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industries which enjoys core sector status and play a crucial role in the economic development and growth of a country. Being a core sector this industry was subject to price and distribution controls almost uninterruptedly from world war-II. When government of India announced the partial decontrol of price and distribution as the market price of cement began to raise response to decontrol manufacturing cement became increasingly attractive and the industry experienced substantial expansion. As the supply in response to the 1982 partial decontrol was significant in March 1989, price and distribution control were finally dispensed with. It was one of the first major industries in the country to be so deregulated.
OVERVIEW OF THE INDUSTRY
The word cement means any substance applied for sticking things. But cement is the-most vital and important material for modem construction as a binding agent. In the ancient times, clay, bricks and stones have been used for construction work. The Romans were using a binding or a cementing material that would harden under water. The first systematic effort was made by SMEATION who under took the erection of a new lighthouse in 1756. He observed that the production obtained by burning limestone was the best cementing material for work under water.
After lifty years UCAT, a Fresh chemist, produced hydraulic: cement by burning finely ground clay used in the form of a paste. Cement invented by JOSEPH ASI'DIN in 182-1. Since hardened cement paste resembled Portland stone found in England he named it s Portland cement, a name Portland Cement, a name. Puriland mm-Mi wills he’s nubile lured in U.S.A. in 1975. in India was produced for the rust Lime in 1940 by South India industries limited, madras. This unit had a capacity of 30 tonnes per day, was based on lime from sea. By 1913, however three units started their operations with a combined installed capacity of 75000 tonnes per annum. In 1914 indigenous production fees for short of domestic demand necessitating an Import of 1,65,723 tonnes. Shipment difficulties and foreign trade relation during the first world war acted as a catalyst for the development of indigenous industry and by 1924 the total installed capacity grew to 5,59,800 tonnes per annum. In 1963 all the cement companies with the exception of SONE V ALLEY PORTLAND CEMENT COMPANY LIMITED merged to form the ASSOCIATED CEMENT COMPANIES LIMITED. This has more facilitated a cost reduction as well as uniformity in quality. By 1947 the installed capacity of the' industry raised to 2.2 million tonnes per annum. After partition 5 of the cement producing units in the country went to Pakistan and total installed capacity of 18 units that remained in India was 1.5 million tonnes per annum. This increased to 3.8 million tonnes by 195051. In the three decades between 1950-1980, the capacity expansion was between 7-8 million tonnes per decade. The target set in respect of additional capacity generation was released with impetus given by the partial decontrol announced in 1982 several units locked up project for expansion of capacity and modernization which contributed towards increased production.
DEFINITION OF CEMENT Cement may is defined as a mixture of calcium silicate and aluminates, which have the prosperity of setting and hardening under water. The amount of silica winch is present on each crust are sufficient to combine with calcium oxide to form the corresponding calcium silicate and aluminates.
CLASSIFICATION OF CEMENT Cement is of 3 types, 1. Puzzolantic cement 2. Nature cement and 3. Portland cement.
It consists of a mixture of silicates of calcium and aluminum. It shows the hydraulic properties when it is in the form of powder and being mixed with suitable proportion of lime. The rate of hardening is much slower and the comprehensive strength developed is about half of Portland cement. It is found mere resistant to the chemical action than others. NATURAL CEMENT:.This is nature occurring material. It is obtained from cement rocks. These cement rocks are 1aying limestone’s containing silicates and aluminates of calcium. The selling property of this cement is more than the Portland cement but the comprehensive is half of it.
PORTLAND CEMENT This is of various kinds 1) Ordinary Portland cement 2) Rapid hardening Portland cement 3) Low head cement 4) White colored cement. 5) Water proof Portland cement. 6) Portland Slang Cement. 7) Portland puzzling cement. 8) Sulphate resisting cement.
INDIAN CEMENT INDUSTRY - PRESENT STATUS Alter the declining of the industry in July 1991 it reacted positively to the policy changes. New capacities created and the volume of production increased. From a situation of importing cement, the country started exporting due to high quality and cost effectiveness. After liberalization the black market in cement also disappeared. Currently India stands second largest in the cement production worldwide after China. On the other hand per capita consumption in India is only Books as compared to the world average of 260kgs. The industry has S9 companies owning US plants. In the matters of exports the government considers cement as an extreme focus area. However Indian cement in the global market is not very competitive due to high power and full costs. In order to improve its position in the International market, technological up graduation is essential in terms of process, product diversification, cost reduction, quality control and energy saving.
