TABLE OF CONTENTS
Page #:
Acknowledgement
2
Executive summary
3
Chapter 01: Introduction
1.1 1.2 1.3
Introduction Introduction to report 4 Purpose of report 4 Methodology of study
4
Chapter 2: Cost Accounting 2.1
Definition of cost
5
2.2
The role of cost accounting
5
2.3
Contribution of cost accounting
6
2.3.1 Planning
6
2.3.2 Controlling
6
2.3.3 Evaluation of alternatives
6
2.3.4 Inventory management
7
2.3.5 Pricing of products and projects
7
2.3.6 External Reporting
7
2.3.7 Analysis of financial statements
7
Chapter 3: Mountain Fruits (pvt.) Limited.
8-10
Chapter 4: Departmental arrangements 4.1
Overview of the company
11
4.2
Organizational chart
11
4.3
Management List
12
4.3.1 Staff List
12
Major Departments 4.4.1 Production department 4.4.2 Accounts Department 4.4.3 Marketing Department
13 13-14 14 15
4. 4
Chapter 5: Cost Elements 5.1
Elements of cost 5.1.1 Direct Material 5.1.2 Direct Labor 5.1.3 Overheads
16 16-17 17-18 18
Chapter 6: Classification of cost
6.1
6.2
Classification 6.1.1 Cost in relation to a product 6.1.2 Cost in relation to volume of production Chart of accounts
19 19 20 21-23
Chapter 7: Budgeting
7.1 7.2 7.3 7.4
Definition of Budget Budget Status Budget Period Production budget
24 24 24 24-26
Chapter 8: Financial Analysis
8.1
Financial Statements 8.1.1 Balance Sheet 8.1.2 Profit and Loss Account
27 27-28 29
Chapter 9: SWOT Analysis
9.1 9.2 9.3 9.4
Strengths Weaknesses Opportunities Threats
30 30 31 31
CONCLUSIONS
31
RECOMMENDATIONS RECOMMENDATIO NS AND FINDINGS
31
REFRENCES
31
2
Chapter 5: Cost Elements 5.1
Elements of cost 5.1.1 Direct Material 5.1.2 Direct Labor 5.1.3 Overheads
16 16-17 17-18 18
Chapter 6: Classification of cost
6.1
6.2
Classification 6.1.1 Cost in relation to a product 6.1.2 Cost in relation to volume of production Chart of accounts
19 19 20 21-23
Chapter 7: Budgeting
7.1 7.2 7.3 7.4
Definition of Budget Budget Status Budget Period Production budget
24 24 24 24-26
Chapter 8: Financial Analysis
8.1
Financial Statements 8.1.1 Balance Sheet 8.1.2 Profit and Loss Account
27 27-28 29
Chapter 9: SWOT Analysis
9.1 9.2 9.3 9.4
Strengths Weaknesses Opportunities Threats
30 30 31 31
CONCLUSIONS
31
RECOMMENDATIONS RECOMMENDATIO NS AND FINDINGS
31
REFRENCES
31
2
Executive Summary MFL was a project of Aga Khan Rural Support Program (AKRSP). AKRSP is a non non deno denomi mina nati tion onal al orga organi niza zati tion on esta establ blis ishe hed d by the the AKF AKF to improve economic situation in the Gilgit Baltistan, the objective of MFl is top support support small small scale scale fruit fruit produc producer ers s in the remote remote valle valleys ys of Karakorum, Hindukush and Western Himalayas through skills training in production and post harvest techniques, micro credit and market information to process and market their produce in the national and intern internati ationa onall market markets. s. Their Their main main partne partnerr is in UK is the “Tropica “Tropicall Whole foods” MFL works as a professional channel, establishing quality benchmarks and ensur ensurin ing g mark market et for for a larg large e no of smal smalll grow grower er assoc associa iati tion ons s through this network, we produce and market a variety of high quality specialty products, products, including including dry apricots ,tomatoes ,tomatoes apricots apricots kernels, almond, walnuts and vegetable seeds . These products are grown in the pristine mountain valleys of Hunza ,Nagar, Gilgit ,Chitral ,Ghizer and Baltistan. The transaction of growing these fruits goes back thousands of years in these valleys ,in the past these fruits served as an important food supplement to the highly food deficit deficit mountain mountain communiti communities es living living in these these remote remote valleys. valleys. Today, Today, using usi ng new new farm farmin ing g tech techni niqu ques es intr introd oduc uced ed by AKRS AKRSP, P, farm farmer ers s are are available to significantly increase their production levels and sale their surp su rplu luse ses s to su supp pple leme ment nt thei theirr inco income me,, whic which h is inve invest sted ed in the the education of their children ,particularly ,particularly girls which is new trend in in this area. The fruits grow in these valleys are unique in terms of their natural flav flavor or,, tast taste e and and serv serve e as a rich rich sourc source e of vitam vitamin ins, s, mine minera rals ls and and dietary fibers. They are also known to provide natural defense against various diseases. Experts also see a link between the longevity trends of local ocal popu popullatio ation n and and the their die dietar tary habi abits, ts, part partic icul ular arlly the the consumption of apricot.
