BUDGETING AND BUDGETARY CONTROL

AT

TECUMSEH PRODUCTS INDIA PRIVATE LIMITED M. HARISH KUMAR
151109672042

Project submitted in partial fulfillment for the award of the Degree of MASTER OF BUSINESS ADMINISTRATION By
PULLA REDDY INSTITUTE OF COMPUTER SCIENCE DOMADAGU VILLAGE NEAR DUNDIGAL AIR FORCE ACADEMY JINNARAM MANDAL MEDAK DIST. 2009-2011

Osmania University, Hyderabad -500007

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DECLARATION

I hereby declare that this Project Report titled Budgeting and Budgetary Control submitted by me to the Department of Business Management, O.U., Hyderabad, is a bonafide work undertaken by me and it is not submitted to any other University or Institution for the award of any degree diploma / certificate or published any time before.

Name and Address of the Student
M.HARISH KUMAR H.No. 2-78/2 GAJULARAMARAM VILLAGE ASHRAMAM LANE JEEDIMETLA HYDERABAD-500055

Signature of the Student

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ABSTRACT
Budget is one of the important and powerful tools available to the organization to have estimates about expenses and income for a definite period of time. Budgetary control involves the use of budget and budgetary reports, throughout the period to coordinate, evaluate and control day to day operations in accordance with the goals specified by the budget. In this present scenario it is very necessary to reduce the cost in regard of all terms to sustain in the market. So i have taken budgetary control as my study, which carries huge weight age to reduce the wastages and does the process efficiently. The following are the objectives of the study
• To study the budgetary control system and techniques implemented in Tecumseh Products India Pvt. Ltd. • To study the performance of the company and various cost

control techniques implemented and their impact. The findings that I have come out of study 1. The actual subject matter, naming the project work on and BUDGETARY CONTROL in a manufacturing

BUDGETING

concern is the practical exposure drawn out from the efforts of management of Tecumseh, Hyderabad.

2. Preparation of master budgets, fixed budgets, flexible budgets are desired to be prepared to have easy and fast access to the data required by the staff and line management. 3. As the company incurred huge unexpected losses in the previous two years there is a lot of requirement to review its standards, estimations and follow accordingly.

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Mrs. 4 . Suvarchala Devi for his motivation. M. GD PAWAN KUMAR for giving us this great opportunity. which has given me an opportunity to carry out our project work in its premises..Harish Kumar.ACKNOWLEDGMENTS I express my humble gratitude to Mr. who provided an opportunity and helped me a lot for successful completion of my project work. Sanjay Tangri (Senior ManagerAccounts Dept.) Tecumseh products India Pvt. help and continuous support. I feel privileged to thank wholeheartedly our Principal. Prof. happen. I am very much obliged to “Pulla Reddy Institute of computer science”. I am thankful to our internal guide and head of the department. I also indebted to his for his valuable suggestions. which made me correct my faults and improve myself. Ltd. which made this project.

INTRODUCTION 2. DATA ANALYSIS & PRESENTATION 5.CONTENTS 1. REVIEW OF LITERATURE 3. SUMMARY AND CONCLUSIONS BIBLIOGRAPHY 5 . THE COMPANY 4.

1 Introduction 1.1 Literature review 2.2 Conclusion 5.4 Limitations Bibliography 65 66 67 68 70 6 .TABLE OF CONTENTS: Contents List of tables List of figures Chapter 1 1.2 Conceptual framework Chapter 3 3.3 Suggestions 5.1Data analysis and interpretation Page numbers 45-60 45-60 8 9 10 11 12 14-29 31-34 36-46 48-63 Chapter 5 5.5 Methodology Chapter 2 2.3 Objectives of study 1.2 Company profile Chapter 4 4.4 Scope 1.2 Need 1.1 Findings 5.1 Industry profile 3.

CHAPTER-1 INTRODUCTION 7 .

It’s a system of planning and control covering all the segments of an organization and also giving a sense of direction to the goals and objectives of an organization. 8 . hence with the help of a proper budget one can achieve the organizational goals and objectives. It’s a blue print of a company’s financial estimates for the future. A management is said to be effective if it can accomplish the objectives of an organization. A budget system should be such that it becomes imperative for the management to establish goals and objectives. which form an essential part of the management accounting and the foundation of firm’s financial control. there are several producers in different fields of electronics. hydro. define policies. But it is equally important for the organization to attain the objectives efficiently with minimum amount of resource utilization. and try to take corrective action if there are any deviations. A budget constitutes the principal instrument for projecting the future cost revenues. Budgeting forms the most important part of the planning function. All of us in some form or other. The industry having a wide scope because of rapid improving technologies because of such wide applications of electronics. nuclear plants and power transmission industries play a vital role for the establishment of heavy electronics industry. Electronics has made life simple.INTRODUCTION A budget is a comprehensive plan of action expressed in physical and financial terms. In order to attain these set goals within a given set of constraints is a difficult job. directly or indirectly are using electronics goods. set targets. Demand for electronics goods has led to the establishment of many manufactures and development is on day-to-day basis. with the announcement of new industrial policy (NIP) in 1991 all the Indian firms were exposed to global competition and foreign currency transactions in a big way. allocate resources. The thermal.

and Threats. funding the proposals. which in turn is simply known as Strengths. Budgeting and Budgetary control helps in this context of dynamism. Opportunities. Budget shows the real need to know the SWOT-analysis. Following these guidelines it is very simple to make proper budget allocations according to requirement and make timely decisions. salaries and wages. quarterly and half-yearly basis gives effective control system in financial management and thus makes the management aware of the regular price changes. controlling the same and implementing the framed budgets and utilize the scarce resources avoiding maximum extent of wastage. To avoid these kinds of threats endangering the survival prospects. costs. production.NEED FOR THE STUDY The day-to–day’s cut throat competition in the world of business. Preparation of Budgets in various fields like purchases. Weaknesses. 9 . and sales process of the company on a monthly basis. there is a compulsion today to have a proper plan of action in predicting the prices. trade and commerce is leading to many complexities which when is not predicted properly according to the fast growing changes that are taking place in the market situations may result in adverse progress and some times may leads to exit from the industry or domestic markets.

• • • 10 . production. To compare the present sales. Ltd. Ltd. To examine the feasibility of present system in Tecumseh Products India Pvt. To study the performance of the company and various cost control techniques implemented and their impact.OBJECTIVES OF THE STUDY The study has been undertaken with the following objectives: • To study the budgetary control system and techniques implemented in Tecumseh Products India Pvt. raw materials and others with actuals.

and analysis was made accordingly. All the budgets are prepared in the organization by the concerned departments and they share the same as and when they required for proper adjustments and necessary updates. 11 . The intention behind preparation of budgets is to forecast the sales and expenses to be incurred in the near future and compare with actuals. The budgeting is done only for the three years and it clearly explains the coverage regarding the duration of the study. and other available data from several interactions with the staff of Tecumseh Products India Pvt.SCOPE OF THE STUDY The study is conducted with the available data from the Annual Reports. Internal Reports. Hence the data collected from them is regarded as fair and absolute. Ltd..

which shows their own limitations. The data is secondary in nature as the records and statements.METHODOLOGY OF THE STUDY Every project work is based on certain methodology. there are many methods of collecting the primary data. SECONDARY DATA Secondary data is collected from previous researches and literature to fill in the respective project. and analysis was made accordingly. and tables. and up to a certain extent it is even said to be primary while the collection of data regarding actual facts are collected from the concerned staff. data collection and data analysis. It is a very important guideline and lead to completion of any project work through observation. The secondary data was collected through the available data from the annual reports. STATISTICAL TOOLS USED Graphs. 12 . which is a way to systematically solve the problem or attain its objectives.. variance. Ltd. and other available data from several interactions with the staff of Tecumseh Products India Pvt. all have not been used for the purpose of this project. DATA COLLECTION To determine the appropriate data for research mainly two kinds of data was collected namely primary & secondary data as explained below: PRIMARY DATA Primary data are those. internal reports. which were collected a fresh & for the first time and thus happen to be original in character. However.

CHAPTER –2 REVIEW OF LITERATURE 13 .

It relates to the future period for which the objectives or goals have already been laid down. prepared and approved prior to defined period of time.” In other words. physical of monetary units or both. It is expressed in quantitative form. It’s a written plan of activities for the future period of time. 2. 4.CONCEPTUAL FRAME WORK OF THE STUDY CONCEPT OF BUDGETING AND BUDGETARY CONTROL BUDGET: “A budget is a financial and quantitative statement. In a business organization a budget represents an estimate of the future costs and revenues. a budget is a systematic plan for the utilization of manpower and material resources. It relates to the income and expenditure for individual functions of the business. usually for one year. It is prepared in advance and is derived from the long-term strategy of the organization. It is prepared for a definite period of time. expenditure and the employment of capital. of the policy to be pursued during that period for the purpose of attaining a given objective. 6. 5. 14 . 3. ESSENTIAL FEATURES OF A BUDGET: 1. It may include income.

OBJECTIVES OF A BUDGET: • • Budgets serve as a “Blue Print” of the desired plan of action. and divisional heads their responsibilities and making them accountable to the same if any deviations from the actuals arise. Budgets help in reduction of wastage and losses by revealing them in time for corrective action. By having a formal budgeting procedure. The organization communicates the policies and targets to the managers in the organization who are responsible to carry out the plan. • Budgets serve as means of communication. sectional. • Budgets compel advance planning. • Budgets facilitate centralized control with delegated authority and responsibility. • Budget brings out the efficiency and improvement in the working of the organization as all the details are clearly spelled out. integrate and balance various operations to achieve set objectives of the organization. 15 . • Budgets are a way of communicating to the departmental. Budgets help to coordinate. management is forced to look to the future instead of living “hand to mouth” without any clear idea or purpose. A system of control can be exercised by having a plan against which the actual results can be progressively compared and corrective actions are taken when ever necessary. • • Budgets serve as the benchmark for controlling ongoing operations.

The meaning and purpose of setting of budgets will not be achieved without effective budgetary control system. budgetary control is an important device for making the organization more efficient on all fronts. there should be enough scope for flexibility to provide individual initiative and drive. The process of budgetary control includes: • • Preparation of various budgets. 16 . No system of planning can be successful without having an effective and efficient system of control. It is an important tool for controlling and achieving the organizational objectives. Continuous comparison of actual performance with the standard or the budgetary performance. It’s a very important activity to ensure that the actuals confirm to the plans set through the budgets. The exercise of control in the organization with the help of budgets is known as budgetary control. • Revision of budgets in the light of changed circumstances. A system of budgetary system should not become rigid. Budgeting is closely connected with control. comparing actual performance with that of the budget and acting upon results to achieve maximum profitability.• BUDGETARY CONTROL: Budgetary control is a system of controlling costs that includes the preparation of budgets. coordinating with the departments and establishing responsibilities.

17 . To clearly lay down responsibility and authority of each employee so that valuable time is not wasted. To combine all the levels of management in preparation of the budget so that there is individual initiative. which coordinates all the activities of the business. To direct capital expenditure in the most profitable direction. Take the necessary corrective action to set the actual performance right. To guide the management to remedy a given situation. Compare the actual performance with the standards set. To ensure that sufficient funds and working capital is available for the efficient functioning of the organization. OBJECTIVES OF BUDGETARY CONTROL: • • • • • • • • • To act as a guide for the management decision making when unforeseen conditions affect the business. Record the actual performance. Calculate the variances and analyze the reasons for the difference. To provide a benchmark against which actual results can be compared. To coordinate all the activities of the business To plan and control income and expenditure so that maximum profitability is achieved.STEPS INVOLVED IN BUDGETARY CONTROL SYSTEM: • • • • • Establish a plan or target of performance.

3. thus facilitating management by exception and also helps in saving the precious time of the top management by not involving in day-to-day affairs. 7. thus increasing their morale and motivating them to work in harmony with the organizational goals.ADVANTAGES OF BUDGETARY CONTROL: 1. Budgets compel management to plan for the future and become more effective and efficient in administrating the business operations. Budgeting improves the quality of communication as all the procedures and rules are written and communicated to all the employees in the organization. Budgeting helps to coordinate. Budgeting increases the participation of the employees in the policy formulation and implementation. it also instills into the manager the habit of evaluating carefully their problems before making a decision. It also helps in making the management more cost conscious. Budgeting helps in proper utilization of existing resources. integrate. 8. both human and capital and also helps in minimizing wastage. Budgeting facilitates control as all the relevant details are clearly laid down. Budgeting helps the management to focus on significant issues affecting the business. and balance the efforts of various departments in the light of the overall objectives of the enterprise. 4. 6. which results in better understanding and harmonious relations among managers and subordinates. 5. 2. Budgeting measures efficiency and thereby enables self-evaluation by the management. It also indicates the progress made in attaining the enterprise objectives. 18 .

• • A good system of accounting is also essential to make the The budgeting system should have a whole-hearted budgeting successful. 19 . • There should be a proper fixation of authority and responsibility. The delegation of authority should be done in a proper way.CHARACTERISTICS OF A GOOD BUDGETING: • A good budgeting system should involve persons at different levels while preparing the budgets. their actual results should be promptly reported so that their performance appraisal is undertaken. • The targets of the budgets should be realistic. if the targets are difficult to be achieved then they will not enthuse the persons concerned. The subordinates should not feel any imposition on them. support of the top management • The employees should be imparted budgeting education. There should be meetings and discussions and the targets should be explained to the employees concerned. • A proper reporting system should be introduced.

SOURCE OF PROCUREMENT: It has mainly two sources of procurement of raw material. 1) DOMESTIC: In this system mainly the procurement of raw materials can be made from with in the country. Conversion process not only converts the material into final products but also gives an ultimate solution. 2) CONVERSION: In this process the base material is being converted into final products through various processes applied on to shape them and give them the need satisfaction power. 2) IMPORTED: In this system the procurement of raw materials can be made from outside the country. 1) DIRECT PROCUREMENT: Direct procurement means that the raw materials are directly identifiable as part of the final product and are directly used on machine.BUDGETING FACTORS AT TECUMSEH PRIVATE LIMITED: PROCUREMENT: Modes of procurement: There are two main modes of procurement of raw material. 20 .

STRATEGIES OF MATERIALS MANAGEMENT: The following are the strategies followed by materials management in Tecumseh Product India Ltd. goods. PLANNING: Budget planning determined how much of which material. • • • Price: The price can be fixed based on the competitor’s price. and other requirements are needed and when. 21 . it could be accommodated by the other source. labour. components. Planning process initiates coordination and classification of sub goals to achieve major corporate goals. This activity is the responsibility of the planner or controller. Decision-making: The activity of making a decision to buy the material directly from supplier or to import the same. Quality: Quality of materials differs from one supplier to the other. • Two sources for all materials: Even though there is shortage of supply from one supplier.