1 lakh tons per annum incorporating suspension-preheated system was commissioned during the year 1969. location organization structure etc. Kesoram has got 2 DG. It is a day process cement plant.K.. It is located at Basanthnagar in Karimnagar district of Andhra Pradesh. LOCATION: Kesoram cement industry is one of the leading manufacturers of cement in India. The power demand for the factory is about 21 MW. The coal for this company is being supplied Iron Singareni collieries and the power is obtained from APSEB.e. linking Madras to New Delhi. i.. The second unit Was setup in year 1971 with a capacity of 2. The Chairman of the company B. Uasanlhimgar is 8km away from the Ramagundam Railway station.26 lakh tonnes per annum.1 tens per annum and (he third unit with a capacity of 2.ABOUT THE INDUSTRY These chapter examiners a profile of Kesoram Cement Industries Ltd. The plant capacity is 8. sets of 4 MW each installed in the year 1987. its history.Birla HISTORY The first unit at Basanthnagar with a capacity or 2.5 lakh tons per annum went on stream in the year 1978. .
In performance and productivity serving the nation for the last two and has a decades. which has outstanding track record. heavy constructions and allied applications. Kesoram cement industry distinguished itself among all the cement . actual power is 15mw. magazines. Birla Supreme in popular brand of Kesoram cement from its prestigious plant of Basantnagar in AP. National council of construction and building material for Certification of derived quality norms. Kesoram offers a choice of top quality portioned cement for light. The plant layout is rational to begin with. The company has vigorously undertaking different promotional measures their product through different media which includes the use of newspapers. It also has the distinction of achieving optimum capacity utilization. The day process technology used in the latest computerized monitoring overseas the manufacturing process.Kesoram cement has setup 15kw capacity power plant to facilitate for uninterrupted supply for manufacturing of cement starts at 24th august 2007 per hour 12mw. It has proved its distinction by bagging several national awards. Quality is built every fact of the operations. samples are sent regularly to the bureau of Indian standards. The limestone is rich in calcium carbonate a key factor that influences the quality of final product. hoardings etc.
factories in India by bagging the National Productivity Award consecutively. .
With only a textile mill under its banner 1924 it grew from strength to strength and spread its activities 10 newer fields like Rayan. which plays . Kerala. Pulp. Refractories. Maharashtra and Gujarat. Kesoram industries Ltd has a cheque red and eventful history dating back to the twenties when the Industrial House of Birla's acquired it. tyres and other products. Vijayawada and Nellore. Commerce and Industries [FAPCCI] also conferred on Kesoram Cement. for the year 1985-84. In other .For two years i. warangal. Nizamabad. An award for the best industrial promotion expansion Units in the state for the year 1984. serving the nation on the industrial front. Transparent paper. The federation of Andhra Pradesh chamber & Sr. Kesoram also bagged KAPCCI awarded for "Best Family Planning in the state" for the year 19871988. One among the industrial giants in the country today.e. Tamilanadu.UI important role in National building activity the Governament of India had de-licensed the' cement industry in the' year 1966 with a view to attract private entrepreneurs to augment the cement production. Karnataka. spun pipes. Kesoram cement undertaking marketing activities extensively in the states of Andhra Pradesh. Kesoram rose to the occasion and divided to set up a few cement plants in the country. In AP sales depots are located in different areas like Karimnagar. Looking to the wide gap between the demand and supply of a vital commodity cement.
Thus award stallby national council for cement and building material (NCCBM) in association with the government of-India. Kesoram cement is best family planning effort" in the federation of Andhra Pradesh chamber of commerce and industry and also national award for two successive years 1985 and 1986. It has also bagged the national award for energy efficiency for the year 1989-1990 for the performance among all cement plants in India. Kesoram bagged the prestigious Andhra Pradesh state productivity award in 1987-1989 also annexed state award for industrial management in 1988-1989 and also "Best industrial promotion expansion efforts" in the state and Yajamanya Ratna and best efforts of an industrial unit in the state to develop rural economy was bagged for its contribution towards the responsibility of rural and community development programmers for the year 1991.states it has opened around 10 depots. During the last 3 years the government of Andhra Pradesh has given the . It also bagged the "may day award" of the government of Andhra Pradesh for the best management and the Pandit Jawaharlal Nehru silver rolling trophy for the industrial productivity effort in the state of Andhra Pradesh by F APCCI and also the Indhira Gandhi memorial national award for excellence. Best management award of the government of Andhra Pradesh for the year 1993. National award for mines safety for two years 1985-86 & 1986-87. The award won are:Kesoram Cement bagged prestigious awards like national awards for productivity and technology and conversation and several stale awards for year 1984.
IN the year March. . 2007 "Best Management award 2007" for the best Management practices in Kesoram Cement. To keep the ecological balance they have also undertaken massive tree plantation in the factory and government of India has nominated township areas and them for VRIKSHMITRA award. Best effort of an industrial unit in the state for rural development 1994-1995 presented by chief minister in March 1996.following awards Best awards for the year 1994. presented by Chief Minister.