3
Chapter 1 INTRODUCTION 1.1 Introduction to Report It is very important for students to get practical insight in any organization after a long theoretical work in University. We went Mountain Fruits (pvt.) Limited to see the practices of cost accounting in the organization. After visiting and interviewing from the Chief Executive Officer, employees and manager accounts and administration in Mountain Fruits (pvt.) Limited. We have written this report with extreme possible attention.
1.2 Purpose of the Study It is necessary for the student of Business that they should be familiar with the practical application of Business studies and should gain experience. The main purpose of this report is to fulfill the practical knowledge and experience of cost accounting in manufacturing concerns. It may be through, to gain a good amount of confidence and to become aware of the policies and practices of the organization by working and dealing with the officers. We select Mountain Fruits (PVT.) Ltd. to see the practices of cost accounting in the company and in return we get some knowledge that how Cost accounting activities will be performed in the company.
1.3 Methodology of Study The quality information was real objective which we tried to collect. We had to use different techniques/methodologies to collect the data. The sources of data were as follows; Interview with Chief Executive Officer Interviews with the Manager Accounts and Administration Interview with supervisor Personal observation through visiting the production department. • • • •
4
CHAPTER 2 COST ACCOUNTING 2.1 Definition of Cost The committee on Cost concepts and standards of American Accounting Association has given a broad definition of cost, so that it may cover all of the various types of the costs as are used by accountants. The committee defines cost as follow: "Cost is foregoing, measured in monetary terms, incurred or potentially to be incurred to achieve a specific Cost object or Cost objective".
2.2 The Role of Cost Accounting Cost accounting furnishes management with the necessary accounting tools for planning and control of activities. Specially, the collection, presentation and analysis of cost data helps management accomplish the following tasks; 1. Creating and executing plans and budgets for operating under
expected competitive and economic conditions. 2. Establishing costing methods and procedures that permit control
and of possible, reductions or improvements of costs. 3. Creating inventory values for costing and pricing purposes and,
at times, controlling physical quantities. 4. Determining company costs and profits for an annual accounting
period or a shorter period. 5. Choosing from among two alternatives which might increase
revenue and decrease cost.
5
2.3 Contribution of cost accounting to management Cost accounting is now used not only by manufacturing organizations but by service and trading organizations as well, both in profit and nonprofit sectors of economy. It is used as an aid for planning and controlling of on going operations, for evaluation of alternatives and projects, for pricing, for special and non-routine decisions and for external reporting. 2.3.1 Planning:
Planning is the process of setting objectives and then determining the steps needed to attain them. In planning management is interested in future costs. To supply appropriate information cost accountant makes make analysis of cost of past operations. These historical costs are adjusted to reflect changes in products, technology, volume, production efficiency, input cost etc. In the planning process Budgeting is the area where contribution of cost accounting is most visible.
