Fyp-Inventory Management-Budgetary Control System-Mahindra-Mahindra PDF
Fyp-Inventory Management-Budgetary Control System-Mahindra-Mahindra PDF
Fyp-Inventory Management-Budgetary Control System-Mahindra-Mahindra PDF
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EXECUTIVE SUMMARY
As we know that Mahindra & Mahindra Co. Ltd. is a production unit. When
ever production term comes then first thing comes in our mind that is inventory.
Because inventory is base for any production unit so, when we control and manage
the inventory properly then the company is benefited. (By reducing holding and
carrying cost of inventory.) Thus after studying inventory Management the important
incorporates the policy of the management during a given period and serves as a
standard for comparing the actual results. Thus a budget is a tool in the actual results.
Thus a budget is tool in the hands of the management which serves as a guide to all
A budget can help us a planning and coordination with all the employees, and
departments, but the most important factor is that it is used for control purposes at all
levels of management.
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into the lower segment of 25 HP, segment of 35 HP and higher segment of 45 HP and
above. The Company s Farm Equipment Sector has a presence in all these segments
M & M Co. Ltd. Farm equipment sector has four plant locations in Rudrapur,
Jaipur, Nagpur & Kandivalli. The project work is done for Nagpur branch. This
branch is certified for ISO 9001, QS-9000, ISO-14001, M & M tractor have earned
goodwill and trust of more than 8,00,000 customers and the Mahindra tractor has
The project requires two months time for the completion. The steps involve in
collection of data from various sources like SAP, Monthly performance review
system (CIMS).
various techniques such as ABC, EOQ, Reorder level etc. management minimize
investment in inventory and meet a demand for the product by efficiently organizing
the production and sales operations. The firm should minimize investment in
inventory which involves costs i.e. ordering cost and carrying cost, so that smaller the
planning which is related to production, sales, stocks, requirement of labors, etc. The
advantage of planning is that we can anticipate the problems before hand. Planning
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the process of thinking which enables to provide new idea to the management
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The basic responsibility of the financial manager is to make sure the firm s
parts: (i) to minimize investments in inventory, and (ii) to meet a demand for
inventory involves costs, such that the smaller the inventory, the lower is the
on the basis of the trade off between costs and benefits associated with the
levels of inventory.
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SCOPE
Inventory management is the base for any production unit so; it is related to
overall objective on the firm. This study is basically concerned with inventory
control required & Economic Order Quantity which help the financial
This study helps to minimize cost of holding the inventory i.e. ordering cost &
Carrying cost. The maintenance of inventory also helps a firm to enhance its
sales efforts. It serves to bridge the gap between current production & actual
sales.
This study also helps to minimize the setup time & manufacturing time for
each unit. This is the time form when a product is ready to start on the
experience.
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Mission Statement :
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CORE VALUES
Our core values are influenced by our past, tempered by our present and are designed
to shape our future. They are an amalgam of what we have been, what we are and
These values are the compass that will guide our actions, both personal and corporate.
They are:
term success that is in alignment with our country's needs. We will do this
Professionalism : We have always sought the best people and given them the
performance.
and effectively.
Quality focus :Quality is the key to delivering value for money to our
customers. We will make quality a driving value in our work, in our products
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express disagreement and respect the time and efforts of others. Through our
History
1963: Incorporation of International Tractor Company of India (ITCI), as a Joint
Venture between Mahindra & Mahindra Limited (M&M), International Harvester
Inc, and Voltas Limited sharing the responsibility of design, manufacturing &
marketing.
1965: Rolled out first batch of 225 Tractors in 35 H.P. Range Model B275 Regular
1977: Merger with M&M forming its Tractor Division. Full fledged responsibility for design,
manufacturing & marketing.
1983: Market leader in domestic Tractor market - has maintained this position till date !
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COMPANY PROFILE :
Rs. 7000 crore Mahindra Group, which has a significant presence in key sector of the
Indian economy. A consistently high performer, M & M is one of the most respected
Set up in 1945 to make general-propose utility vehicles for the Indian market,
M & M soon branched out into manufacturing agricultural tractors and light
commercial vehicles (LCVs). The company later expended its operators form
sectors. The company has, over the years, transformed itself into a Group that caters
to the Indian and overseas markets with a presence in vehicles, farm equipment,
development.
utility and light commercial vehicles and agricultural tractors remaining with the
flagship company.
All other activities were spun off into separate entities and organized under
business groups. Thus groups are in the areas of Hospitality, Trade and Financial
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Infrastructure Development.
implements that are used in conjunction with tractors. This division has also ventured
into manufacturing of industrial engines. It has won the coveted Deming Application
Prize 2003. Incidentally, this is the First Tractor Company in the world to win this
Prestigious Prize.