3 million tones per annum indication surplus conditions while its demand is 56.CEMENT PRODUCTION WORLDWIDE COUNTRY CHINA JAPAN USA INDIA ITALY GERMANY 1981 83 88 65 21 43 30 1983 108 85 64 25 40 28 1980 166 73 71 36 36 24 1989 210 82 70 45 4 27 1 99O 210 87 72 48 41 40 WORLD Ranking 1 2 3 4 5 6 To day in India cement industry is producing 58. Now the cement market has become 'buyer market' which was a 'selling market' till 1970's arid so the quality 66 brand taken an upper edge for cement marketing. But in India 106 major plants are producing 583 lakh tones while al India cement demand is 569 lakh tones leaving the balance for exports. per annum. To day installed at India cement industry is 771 lakh tones.7 million tones lies. .
6 6.INDIA'S LARGEST CEMENT COMPANIES POST ACQUISITION Company Larsen & Turbo ACC GRASIM INDIAN CEMENT GUJARATH AMBUJA Cement Capacity In TPA 12.3 9.7 6.0 11.5 Cement % of Sales 20 93 28 92 100 .
There are good prospects for export with cement export promotion council. OPPORTUNITIES: The industry has tremendous potential for growth in India. In near future cement is going to replace tar for the construction of roads. THREATS: The surplus levels are increasing as the production of the cement is much greater than the consumption. The industry is also facing major packaging problems. In the present scenario of stiff competition there is a declining trend of price.WEAKNESSES: The per capital consumption of the cement in India is very low. The performance of the smaller unit is badly hit by major takeovers. The government polices of reduction in excise duty and exempting cement from the just packaging may act as boon to the industry. The crisis situation in South East Asian countries may create problem to the exports of the industry . The cement industry is lacing with acute power shortage and raw material problem. The transport costs in India are very high.
responsibilities and time periods.INTRODUCTION TO BUDGET BUDGETING BUDGETARY CONTROL The management is efficient if it is able to accomplish the objective of the enterprise. of policy to be pursued during that period for purpose of attaining a given objective.In order to attain long range efficiency and effectiveness.in a way. MEANING OF BUDGETING: The process of planning all flows of financial resources into. From above definition it is clear that budgeting is the actual act of preparing the budget. within and from an entity during some specified future period. prepared and approved prior to a defined period of time. a budgetary control system has been described as a historical combination of a "goal setting machine for increasing an enterprises profits. It is effective when it accomplish the objectives with minimum effort and cost . Budget is the end product of budgeting. A systematic approach to facilitate effective management performance is profit planning and control. expenditure and employment capital. It may include income. functions. It includes providing for the detailed allocation of expected available future resources to projects. . or budgeting. management must chart out its course in advance. MEANING OF BUDGET: It is a financial and quantitative statement. It is the process of evolving the final statement. Budgeting is therefore an integral part of management . In other words it is a pre-determined detailed plan of action developed and distributed as a guide to current operations and as a partial basis for the subsequent evaluation of performance. and a goal achieving machine for facilitating organizational coordination and planning while achieving the budgeted targets".
First of all budgets are prepared and then actual results are the comparison of budgeted and actual figures will enable the management to find out discrepancies and take remedial measures at a proper time. The policy to be followed to attain the given objectives must be laid before the budget is prepared. 4.A. It is prepared for the definite future period. which helps in planning and co-ordination. A budget is a means and budgetary control is the end result. or to provide a firm basis for its revision. It is monetary and/or quantitative statements of the policy MEANING OF BUDGETORY CONTROL: It is the process of establishing of departmental budgets relating the responsibilities of executives to the requirements of a policy. The budgetary control is a continuous process. It provides a method of control too. It is prepared prior to a defined period of time. In the words of J. . either to secure by individual action the objectives of that policy. 2. 3. and the continuous comparison of actual with budgeted results.ESSENTIALS OF A GOOD BUDGET: 1.Scolt "Budgetary control is the system of management control and accounting in which all operations are forecast and so as possible planned ahead and active results compared with the forecast and the planned ones.
6. Budgeting. Analysis of variances in actual performance and budgeted performance. The primary objective can be met only if there is proper communication and coordination amongst different within the organization.ESSENTIAL OF BUDGETARY CONTROL: 1. Collection of actual data pertaining to all budgeted activities. 3. Thus the objectives can be stated as: 1. which is the most profitable for the defined period. The first step in planning is to define the broad aims and objectives of the businesses. Distribution of budgets pertaining to each function to all the relevant sections with in the organization. It cultivates forced planning aiming managers. OBJECTIVES OF BUDGETARY CONTROL: The primary objective of budgetary control's to help the management in systematic planning and in controlling the operations of the enterprise. . Continuous comparison of actual performance with budgeted performance. Budget influences strategies that need to be followed by the originations. is the starling point for budgetary control. Revision of budgeted if it is felt that the budgets prepared are no longer relevant on account of unforeseen developments. 5. or the process of preparing the budget. 4. PLANNING: Business requires planning to ensure efficient and maximum use of their resources. 7. Initiation of corrective action to ensure that actual performance is in line with budgeted performance. strategies to achieve the e desired goals are formulated and tentative schedule of the proposed combinations of the various factors of production. 2. Then.
