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Inventory Management and Budgetary Control System
Inventory Management and Budgetary Control System
As we know that Mahindra & Mahindra Co. Ltd. is a production unit. When
ever production term comes then first thing comes in our mind that is inventory.
Because inventory is base for any production unit so, when we control and manage
the inventory properly then the company is benefited. (By reducing holding and
carrying cost of inventory.) Thus after studying inventory Management the important
activity which is done on quarterly basis in the account department is Budgetary
Control in which operating Budget expenses is to be control in Mahaindra &
Mahindra Co. Ltd. Nagpur Branch.
incorporates the policy of the management during a given period and serves as a
standard for comparing the actual results. Thus a budget is a tool in the actual results.
Thus a budget is tool in the hands of the management which serves as a guide to all
the employees in achieving their goals objectives and targets.
A budget can help us a planning and coordination with all the employees, and
departments, but the most important factor is that it is used for control purposes at all
levels of management.
It designs, develops,
M & M Co. Ltd. Farm equipment sector has four plant locations in Rudrapur,
Jaipur, Nagpur & Kandivalli. The project work is done for Nagpur branch. This
branch is certified for ISO 9001, QS-9000, ISO-14001, M & M tractor have earned
goodwill and trust of more than 8,00,000 customers and the Mahindra tractor has
come to be recognized as a powerful symbol of productivity and performance.
The project requires two months time for the completion. The steps involve in
collection of data from various sources like SAP, Monthly performance review
meetings (MPRM) Reports, Annual Reports, Computerized Inventory Management
system (CIMS).
The basic responsibility of the financial manager is to make sure the firm s
cash flows are managed efficiently.
SCOPE
Inventory management is the base for any production unit so; it is related to
overall objective on the firm. This study is basically concerned with inventory
management techniques. This aspect covered the determination of the type of
control required & Economic Order Quantity which help the financial
manager in planning & budgeting inventory.
This study helps to minimize cost of holding the inventory i.e. ordering cost &
Carrying cost. The maintenance of inventory also helps a firm to enhance its
sales efforts. It serves to bridge the gap between current production & actual
sales.
This study also helps to minimize the setup time & manufacturing time for
each unit. This is the time form when a product is ready to start on the
production line to when it become a finished good producing to demand often
means manufacturing small quantity of product. Producing small batches is
economical only if setup time are small. It encourages research and
development as budgetary control schedules are usually based on past
experience.
Mission Statement :
TO STRIVE FURTHER THAN THE FARTHEST. TO SET NEW STANDARDS
IN PERFORMANCE, AND THEN BREAK THEM. TO REACH FOR THE
HELIGHTS AND THEN SEEK A NEW SUMMIT,
CORE VALUES
Our core values are influenced by our past, tempered by our present and are designed
to shape our future. They are an amalgam of what we have been, what we are and
what we want to be.
These values are the compass that will guide our actions, both personal and corporate.
They are:
term success that is in alignment with our country's needs. We will do this
without compromising on ethical business standards.
Professionalism : We have always sought the best people and given them the
freedom and the opportunity to grow. We will continue to do so. We will
support innovation and well-reasoned risk-taking, but will demand
performance.
Quality focus :Quality is the key to delivering value for money to our
customers. We will make quality a driving value in our work, in our products
and in our interactions with others. We will do it "first time right .
History
1963:
1965:
1970:
1977:
Merger with M&M forming its Tractor Division. Full fledged responsibility for design,
manufacturing & marketing.
1981:
1983:
Market leader in domestic Tractor market - has maintained this position till date !
1985:
1988:
1990:
1991:
1992:
1994:
1995:
1996:
1997:
1998:
1999:
2000:
2001:
2002:
2003:
Set up in 1945 to make general-propose utility vehicles for the Indian market,
M & M soon branched out into manufacturing agricultural tractors and light
commercial vehicles (LCVs).
All other activities were spun off into separate entities and organized under
business groups. Thus groups are in the areas of Hospitality, Trade and Financial
10
Services,
Automotive
Components,
Information
Technology,
Telecom
and
Infrastructure Development.