2.3.2 Controlling: Controlling if the process by which management makes sure that intended and desired results are consistently and continuously achieved. The controlling process consists of the following three steps: i.
Establishment of standards.
ii.
Comparison of results against standards and
iii.
Correction of deviation.
In these activities cost accounting assists management by developing standards, collecting data of actual results, preparing performance reports and by analyzing variance.
2.3.3 Evaluation of alternatives:
6
Management is frequently confronted with decisions involving choice from different alternative course of actions. Cost accounting provides information as to how future costs and revenues will be affected under each alternative thus assists management in making appropriate selection.
2.3.4 Inventory management: Cost accounting assists in inventory management by keeping complete record of materials from the time they enter into the premises till the time they are sold in the form of finished products. Quantitative models for materials planning and management developed by cost accounting enable management to keep stocks to a minimum and, at the same time, guard against being out of stock.
2.3.5 Pricing of products and projects: Pricing involves determination of prices of new products, adjustments in the prices of existing products as well as determination of bid prices for contracts.
2.3.6 External reporting: Cost accounting also serves the purpose of external reporting. While making an upward adjustment in the rates of public utilities e.g. electricity, gas, petrol, etc. the government must justify the increase before the opposition in the legislative assemblies and before the general public. 2.3.7 Analysis of financial statements
Financial statements of a business organization are analyzed by external users and by management to arrive at quantitative decisions regarding profitability, financial strengths, trend etc. Cost accounting assists management in such analysis by providing detailed information about sources of profit or loss as revealed by the financial statements.
7
CHAPTER 3 MOUNTAIN FRUITS PRIVATE LIMITED After three months debate the AKRSP in March 2000 management finally agreed to pool funding of PKRs 2.00 million to initiate training project for quality improvement of dried apricots in Gilgit region. A separate small office was established in Gilgit town with total six staff members. The project aimed to change the traditional unhygienic sun drying method to produce an internationally acceptable food product. Although it seemed impossible under prevailed conditions of resources in the northern areas but it happened in just few years. The project was then shifted in to a purposely built (leased for 10 years) factory at Danyore where the factory has access to spring water to wash over 100 tons of dry apricots in a season. In November 2004, the Dry Fruit Project was converted in to a formal dry fruit export business, Mountain Fruits (pvt.) limited with net assets of 6.5 million after repaying PKRs 3.5 million to the mother organization, AKRSP. By then the Company was exporting over 65 tons of dried apricots, apricot kernels, dried apples and nuts on test basis. Apart from the success of dry fruit business the company employed seasonal women workers in processing of fruits with special focus on the socio economic conditions of the workers. Since the primary objective of the project was to bring economic change at micro level by increasing the income of poor farmers. The company started buying dried apricots at the best market price in 2000 that was PKRs 35 per kilogram, the company increased farm gate price for dried apricots gradually and paid PKRs 87/kg. The company trained over 2000 farmers in improved apricot drying in year 2006 a new company was also established in Gilgit and the prices for the improved quality dried apricots was gone up to PKRs 150 per kilogram at farm gate. This was revolution in the history of farmer’s income in dry apricots. The company not only focused in dry apricots business but also increased product line by adding walnuts and almonds in 2005-6. The
8
company believes value addition is the only tool to increase income and market share therefore from the very beginning the concept of organic production and fair trade certification has been the mandate of the company. To increase farm income of small farmers, AKRSP focused to help in increasing agriculture productivity, introduced cash crops; improve quality of farm products, value addition and linking surplus production to high value market. Dry fruits and nuts have been main horticultural products of farmers. Before opening of the Karakrum Highway the people of northern area have to sustain on what ever they produce in their limited lands. There was no source of food supply from out side and the local population has to supplement dry fruits to their food stuff. After opening of the KKH the farmers got access to outside markets to sell dry fruits and import food grains from planes of Pakistan. Since the market for fresh fruits was far away and it was not possible to market perishable fruits e.g. apricots even in nearest markets in Pakistan therefore farmers have been using un-hygienic sun drying techniques to preserve fruits and nuts. The production of fresh apricots in northern areas has been reported 45,000 to 60,000 tons; about 30% is being wasted before sun drying for various reasons. The conventional sun dried apricots halves are exposed to open atmosphere for a week and the product so dried is full of biological and physical contamination. AKRSP has been working on hygienic drying of fruits and link the product to domestic market but it could not be much successful for quality control reasons In 1999, a staff member of the AKRSP joined North South Seed; a project of the AKRSP and voluntarily did research in production and marketing of whole dried (sulfur treated) apricots. After being success in development of international quality standard product and recognizing the quality of the product from a UK based company, Tropical Whole foods a project proposal named “Dry Fruit Projects” was presented to AKRSP management. In March 2000, the AKRSP management approved to finance rupees 2.0 million to initiate the project (a training program to improve sun drying of fruits in the region).