2. use shorter. These budgets are useful for those industries where gestation period is long i. The long term planning is done by the top management. cotton. Financial budgets. Current budgets. textile. etc. (C) Classification according to flexibility: 1. The following are the types of budgets. engineering etc. Short term budgets.. (B) Classification according to functions: 1. 2. Long time budgets are prepared for some sectors of the concern such as capital expenditure. 2. Master budgets. 3. Long term budgets. etc. Fixed budgets. 3. Flexible budgets.e. it is not generally known to lower levels of management.TYPES OF BUDGETS: The budgets are usually classified according to their nature. long term finances. budgets. research and development. which are commonly used: (A) Classification according to time: 1. (A) ACCORDING TO TIME: 1) Long term Budgets: The budgets are prepared to depict long term planning of the business. machinery electricity. The consumer’s foods industries like sugar. Operating budgets. The period of long-term budgets varies between five to ten years. 2) Short Term Budgets: These budgets are generally for one of two years and are in the form of monetary terms. 22 .

3) Current Budgets: The period of current budgets is generally of months and weeks. These budgets relate to the current activities of the business, according to ICWA London. A current budget is a budget, which is established for use over a short period of time and is related to current conditions.

(B) CLASSIFICATION ON THE BASIS OF FUNCTION:
1. Operating budgets: These budgets relate to the different activities or operation of a firm. The number of such budgets depends upon the size and nature of business. The commonly used operating budgets are: a) Sales budget b) Production budget c) Production Cost budget d) Purchases budget e) Raw Materials budget f) Labour budget g) Plant Utilization budget h) Administrative expenses of Works Overheads budget i) Administrative and selling expenses budget, etc. The operating budget for a firm may be constructed in terms of programmers or responsibility areas, and hence may consist of: (i) Programmed Budget: It consists of expected revenues and costs of various products or projects that are termed as the major programmers of the firm. Such a budget can be prepared for each product line or project showing revenues, costs and the relative profitability of the various programmers. Programmed budgets are thus, useful in locating areas where efforts may be required to reduce costs and increase revenues. They are also useful in determining Imbalances and inadequacies in programs so that corrective action may be taken in future. (ii) Responsibility Budgets: When the operating budget of a firm is constructed in term of responsibility areas it is called the responsibility budgets. However responsibility areas may be classified under three broad categories. (a) Cost/expense centre 23

(b) Profit centre (c) Investment centre 2. Financial Budgets: Financial budgets are concerned with cash receipts, disbursements, working capital, capital expenditure, financial position and results of business operations. The commonly used financial budgets are: (a) Cash budget (b) Working capital budget (c) Capital expenditure budget (d) Income statement budget (e) Statement of retained earnings budget (f) Budget balance sheet or position statement budget 3. Master budget: Various functional budgets are integrated into master budget. This budget is prepared by the ultimate integration of separate functional budgets. According to ICWA London ‘The master budget is the summary budget in corporation’s functional budget. Master budget is prepared by the budget officer and it remains with the top-level management. This budget is used to coordinate the activities of various functional departments and also to help as a control device.

(C) CLASSIFICATION ON THE BASIS OF FLEXIBILITY:
1) Fixed budget: According to ICWA London, “fixed budget is a budget which is designed to remind unchanged irrespective of the level of activity actual attained”. Fixed budgets are suitable under static conditions. If sales, expenses and costs can be forecasted with greater accuracy than this budget can be advantageously used. 2) Flexible budget: A flexible budget consists of a series of budgets for different levels of activity. It therefore, varies with the level of activity attained. A flexible budget is prepared after taking into consideration unforeseen changes in the condition of the business. A flexible budget is defined as a budget, which is by recognizing the difference between fixed, semi-fixed and variable cost is designed to change in relation to the level of activity.

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REQUISITES FOR A SUCCESSFUL BUDGETARY CONTROL SYSTEM:
For making a budgetary control system successful, following requisites are required: • 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 the absence of clear goals, the budgets will also be unrealistic. • Proper delegation of Authority and Responsibility: Budget preparation and control is done at every level of management. Even though budgets are finalized at top level but involvement of persons from lower levels of management is essential for their success. This necessitates proper delegation of authority and responsibility. • Proper communication system: An effective system of communication is required for a successful budgetary control. The flow of information regarding budgets should be quick so that these are implemented. • Budget Education: The employees should be properly educated about the benefits of budgeting system. They should be educated about their role in the success of this system. • Participation of all Employees: The success of budgetary control system depends upon the participation of all employees of the organization. • Flexibility: Flexibility in budgets is required to make them suitable under changed circumstances. • Motivation: Budgets are to be implemented by human beings. Their successful implementation will depend upon the interest shown by the employees.

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ADVANTAGES LIMITATIONS • • • • Maximization of profit Proper coordination Provides specific aims Tools for measuring performance • Uncert ain future • Revisio n required • Discou • • • • • Economy Corrective action Creates budget consciousness Reduced cost Determines weaknesses rages efficient persons • m of coordination • Conflic Proble t among different departments • Depend s upon support of top management 26 .

Manchester M60 1QD. We test the strength of this effect and we find that budgetary commitment brought on by the experience of role ambiguity may over-ride the potential for recognized explanatory variables such as leadership style. it seems. We find that the use of budgets as an antidote to role ambiguity is a powerful influence on the manager's budgeting behavior. the expectations of the superior and occupational socialization. Much consideration has been given over the years to what may be described as the ‘negative' aspect of budgeting. Box 88. 27 . P. We argue that managers confronted with uncertainties associated with role ambiguity may respond by becoming positively committed to achieving budgetary targets as budgets offer a source of structure and certainty. may be as useful to the individual as they are problematic. Budgets. the present study examines the extent to which budgets have a more positive. UK Available online 2 July 2004. to inform managers' budgeting behaviors in these circumstances.O. and that budgetary pressure may lead to unintended behavioral side effects.ARTICLES: Coping with ambiguity through the budget: the positive effects of budgetary targets on managers' budgeting behaviours David Marginson and Stuart Ogden Manchester School of Management. In contrast to this. that budgets may constrain innovation and learning. UMIST. ‘comforting' role to play in the individual's work experiences.

This paper presents data obtained from a representative sample survey on hte budgetary controls used in large U. Warwick. The results show a lower overall incidence of such controls than might be expected from textbook descriptions. Since internal trading of this type is also associated with the presence of trade unions. The paper also uses crosssectional variations in the incidence of budgetary targets with features of the organization and its workforce in order to illuminate the uses to which these budgets are put. The findings are tested against the ‘conventional’ picture of budgetary controls as a response to size diversity and problems of internal co-ordination.K. companies. and against a ‘radical’ view that they are a response to trade union organization and flexibilities within the workforce. the use of budgetary reports is related to managerial freedom to act on the information.Budgetary control and the labour force: Findings from a survey of large British companies Peter Armstrong. U. these employees have higher wastage rates than full-timers and they are easier to lay off and to put on short-time working. University of Oxford. Only a minority of companies uses a wide range of profit and cost ratios whilst an equally large minority appears not to rely on budgetary control at all. Ratios involving labor costs appear to be a response to weakness on the part of the workforce.K. Management Building. Templeton College. They are more frequently used in companies which employ large proportions of part-time or female workers. Paul Edwards and John Purcell Sheffield University Management School. Available online 24 April 2002. companies is intimately linked with considerations of labor control 28 . the data indicate that the usage of budgetary controls in large U.K. In this respect. Oxford. Sheffield University Industrial Relations Unit. the findings point to the existence of a counter-trade union strategy in which ROI targets are used to define the profitability of business units whilst competition from external markets is used to prevent this from being achieved by the export of excess costs into the rest of the organization. Both the theories receive some prima facie support from the ‘raw’ crosssectional variations within the sample. Paul Marginson. U. Generally speaking.K. rather than strength. Overall. University of Warwick.