M & M employs around 12,000 people and has six state-of-the art
manufacturing facilities spread over 5,00,000 square meters, M & M has also set up
two satellite plants for tractors manufacturing. It has 49 sales offices that are
supported by a network of over 650 dealers across the country. This network is
constantly innovate and launch new products for the Indian market. Proof of this
expertise is the launch of the Bolero, Scorpio, a new-generation utility vehicle, and
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the setting up of the Mahindra Research Valley, a facility that will house the
Company s engineering research and product development wings, under one roof.
result, the company has put in place initiatives that seek to reward and retain the best
talent in the industry. M&M is also known for its progressive labour management
practices.
programs that have benefited the people and institutions in its areas of operations.
For the third consecutive year, the Tractor Industry grew substantially
registering a growth of 18% for the year under review. This was mainly on account of
good monsoon, better availability of credit and focus on retail tractor financing by the
Banking Sector.
During the year, Company sold 85, 029 tractors as against 65,390 tractors sold in the
previous year recording a significant growth of 30% and produced 87,075 tractors as
against 67,115 tractors produced in the previous year recording notable growth of
29.7%. Company maintained its market leadership for the 23rd consecutive year in the
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Last year Company launched two new products 235 DI and 245 DI in the
domestic market in the low HP segment and new Arjun Ultra-1 range in the high HP
these segments.
Company sold 14,692 engines during the year under review as against, 6,672 engines
sold during the previous year, registering a massive growth of 120%. The engine
business which started from a customer base of a single client in 2002 has currently
22 corporate clients. Company has also made a foray into the retail and non-genset
segments. Beginning from this year Company has also sold 1,084 Mahindra branded
Company s focus on exports continued with export volumes growing by 29.6%. The
major export markets are USA, SAARC countries, Africa, Australia and China.
Company established a Joint Venture Company (JVC) in China under the name of
Limited, has a 80% shareholding, the balance 20% being held by Jiangling Motors
Co., Group, China. This JVC has a capacity of 12,000 tractors in 18-33 HP range.
This JVC became fully operational in July, 2005. Company has also started its East
European operations by launching tractors in Serbia. Company sold spare parts worth
Rs. 127.88 crores (including exports Rs. 11.7 crores) during the year under review as
compared to sales of Rs. 108.83 crores (including exports Rs. 7.6 crores) in the
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Company plans to offer various product solutions by offering value for money and
reliable products in domestic market. This will help your Company expand its product
existing products with contemporary features. F-06 was an encouraging year for
agriculture. Going forward, due to a good monsoon and water availability during the
year, crop production is expected to be higher by 2.5% over last year. As a result of
this, it is estimated that the agricultural GDP of India will grow by 3.2%.
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Financial Highlights
1000 9000
8327 857
900 8000
800 6769
7000
700 6000
600 5057
513 5000 PAT
500 3811
3320
349
4000 Net Income
400
300 3000
200 146 2000
97
100 1000
0 0
2002 2003 2004 2005 2006
60
50
40
30
20
10
0
2002 2003 2004 2005 2006
YEA R
Basic Earnings per shar e
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Tafe, 6.7
Escorts , 9.2
Eicher , 26.3
Others , 4.2
M & M , 33
PTL, 9.7
Sonalika , 8.9 HMT, 2
Graph 5.1
Particulars Percentage
Tafe 6.7
Escorts 9.2
M&M 33
HMT 2
Sonalika 8.9
PTL 9.7
Others 4.2
Eicher 26.3
Table 5.1
Above graph shows market share of different companies dealing in tractor production
and it is clear that M & M takes 33% of the total market share, followed by Eicher
which is 26% that means M & M is market leader in 25 HP.
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Escorts , 9.9
Sonalika, 9.2
HMT, 3.1
PTL, 18.1
M & M , 28.1
Others , 6.2
Graph 5.2
Particulars Percentage
Escorts 9.9
HMT 3.1
M&M 28.1
Eicher 5.8
Tafe 19.6
Others 6.2
PTL 18.1
Sonalika 9.2
Table 5.2
Above Graph shows market share of different companies dealing in tractor production
and it is clear that M & M takes 25% of total market share followed by Tafe which is
20% that means M & M is market leader in 35 HP.
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Escorts , 20.2
NHT, 14.5
M & M , 18.8
Sonalika, 13.4
Particulars Percentage
Escorts 20.2
HMT 1.5
M&M 18.8
Tafe 6.5
Others 3.1
PTL 9.2
Sonalika 13.4
JD 12.8
NHT 14.5
Table 5. 3
Above graph shows market share of different companies dealing in tractor production
and it is clear that M & M takes 19% total market share and Escort is also showing
19% market share in 45 HP.
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Tractors Below 30 HP
265 DI Sarpanch
265 DI Bhoomiputra
Arjun 445 DI
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INTRODUCTION
As we know that Mahindra & Mahindra Co. Ltd. is a production unit. When
ever production term comes then first thing comes in our mind that is inventory.