It also helps to identify weaknesses in the organization structure 3. Executives are forced to think of the relationship between their department and the company as a wholeThis removes unconscious biases against other departments.2. This is made possible by ensuring their participation in the budgeting process. policies and performances of the organizations. . COMMUNICATIONS : All people in the organization must know the objectives. They must have a clear understanding of their part in the organizations goals. Variances are highlighted and corrective action can be initiated. CO-ORDINATION: Co-ordination is a managerial function under which all factors of production and all departmental activities an balanced and integrated to achieve the objectives of the organization. Budgets also from the basis of performance evaluation in an organization as they reflect realistic estimates of acceptable and expected performance. CONTROLS AND PERFORMANCE EVALUTION: Control ensures control by continuous comparison of actual performance with the budgeted performance. Budgeting provides the basis for individuals in all departments to exchange ides on how best the organizations objectives can be realized. 4.
Budgetary control embraces all and in addition includes the science of Planning the budgets to effect on overall management tool for the business planning and control". . The managers of different departments are made responsible for their Departmental budgets.BUDGET. He constitutes a budget committee for preparing realistic budgets. where as budgeting may be said to be the act of building budgets. A budget officer is the convener of the budget committee who cp-ordinates the budgets of different departments. and practice of achieving given objectives From the above definitions we can differentiated the three terms as "Budgets are the individual objectives of a department. The chief executive's the overall in charge of budgetary system. maintenance and administration of budgets. ESSENTIALS OF BUDGETARY CONTROL: 1. etc. Budgeting is a technique for to the principles. A budgetary committee is formed which comprises the departmental heads of various departments. ORGANISATION FOR BUDGETARY CONTROL: The proper organization is essential for the successful preparation. procedures. BUDGETING AND BUDGETARY CONTROL A budget is n blue print of a plan expressed in a quantitative terms. All the functional heads are entrusted with the responsibility if ensuring proper implementation of their respective departmental budgets.
The heads of all the important departments’ are made members of this committee. His rank should be equal to other functional managers. The budget officer works as a coordinator among different departments. BUDGET OFFICER: The chief executive appoints budget officer. The budget officer will be able to can out his work only if he is conversant with the working of all the departments. He determines the deviations in the budgets and takes necessary steps to rectify the deficiencies. 3. The Budget officer does not have the direct responsibility of preparing the budgets. He must have technical knowledge of the business and should also possess accounting knowledge. He is empowered to scrutinize the budgets prepared" by different functional heads and to make changes in them. is "Budget Controller or Budget Director".2. The committee is responsible for preparation and execution of . BUDGET COMMITTEE: A budget committee is formed to assist the budget officer. if the situation so demands. The budget officer has the specific duty of administering tin budget. He is responsible for timely completion of budgeting activity by various departments and for co-ordination between them so that there is a proper link between them. Such budget officer also called. if any. He continuously monitors the actual performance of different departments. His role is that of a supervisor. He also informs the top management about the performance of different departments. The various functional managers prepare the budgets.
if necessary. The budget .budgets. The members of this committee put up the case of their respective departments and help the committee to take collective decisions.
BUDGETS CENTERS: A budget center is that part of the organization for which the budget is prepared.committee is responsible for reviewing the budgets prepared by various functional heads. Co-ordinance. All the functional heads arc entrusted with the responsibility of ensuring proper of ensuring proper implementation of their respective final departmental budgets. section of a department. it must be ensured that each budget center at least has an indirect representation in the Budget Committee. However. . A budget center may be a department. The establishment of budget centers is essential for covering all parts of the organization becomes easy when different centers are established. All the budgets and approve the final budgets. The budget centers are also necessary for cost control purposes. the head of every center should be a member of the Budget Committee. The Budget Officer acts as coordinator of this committee. Ideally. or any other part of the department. 4.
The financial powers of different managers are given in the manual for enabling the spending amount on various expenses. A budget manual covers the following matters: A budget manual clearly defines the objectives of budgetary control system. A method of accounting to be used for various expenditures is also staled in the manual. A proper table for budgets including the sending of performance reports is drawn so that every work starts in time and a systematic control is exercised. The problem to be followed in the entire system is clearly stated. A budget manual helps in documentation the role of every employee. The specimen forms and number of copies to be used for ore oaring budget reports is also stated. The length of various budget periods and control points is clearly given.BUDGET MANUAL: a) A budget manual is a document that spells out the duties and responsibilities of the various executives concerned with it specialties among various functional areas. Budget centers involved should be clearly stated. c) It gives information about the sanctioning authorities of various budgets. II enables the management to know the persons dealing with various aspects to budgets and provides clarity on their duties and responsibilities. responsibilities. The duties and responsibilities of various persons dealing with preparation and execution of budgets arc also given in a budget manual. his duties. It also gives the benefits and principles of this system. the ways of undertaking various b) c) d) e) f) g) h) .