With that broader objective now in focus. As strategies are changing in response to many competitive and structural pressures. London WC2N 6NN. Dorset DT11 9HQ. Beech Road. and Proxima AMS.Advanced budgeting: a journey to advanced management systems Peter Bunce.. Albert House. U. it was concluded that traditional budgeting is dysfunctional. Dorset BH15 1NF. but the solution is not better budgeting nor stand-alone advanced budgeting systems. Available online 2 May 2002. This paper summarizes a journey that has taken the CAM-I advanced management systems (AMS) program's Advanced Budgeting study group from an initial interest in better budgeting towards a recognition that a wider framework is needed to meet wider objectives (Woodcock. The work can be seen in retrospect as an accumulation of knowledge about the advanced management systems that will be needed to meet the challenges and opportunities of a new and volatile market place. An initial conceptual framework for advanced budgeting was developed and tested with field visits. during which the group became convinced that it could be applied with benefit to activity planning and budgeting. This will require significant changes in systems and culture. but that the journey continue. As a result. 1994). The first evolved from CAM-I's research into the application of activity-based costing (ABC) to product costing. 20 Market Street.K. 1 Embankment Place. U. it seems evident that new management systems are needed to reflect these new realities. Robin Fraser and Lionel Woodcock CAM-I Inc..K. 29 . Spetisbury. Rather. Coopers & Lybrand.K. it can be seen that an important staging has been reached. The work in advanced budgeting started from two different approaches. The second approach came from a recognition that the ultimate purpose of a management system is to link strategies and operations in the most effective way. Poole. the advanced budgeting key goals can only be achieved through an advanced management system which has a business process orientation and integrates a number of different management functions and initiatives within an on-going system. U.

CHAPTER –3 INDUSTRY PROFILE 30 .

490 billion with a growth rate of 52%. with the announcement of new industrial policy (NIP) in 1991 all the Indian firms were exposed to global competition and foreign currency transactions in a big way. 600 units in organized private sector and more than 2800 units in small scale sectors. directly or indirectly are using electronics goods. nuclear plants and power transmission industries play a vital role for the establishment of heavy electronics industry. hydro. 65 units in state public sectors. Electronics has made life simple. Which include in 13 central public sector units with 29 manufacturing establishments. there are several producers in different fields of electronics. The production in the year (1997-2002) is targeted at about Rs. 31 . AIR COMPRESSORS INDUSTRY: Air compressors provide air at pressures higher than atmospheric. and refrigeration enclosure air conditioners remove the heat generated by electronic devices from the inside of cabinets or enclosures. Industrial air filters reduce the number of particles in the air that passes through them. The thermal. Refrigeration compressors and air conditioning compressors are designed specifically for air conditioning.380 billion with a growth rate of 37% and exports at about Rs. All of us in some form or other. Overall production is based on Indian Electronics industry that is widely distributed and there are more than 3500 units engaged in the electronic production. The industry having a wide scope because of rapid improving technologies because of such wide applications of electronics. Breathing and ventilation air systems provide reliable and safe air supply sources to workers in hazardous industrial environments. During the year (1992-97). Compressed air-purgers and vortex coolers are used for spot heating or cooling applications. Demand for electronics goods has led to the establishment of many manufactures and development is on day-to-day basis. heat pumping. the electronics industry has achieved an annual growth of 20% in production and over 40% in exports.INDUSTRY PROFILE Indian electronics and IT plays a major role in both the production and exports.

and refrigeration.1 micron which could cause a short circuit on microchips. The company had sought the Government’s permission to carry out manufacturing – directly through original equipment manufactures (OEMs) as well as through contract manufacturers in India. in which refrigerant gases are cyclically evaporated and condensed. They are integral components of the refrigeration cycle. screw. and piston. Haier Group. Refrigerant compressors are large-scale units specifically designed to be the heart of an industrial cooling or air-conditioning system (HVAC). The compressor serves two main functions: to compress low pressure. At present. absorbing heat from the load to be cooled.Industrial air filters reduce the number of particles in the air that passes through them. heat pumping. and moving to an open environment where it is dissipated. Small. the company is outsourcing its products from domestic appliances 32 . Air filtration supplies the means to reduce the level of particulates in the air to a cleanliness standard required by any definition of “air conditioning”. had swamped the country’s consumer durable and electronics market. but they are less common. LG and Samsung. Refrigerant compressors are designed specifically for air conditioning.2 billion consumer durables and electronics major. and to remove vapor from the evaporator to maintain a low boiling point. It extends from the simple task of preventing lint and other debris from plugging heating/cooling coils to removing particles as small as 0. Ltd by buying out the initial Indian promoters. Industrial air filter Haier Electrical Appliance is a China based $9. stand-alone compressors are not included within this grouping. low volume gases into high pressure and temperature gases. has recently taken control of 100% stake in Haier appliances (India) Pvt. There are three main types of refrigerant compressors: scroll. Other compressor styles are available. Haier appliances (India) forayed into the Indian market when the Koreans.

Industrial segment develops. and Chicago Pneumatic. It operates through two segments: Industrial segment and Construction and Mining segment. pusher legs. We are made up of 8 major group companies. The Company's principal activity is to manufacture and sell air and gas processors. breakers. rock drilling rigs. each led by the best engineering and managerial talent in India. we are a 600 Million US Dollars engineering conglomerate driving critical industries. The Company's products serve industrial. agriculture. oil and gas and environment protection with a range of world-class industrial products and turnkey services. The main brands are Atlas. Copco. ELGI has hived off unfavorable businesses in which it did not have a competitive advantage and decided to concentrate more on core compressor business. construction tools. 33 .manufacturers such as BPL and Voltas. industry and transport. rock drills.08% share as of 2004. It has rearranged its entire operations by creating separate business units to concentrate on core products. impact wrenches and screw drivers. and pumps and loading equipment. Kirloskar. It has consistently been increasing its presence in the compressor market to command 11. The construction and mining segment manufactures and markets rock drilling tools. Atlas Copco (India). merchandised drilling equipment and rock drilling tools. In addition to engineering. The company plans to make India as a production base for exports to neighboring countries in the near future. construction and mining. The Company also manufactures and markets a wide range of tools like grinders. ELGI also undertakes turnkey projects for setting up exclusive service stations for all major manufacturers and offers annual maintenance contracts for all service station equipment. drills. construction and mining industry. we have interests in civic utility systems and in Information Technology and communication. Its Pneumatic break business has already been hived off and it has tapered down the production of multi-utility vehicles and plans to gradually close the multi-utility vehicle business in which he does not have enough competitive advantage. We are century old pioneers in our areas of specialization like power. Apart from these initiatives. manufactures and markets a wide range of air compressors.

The company commenced manufacturing compressors in 1994 in technical collaboration with SANYO – Japan. Washing Machines. deep freezers. Telecommunication Medical Electronics. Quality. Expertise. multi-location conglomerate is built on the plinths of Experience. Innovation and Values in the business. bottle coolers.Our multi-unit. 34 . water coolers and dehumidifiers. The products are widely used in refrigerators. multi-product.. The Compressor Division of BPL Engineering Ltd. a well-known Indian conglomerate in the field of Consumer Electronics & Home Appliances. BPL has Technical collaboration with SANYO – Japan in Co lour Televisions. Power and Electronic components. Refrigerators and components such as Compressors. Our best play is successful work and creation of a new industrial order where we can provide tailor made solutions to the customers. BPL Engineering Ltd. is engaged in manufacturing of ‘Hermetically Sealed Compressors’ for refrigeration industry.

COMPANY PROFILE 35 .

Later Westing House stopped manufacturing compressors and Siel went into Technological Collaboration with Tecumseh Products Company (TPC). Lala Charath Ramji who was from a renowned industrial family of DCM and Coromendal Group of Companies started URIL. air-conditioners and air-coolers. Shriram went into Tech collaboration with Westing House. URIL manufactured compressors for water cooler. Shriram Industries also kept its hands in international trade and were successful in exporting their products to the neighbouring countries.COMPANY PROFILE TECUMSEH PRODUCTS INDIA LTD. In the process for survival. US and was named as Siel Compressors. The period saw sea change in industrial policy. Siel Compressors were the first Indian Company to manufacture compressors. Tecumseh means “Crouching Panther” derived from chief of the Shawnee Tribe (1768-1813). In 1970 the URIL was changed to Shriram Refrigeration Limited and the business was also diversified towards manufacturing of diesel engines and water coolers. Shriram Industries played a great role in the field and captured more than 50% of the market share in India. which resulted in a great change in the industrial sector. As soon as Tecumseh took over the company it stopped 36 . USA in 1988. was originally established and registered in 1963 under the name of USHA REFRIGERATION INDUSTRIES LIMITED (URIL). Subsequently TPC took over Siel Group in1997 and Siel Group became 100% subsidiary of TPC. became the chairman cum Managing Director of the company. Usha Refrigeration Industries Limited (URIL) started in 1963. Siddharth C. Nepal and Bangladesh. In 1980 Lala Charath Ramji’s son. Shriram. it started its operations to offer new state of art AW Series to Indian customers.

TPC has 29 manufacturing locations in 4 continents. Tecumseh India is a 100% subsidiary to Tecumseh Products Company (TPC) USA. Tecumseh Products Company’s (TPC) entered India through a dual acquisition of Siel Compressors Limited – Hyderabad and the compressor division of Whirlpool India Limited at Ballabgarh in July 1997. Tecumseh India is the preferred supplier to those who deal in the AC&R Industry in India and in the Middle East. In India the company has 20 sales offices and extensive networks of over 200 dealers and more than 600 registered small-scale manufacturers. American based MultiNational Company. TECUMSEH PRODUCTS INDIA LIMITED (TPIL) was incorporated in New Delhi. Ltd (TPIPL).manufacturing water coolers and restricted its production to CFC/hermetically sealed compressors. TPIL is principally promoted on behalf of Tecumseh Products Company (TPC). AW Assembly and AW Machine Shops such that it acquired a Lion’s share of the Indian Compressor market by gaining 50% share. India with limited liability on January 30. TPIPL is an ISO 14001 and 9001 certified. Ltd (TPIPL) is the largest independent manufacturer of both air-conditioning and refrigerator compressors in India. Which is the world’s only full line. SAARC countries. 1997. TPC invested $80 million in Indian operation known as Tecumseh Products India Pvt. It has two state-of-the-art manufacturing facilities at Hyderabad (Andhra Pradesh) and Ballabgarh (Haryana). TPIPL has two states of art manufacturing facilities at Hyderabad (Andhra Pradesh) and Ballabgarh (Haryana) with CADEM Center at Hyderabad plant to meet Global Engineering needs. Tecumseh Products India Pvt. TPIPL has gained core expertise in Research & Development. Which has core expertise in manufacturing compressors (mostly hermetic) in the air conditioning and refrigeration industry in India. independent manufacturer of compressors. 37 . USA and its nominees hold its shares.

At Hyderabad both reciprocating (AW series) and Rotary (RN series) compressors are manufactured. Fedders. It is spread across 55-acres of land at Balanagar Industrial belt. bottle coolers. Kolkata.60 million units per annum respectively.. Narsapur Road. with an installed capacity of 0. aeronautical and other verticals. Videocon.75 and 0. 15 km away from the Hyderabad City on the highway line going towards HMT Ltd. Amtrex. The CADEM centre started in 2001 as a centre for Tecumseh’s global design needs. and Chennai and the remaining two are at Ahmedabad and Secunderabad. The Hyderabad plant has six regional offices among which four offices are at the metro cities: Delhi. Godrej. The in house application engineering testing facility is well equipped to constantly improve the performance of compressors. TPIPL Hyderabad plant was successfully in getting the ISO 9001 certification for maintaining quality of the compressors in 1994 and for the eco friendly environment maintenance the company has got ISO 14001 certification. Voltas. 38 . The Hyderabad plant also has a network of about 177 dealers across the nation and are preferred supplies to key original equipment manufactures (OEM’s) like LG. Blue Star. and water coolers which are considered to be the World’s No. and has been accredited with ISO 9001 and ISO 14001 certification for best operational and environmental practices. 1 in the 150 million compressor market a year. Besides these there are branch offices and depots located in prime cities across the country. Hitachi. Mumbai.HYDERABAD PLANT: The plant at Hyderabad manufactures compressors only for the Air-conditioners and compressors for deep freezers. Even this engineering facility is ISO 9001 certified. Today CADEM centre undertakes not only the in sourced work from its different manufacturing plants but also outsourced CAD/CAE work from the companies in automobile. etc.

Accounts Department Attendance and Pay Office (A&PO) Export Oriented Unit (EOU) Research and Development (R&D) Maintenance and Engineering Department Quality Development of AW assembly AW Press Shop AW Machine Shop Service Center Dispensary Chemical and Technological Laboratories TPIPL Hyderabad has a total of 766 permanent employees as on which includes: • • • 172 officers 232 Staff 362 Workers 39 . converting into natural meaner.The management has started development activities in the following areas: • • • • Effluent treatment plant Tree Plantation. DEPARTMENTS OF TPIPL (HYDERABAD): • • • • • • • • • • • • Human Resource Department. Rainwater harvesting is to increase the ground water level and TPIPL Vermiculture is the process of utilizing canteen food wastage for has the distinction of being the first organization in this regard.

Compressors for air-conditioning: • • Residential Air-conditioners. Each of these commands into own well-defined infrastructure for market coverage and service to original equipment manufacturers (OEMs). design automation. CADEM centre for global design needs and services: • CAD (computer aided-design) for product design. Software and web development. TPIPL’S Vision: To provide comprehensive solutions to customers in the field of cooling while providing autonomous working environment for employees.OPERATIONS: Tecumseh’s operations can be organized into three business clusters. Commercial Air-conditioning systems (both room and central) and contract manufacturing. • • • CAE (computer aided engineering) for structural and CFD analysis. bring out the best in them and optimize stake holder’s returns. Commercial refrigeration applications including the freezers. 40 . CAM (computer aided manufacturing) for designing tools and mould. Compressors for refrigeration: • • Household refrigerators and freezers. to tap their creative potential. re- engineering and cost reduction. dehumidifiers and vending machines.