Because inventory is base for any production unit so, when we control and manage
the inventory properly then the company is benefited. (By reducing holding and
Inventory, as a current asset, differs from other current assets because only
financial managers are not involved. Rather, all the functional areas finance,
marketing, production, and purchasing, are involved. The views concerning the
appropriate level of inventory would differ among the different functional areas. The
Conflicting view points of the various functional areas regarding the appropriate
inventory levels in order to fulfill the overall objective of maximizing the owner s
wealth. Thus, inventory management, like the management of other current assets,
should be related to the overall objective of the firm. It is basically concerned with
to the management and control of inventory. The aspects covered are: (i)
determination of the type of control required, (ii) the basic economic order quantity,
(iii) the recorder point, and (iv) safety stocks. As a matter of fact, the inventory
management techniques are a part of production management. Thus it will help the
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Meaning of Inventory
Inventories are stock of the product a company is manufacturing for sale and
components that make up the product. The various forms in which inventories exist in
Raw materials are those basic inputs that are converted into finished product
through the manufacturing process. Raw materials inventories are those units
products that need more work before they become finished products for sale.
which are ready for sale. Stocks of raw materials and work-in-process
are two basic categories: (i) Ordering or Acquisition or Set-up costs, and (ii) Carrying
costs.
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Ordering Costs
inventory. Firms have to place orders with suppliers to replenish inventory of raw
materials. The expenses involved are referred to as ordering costs. Included in the
ordering costs are costs involved in (i) preparing purchase order or requisition form
and (ii) receiving, inspecting, and recording the goods received to ensure both
quantity and quality. The cost of acquiring materials consists of clerical costs and
costs of stationery. It is, therefore, called a set-up cost. They are generally fixed per
order placed, irrespective of the amount of the order. The larger the orders placed the
costs. The acquisition costs are inversely related to the size of inventory: they decline
with the level of inventory. Thus, such costs can be minimized by placing fewer
orders for a larger amount. But acquisition of a large quantity would increase the cost
CARRYING COSTS
1. Those that arise due to the storing of inventory. The main components of
this category of carrying costs are (i) storage cost, that is, tax, depreciation,
(iv) serving costs, such as, labour for handling, clerical and accounting costs.
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The sum of the order and carrying costs represents the total cost of
the various activities of a firm so that all do not have to be pursued at exactly the same
rate 3. The key activities are (1) purchasing, (2) production, and (3) selling.
Benefits in Purchasing
the sales level. This will enable it to avail of discounts that are available on bulk
purchases. Moreover, it will lower the ordering cost as fewer acquisitions would be made.
There will, thus, be a significant saving in the costs. Second, firms can purchase goods
before anticipated or announced price increases. This will lead to a decline in the cost of
production. Inventory, thus, serves s a hedge against price increase as well as shortages of
Benefits in Production
Finished goods inventory serves to uncouple production and sale. This enables
production at a rate different from that of sales. That is, production can be carried on
at a rate higher or lower than the sales rate. This would be of special advantage to
firms with seasonal sales pattern. In their case, the sales rate will be higher than the
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production rate during a part of the year (peak season) and lower during the off-
season. The choice before the firm is either to produce at a level to meet the actual
demand, that is, higher production during peak season and lower (or nil) production
during off-season, or, produce continuously throughout the year and build up
Benefits in Work-in-Process
is necessary because production processes are not instantaneous. The amount of such
inventory depends upon technology and the efficiency of production. The larger the
steps involved in the production process, the larger the work-in-process inventory and
purpose also.
Benefits in Sales
The maintenance of inventory also helps a firm to enhance its sales efforts. A firm
will not be able to meet demand instantaneously. There will be a lag depending upon the
production process. If the firm has inventory, actual sales will not have to depend on
lengthy manufacturing processes. Thus, inventory serves to bridge the gap between
current production and actual sales. A basic requirement in a firm s competitive position
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problem-areas that comprise the heart of inventory controls are (i) the classification
problem to determine the type of control required, (ii) the order quantity problem, (iii)
1. A B C System
types of inventories to determine the type and degree of control required for each. The
On the basis of the cost involved, the various inventory items are, according to
this system, categorized into three classes: (i) A (ii) B and (iii) C.
After various inventory items are classified on the basis of the A B C analysis.
A key inventory problem particularly in respect of the Group. An items relates to the
addressed are 8. How much inventory should be bought in one lot under one order on
should the requirement of materials during a given period of time (say, six months or
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small lots? Such inventory problems are called order quantity problems.
Buying in large quantities implies a higher average inventory level which will
assure (i) smooth production/sale operations, and (ii) lower ordering or set-up costs.
But it will involve higher carrying costs. On the other hand, small orders would
reduce the carrying cost of inventory by reducing the average inventory level but the
ordering costs would increase as there is interruption in the operations due to stock-
outs. The optimum level of inventory is popularly referred to as the economic order
quantity (EOQ). It is also known as the economic lot size. The economic order
quantity may be defined as that level of inventory order that minimizes the total cost
associated with inventory management. EOQ refers to the level of inventory at which
cost is minimal.