The timings for the availability of the finance. . To co-ordinate budgeting activities. it also helps in reducing ambiguity at any point of time. The financial manager usually responsible for organizing this budget. To scrutinize control reports later on. To reconcile divergent views. The choice of a budget period depends upon the following considerations. he must perform the following functions: To decide the general policies and guidelines. To suggest changes. 6 BUDGET PERIOD: A budget period is the length of time for which a budget is prepared. To offer technical advice. All the above mentioned factors are taken into account while fixing the period of budgets. The economic situations of the cycles.tasks etc. It depends upon a number of factors. To approve budges with or with out revisions. The type of budget (long/short) The nature of demand for the products. thus. In this budgeting process the financial manager has to take the financial decision on the budgets. . To receive and review individual budget estimates.
later on.To scrutinize budget reports. To disseminate these guide lines. CONTINUOUS BUDGETING SYSTEM : A continuous budgeting system is a method of having two different budget periods within the same budget. . The purpose of having this system is to have greater control in terms of operational activities without losing sight is to have greater control in terms of it results in incorporating the effect of changes in the short term on the long-term targets of the organization. After finalizing the budget proposals the budget committee subjects the final budget to the Board of Directors or Budget Director for approval.
PROPER DELEGATION OF AUTHORITY AND RESPONSIBILITY: Budget preparation and control is done at every level of management.DETERMINATION OF KEY FACTOR : The budgets are prepared for all functional areas. CLARIFYING OBJECTIVES: The budgets are used to realize objectives of the business. 1. . The key factor highlights the limitations of the enterprise. These budgets are interring dependent and inter-related. 2. REQUISITES FOR A SUCCESSFUL BUDGETARY CONTROL SYSTEM. The constraints on some budgets may have an effect on other budgets too. is known as "key factor or principal factor". The objective must be clearly spelt out so has budgets are properly prepared. other factors may also improve at different times. The raw materials supply may be limited: at one time but it may be easily available at another time. which influences all other budgets. A factor. For making a budgetary control system successful requisites are required. Similarly. The key factor may not necessity remain the same. A proper co-ordination among different budgets is necessary for budgetary control to be successful. In the absence of clear goals. This will enable the management to improve the working of those departments where scope for improvement exists. the budgets will also be unrealistic.
which is always uncertain.Even though budgets are finalized at top level but involvement of Persons from lower levels of management is essential for their success. 5. FLEXIBILITY: Flexibility in budgets is required to make them suitable under changed circumstances. Budges are prepared for the future. The flow of information regarding budgets should be quick so that these are implemented. The upward communication will help in knowing the difficulties in implementation of budgets. even though budgets are prepared by considering the future . 4. The performance reports of various levels will help top management in budgetary control. PROPER COMMUNICATION SYSTEM: An effective system of communication is required for a successful budgetary control. This necessitates project delegation of authority and responsibility 3. BUDGET EDUCATION: The employees should be educated about the benefits of budgeting system they should be the benefits of budgeting system they should be educate about their roles in the success of this system. Budgetary control may not be taken only as a control device by the employees but it should be used as a tool to improve their efficiency.
The financial "Controller" exclusively for the top management usually prepares long-term budgets.e . These budgets are very useful in terms of physical units (i. TYPES OF BUDGETS: LONG TERM BUDGETS: The long-term budgets are the budgets prepared for a long period of five to ten years. quantities) or percentages. Flexible makes the budgets more appropriate and realistic. MOTIVATION: Budgets are to be implemented by human beings. A proper system of motivation should be introduced for making this system a success. etc. Capital expenditure. They are concerned with planning the operations of a firm over a considerably long period of time.. All persons should be motivated to improve their working so that budgeting is successful. 6. since accurate values may be difficult to forecast over such long period. are examples of long-term budgets.possibilities but still some adjustments. SHORT TERM BUDGETS: . Their successful implementation will depend upon the interest shown by the employees. research and development budgets.