M & M employs around 12,000 people and has six state-of-the art
manufacturing facilities spread over 5,00,000 square meters, M & M has also set up
two satellite plants for tractors manufacturing.
supported by a network of over 650 dealers across the country. This network is
connected to the company s plants by an extensive IT infrastructure.
11
During the year, Company sold 85, 029 tractors as against 65,390 tractors sold in the
previous year recording a significant growth of 30% and produced 87,075 tractors as
against 67,115 tractors produced in the previous year recording notable growth of
29.7%. Company maintained its market leadership for the 23rd consecutive year in the
domestic tractor market.
12
in the
domestic market in the low HP segment and new Arjun Ultra-1 range in the high HP
segment. These products have significantly strengthened your Company s position in
these segments.
Company sold 14,692 engines during the year under review as against, 6,672 engines
sold during the previous year, registering a massive growth of 120%. The engine
business which started from a customer base of a single client in 2002 has currently
22 corporate clients. Company has also made a foray into the retail and non-genset
segments. Beginning from this year Company has also sold 1,084 Mahindra branded
Diesel Generators (DG Sets).
Company s focus on exports continued with export volumes growing by 29.6%. The
major export markets are USA, SAARC countries, Africa, Australia and China.
Company established a Joint Venture Company (JVC) in China under the name of
Mahindra (China) Tractor Company Limited (MCTCL) in which a wholly owned
subsidiary of the Company, Mahindra Overseas Investment Company (Mauritius)
Limited, has a 80% shareholding, the balance 20% being held by Jiangling Motors
Co., Group, China. This JVC has a capacity of 12,000 tractors in 18-33 HP range.
This JVC became fully operational in July, 2005. Company has also started its East
European operations by launching tractors in Serbia. Company sold spare parts worth
Rs. 127.88 crores (including exports Rs. 11.7 crores) during the year under review as
compared to sales of Rs. 108.83 crores (including exports Rs. 7.6 crores) in the
previous year, registering a healthy growth of 17.5%.
13
Company plans to offer various product solutions by offering value for money and
reliable products in domestic market. This will help your Company expand its product
range in low HP segment. Apart from new products, it is important to upgrade
existing products with contemporary features. F-06 was an encouraging year for
agriculture. Going forward, due to a good monsoon and water availability during the
year, crop production is expected to be higher by 2.5% over last year. As a result of
this, it is estimated that the agricultural GDP of India will grow by 3.2%.
14
Financial Highlights
Year
PAT
2002
2003
2004
2005
2006
97
146
349
513
857
1000
900
800
700
600
500
400
300
200
100
0
Net Income
(Rs. In Lakhs)
3320
3811
5057
6769
8327
9000
8327 857
6769
7000
6000
5057
3320
8000
513
3811
349
5000
PAT
4000
Net Income
3000
2000
146
97
1000
0
2002
2003
Year
2002
2003
2004
2005
2006
2004
2005
2006
2003
2004
2005
2006
YEA R
Basic Earnings per shar e
15
Tafe, 6.7
Escorts , 9.2
Eicher , 26.3
Others , 4.2
M & M , 33
PTL, 9.7
Sonalika , 8.9
HMT, 2
Graph 5.1
Particulars
Percentage
Tafe
6.7
Escorts
9.2
M&M
33
HMT
Sonalika
8.9
PTL
9.7
Others
4.2
Eicher
26.3
Table 5.1
Above graph shows market share of different companies dealing in tractor production
and it is clear that M & M takes 33% of the total market share, followed by Eicher
which is 26% that means M & M is market leader in 25 HP.
16
Escorts , 9.9
Sonalika, 9.2
HMT, 3.1
PTL, 18.1
M & M , 28.1
Others , 6.2
Tafe, 19.6
Eicher , 5.8
Graph 5.2
Particulars
Percentage
Escorts
9.9
HMT
3.1
M&M
28.1
Eicher
5.8
Tafe
19.6
Others
6.2
PTL
18.1
Sonalika
9.2
Table 5.2
Above Graph shows market share of different companies dealing in tractor production
and it is clear that M & M takes 25% of total market share followed by Tafe which is
20% that means M & M is market leader in 35 HP.
17
Escorts , 20.2
NHT, 14.5
JD, 12.8
HMT, 1.5
M & M , 18.8
Sonalika, 13.4
PTL, 9.2
Particulars
Escorts
Others , 3.1
Tafe, 6.5
Percentage
20.2
HMT
1.5
M&M
18.8
Tafe
6.5
Others
3.1
PTL
9.2
Sonalika
13.4
JD
12.8
NHT
14.5
Table 5. 3
Above graph shows market share of different companies dealing in tractor production
and it is clear that M & M takes 19% total market share and Escort is also showing
19% market share in 45 HP.
18
Tractors Below 30 HP
265 DI Sarpanch
265 DI Bhoomiputra
Arjun 445 DI
19
INTRODUCTION
As we know that Mahindra & Mahindra Co. Ltd. is a production unit. When
ever production term comes then first thing comes in our mind that is inventory.
Because inventory is base for any production unit so, when we control and manage
the inventory properly then the company is benefited. (By reducing holding and
carrying cost of inventory).
Inventory, as a current asset, differs from other current assets because only
financial managers are not involved. Rather, all the functional areas finance,
marketing, production, and purchasing, are involved. The views concerning the
appropriate level of inventory would differ among the different functional areas. The
Conflicting view points of the various functional areas regarding the appropriate
inventory levels in order to fulfill the overall objective of maximizing the owner s
wealth. Thus, inventory management, like the management of other current assets,
should be related to the overall objective of the firm. It is basically concerned with
inventory management techniques. Attention is given here to basic concepts relevant
to the management and control of inventory. The aspects covered are: (i)
determination of the type of control required, (ii) the basic economic order quantity,
(iii) the recorder point, and (iv) safety stocks. As a matter of fact, the inventory
management techniques are a part of production management. Thus it will help the
financial managers in planning and budgeting inventory
20
Meaning of Inventory
Inventories are stock of the product a company is manufacturing for sale and
components that make up the product. The various forms in which inventories exist in
a manufacturing company are: raw materials, work-in-process and finished goods.
Raw materials are those basic inputs that are converted into finished product
through the manufacturing process. Raw materials inventories are those units
which have been purchased and stored for future productions.
21
Ordering Costs
This category of costs is associated with the acquisition or ordering of
inventory. Firms have to place orders with suppliers to replenish inventory of raw
materials. The expenses involved are referred to as ordering costs. Included in the
ordering costs are costs involved in (i) preparing purchase order or requisition form
and (ii) receiving, inspecting, and recording the goods received to ensure both
quantity and quality. The cost of acquiring materials consists of clerical costs and
costs of stationery. It is, therefore, called a set-up cost. They are generally fixed per
order placed, irrespective of the amount of the order. The larger the orders placed the
costs. The acquisition costs are inversely related to the size of inventory: they decline
with the level of inventory. Thus, such costs can be minimized by placing fewer
orders for a larger amount. But acquisition of a large quantity would increase the cost
associated with the maintenance of inventory that is, carrying costs.
CARRYING COSTS
1.
Those that arise due to the storing of inventory. The main components of
this category of carrying costs are (i) storage cost, that is, tax, depreciation,
insurance of the building, utilities and janitorial services; (ii) insurance of
inventory against fire and theft; (iii) deterioration in inventory because of
pilferage, fire, technical obsolescence, style obsolescence and price decline ;
(iv) serving costs, such as, labour for handling, clerical and accounting costs.
2.
22
23
production rate during a part of the year (peak season) and lower during the offseason. The choice before the firm is either to produce at a level to meet the actual
demand, that is, higher production during peak season and lower (or nil) production
during off-season, or, produce continuously throughout the year and build up
inventory which will be sold during the period of seasonal demand.
Benefits in Work-in-Process
The inventory of work-in-process performs two functions. In the first place, it
is necessary because production processes are not instantaneous. The amount of such
inventory depends upon technology and the efficiency of production. The larger the
steps involved in the production process, the larger the work-in-process inventory and
vice versa. In a multi-stage production process, the work-in-process inventory serves
purpose also.