2 AO
EOQ
C
Assumptions
The firm knows with certainty the annual usage (consumption) of a particular
item of inventory.
The rate at which the firm uses inventory is steady over time.
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The orders placed to replenish inventory stocks are received at exactly that
to minimize the carrying as well as the ordering costs. In other words, the EOQ
provides an answer to the question: how much inventory should be ordered in one lot?
The reorder point is stated in terms of the level of inventory at which order
should be placed for replenishing the current stock of inventory. In other words,
reorder point may be defined as the level of inventory when fresh order should be
placed with the suppliers for procuring additional inventory equal to the economic
order quantity. It is based on the following assumptions: (i) constant daily usage of
inventory, and (ii) fixed lead time. In other words, the formula assumes conditions of
certainly.
The recorder point = Lead time in days x average daily usage of inventory
4. Safety Stock
inventory. The delay may arise from strikes, floods, transportation and other bottle
necks. That is, the firm would face a stock-out situation. This, in turn, as explained in
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detail below, would disrupt the production schedule and alienate the customers. The
firm would, therefore, be well advised to keep a sufficient safety margin by having
additional inventory to guard against stock-out situations. Such stocks are called
safety stocks. The safety stock involves two types of costs: (i) stock-out, and (ii)
carrying costs.
FINDING:
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Suggestion
1. Emphasis is placed on minimizing the setup time & manufacturing lead time
for each limit. This is the time from when a product is ready to start on the
production line to when it become a finished good producing to demand often
means manufacturing small quantities on product producing small batches is
economical only if setup time are small.
3. This production limit consists of large amount of scrap which is the root cause
of the manufacturing unit. So the firm should emphasis on eliminating these
causes. So that wastage should not occur & that will reduce the lead time of
product.
4. The reorder point is the quantity level of inventory that triggers a new order.
It equals the sales per unit of time multiplied by the purchase-order lead time.
Safety stock is the buffer inventory held as a cushion against unexpected
unavailability of stock from suppliers.
Limitations:
1. All the programs are going under SAP System so there are the limitations
regarding the analysis of the data without user of that company only.
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INTRODUCTION
what to do, and when to do, and who will do the particular task? Plan is made to
achieve best results. Control in the process of checking whether the plans are being
adhered to or not, keeping the record of process, comparing it with the plans and then
taking corrective measure for future if there is any devotion. Every business enterprise
needs the use of control techniques for surviving in the highly competitive and
managing economic world. There are various control devices in use .budget are the
most important tool of profit planning and control. They also act as an instrument of
coordination.
period covered.
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evolution of performance
time, of the police to be pursued during that period for the purpose of attaining a
given objective .
purpose. A sales budget is prepared for the purpose of forecasting sale for the future
costs. The master budget embodies forecasting the figure of profit or loss.
action required this is a very general definition of term. However as the management
function, it has been defined as The process by which managers assure that resources
organizations goals.
activities planing and control. Planning means deciding what it is to be done and how
it is to be done control is assuring that desired results (which may be different from
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simply a plan of action hence the technique of budgetary control is an important tool
of managing control.
executives to the requirement of the policy, and continuous comparison of actual with
budgeted results, either to secure by an individual action the objective of the policy or
to provide a basis for its revision. According to the J.A.Scott, it is the system of
management control and according in which all operation are forecasted and so for as
possible planned ahead and the actual results compared with the forecasted with the
In today s completive world, without proper planning and control over the
which depends upon the external factor like market condition, demand, competitors
etc another way to increase profit is to decrese cost (profit=sales-total cost). But for
decreasing cost proper control system should be an action .with the help of proper
company like m & m which comes under farm equipment sector comparison of actual
with budgets and taking remedial major for division is must do job. Termined
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Budget and Budgetary control system is a very vast subject. But at the same
time it is basic need of every company to make the budget. So it requires the overall
knowledge and skill for making budget and without planning nobody can achieve
organizational goals. This topic is very essential to every company and it's have
To study in detail the budget procedure of Mahindra & Mahindra Co. Ltd.
Nagpur.
To list of various types of budgets generally Mahindra & Mahindra Co. Ltd.
Nagpur prepares.
To evaluate variance analysis of Mahindra & Mahindra Co. Ltd. for taking
suitable action by comparing actual results with budgets so that the causes are
not repeated and remedial action should be taken in future.
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Scope
M & M Co. Ltd. Is the large organization where budgetary control is the
important aspects. From this study we see that how Company plan there budged
according to the requirement is important the i.e. planning, co-ordination and control
a. Any modern business can t not function without planning which is related to
planning is that we can anticipate the problems before hand. Planning through
the process of thinking which enables to provide new idea to the management.
b. A detailed budgetary control system is one where the plans are written down
and these plans are circulated to all the levels management this can be achieve
usually based on past experience. From the study variances analysis is possible
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MEANING OF A BUDGET
policies to be pursued in the future period of time. The term budgeting is used for
repairing budgets and other procedures for planning, co-ordination and control of
the policy to be pursued during that period for the purpose of attaining a given
statement of management policy during a given period which provides a standard for
enterprises for me future period and then comparing the budgeted figures with the
actual performance for calculating variances, if any, first of all budgets are prepared
and then actual results are recorded. The comparison of budgeted and factual figures
will enable the management to find out discrepancies and lake remedial measures at a
proper time. The budgetary control is a continuous process, which helps in planning
and controlling all aspects of producing and /or selling commodities and services.