Say. textiles. cotton. prepared in terms of physical units (i. Materials budget. They arc prepared for a very short period.e.. They relate to current activities of the budgets. periods. they are generally. a quarter or a month. These budgets may get integrated with the budget of the following period. etc.e. rash budget.. CURRENT BUDGETS: Current Budget is a budget.e. They are useful to lower level of management for control purpose. These budgets are very useful in case of consumer goods industries such as sugar. quantities) t as well as monetary units (i. . Thus current budgets are essentially short term budgets adjusted to current (i. INTERIM BUDGETS: Interim budgets are budgets. present or prevailing) conditions or circumstances. They arc prepared for those activities tic trend in which cannot be foreseen easily over long periods.Short-term budgets are budgets prepared for a short period of one to two years. Values. etc are examples of short term budgets..). which is established for use over a short period of time and is related to current conditions. which are prepared in between two budgets.
purchase budget. Sales budget. Longterm budgets are usually prepared in physical terms. etc are examples of such budgets. Budgets such as . They do not include corresponding rupee value. materials budget. etc.CLASSIFICATION OF BUDGETS ACCORDING TO CONTENT: Budgets may be classified into budgets in physical terms and into budgets in monetary terms. b] BUDGETS IN MONETARY TERMS: Budgets in monetary terms are budgets that budget in terms of quantities as well as their corresponding rupee value. a] BUDGETS IN PHYSICAL TERMS: Budgets in physical terms are budgeted that budget in terms of quantities only. Examples of such budgets are production budget.
2. iv. The number of such budgets depends upon the size and nature of the business. the commonly used operating budgets are: i. Sales budgets Purchase budget Raw Materials Budget Labour budget Factory utilization budget . etc that may not have physical quantities also from part of budgets in Monterey terms.cash budget. v. Master budget 1) OPERATING BUDGET: These budgets relate to different activities or operations of a firm. CLASSIFICATION OF BUDGETS ACCRODING TO FUNCTION: Budgets can be classified into: 1. Financial budgets 3. ii. capital expenditure budget. Operating budgets. iii.
. Manufacturing Expenses or Works Overhead budget vii. cost and the relative profitability of the various in locating areas where efforts may be required to reduce costs and increase revenues.. Such a budget can be prepared for each product line or project showing revenues. Administrative and selling expenses budget etc.vi. The operating budget for a film may be constructed in terms of programs or responsibility areas. They arc also useful in determining imbalances and inadequacies in programs so that corrective action may be taken in future. and hence may consist of: A) Programme budget B) Responsibility budget A] PROGRAMME BUDGET: It consists of expected revenues and costs of various products or projects that are termed as the major programs of the firm.
It is used by the management as a control them. The commonly used financial budgets include Cash budget. working capitol. Investment center 2) FINANCIAL BUDGETS: Financial budgets are concerned with cash receipts and disbursements. Budgeted balance sheet or position statement budget. and Income statement budget. financial: position and results of business operations. set for them and proper action is taken for adverse results. Profit center III. It is used by the management as a control device to evaluate the performance of executives who are in charge of various cost centers. Statement of retained earnings budget. such a budget shows the plan in terms of person's responsible for achieving them. Working capital budget. . Responsibility areas may be classified under three broad categories: I. Their performance is compared to the targets (Budgets). Cost/expense center II.B] RESPONSIBILITY BUDGETS: Who are the operating budgets of a firm is constructed in terms of responsibility areas.
All the operational and financial budgets are integrated into the Master budget.3) MASTERBUDGET The Master budget is the summary budget incorporating its functional budgets. This budget is used to coordinate the activities of various functional departments. The Budget officer for the benefit of the top level management prepares this budget. It is also used as an effective control device. .
Hence. b) FLEXIBLE VARIABLE SLIDING SCALE OR CONTROL TYPE BUDGETS: According to 1CMA. In other words it provides the budgeted costs at any level of activity. It is based on a fixed volume of activity and shows one volume of output and related cost. A flexible budget contains several estimates for different assumed circumstances instead of just one estimate. it provides for automatic adjustments with changes in the volume of activity. a situations operating in an unpredictable environment. generally. London "a fixed budget is a budget which is designed lo remain unchanged irrespective of the level of activity actually attained". London "a flexible budget is a budget which is designed to change in accordance with the level of activity actually attained".CLASSIFICATION ON THE BASIS OF FLEXIBILITY FIXED BUDGET: According to ICMA. Thus. A fixed budget is useful only when the actual level of activity corresponds with the budgeted level of activity. It is not adjusted according to the actual level of activity attained. Business activity cannot be accurately predicted on account of uncertainties of business environment. does not happen as such a fixed budget is not useful for managerial purposes. a flexible budget changes according to the change in the level of activity. . But this.
ZERO BASED BUDGETING: Zero-based budgeting is the latest technique of budgeting and it has interested use as a managerial tool. . Jimmy Carter. This technique was first used in America in 1962. This method carries previous years inefficiencies the present year because we taken last year as a guide. and decide "what is to be done this year when this much was the performance of the last year’’. Zero is taken as a base and likely future activities are decided according to present situations. the budget for this year will have to be justified according to present situation. by the former president America. In zero base budgeting a manager is to justify why he wants to spend. it is starting from a "scratch". As the name suggests. The performance of spending on various activities will depend upon their justification and priority for spending will have to be proved that an activity is essential and the amounts asked for are really reasonable taking into account the volume of activity. the normal technique of budgeting is to use previous years cost levels as a base for preparing this year's budget. In zero based budgeting every year is taken as a new year and previous year is not taken as a base.