Benefits in Sales
The maintenance of inventory also helps a firm to enhance its sales efforts. A firm
will not be able to meet demand instantaneously. There will be a lag depending upon the
production process. If the firm has inventory, actual sales will not have to depend on
lengthy manufacturing processes. Thus, inventory serves to bridge the gap between
current production and actual sales. A basic requirement in a firm s competitive position
is its ability vis--vis its competitors to supply goods rapidly.
24
1.
A B C System
The first step in the inventory control process is classification of different
types of inventories to determine the type and degree of control required for each. The
A B C system is a widely-used classification technique to identify various items of
inventory for purpose of inventory control.
On the basis of the cost involved, the various inventory items are, according to
this system, categorized into three classes: (i) A (ii) B and (iii) C.
2.
A key inventory problem particularly in respect of the Group. An items relates to the
determination of the size or quantity in which inventory will be acquired. In other
words, while purchasing raw materials or finished goods, the questions to be
addressed are 8. How much inventory should be bought in one lot under one order on
each replenishment? Should the quantity to be purchased be large or small? Or,
should the requirement of materials during a given period of time (say, six months or
25
Buying in large quantities implies a higher average inventory level which will
assure (i) smooth production/sale operations, and (ii) lower ordering or set-up costs.
But it will involve higher carrying costs. On the other hand, small orders would
reduce the carrying cost of inventory by reducing the average inventory level but the
ordering costs would increase as there is interruption in the operations due to stockouts. The optimum level of inventory is popularly referred to as the economic order
quantity (EOQ). It is also known as the economic lot size. The economic order
quantity may be defined as that level of inventory order that minimizes the total cost
associated with inventory management. EOQ refers to the level of inventory at which
the total cost of inventory comprising acquisition/ordering/set-up costs and carrying
cost is minimal.
EOQ
2 AO
C
26
The orders placed to replenish inventory stocks are received at exactly that
point in time when inventories reach zero.
3.
to minimize the carrying as well as the ordering costs. In other words, the EOQ
provides an answer to the question: how much inventory should be ordered in one lot?
The reorder point is stated in terms of the level of inventory at which order
should be placed for replenishing the current stock of inventory. In other words,
reorder point may be defined as the level of inventory when fresh order should be
placed with the suppliers for procuring additional inventory equal to the economic
order quantity. It is based on the following assumptions: (i) constant daily usage of
inventory, and (ii) fixed lead time. In other words, the formula assumes conditions of
certainly.
The recorder point = Lead time in days x average daily usage of inventory
4.
Safety Stock
The safety stock
27
detail below, would disrupt the production schedule and alienate the customers. The
firm would, therefore, be well advised to keep a sufficient safety margin by having
additional inventory to guard against stock-out situations. Such stocks are called
safety stocks. The safety stock involves two types of costs: (i) stock-out, and (ii)
carrying costs.
FINDING:
28
Suggestion
As we study the inventory management system of Mahindra & Mahindra co.Ltd. We
can give few suggestions regarding the management control which increase the
production and reduce the lead time to some extend of that company1. Emphasis is placed on minimizing the setup time & manufacturing lead time
for each limit. This is the time from when a product is ready to start on the
production line to when it become a finished good producing to demand often
means manufacturing small quantities on product producing small batches is
economical only if setup time are small.
2. The production line is stopped if parts are absent or defective work is
discovered. Stoppage creates an emergency about correcting problem that
causes defective units.
3. This production limit consists of large amount of scrap which is the root cause
of the manufacturing unit. So the firm should emphasis on eliminating these
causes. So that wastage should not occur & that will reduce the lead time of
product.
4. The reorder point is the quantity level of inventory that triggers a new order.
It equals the sales per unit of time multiplied by the purchase-order lead time.
Safety stock is the buffer inventory held as a cushion against unexpected
unavailability of stock from suppliers.
Limitations:
1.
All the programs are going under SAP System so there are the limitations
regarding the analysis of the data without user of that company only.
2.
29
3.
4.