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This relates budgetary control with day to day control process. According to him,
in according with the goals specified by the budget . From the above given definitions
is the technique for. Budgetary control, on the other hand, refers to the principles,
Rowland and William have differentiated the three terms as Budgets are the
building budgets. Budgetary control embraces all and in addition includes the science
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of planning the budgets to affect an overall management tool for the business
for carrying various functions and carrying the activities of the business. The
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required.
1. Clarifying objectives:
The budgets are used to realize objectives of the business. The objectives
must be clearly spelt out so that budgets are properly prepared. In absence of clear
Even though budgets are finalized at top level but involvement of person from lower
implementation of budgets. The performance level will help the top management in
budgetary control.
4. Budget education:
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system. They should be educated about there role in the success of this system.
Budgetary control may be mil he taken, only as control device by employees but it
Budgeting is done for every segment of business. It will require the active
executed at lower level management. Those for whom the budget is framed should be
actively associated with their participation and execution. The employees on the basis
of their past experience may give more practical and useful suggestions. The success
6. Flexibility:
Flexibility in the budget required to make them suitable under the change
in circumstances. Budget is made for future which is always uncertain. Even through
budget are prepared by consideration of future possibility but still some occurrences
later on may necessitate certain adjustments. It will make the budget more appropriate
and realistic.
7. Motivation:
interest shown by the employees. All persons should be motivated to improve their
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TYPES OF BUDGETS
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The budgets are classified according to their nature. The following are the
The budgets are to be prepared to depict the long term planning of the
business. The period of long term planning varies from five to ten years. The
top level management does the long term planning; it is not generally to the
lower level of management. long time budgets are prepared for some sectors
term finance etc. those budget are useful or those industries where gestation
These budgets are generally for one to two years and are in the form of
monetary terms. The consumer s goods industries like sugar, cotton, textile,
3. Current budgets:
The period of current budget is generally of months and weeks. These budgets
current budget is the budget which is established for the use over the short
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1. Operating budgets:
number of such budget depends upon the size and the nature of the business. The
Sales budget
Production budget
Purchase budget
Labours budget
The operating budget for the firm may be constructed in terms of programs or
A. Program budget
B. Responsibility budget.
Chart ..
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A. Program budget:
are termed as die major programme of the firm. Such a budget is prepared for each
product line or project showing revenues, costs and the relative profitability of the
various programs. Program budget are useful in locating areas where efforts may be
required to reduce cost and increase revenues. They are us useful in determining
future.
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B. Responsibility budget:
areas is called the responsibility budget. Such a budget had shown the plan in terms of
person responsible for achieving them. The management uses it as a control device to
evaluate the performance of executives who are in charge of various cost centers.
Their performance is compared to targets (budgets), set for them and proper action is
taken for adverse results, if any. The kind of responsibility area depends upon the size
Cost/expenses center.
Profit center.
Investment center.
2. Financial budgets:
Financial budgets are concerned with cash receipts and disbursements, working
Cash budget.
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3. Master budget:
Various functional budget are integrated into master budget .this budget is
I.C.W.A. London, master budget is the summary budget incorporating its functional
budgets . The budget officer prepared master budget and it remains in the top level
1. Fixed budget:
The fixed budgets are prepared for a given level of activity; the budget is
prepared before the beginning of the financial year. If the financial period starts in
January then the budget will be prepared a month or two earlier, i.e. November or
December. The hang in expenditure arising out of anticipated change will not be
adjusted in budget. There is a difference of about twelve months in the budgeted and
actual figures. According to I.C.W.A London, fixed budget is the budget which is to
attained . Fixed budgets are suitable under static conditions. If sales, expenses and
costs can be forecasted with greater accuracy then this budget can be advantageously
used.
2. Flexible budget:
Therefore, varies with the activity attained. A flexible budget is prepared after taking
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is defined as budget which is recognized the difference between fixed, semi-fixed and
variable cost is designed to change in relation to the level of activity. The flexible
budget will be useful where levels of activity are changes from time to time. Then the
shortage of material, labour etc, then this budget will be more suited.
When control through budgets is desired the budgetary organization are to busy with
defined for the purpose of budgetary control. Budget centers should be clearly defined
and established for each of which a budget will set with the help of the departments
concerned e.g. labour budget, production cost budget etc. by the accountant in
responsibilities of each member management and that he knows his position in the
organization and this relation to other members .the organization chart may have to be
staff.