Vision Statement It is our goal to be the global leader in all of the Markets in which we choose to participate. • Nothing will be done to compromise our integrity. To be driven to reach the highest possible standards of excellence in all our endeavors. To create an environment in which our employees can grow to their full potential and make difference. • • To provide our customers superior products and services. TPIL’S Mission: • To be recognized as the world leader in the supply of refrigerator and air conditioning compressors. 41 . We will pursue disruptive technologies to redefine our products. • • To provide superior value to our stake holders.

• Striving to provide products and service of global quality standards and to reach a position of leadership in the field of operations. vendors and other business associates. development with total involvement and commitment. liquid and gaseous wastes. Among others this can be achieved through: • • Allocation of company – wide priority for sustainable Evaluation and up gradation of current technologies. • Realization of tangible objectives and targets set for continual improvement to control and prevent pollution and conserve resources. products and raw materials for minimization. • Continuous improvement across the organization and upgradation of product. at least const to society shall be the means to achieve the goals. implied or latent. technology and process supportive environment. setting new values.TPIPL’s Quality Policy: • Committed to total customer satisfaction by meeting their expectations and aspirations – stated. handling and disposal of solid. TPIPL’s Environmental Policy: The vision of Tecumseh India is to be a serene green and eco-friendly cooperation carrying our all its operations contributing to preservation of environment and natural resources for the benefit at large. 42 . • The approach will be through proper systems and procedures and total involvement of employees. evolving needs.

6. Unresponsive customer service. • • Maintain clear technology leadership. 4. TPIPL’s Seven Deadly Sins: 1. 7.• • Legal compliance and going beyond setting new Meeting international expectations such as Montreal our CFC’s as refrigerants in our standards. 3. Market share leadership with focus on customer needs. Slow response to market place. Inadequate employee involvement. Creativity club. Uncompetitive cost structure. Ineffective resource allocation. • • Achieve total quality. TPIPL’s Key Business Objective: • Set the world industry standard of excellence for customer satisfaction. protocol. 2. • Training and propagation of Knowledge on environment. Inconsistent product quality. 5. To attain and surpass global quality and reliability standards for our products. Lack of innovative and competitive product. 43 . 1987 in phasing compressors. STRATEGIES AND PROCESSES AT TPIPL: • • Workplace improvements.

44 .• • • • • • • KRA’s (improvements/suggestions) Variable earnings sharing of value addition Agreement process – organization needs Non conformance reporting /audits Open house/communication meetings Team assessment and feedback Changing life styles.

IMPORTANT EVENTS: In the year 1998: TECUMSEH fully acquired   Sri Ram. facility at Faridabad/Ballabgarh. In the year 2002:  Setting up of the CADEM Center In the year 2003:  Setting up of a 100% EOU for export of compressors and its parts. In the year 1999:  Development of Plant in Ballabgarh In the year 2000:  Amalgamation with TIPL In the year 2001:      Voluntary Retirement Scheme Industrial Unrest and lockout in the first half of the year. 45 . Hyderabad Whirlpool compressor. Obligations met towards customers by importing finished goods and selling at a loss. High foreign outgo. Export obligations not met during the year.

46 . In the year 2005:    Tecumseh compressors for china.   Expansion in installed capacity at the Hyderabad plant.  Has won the “Green Tech Environment Excellence Silver Award” in the countrywide competition among the engineering industries. Tecumseh India to set-up rotary compressors unit. Total foreign outgo reduced drastically. Tecumseh posts 84% rise in export earnings. In the year 2004:  This year export showed a growth of 3 times over previous years involvement. Improvement in the market for compressors as a result of an improvement in the market for air-conditioners and refrigerators.   AW capacity expansion program Company has launched two new commercial models of MLA series compressors.

Chartered Accountants Bankers Allahabad Bank State Bank of Hyderabad Standard Chartered Bank ICICI Bank HDFC Bank 47 .K. James F Curley Mr. Sachdeva Chairman & CEO Director : : : : : : : Director Managing Director (till Jan 7th. 2007) Director (till Nov 7th.BOARD OF DIRECTORS Mr. Hyderabad-500 037 Andhra Pradesh Auditors Director M/s Price Waterhouse. Stolzenberg Mr. Todd W Herrick : Mr. R. 2005) Company Secretary T. Eric L. 2007) Director & CFO (from Nov 7th. John H Ferguson : Mr. MG Ramachandran Mr. Venkat Registered Office Balanagar Township. Kent B Herrick Mr. Vipin Sondhi Mr. 2005) Director Director Director (from Jan 19th. James S Nicholson Mr. RKP Shankerdass: Mr.

CHAPTER-4 DATA ANALYSIS & INTERPRETATION 48 .

Production Budget 850000 750000 650000 550000 Units 450000 350000 250000 150000 50000 -50000 2007 2008 Years 2009 1 750000 544500 620000 49 .ANNUAL BUDGETS PRODUCTION BUDGET Table 1. PRODUCTION BUDGET AW all Models Particulars Sale of units Add: Closing Stock (as on 31st December) Less: Opening Stock (As on 1st January) Total Production in Units 2007 750000 110500 860500 110500 750000 Year 2008 625000 30000 655000 110500 544500 In Units 2009 600000 50000 650000 30000 620000 Graph 1.

e. but slightly increased from the year 2008. to the chart above is self explanatory that the estimations or the budgeted figures of production in units has constantly decreased and increased in the year 2009. PRODUCTION COST PER UNIT AW (Domestic and Exports) all models Particulars Year 2007 AW 1500 Q Actual Material Cost Add: Consumables Rejection Cost Power Cost Wage Cost (Labour) New Lines (Stomat. and Lamination) Freight Inwards (1. ACTUAL PRODUCTION AW all Models Particulars Total Production in Units Total Production in Units 2007 411013 411013 In Units Year 2008 591323 591323 2009 213476 213476 2387 181 27 100 290 30 29 40 3084 2008 2417 186 25 85 250 29 44 3036 2009 2782 175 20 65 278 22 38 3380 50 .14%) Warranty PRODUCTION COST PER UNIT Table 3. The production.INTERPRETATION: Here production budgets for three years i. Table 2. from the year 2007 to 2009 are compared.6%.. by observation.67%. The product cost figures are available in the following chart for the reference purpose only. The slight change in the production of units is acceptable as it shows a favourable change. The percentage change in the year 2008 decreased to 72. While calculating percentage changes year 2007 is taken as base year. Talent. The percentage change in the year 2009 decreased to 82.

The overall variance of the three years i. the variance is positive and it is expressed to be favourable performance. 51 . actuals is very unsatisfactory and the result is expressed as adverse. Note: In the year 2009.. for three months. CALCULATION OF PRODUCTION VARIANCE (BUDGETED VS ACTUALS) In Units Year Budgeted Actuals Variance Result 2007 750000 411013 -338987 Adverse 2008 544500 591323 46823 Favourable 2009 155000 213476 58476 Favourable 1449500 1215812 -233688 Graph 2. the actual production units are available only till March '08 i. Hence budgeted figures for variance purpose are adjusted for three months. Production variance 1000000 800000 600000 budgeted 400000 200000 0 2007 -200000 -400000 2008 2009 actuals variance INTERPRETATION: The variance in the year 2007 comparing to budget vs.. the overestimation of the budgeted figures over actuals. In the year 2008 & 2009. Concentration of performance appraisal in production is at most desired.e.Table 4. The reason behind is. there is a curious requirement to review the budgets. from 2007 to 2009 is negative. Hence.e.

Direct Labour Budget 140000000 120000000 100000000 80000000 60000000 40000000 20000000 0 Direct Labour Cost 119193770 126531000 93169261 2007 2008 Years 2009 52 .) Total Direct Labour Amount 2007 750000 3. DIRECT LABOUR BUDGET Particulars Production in Units Labour hours per unit (in hrs) Total Hours (in Hrs) Rate per hour (in Rs.56 93169261 Graph 3.93 280825 56.93 190600 78.DIRECT LABOUR BUDGET Table 5.32 126531000 2009 600000 2.17 119193770 Year 2008 544500 1.24 267300 43.

showing that the strict management control on this issue in this year. The percentage change in the year 2008 increased to 106.45 167480 68. This shows over expenditure.17%.) Total Direct Labour Amount 2007 411013 2.74 56967. While calculating percentage changes. ACTUAL LABOUR COST Particulars Production in Units Labour hours per unit (in hrs) Total Hours (in Hrs) Rate per hour (in Rs.16%.99 97243000 2009 213476 3.35 91581564 Year 2008 591323 2. This shows there is a lot of expenditure incurred in the year 2008.8 Adverse 53218174 53 . which is beyond the limit.INTERPRETATION: From the above data direct labour budget for three years right from 2007 to 2009 are compared. Table 6. The percentage change in the year 2009 decreased to 78. The direct labour cost has increased in tune with decreased production.18 26974347 Table 7. CALCULATION OF DIRECT LABOUR VARIANCE (BUDGETED VS ACTUALS) Year 2007 2008 2009 Budgeted 119193770 126531000 23292315 269017085 Actuals 91581564 97243000 26974347 215798911 Variance Result 27612206 Favourable 29288000 Favourable -3682031. 2007 is taken as base year.72 217087 55. A gradual decrease has been found in the year 2009 comparing to the base year 2007. The level of expenditure is controlled up to a maximum level by thorough revisions.5 59.

Note: In the year 2009. Direct labour variance 140000000 120000000 100000000 80000000 60000000 40000000 20000000 0 -20000000 budgeted actuals variance 2007 2008 2009 INTERPRETATION: In The year 2007 and 2008. 54 ..e. for three months. the actual direct labour costs are available only till March ‘08 i. Hence budgeted figures for variance purpose are adjusted for three months. but whereas in theyear2009 The variance is showing adverse as the actual expenditure is exceeding the budgeted figure. It is suggested that strict supervision may yield favourable results. all the budgeted actual and variance figures are showing positive expenditures hence the variance is favourable.Graph 4.

In Lakhs) 27289 25062 24930 Year (Rs. In Lakhs) Exports: Rate Quantity Value (Rs. In Lakhs) Combined Sales Value (Domestic and Exports): Value (Rs. in Lakhs) 27000 26500 26000 25500 25000 24500 24000 23500 2007 2008 25062 24930 2009 27289 Years 55 . Sales Budget 27500 Sales (Rs. SALES BUDGET Particulars Domestic Sales: Rate Quantity Value (Rs. In Lakhs) 2007 2008 2009 3765 175000 6589 3600 575000 20700 4492 100000 4492 3918 525000 20570 4205 100000 4205 4145 500000 20725 Graph 5.SALES BUDGET Table 8.

Table 9. though the production has increased. It is the combination of total sales including domestic and exports. In Lakhs) Table 10. The increase in sales in the year 2007 is due to excess production. In the year 2008. quick redressal to the problem of sales is desired.INTERPRETATION: The year 2007 is clearly indicating high sales while comparing to the successive years. In the year 2009. ACTUAL SALES Particulars 2007 Combined Sales Value (Domestic and Exports): Value (Rs. Quite improvements are required for further recovery. the total sales value has drastically decreased due to less production. sales did not improve. Hence. CALCULATION OF SALES VARIANCE Year Budgeted Actuals Variance Result 2007 2008 2009 27289 25062 6233 21155 23132 7275 -6134 Adverse -1930 Adverse 1042 Favourable 2115514759 2115514759 Year 2008 2313188784 2313188784 2009 727495314 727495314 56 . The percentage decreased to 92 and 91 for the years 2008 and 2009 respectively compared to base year 2007. Variation is very huge.

57 . Keeping the same spirit may yield fruitful results and leads to further growth opportunities. The performance in sales budget in the year 2009 is expressed to be excellent. Domestic sales are to be increased as a remedy. the actual sales value is available only till March '08 i.. Sales variance 30000 25000 20000 15000 10000 5000 0 -5000 -10000 2007` 2008 2009 budgeted actuals variance INTERPRETATION: The budgeted sales value is overestimated to the actual sales through which the result of sales budget in the year 2007 and 2008 is showing adverse. for three months. In the year 2009. Hence budgeted figures for variance purpose are adjusted for three months.Graph 6.e. excellent improvement is evident from the above graph and as such it indicates favorable result. Note: In the year 2009.

ROTARY AND CADEM) Particulars Year (Rs.BUDGETED INCOME STATEMENT Table 11. Budgeted Income Statement 2500 2000 1500 1000 500 0 2007 2008 Years 2009 594 2042 1788 Profit/Income (in Lakhs) 58 . In Lakhs) 2007 2008 2009 Net Sales 41159 37632 30707 Less: Cost of Sales (total) or COGS 36218 32503 26522 Gross Profit 4941 5129 4185 Less: Total Overheads 4698 4639 5106 Profit Before Tax 243 490 -921 Add: Other Income/DEPB 1829 1298 1245 CADEM Profitability 270 Profit (including other income) Before Tax 2072 1788 594 Less: Tax Provisions 30 Net Profit/Net Income/(Loss) 2042 1788 594 Graph 7. BUDGETED INCOME STATEMENT (RECIP.

The percentage change has been showing a drastic decrease to 87. but there is a drastic decline in the year 2009 almost predicting losses. Table 12. The variation between 2007 and 2008 is negligible as we see only a normal difference. This is due to unexpected increase in the value of raw materials (copper per kilogram increased thrice to the normal value).INTERPRETATION: From the year 2007-2009 there is a gradual decrease in the budgeted figures of profit or income statement. CALCULATION OF INCOME VARIANCE Year 2007 2008 2009 (BUDGETED VS ACTUALS) Budgeted Actuals Variance 2042 1788 149 62 -763 933 Result 2009 93310955 -1980 Adverse -2551 Adverse 785 Favourable 59 .56% in the year 2008 and to 29% in the year 2009 comparing to the base year 2007. ACTUAL INCOME STATEMENT Particulars Year 2007 2008 Net Profit/Net Income/(Loss) 6192051 -76331610 Table 13. which is evident from the above chart.

This is evident by seeing only three months statement. even then the actual profit went into losses. the result is adverse. as the actual income is very less comparing to the budgeted income/profit which has resulted in adverse result.Graph 8. i. 60 . Income variance 3000 2000 1000 0 -1000 -2000 -3000 2007 2008 2009 budgeted actuals variance INTERPRETATION: There is an over estimation with regards to profits in the year 2007 by looking into the chart. In the year 2009. Lack of proper planning is visualized.. due to proper revisions and effective budgetary controlling techniques they recouped their profit back. which is above 9 crores.e. Hence. Though the budgeted income/profit statement in the year 2008 is declined. the actual loss is above 7 crores. This is indicated to be excellent progress.