INTRODUCTION
Planning is the basic managerial function. It helps in determining the course of
action to be followed for achieving organizational goals. It is the decision in advance
what to do, and when to do, and who will do the particular task? Plan is made to
achieve best results. Control in the process of checking whether the plans are being
adhered to or not, keeping the record of process, comparing it with the plans and then
taking corrective measure for future if there is any devotion. Every business enterprise
needs the use of control techniques for surviving in the highly competitive and
managing economic world. There are various control devices in use .budget are the
most important tool of profit planning and control. They also act as an instrument of
coordination.
30
31
simply a plan of action hence the technique of budgetary control is an important tool
of managing control.
In today s completive world, without proper planning and control over the
expenses no company can survive. Profit can be maximized by increasing sales,
which depends upon the external factor like market condition, demand, competitors
etc another way to increase profit is to decrese cost (profit=sales-total cost). But for
decreasing cost proper control system should be an action .with the help of proper
budgetary control system maximization of wheat of shareholder is possible. And for
company like m & m which comes under farm equipment sector comparison of actual
with budgets and taking remedial major for division is must do job. Termined
32
To study in detail the budget procedure of Mahindra & Mahindra Co. Ltd.
Nagpur.
To list of various types of budgets generally Mahindra & Mahindra Co. Ltd.
Nagpur prepares.
To evaluate variance analysis of Mahindra & Mahindra Co. Ltd. for taking
suitable action by comparing actual results with budgets so that the causes are
not repeated and remedial action should be taken in future.
33
Scope
M & M Co. Ltd. Is the large organization where budgetary control is the
important aspects. From this study we see that how Company plan there budged
according to the requirement is important the i.e. planning, co-ordination and control
a.
Any modern business can t not function without planning which is related to
production, sales, stocks, requirement of labour, etc. The advantage of
planning is that we can anticipate the problems before hand. Planning through
budgetary control is necessary at all levels of management in which there is
the process of thinking which enables to provide new idea to the management.
b.
A detailed budgetary control system is one where the plans are written down
and these plans are circulated to all the levels management this can be achieve
only through proper communication.
c.
34
35
A budget is a
36
This relates budgetary control with day to day control process. According to him,
Budgetary control involves the use of budget and budgetaryreports,
Rowland and William have differentiated the three terms as Budgets are the
individual objectives of a department, etc where as budgeting may be said to be act of
building budgets. Budgetary control embraces all and in addition includes the science
37
of planning the budgets to affect an overall management tool for the business
planning and control .
38
39
1. Clarifying objectives:
The budgets are used to realize objectives of the business. The objectives
must be clearly spelt out so that budgets are properly prepared. In absence of clear
goals, the budget must be unrealistic.
4. Budget education:
40
6. Flexibility:
Flexibility in the budget required to make them suitable under the change
in circumstances. Budget is made for future which is always uncertain. Even through
budget are prepared by consideration of future possibility but still some occurrences
later on may necessitate certain adjustments. It will make the budget more appropriate
and realistic.
7. Motivation:
41
TYPES OF BUDGETS
Time
Functions
Flexibility
1. Long-term budgets
1. Operating Budgets
1. Fixed budged
2. Financial budgets
2- Flexible budged
3. Current budgets
3. Master budget
42
A.
1.
2.
3.
Current budgets:
The period of current budget is generally of months and weeks. These budgets
relate to the current activities of the business. According to I.C.W.A London,
current budget is the budget which is established for the use over the short
period of time and is related to the current condition .
43
B.
1.
Operating budgets:
These budgets relate to different activities or operations of the firm. The
number of such budget depends upon the size and the nature of the business. The
commonly operating budgets are:
Sales budget
Production budget
Purchase budget
Production cost budget
Row material budget
Labours budget
Plant utilization budget
Manufacturing expenses or work overhead budget
Administrative and selling expenses budget, etc.
The operating budget for the firm may be constructed in terms of programs or
responsibility areas, and these may consist of:
A. Program budget
B. Responsibility budget.
Chart ..
44
A.
Program budget:
It consists of expected revenues and costs of various product or projects that
are termed as die major programme of the firm. Such a budget is prepared for each
product line or project showing revenues, costs and the relative profitability of the
various programs. Program budget are useful in locating areas where efforts may be
required to reduce cost and increase revenues. They are us useful in determining
imbalances and inadequacies in programs so much corrective action may be taken in
future.
45
B.
Responsibility budget:
When the operating budget of the firm is constructed in terms of responsibly
areas is called the responsibility budget. Such a budget had shown the plan in terms of
person responsible for achieving them. The management uses it as a control device to
evaluate the performance of executives who are in charge of various cost centers.
Their performance is compared to targets (budgets), set for them and proper action is
taken for adverse results, if any. The kind of responsibility area depends upon the size
and nature of business activities and the organizational structure. However
responsibility area may be classified under three broad categories:
Cost/expenses center.
Profit center.
Investment center.
2.
Financial budgets:
Financial budgets are concerned with cash receipts and disbursements, working
46
3.
Master budget:
Various functional budget are integrated into master budget .this budget is
C.
1.
Fixed budget:
The fixed budgets are prepared for a given level of activity; the budget is
January then the budget will be prepared a month or two earlier, i.e. November or
December. The hang in expenditure arising out of anticipated change will not be
adjusted in budget. There is a difference of about twelve months in the budgeted and
actual figures. According to I.C.W.A London, fixed budget is the budget which is to
be designing to remain unchanged irrespective of the level of activity actually
attained . Fixed budgets are suitable under static conditions. If sales, expenses and
costs can be forecasted with greater accuracy then this budget can be advantageously
used.
2.
Flexible budget:
A flexible budget consists of series of budgets for different level of activity.
Therefore, varies with the activity attained. A flexible budget is prepared after taking
47
A.
defined for the purpose of budgetary control. Budget centers should be clearly defined
and established for each of which a budget will set with the help of the departments
concerned e.g. labour budget, production cost budget etc. by the accountant in
conjunction with production manager and other executives
B.
responsibilities of each member management and that he knows his position in the
organization and this relation to other members .the organization chart may have to be
adjusted to ensure that each center is to be controlled by an appropriate member to the
staff.
48
49
C.
D.
coordinate all work involved, but in larger organization the budget committee consist
of chief executive , budget officer and heads of departments or budget centers, is
established. The main functions of budget committee are as follows:
the routine of, and the forms and the records required for, budgetary control. a budget
manual helps in standardizing methods and procedures and the risk of overlapping of
function is eliminated.
50
C.
and employed. Except in case of capital expenditure budget, the budget prepared is
generally the accounting year subdivided into 4 quarter or 12 months.
D.
ensure that functional budgets are reasonably capable of fulfillment. The key factor
serves as the starting point for preparing the budget. Generally, sales become the key
factor, but other factors of production, such as men, material, capital etc. may also be
factors.
b.
It help to increase the efficiency, reduce the wastage and control the costs.
c.
d.
With the help of budgeting, the responsibility of the manager can be fixed for
planning, so that they can think for future, anticipated and be prepared to meet
the challenges ahead.
e.
Actual result is compared with the budget so that corrective action can be
taken in time.
f.
51
The budgetary control system is not perfect tool. It has its own limitations
which are as follows:
1.
of budgetary control
cannot be successful unless it has the full support of the top management
Chir Argyris has, in his study of Human Problems with budget has pointed
out the following reasons for a high degree of negative reaction against
budgeting on the part of the front line managers
a)
Budgets are evaluation instruments. They tend to set the goals against which
the people are measured hence they nautically are complained about
b)
c)
Budgets are thought of as pressure devices as such they produce the same kind
of unfavorable reaction as do other kinds of pressure, regardless of origin
2.
52
3.
Time factor.
The accuracy in budgeting came through experience. Management must not
expect too much during the development period
4.
5.
Cooperation required.
The success of the budgetary control depends upon willing co-operation and
teamwork. Budget officer must get cooperation from all department managers.
These managers must feel the responsibility for achieving or bettering
department goals laid down in the budget.