9
AKRSP enterprise section pooled seed money for the project and the project was initiated as a training program but the hidden mandate of the project leader was to establish dry fruit export business. After two years, in year 2002 the project made break even and it was physically shifted to a food processing factory having annual capacity to produce 100 tons of dry fruits. The Tropical Whole foods, UK were an established business company they provided technical assistance to the project staff and now the project is a registered company named as “Mountain Fruits (pvt) limited”. The company has increased its product line including dried apples, walnuts halves, dried tomatoes, apricot kernels in addition to sulfured and non-sulfured apricots. Mountain Fruits (pvt) limited is the only factory in the northern areas where more than 50 ladies workers have chance to find seasonal work. About 2000 families are benefiting selling their products to the company. Following are statistical information of the company
10
CHAPTER 4 DEPARTMENTAL ARRANGEMENTS 4.1 Overview of the company The management of the company consists of a Chief Executive Officer and 3 Board of directors besides the managerial staff, supervisors, and working labors. The working labors in the production department are only
female labors.
4.2 ORGANIGATIONAL CHART Chief Executive Officer
Manager Accounts and Administration
Factory Manager
Field Manager
Data Entry Officer
Supervisor
Assistant Field Manager
Marketing Manager
11
4.3 Management List Names
Designations
Sher Ghazi
Chief Executive Officer
Brett Adam
Director
Friend Richard
Director
Sakhi Murad
Honorary Director/ Manager Accounts & Administration
4.3.1 Staff List: S. No.
1 2 3 4 S.
2 3 4 5 6
7 8
Admin Section Name of Employee Sher Ghazi Sakhi Murad Amir Shah
Designation
Salman Khan
CEO Manager Accounts Watchman Electrician
Production section Jamila khatoon Shahina Perveen Farman Azeem ullah Iftikhar Ali Rahim ullah Bahadur Murad
Asst.QCO Processing Incharge Driver Purchasing officer Asst.PO Asst. field Asst. field
12
4.4 Major departments:
Mountain Fruits (pvt.) Limited
Production
Accounts
Marketing
Department
Department
Department
4.4.1
Production Department
Purchasing of Raw material Production department deals with the purchasing of raw material (i.e.) apricots, walnuts, almonds and fresh apples. These are purchased from different districts of Gilgit-Baltistan likely apricot, almonds and fresh apples from district Hunza-Nager, walnuts from district Sakardu. These items are purchased by the field assistants, who go to the farmers and purchase them. The raw material when received into the company the dat entry officer records the quantity and the area and the name of farmer from which the material has been purchased in the field and then the material is sent to the warehouse from where it is forwarded for the processing.
Grading of raw material The grading of the raw material is made according to its quality for future processing. The processing in charge of the company has the responsibility of grading the raw material according to its quality and quantity.
Processing of raw material
13
After the grading of raw material it is sent to for processing in accordance of the demand for a product in the market. The raw materials are processed at different stages, e.g. Raw material of apricots are first washed in water in special type of electric machine called apricot washer machine then the wet apricot are send to the electric dryer for few hours and then the apricots are let dry in the solar drying system which they called the tunnel. After drying of the apricot its sent for re-grading, where the women labors give their services of re-grading the apricots into three different categories which are, •
"A" Grade for the best apricots.
•
"B' Grade for the better apricots.
•
"C" Grade for the not for export quality apricots.
After this process the apricots are sent for packing and labeling of the product which different denominations of weights in cartons. After packing and labeling of the product it is sent to the finished goods inventory store from where they are consigned towards the consignee.
4.4.2
Accounts Department
The accounts department of Mountain Fruits (pvt.) limited, have the responsibilities of dealing with the controlling and planning of the financial resources of the company to achieve the organizational objectives. The accounts department is being handled by the Manager Accounts and Administration and the data entry officer. The planning and controlling of the financial resources means to plan and control the costs and expenditures of the company to gain maximum profit. •
Exporting of products The consignments procedure of products to other countries is also executed here in the accounts department. The accounts department prepares sales invoice, Form "E" and other requirements of exporting products. Here the orders 50% advance payment is received from the purchasing party of the product in Europe or other country. After receiving 50% advance payment of the shipment the goods are consigned through
14
Karachi Sea Port where the clearing agent of the company clears all the affairs and requirements, and then the clearing agent sends the Bill of lading to the consigner and consignee both. After receiving the consignment their consignee sends the payment in full settlement in the name of company to the bank where Mountain Fruits (pvt.) Limited has the account. Due to the fluctuations in the currency rates of different countries the company has, •
Capital Gain.
•
Capital Loss.
4.4.3
Marketing Department
The marketing department deals with marketing of the products of the company abroad and locally in Pakistan. It is done through sending delegations to different countries and different cities. It ensures the attraction of new customers and retaining of the customers by giving customer value. Through different marketing tools and strategies the marketing of different products are marketed in different countries and cities.
15
CHAPTER 5 COSTING ELEMENTS 5.1 Elements of Cost The elements of cost are the components which are used to acquire the finished product after processing in the manufacturing companies. Mountain Fruits (pvt.) Limited also uses the following elements of cost; 1. Direct Material 2. Direct Labor 3. Overhead
5.1.1
Direct Material
Direct Material is the raw material purchased by the company form the field in form of, •
Apricots
•
Walnuts
•
Almonds
•
Fresh Apple
Procedure of Material Purchasing: Procedures for material procurement and use involves forms and records necessary for general ledger, financial accounting as well as those necessary costing a job, process, or department, and for maintain inventories and other statistical summaries. •
Purchases of raw material The actual purchase of all materials is usually made by the purchasing department headed by a general purchasing assistant. The purchasing department receives purchase requisition for raw material and supplies. The types pf purchasing form used in the company are as under, o
Purchase Requisition
16
o
•
Purchase Order
Receiving of material The function of the receiving material is performed here is as,
•
i.
Unloading and unpack incoming material
ii.
Check quantities received against the shipper's packing list
iii.
Identify goods received with descriptions on the purchase order
iv.
Prepare a receiving report
v.
Arrange for inspections if necessary
vi.
Route accepted materials to the appropriate factory locations.
Electronic Data Processing for purchases In a electronic data processing (EDP) system, the computer data base is used to record the material purchased and recived into the factory. The Data Entry Officer makes the entries in the computerized software about the receipts of raw material from the field with their quantity and other necessary information in the data base.
5.1.2
Direct Labor
No work can be performed without employment of staff and workers. Women who working the production in Mountain fruits (pvt.) Limited is generally called labor. Labor in cost accounting of men working in a factory, though they may be working as C.E.O, managers and workers. The main categories of labor for costing purpose are as under;
17
i.
Direct labor The workers employed in the company who directly work on production of goods for sale are classified as Direct labor.
ii.
Indirect labor Beside direct labor, there are some general workers who also work in the production such as movement of materials from one place from another place, supervision etc. Their wages can't be allocated directly to a product under process. These personnel are termed as indirect labor.
5.1.3 Over heads In the earlier two cost elements we described about direct material and direct labor whose cost are directly identifiable with specific products. There are, however, many indirect expenses such as electricity, repair and maintenance etc. which can't be directly related to a specific product, yet these have to be taken into consideration to have the cost of production of each finished goods are realistic. Such indirect costs are termed as overheads. These indirect expenses or overheads are usually classified as; •
Factory overheads
•
Administrative overheads, and
•
Selling and distribution overheads.
CHAPTER 6
18
CLASSIFICATIONS OF COST 6.1 Classification At mountain fruits (pvt.) Limited the classification of cost is being under the following relationships of cost to achieve the company's objectives; 1. The product 2. Volume of production
6.1.1 Costs in relation to a product At Mountain Fruits (pvt.) Limited, total operating cost consists of, •
Manufacturing Costs
•
Commercial Costs.
6.1.1.1 Manufacturing Costs Manufacturing cost is the sum of the elements of costs, which are direct material, direct labor and overhead. Direct material and direct labor are combined into another classification called prime cost. Direct labor and overhead may be combined into classification called conversion cost, which represents the cost of converting direct material into finished products. Manufacturing costs are classified into the following categories; •
Direct Material
•
Direct Labor
•
Overheads
•
Indirect material
•
Indirect labor
6.1.1.2 Commercial Expenses
19
Commercial expense falls into two large classifications; •
Marketing and selling expenses
•
Administrative and general expenses
6.1.2 Costs in relation to volume of production: Some costs vary directly in relation to changes in the volume of production or output, while others remain constant. The costs which vary and remain constant in Mountain Fruits (pvt.) Limited are as under, •
Variable costs: The following list identified overhead costs of Mountain Fruits (pvt.) Limited which are usually classified as Variable costs; Fuel etc Repair & Maintenance Others Generator Fuel Generator Repair Office Supplies Utilities Entertainment Daily Wages Rent & Maintenance Communication Fixed Costs: • • • • • • • • • •
•
The following list identified overhead costs of Mountain Fruits (pvt.) Limited which are usually classified as fixed costs; •
Salaries of regular staff
•
Depreciation
•
Insurance
•
Rent
20
6.2 Chart of Accounts Account ID 10000 10200 10300 10500 10600 10650 10700 10900 10950 11000 11100 11200 12000 12100 12200 12300 12400 12600 12820 12830 12900 16000 16200 16210 16500 16800 16900 17000 17010 17015 17020 17100 17200 17300 17400 20100 20200 20300 20400 20500
Account Description Goodwill Cash at SBL - PLS 5000-1 Petty Cash Security Deposit Cash at ABL - C/A 2878 ABL Saving 01-151-0010-9 Cash at ABL - FC A/c SBL 11024-01 SBL FC/Ac11024-03 Accounts Receivable Provision for Doubtful Account Other Receivables Prepaid Rent Advance to Supplier – Hunza Advance to Supplier – Gilgit Advance to Supplier – Ghizer Advance to Supplier – BLN Advance to Supplier – Punjab Advance to Supplier – Zulfi Advance to Supplier - Azeem-Apri Advance to Supplier – Kamal Inventory-Apricot Inventory-Dried Apple Inventory-Fresh Apple Inventory -Apri. Kernel Sweet Inventory - Walnuts (in shell) Inventory - Walnuts Shelled Inventory Apricot – Open Inventory – Almonds Inventory Almonds Shelled Inv. Almond Oil Packaging Material Chemical Training Inputs Packages – Raw material Computer & Accessories Equipment & Appliances Furniture & Fixture Plant & Machinery Vehicles