MATERIAL PURCHASE BUDGET Table 14. MATERIAL PURCHASE BUDGET Particulars Annual Production Add: Closing Inventory Quantity Less: Opening Inventory Materials to be Purchased Graph 9. Year 2007 750000 131400 881400 36000 845400 (In Units) 2008 2009 544500 620000 23140 32806 567640 652806 107438 32903 460202 619903 Material Purchase Budget 1000000 800000 Units 845400 619903 460202 600000 400000 200000 0 2007 2008 Years 2009 61 .

In the year 2008. a good estimation. which can be affidavit by seeing income statements for the year 2008. strict supervisory control enabled the management to have an effective control over materials purchased. In the year 2007. a proper revise. a sudden steep decline is visualized showing very less material volume. 62 . by observing the above chart. The performance in this year is very poor. The reason behind is the decrease in production volume. material purchase is very high. In the year 2009. This may be due to high production volume.INTERPRETATION: A zigzag curve is framed if a graph is plotted.

As the booms and depressions (business cycles) changes at a fast phase during odd months or off seasons.Kits Total Graph 10. 63 . MODEL SALES VOLUME BUDGET UNITS JAN FEB MAR 67541 1000 750 20833 8333 98457 70805 2500 750 20833 8333 103221 57060 2500 1800 20833 8333 90526 APR 81169 7500 1800 20833 8333 119635 AW RN AK AK. Keen concentration required on sales volume in the month of March in the successive years. RN. Sales Volume Budget 120000 100000 Sales (in Units) 80000 60000 40000 20000 0 JAN FEB Months MAR 103221 119635 98457 90526 APR INTERPRETATION: The above mentioned configured figures are the extracts from sales volume budget prepared in the year 2010. which is the latest data.QUARTERLY BUDGETS SALES VOLUME BUDGET Table 15. The models included in the sales volume budget are AW. AK. and AWJ – Kits.Kits AWJ . Seasonal fluctuations should be considered as very severe factors for sales variances. AK – Kits.

and AWJ – Kits are expressed to be absolutely normal. The costs incurred for AK. The values are expressed in Rupees in Lakhs for the models combined. and AWJ – Kits. The total material cost control is absolutely satisfied. RN. March. AK. TOTAL MATERIAL COST BUDGET MODEL AMOUNT (Rs. The material cost is moderately high in the month of January.Kits Total Graph 11.TOTAL MATERIAL COST BUDGET Table 16. The performance in handling material cost is very high in the current year. AK – Kits.Kits AWJ . 2010. AK – Kits. 64 . In Lakhs) JAN FEB MAR APR AW RN AK AK. naming AW. Total M aterial Cost Budget 2215 2110 2006 1761 54 18 124 49 2007 1696 92 18 124 49 1979 1838 160 44 124 49 2215 1772 121 44 124 49 2110 2250 2200 Value (in Lakhs) 2150 2100 2050 2000 1950 1900 1850 1979 JAN FEB M onths M AR APR INTERPRETATION: The quarterly total material cost budget witnessed above is the clear indication for the months of January to April. The costs incurred on AW and RN models had drastic changes. and April.

The allocation of budget on permanent workers is constant. In Lakhs) JAN FEB MAR APR AW RN AK AK. Labour Absorbtion Budget 220 Labour Cost (in Lakhs) 215 210 205 200 195 190 185 180 JAN FEB Months MAR APR 198 195 218 174 5 2 12 5 198 167 9 2 12 5 195 181 16 4 12 5 218 174 12 4 12 5 207 207 INTERPRETATION: Total labor absorption budget in the above chart is the imitation for the months of Jan to Apr 2010.TOTAL LABOUR ABSORPTION BUDGET Table 17.Kits AWJ . TOTAL LABOUR ABSORPTION BUDGET MODEL AMOUNT (Rs. 65 .Kits Total Graph 12. whereas opting for badlis who are called to be surplus workers is to be reduced. For fruitful results and getting excellent profitability labour budget controlling is always suggested. whereas on temporary and contract basis workers are fluctuating. Utilization of skilled labour progressively gives desired results and it is also possible to curtail down unnecessary expenditure on untrained workers. Expenditure on blue collars and technicians is always desired.

CHAPTER 5 FINDINGS/RESULTS 66 .

• The actual subject matter.FINDINGS • The study at Tecumseh Products India Pvt. operating budgets. • As the company incurred huge unexpected losses in the previous two years there is a lot of requirement to review its standards. and their performances are studied and interpreted according to the actual performance evidenced from past three years. • The various budgets called financial budgets. The professionalism that encapsulates the various degrees of performances at every step of financial study is like a new game. Ltd. 67 . estimations and follow accordingly. well. naming the project work on and BUDGETARY CONTROL in a BUDGETING manufacturing concern is the practical exposure drawn out from the efforts of management of Tecumseh. flexible budgets are desired to be prepared to have easy and fast access to the data required by the staff and line management. fixed budgets. • The overall performance of the company is found to be improving. and satisfactory. Hyderabad. • Preparation of master budgets. at Hyderabad Plant is defined to be the most technical and analytical study.

which are over estimated in initial stages and got adjusted in their successive stages. the following conclusions are drawn: • From this study it is observed that Annual Budgets and Quarterly Budgets it is well understood that the estimates and their revisions are factualised according to the past performances. 68 . Ltd. • The overall performance of the company found to be improving and satisfactory.CONCLUSIONS From the study conducted on Budgeting and Budgetary control at Tecumseh Products India Pvt. • As the business of the company depends on exports up to a larger extent.. increasing global standards is a vital element and that has to be practiced.

quality of raw materials. • Good review of mission. becoming the global leader in the markets which ever they choose to participate. observation of business cycles. • Collection of latest market information regarding the cost of raw materials. concentration of skilled labour are some of the important pre-requisites. • Taking timely appropriate steps may reduce the strain of incurring further losses is assured.SUGGESTIONS Financial interpretations for each and every budget are required to be clearly analyzed and frequent revisions for setting dynamic goals according to the changing market conditions may lead to the chasing of the actual target i. requires lot of time and labour and this may delay decision making as well as the information costs. • As the business of Tecumseh depends basically on exports up to a larger extent. increasing global standards is a vital element that has to be practiced. 69 . alternative suppliers. The effective six-sigma and participatory budgeting will be beneficial for the organization. competitor prices. growth opportunities. but required exact practical implementations. SWOT analysis. SMART production methods. not from the point of theory.e.. the diversifying marketing expansion. Preparation of complicated data always leads to many conflicts. upgradation of technology.

• The budgeting is done only for three years and it clearly explains the limitations regarding the duration of the study. internal reports. • The study is conducted with the available data gathered from annual reports. 70 . • With regards to the material purchase budget. The data is highly confidential and was not supposed to reveal the data for any purpose. the actual figures are not provided by TPIPL. during this limited time the study may not be detailed in all aspects.LIMITATIONS OF THE STUDY • This study is conducted in a short period. and from several interactions with the staff of TPIPL and analysis was made accordingly.

BIBLIOGRAPHY 71 .

com www.Y.BIBLIOGRAPHY TECUMSEH REPORTS: Business Plan Statements of the years 2007 to 2009.com 72 .2003)…… M. Ltd. BOOKS AND PERIODICALS: Financial Management (Oxford University Press . KHAN & JAIN Financial Management …………………………… PRASANNA CHANDRA Financial Management …………………………… BRIGHAM & VAN HORNE WEBSITES: www.tecumsehindia. Annual Reports of Tecumseh India Pvt.netmba/finance/capitalbudgeting. Articles published by Tecumseh.

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