53
expenditure, and the most suitable system of cost and financial accounts .
54
Nagpur PU Total
879.26
773.58
105.68
12.02
F - 2005
807.96
822.86
-14.9
-1.84
F - 2006
974.41
1150.09
-175.68
-18.03
Rs. in lakhs
1000
800
Budget
600
Actual
400
Variance
200
0
-200
F - 2004
F - 2005
F - 2006
-400
Year
Causes:F-2004
F-2005
F-2006
55
Remedies:F-2004
F-2005
F-2006
2. Tractor PGL
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
F - 2004
227.76
191.69
36.07
15.84
F - 2005
190.15
199.86
-9.71
-5.11
F - 2006
186.77
237.08
-50.31
-26.94
Rs. in lakhs
200
150
Budget
100
Actual
Variance
50
0
-50
F - 2004
F - 2005
F - 2006
-100
Year
56
Causes:F-2004
F-2005
F-2006
Remedies:F-
2004
government policy.
Company has to keep on doing regular maintenance of machinery so
that break down will not occur.
F-
2005
condition.
Traveling, postage, printing and telephone exp. can be reduce by
using internet services.
F-
2006
occurs.
Repair and maintenance technique of the company for the machinery
may not be good due to that reason exp. Increases.
57
3.
Engine PGL
84.51
81.07
3.44
4.07
F - 2005
119.5
131.82
-12.32
-10.31
F - 2006
130.42
223.07
-92.65
-71.04
Rs. in lakhs
150
100
Budget
50
Actual
Variance
0
-50
F - 2004
F - 2005
F - 2006
-100
-150
Year
Causes:F-2004
F-2005
58
F-2006
Remedies:F-2004
F-2005
F-2006
4.
Transmission PGL
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
F - 2004
47.28
41.36
5.92
12.52
F - 2005
95.85
95.03
0.82
0.86
F - 2006
80.62
91.34
-10.72
-13.30
59
80
Budget
60
Actual
40
Variance
20
0
-20
F - 2004
F - 2005
F - 2006
Year
60
Causes:F-2004
F-2005
F-2006
Remedies:F-2004
F-2005
F-2006
5.
Hydraulics PGL
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
F - 2004
100.83
75.31
25.52
25.31
F - 2005
81.53
82.52
-0.99
-1.21
F - 2006
88.13
93.63
-5.5
-6.24
61
Rs. in lakhs
80
Budget
60
Actual
40
Variance
20
0
-20
F - 2004
F - 2005
F - 2006
Year
Causes:F-2004
F-2005
F-2006
Remedies:F-2004
F-2005
F-2006
6.
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
62
F - 2004
108.29
100.13
8.16
7.54
F - 2005
89.52
92.02
-2.5
-2.79
F - 2006
85.39
97.43
-12.04
-14.10
Rs. in lakhs
80
Budget
60
Actual
40
Variance
20
0
-20
F - 2004
F - 2005
F - 2006
Year
Causes:F-2004
F-2005
F-2006
Remedies:F-2004
63
F-2006
ER & D PGL
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
F - 2004
136.58
119.52
17.06
12.49
F - 2005
126.83
126.75
0.08
0.06
F - 2006
123.87
162.7
-38.83
-31.35
7.
Budget
100
Actual
50
Variance
0
F - 2004
F - 2005
F - 2006
-50
Year
64
Causes:F-2004
F-2005
F-2006
Remedies:F-2004
F-2005
F-2006
65
8.
Account PGL
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
F - 2004
7.16
5.95
1.21
16.90
F - 2005
5.69
5.47
0.22
3.87
F - 2006
5.01
4.79
0.22
4.39
6
5
Budget
Actual
Variance
2
1
0
F - 2004
F - 2005
F - 2006
Year
Causes:F-2004
F-2005
F-2006
Remedies:F-2004
F-2005
F-2006
66
Sourcing PGL
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
F - 2004
7.58
7.38
0.2
2.64
F - 2005
7.54
4.14
3.4
45.09
F - 2006
3.77
2.52
1.25
33.16
6
5
Budget
Actual
Variance
2
1
0
F - 2004
F - 2005
F - 2006
Year
Causes:F-2004
F-2005
F-2006
Remedies:F-2004
67
F-2005
F-2006
10.