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It is essential that the accounting system should be able to record and analysis and
linked with the budget centers for the establishment of budget and control through the
budgets.
coordinate all work involved, but in larger organization the budget committee consist
It is the document setting out the responsibilities of the person engaged in,
the routine of, and the forms and the records required for, budgetary control. a budget
manual helps in standardizing methods and procedures and the risk of overlapping of
function is eliminated.
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A budget period is the period of time for which the budget is to be prepared
and employed. Except in case of capital expenditure budget, the budget prepared is
It is the factor to the extend whose influence must first be assessed in order to
ensure that functional budgets are reasonably capable of fulfillment. The key factor
serves as the starting point for preparing the budget. Generally, sales become the key
factor, but other factors of production, such as men, material, capital etc. may also be
factors.
b. It help to increase the efficiency, reduce the wastage and control the costs.
d. With the help of budgeting, the responsibility of the manager can be fixed for
planning, so that they can think for future, anticipated and be prepared to meet
the challenges ahead.
e. Actual result is compared with the budget so that corrective action can be
taken in time.
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The budgetary control system is not perfect tool. It has its own limitations
cannot be successful unless it has the full support of the top management
Chir Argyris has, in his study of Human Problems with budget has pointed
out the following reasons for a high degree of negative reaction against
a) Budgets are evaluation instruments. They tend to set the goals against which
the people are measured hence they nautically are complained about
c) Budgets are thought of as pressure devices as such they produce the same kind
The preparation of budget which gives a realistic position of the firm s affair
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3. Time factor.
5. Cooperation required.
The success of the budgetary control depends upon willing co-operation and
teamwork. Budget officer must get cooperation from all department managers.
control is a must for each enterprise. It leaves sufficient time for the top
management for formulation of overall policy and planning. Much success can
depend upon adequacy and reliability records, the past and present
performances, on the interest of all the executives and ordinate in the purpose
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expenditure, and the most suitable system of cost and financial accounts .
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1. Nagpur PU Total
1400
1200
1000
800
Rs. in lakhs
Budget
600
Actual
400
Variance
200
0
-200 F - 2004 F - 2005 F - 2006
-400
Year
Causes:-
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Remedies:-
2. Tractor PGL
Financial Year Budget Expenses Actual Expenses Variance Variance in %
F - 2004 227.76 191.69 36.07 15.84
F - 2005 190.15 199.86 -9.71 -5.11
F - 2006 186.77 237.08 -50.31 -26.94
300
250
200
Rs. in lakhs
150 Budget
100 Actual
50 Variance
0
F - 2004 F - 2005 F - 2006
-50
-100
Year
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Causes:-
F-2004 Variable expenses such as power & fuel consumption increased by
Rs.24.29 lakhs.
Fix expenses like repair and maintenance are decreased by Rs.5.66
lakhs, other expenses is in control.
F-2005 Variable expenses such as stores consumption increased by Rs.8.36
lakes.
Fix expenses like repair and maintenance, traveling, postage,
printing, telephone etc. are increased.
F-2006 Variable expenses such as stores consumption increased by
Rs.49.33 lakhs, repair and maintenance are decreased by Rs.6.98
lakhs.
Fix expenses like repair and maintenance on spares are increased
by Rs.8.33 lakhs, other expenses such as traveling, postage,
printing, telephone etc. are decreased.
Remedies:-
F- Company has to keep contingency reserve due to change in
2004 government policy.
Company has to keep on doing regular maintenance of machinery so
that break down will not occur.
F- Company always keep maximum target according to the market
2005 condition.
Traveling, postage, printing and telephone exp. can be reduce by
using internet services.
F- Company has to focus on handling of inventory so that wastage not
2006 occurs.
Repair and maintenance technique of the company for the machinery
may not be good due to that reason exp. Increases.
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3. Engine PGL
250
200
150
Rs. in lakhs
100 Budget
50 Actual
0 Variance
-100
-150
Year
Causes:-
F-2004 Variable expenses such as stores consumption decrease by Rs.3.67
lakhs.
Fix expenses like repair and maintenance are increased by Rs.5.94
lakhs.
F-2005 Variable expenses such as stores consumption increase by Rs.1.33
lakhs, tools consumption increased by Rs.1.82 lakhs & repair and
maintenance of spare are increased by Rs.2.93lakhs.
Fix expenses like repair and maintenance are increased by Rs.2.78
lakhs.
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4. Transmission PGL
Financial Year Budget Expenses Actual Expenses Variance Variance in %
F - 2004 47.28 41.36 5.92 12.52
F - 2005 95.85 95.03 0.82 0.86
F - 2006 80.62 91.34 -10.72 -13.30
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120
100
80
Rs. in lakhs
Budget
60
Actual
40
Variance
20
0
F - 2004 F - 2005 F - 2006
-20
Year
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Causes:-
F-2004 Variable expenses like store consumption & repair and
maintenance of spare are increased.