OBJECTIVES OF THE BUDGETARY SYSTEM : To prepare annual budgets in such a manner those managers at various levels in the organization carry out periodical exercise in respect of each contact or responsibility center for physical planning and matching resources broke up monthly targets or cash flows. To bring about effective co-ordination of all activities of the organization of all activities of the organization and to gear up service divisions to meet effectively the requirements of project. KARIMNAGAR The budgeting process is used in the performance budgeting for the construction of phase. which is presented in the form of annual plan. which includes pre-commissioning activities. into To introduce and operate responsible for achievement of specified targets with the resources allocated for the purpose. BASANTH NAGAR. Besides meeting the essential requirements of managerial control. The budgeting exercise also covers the longterm capital budgeting. .BUDGET AND BUDGETARY SYSTEM IN KESORAM CEMENT INDUSTRIES LIMITED.
Budgets should indicate monthly phasing of expenditure and targets for the first and quarterly phasing for the second half of the year. Allocation of the cost as system wise affords a sound basis for cost accounting. the budget should be drawn up for the ensuring financial year in the form of Budget estimates financial year in the form of Revised Estimates (R. capital budget for ongoing and new schemes should be formulated as a part of the exercise for preparation of Annual plan. Budget provisions are related to project estimates and monitoring of actual expenditure where as control cables for part . it is essential that costs are collected for each system of the factory though this may involve splitting up of payments against contracts which embrace more than one system. in the light of actual expenditure n addition.) i budgets are to be reviewed teams. The long term capital Budget should indicate for a period of six years following the budget period project wise annual phasing of the capital expenditure and physical schedules resource based network. While drawing up the actual budget in October every year. inter firm comparison and provides valuable i n p u t s to d a t a b an k. the long-term.E. At the time of review of the budget estimates to frame revised estimates the Quarterly phasing should be broken up into monthly phasing.BUDGET PERIOD AND PHASING: The budget period or annual budgets should correspond with the financial year . BUDGET HEADS: For uniform accounting. the on monthly basis by project review and projections in the budget period.
Technical consultancy. Factory piping. . Auxiliary' pumps for water treatment plant and civil works system. Preliminary expenses Misc. brought out assets Cash budget Township budget construction. for ash water mains. If there are. any contracts not covered in the budget heads provision for such contracts should be shown against the appropriate system head by adding code number. compressed air system and civil works piping. Incidental expenditure during Employee cost Other establishment expenses: Training and recruitment.control and instrumentation system. 5 TYPES OF BUDGETS IN KESORAM CEMENT INDUSTRIES LIMITED : According to the nature expenditure budget are classified as under Direct capital outlay on works. which include pipelines.
A responsibility centre can be defined as any functional unit headed by a manager who is responsible for the activities of that unit. • It helps to co-ordinate the activities of the organisation. Inter-departmental sales are often made using "transfer prices". d) Investment centres Where outputs are compared with the assets employed in producing them. There are four types of responsibility centres: a) Revenue centres Organisational units in which outputs are measured in monetary terms but are not directly compared to input costs. ROI. • Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets.e. These enable managers to monitor organisational functions. Advantages of budgeting and budgetary control . c) Profit centres Where performance is measured by the difference between revenues (outputs) and expenditure (inputs). b) Budgetary control: • A control technique whereby actual results are compared with budgets. i.Budgetary control methods a) Budget: • A formal statement of the financial resources set aside for carrying out specific activities in a given period of time. Budgetary control and responsibility centres. b) Expense centres Units where inputs are measured in monetary terms but outputs are not. An example would be an advertising budget or sales force budget.
A budget is basically a yardstick against which actual performance is measured and assessed. Departures from budget can then be investigated and the reasons for the differences can be divided into controllable and noncontrollable factors.There are a number of advantages to budgeting and budgetary control: • Compels management to think about the future. • Improves the allocation of scarce resources. operation and (ideally) each manager. thus resulting in: a) bad labour relations b) inaccurate record-keeping. • Economises management time by using the management by exception principle. • It is difficult to reconcile personal/individual and corporate goals. • Clearly defines areas of responsibility. • Departmental conflict arises due to: a) disputes over resource allocation b) departments blaming each other if targets are not attained. Problems in budgeting Whilst budgets may be an essential part of any marketing activity they do have a number of disadvantages. Control is provided by comparisons of actual results against budget plan. • Enables remedial action to be taken as variances emerge. • Provides a basis for performance appraisal (variance analysis). to anticipate and give the organisation purpose and direction. • Promotes coordination and communication. Forces management to look ahead. . particularly in perception terms. • Waste may arise as managers adopt the view. This is often coupled with "empire building" in order to enhance the prestige of a department. • Budgets can be seen as pressure devices imposed by management. "we had better spend it or we will lose it". • Motivates employees by participating in the setting of budgets. Requires managers of budget centres to be made responsible for the achievement of budget targets for the operations under their personal control. to set out detailed plans for achieving the targets for each department. which is probably the most important feature of a budgetary planning and control system.