Quality PG
Financial Year
Budget Expenses
Actual Expenses
Variance Variance in %
F - 2004
9.78
7.65
2.13
21.78
F - 2005
8.35
7.79
0.56
6.71
F - 2006
7.14
6.12
1.02
14.29
R s. in lakh s
10
8
Budget
Actual
Variance
4
2
0
F - 2004
F - 2005
F - 2006
Year
Causes:F-2004
F-2005
F-2006
68
69
Remedies:F-2004
F-2005
F-2006
11.
SC PC
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
F - 2004
3.1
1.86
1.24
40.00
F - 2005
2.17
1.76
0.41
18.89
F - 2006
22.98
21.19
1.79
7.79
R s . in la k h s
20
Budget
15
Actual
10
Variance
5
0
F - 2004
F - 2005
F - 2006
Year
70
Causes:F-2004
F-2005
F-2006
Remedies:F-2004
F-2005
F-2006
12.
Nagpur Others
Financial Year
Budget Expenses
Actual Expenses
Variance
Variance in %
F - 2004
43.07
21.86
21.21
49.25
F - 2005
70.82
48.94
21.88
30.90
F - 2006
225.5
184.84
40.66
18.03
71
R s. in lakh s
200
Budget
150
Actual
100
Variance
50
0
F - 2004
F - 2005
F - 2006
Year
Causes:F-2004
F-2005
F-2006
Remedies:F-2004
F-2005
F-2006
72
73
CONCLUSION
Inventory management:
The study of Inventory management control the activities focus on the flow of
inventory from the organization. Many decisions fall under the inventory management
umbrella which is to be seen in M & M Co. Ltd..
74
3. The reorder point is the quantity level of that inventory that trigger a
new order. Safety stock is the buffer inventory held as a cushion
against unexpected unavailability of stock from suppliers.
4. EOQ analysis helps to minimize the cost of holding the inventory. This
is to be done only for hydraulics department in M & M Co. Ltd. In this
department the profit which is obtained is Rs. 4695599.7 lakhs.
Budget and budgetary control system is basis need of entire finance gamut.
Without budget and budgetary control system no company can achieve his goals.
Budget and budgetary control system is a master key which is determining the profit
level for the company
It is a method of forecasting future demand because of that the work of achieving the
goal can be done easy. It helps to introduce standard costing technique.
It also help to ensure cash flow and hence bank credit can be obtained. It creates cost
consciousness in the mind of the employees in the organization. Maximization of
profit is possible through budgeting. It ensures the capital of the firm utilized in
proper way and that there is no mis-utilization of funds.
75
The control system of Mahindra and Mahindra Co. Ltd. Nagpur is based on
responsibility basis means every department get the target and that department must
be complete given the target.
After carefully analyzing and studding the entire procedure of budget and
budgetary control system of M & M Co .Ltd. at Nagpur, Some observation are made
as well as the following recommendations are being suggested.
1.
2.
Volume changes:
M & M Co. Ltd should determine the proper volume of production because of
changing in volume budget always remain uncertain.
3.
Store consumption:
M & M Co. Ltd. Should provides sufficient material to every department
because of that every department can be completed their target within time.
Then there is no need special fund to that department.
4.
Machinery fault:
76
Company is expensing the more money than budget on machinery and spare
parts for repairs and maintenance. So. M & M Co. Ltd should concentrate on
machinery.
The success lies in the budget and budgetary control system as accurate as
possible. And as M & M co. Ltd at Nagpur adopts a scientific budget and
budgetary control system it is required to maintain accuracy in the process.
77
SUGGESTIONS
As we were calculate the variation of all the functional unit on department of
Mahindra & Mahindra Co. Ltd. we suggest them
1.
2.
LIMITATIONS
1.
2.
3.
4.
78
BIBLIOGRAPHY
1.
2.
3.
4.
WEBSITE :
1.
www.mahindra.com
2.
www.mahindraworld.com
79