21
22100 22200 22300 22400 22500 23000 24100 25000 25050 25300 25700 25800 25900 26000 26100 26200 27000 27100 27300 27310 27330 27340 27400 27500 27700 27800 27900 29000 29100 29300 29400 29800 29900 30000 30600 30620 30650 30670 30700 30800 31100 31400 31800
Acc. Dep-Computer & Accessories Acc. Dep-Equipment & Appliances Acc. Dep-Furniture & Fixture Acc. Dep-Plant & Machinery Acc. Dep-Vehicles Share Capital Retained Earnings Accounts Payable Other Payable Income Tax Payable Expenses Payable Advance from Customers Accumulated Amortization CPF Payable CPF Installment Payable CPF Loan Installment Payable Staff Salaries-Admin Staff Salaries-Production Staff Travel - Admin. Staff Travel - Production Staff benefits - Admin Staff benefits - Production Fuel etc Repair & Maintenance Others Generator Fuel Generator Repair Office Supplies Utilities Entertainment Daily Wages Rent & Maintenance Communication General Expenses Bank Charges Export Charges - Apricot Export Charges - Dried Apple Export Charges - Walnut Shelled Export charges - Almond Research & Development Loss on Exchange Vehicle Operation Transportation Outward Training & Support
22
32100 32300 32400 32500 32600 35000 35100 35200 35600 35700 35710 35900 35950 35955 35960 35980 35990 35995 36000 36100 36200 36300 36400 36500 37000 37050 37100 38300 38321 38360 38380 38400 38470 38480 38500 38600
Dep. - Computer & Accessories Dep. - Equipment & Appliances Dep. - Furniture & Fixture Dep. - Plan & Machinery Dep. - Vehicles Sales-Apricot-A Sales-Apricot-B Sales-Apricot-C Sales- Dried Apple-A Sales-Dried Apple-C Sales Fresh Apple Sale - Apricot Kernel Sw-A Sales - Walnuts Shelled-A Sales Walnut Shelled - (In) B Sales - Walnuts Shelled- (In)C Sales Apricot - Open Sales Walnut In shell Sales - Almond, Kernel Oil Other Income Profit on Deposits Sales Return Sales Discount Gain on Exchange Nursery Income Sales - Almond A Sales Almond Shelled Sales - Almond Pieces Direct Labor - Apricot Direct Labor - Dried Apple Direct Labor - Walnut Shelled Direct Labor Almonds Transportation-In - Apricot Trans. In - Walnut in shell Transportation In - Packages & MT Commission - Apricot Factory Overheads
CHAPTER 7 BUDGETING 23
7.1 Budget A budget is a quantitative and financial expression of policies to be pursed and strategies to be employed during a prescribed future period of time in order to achieve an objective.
7.2 Budget Status The budget at Mountain Fruits (pvt.) Limited is centralized. It's forecasted on the basis of orders received from the customers in the previous period or by past experience. The budget is in control of Chief Executive Officer and the Manager Accounts and administration. A budget for production is forecasted for every financial year of the company.
7.3 Budget Period The period of time to be covered by the budget is to be specific- a year or less. At Mountain Fruits (pvt.) Limited the budget period is for one accounting period that is 1st July to 30th June.
7.4 Production Budget Mountain Fruits (Pvt.) Ltd. Production Budget For the year 2009 Direct material 1.1 Purchases Product Line
Purchase Forecast Units Kg. 79,3
Apricot
41
Av.Rate 80. 00
Apricot kernels
-
82,0
Walnuts
83
00
33
Grand Total
395
00
00
254,957
5,335,
80.
15,0 Fresh Apple
65.
78,5 Almond
Amount 6,347, 280
6,282, 640
15. 00
225, 000
18,190,315
24
1.2 Transportation Inwards 79,3 Apricot
41
0. 92
72, 850
1. Apricot kernels
-
83 82,0
Walnuts
83
0. 78
78,5 Almond
33
030
78
00
64,
0.
15,0 Fresh Apple
-
61, 261
1. 83
27, 450
225,59 254,957
1
1.3 Master Trainer Remuneration 79,3 Apricot
41
1. 00
79, 341
1. Apricot kernels
-
00 82,0
Walnuts
83
2. 00
78,5 Almond
33
166
00
00
164,
2.