Fix expenses like printing and stationary, postage and general &
mis. Exp. are decreased.
F-2005 Variable expenses such as stores consumption decreased by
Rs.9.10 lakhs.
Fix expenses like repair and maintenance are increase by
Rs.5.98 lakhs.
F-2006 Variable expenses like store consumption is increased by Rs.1.6
lakhs.
Fix expenses like repair and maintenance are increased by
Rs.11.46 lakhs
Remedies:-
F-2004 There is considerable increase in variable expenses occurs.
F-2005 Company has to work on new marketing strategy for their survival
in market.
Company has to provide training to employee so that they can use
machinery properly.
F-2006 Over utilization of machinery should not be done.
5. Hydraulics PGL
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120
100
80
Rs. in lakhs
Budget
60
Actual
40
Variance
20
0
F - 2004 F - 2005 F - 2006
-20
Year
Causes:-
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120
100
80
Rs. in lakhs
Budget
60
Actual
40
Variance
20
0
F - 2004 F - 2005 F - 2006
-20
Year
Causes:-
F-2004 Variable expenses such as stores consumption increase by Rs.
4.36 lakhs.
Fix expenses like repair and maintenance are increased by
Rs.19.37lakhs
F-2005 Variable expenses are decreased by Rs.1.36 lakhs.
Fix expenses like repair and maintenance are increased by
Rs.5.47 lakhs
F-2006 Variable expenses such as Tools consumption increased by
Rs.6.49 lakhs.
Fix expenses like repair and maintenance on building are
increased by Rs.2.33 lakhs, and on machinery Rs.3.28 lakhs.
Remedies:-
F-2004 Company has to provide training to employee so that they can use
inventory properly.
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7. ER & D PGL
Financial Year Budget Expenses Actual Expenses Variance Variance in %
F - 2004 136.58 119.52 17.06 12.49
F - 2005 126.83 126.75 0.08 0.06
F - 2006 123.87 162.7 -38.83 -31.35
200
150
Rs. in lakhs
100 Budget
Actual
50 Variance
0
F - 2004 F - 2005 F - 2006
-50
Year
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Causes:-
F-2004 Fix expenses like Hire & Service charges are decreased by
Rs.3.96 lakhs, Gen & Misc expense are decrease by Rs.5.83
lakhs.
F-2005 Fix expenses like General repair and maintenance are
increased by Rs2.38 lakhs
Legal exp. is decrease by Rs.3.84 lakhs.
F-2006 Variable expenses such as store consumption increase by Rs.
5.81 lakhs.
Fix expenses like General repair and maintenance are
increased by Rs.7.28 lakhs & legal expenses due to wage
settlement, increased by Rs.15.53 lakhs.
Remedies:-
F-2004 Company has to do their necessary material transportation
activity, which is pending.
Company has to maintain labours as per their requirement and
need, for cleaning and lab testing activity.
F-2005 Upkeepment of assets is good for machinery but it should not
be repeated in nature.
Company has to spend money on legal exp. because legal cases
should be solve as fast as possible.
F-2006 Company has to try to maintain the relationship with their
labours by listening problem of them and by solving it.
Improve preventive maintenance and conditioning monitoring.
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8. Account PGL
Financial Year Budget Expenses Actual Expenses Variance Variance in %
F - 2004 7.16 5.95 1.21 16.90
F - 2005 5.69 5.47 0.22 3.87
F - 2006 5.01 4.79 0.22 4.39
8
7
6
Rs. in lakhs
5 Budget
4 Actual
3 Variance
2
1
0
F - 2004 F - 2005 F - 2006
Year
Causes:-
F-2004 Fix expenses like traveling exp. are increased by Rs.0.86 lakhs.
Professional exp. is decrease by Rs. 1.98 lakhs.
F-2005 Fix expenses are decreased.
F-2006 Fix expenses are decreased.
Remedies:-
F-2004 Company can use video conferencing system so that traveling
exp. is reduce.
Company has to take expertise suggestions from outsider also.
F-2005 There is a considerable change in fix expenses.
F-2006 There is a considerable change in fix expenses.
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Sourcing PGL
Financial Year Budget Expenses Actual Expenses Variance Variance in %
F - 2004 7.58 7.38 0.2 2.64
F - 2005 7.54 4.14 3.4 45.09
F - 2006 3.77 2.52 1.25 33.16
8
7
6
Rs. in lakhs
5 Budget
4 Actual
3 Variance
2
1
0
F - 2004 F - 2005 F - 2006
Year
Causes:-
F-2004 Fix expenses like traveling exp. are increased by Rs.0.96 lakhs.
F-2005 Fix expenses like traveling exp. are increased by Rs.2.35 lakhs
F-2006 Variable expenses like tool consumption are increased by
Rs.0.05 Lakhs.
Fix expenses are decreased by Rs.1.30 lakhs.
Remedies:-
F-2004 Company has to change their mode of traveling.