b) Budget committee: This may consist of senior members of the organisation. • Flexibility: allow for changing circumstances. • Standards: base it on established standards of performance. e. c) Budget Officer: Controls the budget administration The job involves: • liaising between the budget committee and managers responsible for budget preparation • dealing with budgetary control problems • ensuring that deadlines are met • educating people about budgetary control. A budget centre may encompass several cost centres. Every part of the organisation should be represented on the committee. power costs. Functions of the budget committee include: • Coordination of the preparation of budgets.Responsibility versus controlling. • Analysis of costs and revenues: this can be done on the basis of product lines. i. d) Budget manual: This document: • charts the organisation • details the budget procedures . marketing and so on. production. • Comprehensiveness: embrace the whole organisation. Budget organisation and administration: In organising and administering a budget system the following characteristics may apply: a) Budget centres: Units responsible for the preparation of budgets. • Feedback: constantly monitor performance. so there should be a representative from sales. • Managers may overestimate costs so that they will not be blamed in the future should they overspend. Characteristics of a budget A good budget is characterised by the following: • Participation: involve as many people as possible in drawing up a budget.e.g. some costs are under the influence of more than one person. including the issue of a manual • Issuing of timetables for preparation of budgets • Provision of information to assist budget preparations • Comparison of actual results with budget and investigation of variances. e. departments or cost centres. departmental heads and executives (with the managing director as chairman).g.
• The materials purchases budget is both quantitative and financial.• contains account codes for items of expenditure and revenue • timetables the process • clearly defines the responsibility of persons involved in the budgeting system. If requirements exceed capacity he may: • subcontract • plan for overtime • introduce shift work • hire or buy additional machinery • The materials purchases budget's both quantitative and financial. sales. b) Production budget: expressed in quantitative terms only and is geared to the sales budget. c) Raw materials and purchasing budget: • The materials usage budget is in quantities. Factors influencing a) and b) include: . material or labour. Methods of sales forecasting include: • sales force opinions • market research • statistical methods (correlation analysis and examination of trends) • mathematical models. e. In using these techniques consider: • company's pricing policy • general economic and political conditions • changes in the population • competition • consumers' income and tastes • advertising and other sales promotion techniques • after sales service • credit terms offered. This is also known as the key budget factor or limiting budget factor and is the factor which will limit the activities of an undertaking. This is prepared in units of each product and also in sales value. This limits output.g. a) Sales budget: this involves a realistic sales forecast. Budget preparation Firstly. determine the principal budget factor. The production manager's duties include: • analysis of plant utilisation • work-in-progress budgets.
it highlights monthly surpluses and deficits of actual cash. e. It summarises monthly receipts and payments. Payments of cash may be for one or more of the following: • purchase of stocks • payments of wages or other expenses • purchase of capital items • payment of interest.1 Composition of a master budget OPERATING BUDGET FINANCIAL BUDGET consists of:consists of Budget P/L acc: get: Cash budget . e) Cash budget: a cash plan for a defined period of time. dividends or taxation.g.g. e. d) Labour budget: is both quantitative and financial. change of credit terms offered to customers. This is influenced by: • production requirements • man-hours available • grades of labour required • wage rates (union agreements) • the need for incentives. Hence. Receipts of cash may come from one of the following: • cash sales • payments by debtors • the sale of fixed assets • the issue of new shares • the receipt of interest and dividends from investments. stock and debtors • to enable a firm to take precautionary measures and arrange in advance for investment and loan facilities whenever cash surpluses or deficits arises • to show the feasibility of management's plans in cash terms • to illustrate the financial impact of changes in management policy.• production requirements • planning stock levels • storage space • trends of material prices. Figure 4. Its main uses are: • to maintain control over a firm's cash requirements.
Having identified cost centres. .g. for e. the next step will be to make a quantitative calculation of the resources to be used. budget Stocks budget f) Other budgets: These include budgets for: Balance sheet Funds statement • administration • research and development • selling and distribution expenses • capital expenditures • working capital (debtors and creditors). The master budget (figure 4. the greater the control that can be exercised by the budget but the greater the expense in preparation of the budget and reporting of any variances. there will be costs for labour. With each operation. Therefore. and to further break this down to shorter periods. materials and machinery usage. say. these may include four resources. An example A sugar cane farm in the Lowveld district may devise an operating budget as follows: • Cultivation • Irrigation • Field maintenance • Harvesting • Transportation. namely: • Labour: -cutting -sundry • Tractors • Cane trailers • Implements and sundries. The length of period chosen is important in that the shorter it is. harvesting.1.1) illustrates this.Production budget Materials budget Labour budget Admin. Now attempt exercise 4. one month or three months.