15,0 Dried Apple
-
157, 066
2. 00
15, 000
415,57 254,957
3
1.4 Packages 79,3 Apricot
41
0. 60
47, 605
1. Apricot kernels
-
00 82,0
Walnuts
83
1. 00
78,5 Almond
33
083
00
00
82,
1.
15,0 Dried Apple
-
78, 533
1. 00
15, 000
223,22 254,957
1
1.5 Loading & Unloading
25
79,3 Apricot
41
1. 00
79, 341
1. Apricot kernels
-
00 82,0
Walnuts
83
1. 00
78,5 Almond
33
083
00
00
82,
1.
15,0 Dried Apple
-
78, 533
1. 00
15, 000
254,95 254,957
7
254,9 Total
57
75. 74
19,309, 656
CHAPTER 8 26
FINANCIAL ANALYSIS
8.1 Financial Statements 8.1.1 Balance Sheet MOUNTAIN FRUITS (PRIVATE) LIMITED BALANCE SHEET AS AT 30TH JUNE 2009 2009
2008
Rupees
Rupees
ASSETS Non Current Assets
708,1
747,
Fixed assets – tangible
09
604
1,882,
1,882,
Intangible asset – Goodwill
514
514
Current assets
8,802, 450 3,053, 840 1,325, 147 4,005, 251 17,186,
804,
Stock in trade
032 720,
Trade debts
176 3,479,
Advances, deposits, prepayments and other receivables Cash and bank balances
625 10,980, 370 15,984, 203 18,614,320 .43
688 19,777, 311
Authorized Capital
6,697,
6,697,
669,700 (2006: 669,700) ordinary shares of Rs.10 each
000
000
27
Issued, Subscribed and paid up Capital 6,500, 000 3,298, 190 9,798,
6,500,
650,000 (2006: 650,000) ordinary shares of Rs. 10 each
000 4,251,
Accumulated profits
743 10,751, 743
190
LIABILITIES Current liabilities
2,500, Short term borrowing
000
-
810,0
735,
Creditors, accrued and other liabilities
44
982
6,669,
7,126,
Advances from customer - associated company
596 18,614,320 .43
077 19,777, 311
-
8.1.2 PROFIT AND LOSS ACCOUNT
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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 2009
2009 Rupees
2008 Rupees
Sales Export sales Less: Export charges Sales Discount Local sales
Cost of sales Gross profit
20,596,832
13,578,416 (742,204) -
(1,282,918) -
12,836,212
19,313,914
556,397
1,788,806
13,392,609
21,102,720
(11,371,093)
(17,835,717)
2,021,516
3,267,003
(1,389,050)
(2,374,898)
Financial expenses
(13,415)
(91,072)
Other operating income
334,502
460,264
Profit/(loss) for the year
953,553
1,261,297
3,298,190
2,036,893
Administration and selling expenses
Accumulated profit at beginning of the year Accumulated profit at end of the year
3,298,190
4,251,743
CHAPTER 9
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SWOT ANALYSIS 9.1 Strengths: The following are strengths of MFL: a) MFL has the latest employee training and development approaches. Therefore it can adapt to all sorts of change and bring immediate improvement in work practices whenever the need arises. b) MFL have highly qualified management and exceptionally intelligent and energetic people. This result in lesser problems in maintaining high quality and production levels take constructive criticism and focus on personal and professional development by focusing solely on achieving their work.
c) MFL believes in making people realize their full potential and capabilities of household women, thus giving women new opportunities of income generation.
d) MFL also have great production techniques and machinery
because of their alliance with an international company.
9.2 Weaknesses: It is very difficult to find any weaknesses in the company; however some weaknesses can be pointed out. a) The workers, especially cracking labors are supposed to under sky as the company do have its own proper building yet. This may affect their performance level.
b) According to given information the daily waged labors are not subjected to bonuses or rewards, which may reduce their working moral. c) The company is not giving proper attention to marketing activities.
9.3Opportunities:
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