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10. Quality PG
Financial Year Budget Expenses Actual Expenses Variance Variance in %
F - 2004 9.78 7.65 2.13 21.78
F - 2005 8.35 7.79 0.56 6.71
F - 2006 7.14 6.12 1.02 14.29
12
10
8
R s. in lakh s
Budget
6 Actual
Variance
4
0
F - 2004 F - 2005 F - 2006
Year
Causes:-
F-2004 Fix expenses like traveling exp. decreased by Rs.2.21 lakhs.
F-2005 Store consumption is decrease by Rs.1.04 lakhs
Fix expenses like repair & maintenances, traveling, postage,
telephone and gen. & misc. exp. are increased.
F-2006 Variable expenses like stores & tools consumption are increased
.
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Remedies:-
F-2004 Changes in government policy of tax is the reason of decrease in
fix exp.
F-2005 Company has to prepare a budget as per production requirement.
Traveling, postage, printing and telephone exp. can be reduce by
using internet services.
F-2006 There is a considerable change in variable expenses.
There is a considerable change in fix expenses.
11. SC PC
Financial Year Budget Expenses Actual Expenses Variance Variance in %
F - 2004 3.1 1.86 1.24 40.00
F - 2005 2.17 1.76 0.41 18.89
F - 2006 22.98 21.19 1.79 7.79
25
20
R s . in la k h s
15 Budget
Actual
10 Variance
0
F - 2004 F - 2005 F - 2006
Year
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Causes:-
F-2004 Fix expenses are decrease by Rs.1.86 lakhs.
F-2005 Fix expenses are increased.
F-2006 Variable expenses like store consumption are decreased by
Rs.1.91 lakhs.
Fix expenses decreased by Rs.2.62 lakhs.
Remedies:-
F-2004 Company has to make proper communication with their vendor or
other person / company.
F-2005 Company has to change their mode of traveling and also traveling
means required for employee should be economical.
F-2006 Company has to provide training to employee about logistic &
quality management so that they can use inventory properly.
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250
200
R s. in lakh s
150 Budget
Actual
100 Variance
50
0
F - 2004 F - 2005 F - 2006
Year
Causes:-
F-2004 Fix expenses like repair and maintenance are increased by
Rs.23.97lakhs.
F-2005 Variable expenses are decreased by Rs.5.73 lakhs
Fix expenses like repair and maintenance are decreased by
Rs.6.24lakhs.
Insurance exp. is increase by Rs.3.38 lakhs.
F-2006 Variable expenses are decreased on stores & tools consumption
Rs.18.24 lakhs
Fix expenses like repair and maintenance are increased by
Rs.21.47lakhs & traveling by Rs.21.47 lakhs
Remedies:-
F-2004 Company has to install new machinery for continuous production.
F-2005 Company has to prepare a budget as per production requirement.
Company has to done proper and timely maintenance for all
machinery.
Company has to purchase insurance policy which is necessary as
per safety point of view.
F-2006 Company has to work on new marketing strategy and adopt new
technology for their survival in market.
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CONCLUSION
Inventory management:
The study of Inventory management control the activities focus on the flow of
inventory from the organization. Many decisions fall under the inventory management
to 1600 .
to order. The larger the order quantity, the higher the annual carrying
costs and lowers the annual ordering costs. The smaller the order
quantity, the lower annual carrying costs and higher the annual
recorded.
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3. The reorder point is the quantity level of that inventory that trigger a
4. EOQ analysis helps to minimize the cost of holding the inventory. This
cost and carryings cost which is one of the critical factor in the project.
Budget and budgetary control system is basis need of entire finance gamut.
Without budget and budgetary control system no company can achieve his goals.
Budget and budgetary control system is a master key which is determining the profit
It is a method of forecasting future demand because of that the work of achieving the
It also help to ensure cash flow and hence bank credit can be obtained. It creates cost
profit is possible through budgeting. It ensures the capital of the firm utilized in
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The control system of Mahindra and Mahindra Co. Ltd. Nagpur is based on
responsibility basis means every department get the target and that department must
After carefully analyzing and studding the entire procedure of budget and
budgetary control system of M & M Co .Ltd. at Nagpur, Some observation are made
M & M Co. Ltd. Should be carefully observe the market. Because if there is
any single words that can best describe today s market, it is change if they
will observe properly to the changing market condition they will not face the
2. Volume changes:
M & M Co. Ltd should determine the proper volume of production because of
3. Store consumption:
because of that every department can be completed their target within time.
4. Machinery fault:
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Company is expensing the more money than budget on machinery and spare
parts for repairs and maintenance. So. M & M Co. Ltd should concentrate on
machinery.
The success lies in the budget and budgetary control system as accurate as
possible. And as M & M co. Ltd at Nagpur adopts a scientific budget and
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SUGGESTIONS
right time.
LIMITATIONS
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BIBLIOGRAPHY
WEBSITE :
1. www.mahindra.com
2. www.mahindraworld.com
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