 @ .12#adv$

:tatutory Bonus 1 1? 12 *#fav$

:tipend to 'rainees **C ** **@ #fav$

Ff#%nd. %nsp.$ **.3 *?.@@ *@.3 #fav$

9ratuity 1@?. 1@@ [email protected] @.C#adv$

G4: 111. .@@ C@.* .*#adv$

+isc .? 3.? .@ *.?#adv$

))5=8 988=57 =19=1) ))7=450fa


70/86

'he increase in sales !uantity and G)F of actual over 4 indicates that sufficient orders

were received, particularly of low value items lime soft iron. 0uclear :teel than those of

high value items like super alloys, heating elements alloys.

)ff(8oading "penses7 Besides the regular jobs off loading like

machining of low alloys steels, rolling steels etc. off loading of work in resorted to

reduce the cost of production by getting the small works done outside at cheaper rate,

in order to obtain better yields. =uring the e"penses were higher because of drastic

reduction in volume if off loading !uality.

:alaries and


71/86

YEAR% BE RE ACTUAL%

*@@(@C ?1C? 32C2 ??1

*@@C(1@ ?@1C 33 ??

*@1@(11 3C2 ?32? 3???*@11(1* 3?@C ??2 3C*3

Inte*etation:

'he inventory level was increased in *@@(@C. After that ne"t year the level of

inventory decreased. %ncreasing in inventory as against 4 in *@11(1* due to low value of

production resulting in leaser consumption.

TOTAL %ALE% >UANTITY BUDGET

0

1000

2000

3000

4000

5000

6000

7000

Inventory

200809 200910 201011 201112

Years

Total Inventory

BE

RE

ACTUAL'

1


72/86

YEAR% BE RE ACTUAL%

*@@(@C *1@ *?11 *@1

*@@C(1@ *1 *?1? 12C

*@1@(11 *@11 1C3 1@

*@11(1* *? *3?* *3?

Inte*etation:

:ales !uantity has been increasing from *@@(*@@C to *@@C(1@. %n *@1@(11 sales !uantity

has decreased. %n the year *@@(@C actual was overcome the target. Actuals over 4

indicates that sufficient orders were received, particularly of low value items like soft iron.

0uclear strolls than those of high value items like supper alloys.

%ALE% BUDGET

0

500

1000

1500

2000

2500

3000

Sales Qty

200809 200910 201011 201112

Years

Total Sales Quantity Budget

BE

RE

ACTUAL'

*


73/86

Inte*etation:

'aking in to the consideration of 2 years data of sales budget. 'here is increase in the year

*@@C(1@. Actual were low than the revised estimates. 5ence it is not reached to the targets.


74/86

9 YEAR% AT A GLANCE

Pati.u"as )335?36 )336?37 )337?13 )313?11 )311?1)

1 :ales

'o consumers=ispatches to:ub(contractors

C,@3.C?

*,1.3

*@@C(1@ ,2?.21

1,?2.?

C,3?*.?

*,C2C.C?

11(173=56

1(74=)

) Galue ofFroduction#including =$

11,?.3*@1@(11

C,3@.* 11,?21. 18(144=5

&ash profit loss#Before priorFeriodAdjustments

and "cludingAmortization of=4 ; =ep

3C.?*

*@11(1*

#*.3$ C@.?* 1(9=85

8 0et Frofit #FA'$Before priorFeriodAdjustments

3.12 .C3 #*?.@$ [email protected] 465=36

9 Galue added ,1*.? ,[email protected] ?,?.?2 C,@*.C 7(475=87

4 Galue added for

employee

3.*3 3.32 3.*? .@? 7(475=87

5 Froductivity formployee

.2 .*C .* C.@3 13=5)

6 Faid up &apital 1,C. 1,2.@@ 1,2.@@ 1,2.@@ 1(58

7 &apitalmployed

1,C. 12,@C.C 1,1*.@ 1,*3.32 18(41=4

13 0et


75/86


76/86

Inte*etation:

'he FA' level was decreased from *@@(@ to *@@(@C After that ne"t year the level of FA'

%ncreased *@@(@C to *@@C(1@ and *@1@(11 this year it has slightly raised high it is good

period to the organization because seeking high profits but in *@11(1* FA' decreased 1Q

:o here it indicates to good measures that followed in year *@1@(11.

ELE'ENT% O& %UCCE%%&UL BUDGETING PLAN

'he success of the budgeting process is an organization depends on the following

essential elements7

A..uate &oe.asting of Business A.ti


77/86

Coodinating Business A.ti


78/86


79/86

actors influencing A$ and B$ include7

Froduction re!uirements

+an(hours available


80/86

CHAPTER 9@


81/86


82/86

)ther e"penses have also decrease form year to year. 'hese results it is said

to be that the e"penses budget is satisfactory.

CONCLU%ION%

After analyzing the financial position of 89 lectronics %ndustries and evaluatingits budgetary control or &apital Budgeting techni!ues in respect of components

analysis.

Garious budgetary policies of 89 lectronics were analyzed.

&ost of production, inventory, :alaries details, other e"penses, Budgets variants

analysis was done for five years and reasons for variance were analyzed. %t was found that inventory budget decreased.

*


83/86

:ales budget increased and also other e"penses budget decreased.

%t is hoped that the interpretations, suggestions and ideas and findings of this studywould support the company in an efficient and better way.

%UGGE%TION%

As the internal resources are not sufficient to take up the major modifications

revamping of the e!uipment covering to the re!uirements of strategic sector, 9overnment

of %ndia must take steps to provide.


84/86

As 89 is the manufacturer of electronics and consumer durables alloys in the country,

the most acceptable material for electronics devices world wide. %t should put in more

efforts to capture a sizable market share of consumer durables.

89 8&'4)0%&: continues to be comfortable on the power front with the

availability of surplus power uninterruptedly from its feeder agencies. 5owever, by taking

strategic decisions at appropriate time it could be able to transfer some of its surplus

power, reserved for its future e"pansion and modernization schemes, temporary to another

sister organizations in public sector, thereby avoiding payment for unused power charges

duly safe guarding is re!uirements to avail the same at times it becomes necessary.

or the past few years it is evident that the inventories including the scrap generated

internally is in e"cess of estimates. 'he organization must take steps to utilize the scrap to

bring down inputs costs.


85/86

BIBIBLOGRAPHY

BIBLIOGRAPHY

Cost A..ounting

0Pin.i*"es and Pa.ti.e2 ? %=P= #ain / =L= Naang

Cost A..ounting ? #aa-a"a"

Cost A..ounting

3


86/86

Documents

Budgetary Control -l g Electonics