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Expense budgeting at Bectochem Consultants & Engineers Pvt Ltd


Nagesh Kashyap Akshintala


May, 2011


Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd

Expense budgeting at Bectochem Consultants & Engineers Pvt Ltd


Nagesh Kashyap Akshintala

Under the Guidance of

Mr. N. K. Unnikrishnan Business Head - Pharma Pharmacy Business Head Bectochem Consultants & Engineers Pvt Ltd

Dr. Gunjan Malhotra Assistant Professor Operations Management Institute of Management Technology


May, 2011


Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd

Certificate of ApprovalThe following Summer Project Report titled "Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Diploma in Business Management for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted. Summer Project Report Examination Committee for evaluation of Summer Project Report Name Signature

1. Faculty Examiner



2. PG Summer Project Co-coordinator _______________________



Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd

Certificate from Summer Project GuidesThis is to certify that Mr. Nagesh Kashyap Akshintala, a student of the Post-Graduate Diploma in Business Management, has worked under our guidance and supervision. This Summer Project Report has the requisite standard and to the best of our knowledge no part of it has been reproduced from any other summer project, monograph, report or book.

Dr. Gunjan Malhotra Assistant Professor Operations Management Institute of Management Technology Raj Nagar, Ghaziabad, Uttar Pradesh 201001 Date:

Mr. N. K. Unnikrishnan Business Head - Pharma Bectochem Consultants & Engineers Pvt Ltd Building 5C/204, Mittal Estate, Andheri-Kurla Road, Andheri(E), Mumbai 400059 Date:


Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd

Abstract Expense budgeting at Bectochem Consultants & Engineers Pvt Ltd By Nagesh Kashyap Akshintala

The Company under study, Bectochem Consultants & Engineers Pvt Ltd is a leading process equipment manufacturer that produces machinery for pharmacy companies. It has a wide range of product portfolio catering needs of Pharmacy, cosmetic and food processing industries. Itshead office is present in Mumbai and it has two manufacturing plants located at Ankleshwar(Gujarat) and Pune. Job order production is carried out by this company. The major production is

carried out at Ankleshwar plant. The objectives of the project are: To find various expenses those occur in producing a job and to compare the expenses in job production with present pricing policy. To analyse if the present investment, cash management scenario is at par with the industry and consistent with the performance.

As part of project following approach is adopted Micro Analysis of the expenses involved in the production of an individual job.

In this study the P&L report for the year 2010-11 is considered and the expenses are classified under Factory Expenses, Labour, Marketing and Material heads. The percentage share of these individual heads on sales is calculated. Further, seven jobs were considered for study and all possible direct costs were calculated and the costs which cannot be calculated are apportioned as a percentage of sale value which is derived from p&L document. Thus expenses involved in production of these jobs are estimated and compared with the traditional costing process of the company. The annual expenses under different heads are restructured as expenses for different activities, using Activity Based Costing process. Later the jobs which were studied earlier are also represented in Activity Based Costing Format. This representation supports in managerial decision making regarding the expenses incurred in various activities. It is observed that the expenses estimated from job costing vary with the price quoted either ways. So, sometimes a greater profit is realised and sometimes expenses may be more than estimated. This way of costing helps in cross checking if the price quoted is adequate. Financial Statement Analysis

The Financial Statement Analysis is carried out in the following manner 1) Trend Analysis : Performance of company over a period of 5 years 2) Cross sectional Analysis: Performance of company with respect to its peer companies


Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd

3) Working capital Management: The current asset, liability, inventory management over time and with respect to peers Under each study, a horizontal analysis, vertical analysis and a ratio analysis is carried out. The observations are recorded and conclusions and recommendations regarding the performance of the company are assessed. The detailed job analysis brings out the fact that, there is a variation in the traditional price estimation method and the actual expenses incurred. Especially the labour costs appear to be more than estimated, and the share of different cost centres is not in sync with the way they are estimated. Secondly, the company is working on a lower profit margin, compared to its peers. The growth has not been in sync with industry pace. Hence it is strongly recommended to increase capacity to cater the activity needs. Thirdly the working capital management has to be made effective. Efficient management of working capital through effective credit, purchase and inventory policy can fetch greater net profit that adds to the growth. There should be a coordinated growth rather than growth in a single dimension. Focus to grow in one direction may lead to inconsistencies in business processing. Hence it is recommended to initiate a coordinated growth. The study is also constrained by few limitations, especially in detailed production and transport costs. Further study can be focussed on, Capacity Adequacy for the present sales growth Review of Credit Policy for sales and Purchase


Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd


I would like to thank Mr. Alok Bector and Mrs. Sangeeta Bector for giving me this opportunity to work on a project which has been challenging and a great learning experience. I am very much thankful to my project guide Mr. N. K. Unnikrishnan (DGM, Pharmacy Business Head) for the support, guidance and the encouragement he has given all through the project. My special thanks to my IMT faculty project guide Dr. Gunjan Malhotra for herguidance during my project.

I thank the Planning, Accounts, HR, Production and Quality departments of Bectochem Ankleshwar plant, Accounts department Mumbai office and all the staff members for their prompt support in guiding and sharing the information for my project. My special thanks Mr. M. S. Pandey and Mrs. Vidya who have been taking care of all my requirements during the project. Nagesh Kashyap Akshintala


Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd

Table of Contents

Certificate of Approval Certificate from Summer Project Guides Abstract Acknowledgement Table of Contents List of Tables List of Figures List of Appendices Chapter 1 : Company Profile 1.1 About the Company 1.2 Operation Procedure 1.3 Product Portfolio Chapter 2: Project Introduction 2.1 Introduction 2.2Problem definition 2.3 Literature Chapter 3: Job Costing 3.1 Overhead Break Up 3.2 Job Costing 3.3 Activity Based Costing 3.4 Learning 3.5 Recommendations 3.6 Limitations and Further Study Chapter 4: Financial Statement Analysis 4.1 Financial Statement Analysis 4.2 Trend analysis 4.3 Competitor Analysis 4.4 Working Capital Management

3 4 5 7 8 9 10 11 13 14 18 21 21 21 24 24 29 33 33 33 35 36 46 55 58 59 61

4.4 Recommendations from FSASummary Appendix


Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd

List of Tables

Table 1.1: Kick off SOP Table 1.2: Design SOP Table 1.3: Planning SOP Table 1.4: Manufacture SOP Table 1.5: Testing SOP Table 1.6: Dispatch SOP Table 2.1: Job Costing Break Up Table 3.1: Cost head Break up Table 3.2: Costing sheet sample Table 3.3: Job Costing Table 3.4: Comparison with Bectochem Costing Table 3.5 : Departmental costing Table 3.6: Activity Cost Table 3.7: Cost Driver Table 3.8: Activity cost appropriation Table 9: Activity Based Job Costing Table 3.10: Cost comparison Table 4.1: Horizontal analysis Observations Table 4.2: Vertical analysis Table 4.3: Vertical Analysis Observations Table 4.4: Ratio Analysis Output Table 4.5: Ratio Analysis Observations Table 4.6: Growth rate of peer companies Table 4.7: Horizontal analysis observations Table 4.8: Vertical Analysis Observations Table 4.9: Ratio Analysis Table 4.10: Ratio Analysis Observations Table 4.11: Over Trading Symptoms

16 17 17 18 18 19 23 25 26 29 29 31 31 32 33 33 34 39 40 42 44 45 49 50 53 54 55 57


Expense Budgeting at Bectochem Consultants & Engineers Pvt Ltd

List of Figures

Figure 1.1: SOP Figure 3.1: 2010-11 Annual Overhead Break Up Figure 3.2: Activity Expenses Break Up Figure 4.1: P&L Trend Figure 4.2: Capital Structure Trend Figure 4.3: