Post Graduate Diploma in Management studies 2003-2004 Year 2 Managing Finance and Accounting Tutor: Ian Andrews Module Title: Managing Finance and Accounting Student: Date: June 2004 CONTENTS 1 Cash Budget for July – October 2 Forecast Productions for three-month period 2. 1 Actual Production for three-month period 2. 2 Potential reasons for variation 2. 3 Recommendations 1 Prepare a cash budget for the four months July – Oct Task 2 JULY AUGUST SEPTEMBER OCTOBER lb lb lb lbRECIEPTS Capital Introduced 300, 000 Debtors 285, 000 440, 700 567, 870 583, 110 Total Receipts for the month 585, 000 440, 700 567, 870 583, 110 PAYMENTS Labour Wages paid end of each month lb 10 per unit) 95, 000 93, 000 99, 000 100, 000 Stock / materials 57, 465 164, 715 176, 370 189, 925 Creditors syndicate lenders loan 60, 000 60, 000 60, 000 Overheads 47, 500 46, 500 49, 500 50, 000 Depreciation lb 5 per unit 47, 500 46, 500 49, 500 50, 000 Administration 28, 500 27, 900 29, 700 30, 000 Marketing 19, 000 18, 600 19, 800 20, 000 Capital Expenditure 50, 000 Total Payments for the month 294, 965 457, 215 483, 870 549, 925 Net Cash Flow (receipts less payments) Bank Balance close of previous month 50, 000 340, 035 323, 520 407, 520 Bank Balance 340, 035 323, 520 407, 520 440, 7052 Forecast Production for three-month Period Task 3 Activity level (units) 4000 5000 6000 7000 8000 Direct Materials 80, 000 100, 00 120, 000 140, 000 160.
000 Direct Labour 50, 000 62, 500 75, 000 87, 500 100, 000 Power 18, 000 18, 000 18, 000 21, 000 24, 000 Repairs 20, 000 22, 500 25, 000 27, 500 30, 000 Supervision 20, 000 24, 000 28, 000 32, 000 36, 000 Rent and rates 9, 000 9, 000 9, 000 9, 000 9, 000 Insurance 15, 000 17, 500 20, 000 22, 500 25, 000 Total 212, 000 253, 500 295, 000 339, 500 384, 0002. 1 Actual Production for three-months Period During the three-month period July-September, 5, 000 units were produced. The cost incurred for this period is as follows: 5000 Compared to expected cost Direct Materials 110, 000 +10, 000 Direct Labour 70, 000 +7, 500 Power 18, 000 SAME Repairs 30, 000 +7, 500 Supervision 20, 000 +4, 000 Rent and rates 8, 000 -1000 Insurance 17, 500 SAME Total 273, 500 +28, 0002. 2 Potential Reasons for variations: O Due to an increase in repairs by lb 7, 500, the cost of material is going to increase. This is shown as an increase of lb 10, 000. Because more work is carried out through higher repairs more labour and supervision costs are also incurred at lb 7, 500 for labour and lb 4, 000 for supervision.
The Essay on Basic Manufacturing Cost Categories
The term direct labor is reserved for those labor costs that can be essentially traced to individual units of products. Direct labor is sometime called touch labor, since direct labor workers typically touch the product while it is being made. Manufacturing Overhead Cost: Manufacturing overhead, the third element of manufacturing cost, includes all costs of manufacturing except direct material and ...
O The work force could be under skilled therefore are making mistakes, causing wastage in material, so additional material has to be purchased for lb 10, 000. As they are not fully trained mistakes could be occurring causing a rise in repairs by lb 7, 500. To carry out this additional work labour cost and supervision cost also goes up by lb 7, 500 for labour and lb 4, 000 for supervision. 2.
3 Recommendations I would recommend this be looked into and some key management indicators set to correspond with the organization objectives and strategy. For example: O unit production per employeeO Cost of unit production per employeeO Labour cost per pound of sales revenue Just as a business should be measured on more than one financial result, it is also necessary to use more than one performance indicator.
