Budget Information Problem Based In Metroline Travel Engineering Accounting Essay

Budget Information Problem Based In Metro identify run Engineering Accounting EssayThis report outlines a cipher culture problem ground in Metroline Travel engineering and logistic function. The report all overly presents a discussion and analysis of a work out knowledge problem with reference to the problem solving frame work.The project also includes the 4 Ps within the marketing mix, limitations of incremental reckoning, 10 criteria which are proposed for good-quality information and a pecuniary analysis of the logistical function over epoch woo.These analyses are necessary for equal decision-making. In addition, the report concludes with an investigative examination of these problems and plausible recommendations to address the companys deficiencies. Also noteworthy, advantages and disadvantages using the SMART framework with recommendations and implications leave behind also be outlined.Contents denomination 02 1A budget information problem within the logistical fun ction 1B629/BZX629 Managing 2 Marketing and Finance 1 topic ready by Kelemn Wyllie 1 senior sensible Support Manager 1Metroline Travel 1Tutor 1Mr. Jay Naik 11Date of the Report 25-08-2010 1Contents 3TMA subroutine 1 5Introduction 5Stakeholder Analysis 6Problem Statement 7 encrypt 4 Internal Engineering Value Chain Analysis 7Analysis 910Conclusion 14 testimonial 16 code 12 recommendations within the budget control loop 16Bibliography 21Appendix 22TMA Part 2 TMA Activities 38Activity 1 workweek 6 Table 6.1 Three parvenu tasks you could do at work 38Activity 2 calendar week 6 Table 6.2 Costs Rewards associated with the proposed 3 bracing work 39Activity 3 calendar week 6 Table 6.3 Communicating your proposed idea to peers in the organisation 40Activity 4 Week 7 Table 7.1 How I currently deliver the process and how it could be improved 41Activity 5 Week 8 Table 8.1 charge group research on a marketing problem 42Activity 6 Week 9 Table 9.1 Investigate marketing prep in my ow n organisation 43Activity 7 Week 9 Table 9.2 The Marketing Plan 44Activity 8 Week 10 Part A What financial information do you deal with at home and at work? 45Activity 8 Week 10 Part B Share with other students what you hope to achieve by studying finance 46Activity 9 Week 10 Table 10.1 Stakeholders financial information needs 47Activity 10 Week 10 Table 10.2 Financial information requirements 48Activity 11 Week 11 A completed form of Table 11.1 Garden Furnishings solving the problem 49Activity 12 Week 12 A Word Document noting your/your line coachs budgetary information requirements 50Activity 13 Week 12 Part A A completed version of Table 12.2 Template for cash budget 51Activity 13 Week 12 Part B A Word document discussing possible application of master and cash budget information to problems of Garden Furnishings 52Activity 14 Week 12 Resolving a budget information problem 53TMA Part 1IntroductionAs fourth-year veridical carriage in a public bus company called Metroli ne Travel. A subsidiary company owned by the Singapore based ComfortDelGro Corporation. See Appendix for profit and loss account and other related financial information as of 31st march 2010. The worlds second largest listed land transport company. The senior cloth manager supervises a team of 15 veridical support managers crosswise London. These soulnel are the logistical team and their core responsibilities are the supply, storage and procurement of parts to engineering (core activity). The logistical hierarchy is illustrated in figure 1.Figure 1 Metroline Organisational Structure (Logistical Department)Stakeholder AnalysisStakeholder analysis is a useful technique used to identify the discover people within the logistical function framework. These key personnel are very important to the organizational structure because they have tremendous power and influence which affects the performance and future resource planning allocated from senior management. Managers should consider the organisations responsibilities and commitment to all its stakeholders. ( understanding marketing and financial information, P. 196) According to Mendelows matrix these advise be grouped into to 4 categories which are illustrated figure 2 in Metroline Travel belowFigure 2 Mendelows matrixHighLowC- Keep SatisfiedD- Key PlayersA- Minimal EffortB-Keep InformedLowHighPower train of InterestA- DriversB- Operation, SuppliersC- Finance departmentD- Engineering (Core Activity)AssumptionsTo make the problem more bounded fabric managers have complete autonomy over their overtime literal manager received invoices on a Fri mean solar solar day in may, June and JulyBudgets are formed outside the control of the logistical functionCost can be divided up in to fixed and variable personifyThe literal managers are constraint to 19 hours per week overtime (limiting factor) in line with the EU working time directiveProblem StatementBudgets are used for detailed planning in the allocation of re sources in a business. This information is important to management and stakeholders equivalent in assessing the activities and performance of an organisation, illustrated in Figure 3. The logistical function overtime budget is based on an incremental budgeting principle with an soaking up belling come near for allocating cost per material managers.The incremental budgeting principle is based on 9% of their base salary plus current inflation. However, the material mangers overtime for May, June and July allowance were over budgeted which would affect workers long term motivational aim working on a weekend. This over-budget affects the controlling, planning and decision-making of its activities. This overtime process is very important in maintaining a reliable service to engineering.Figure 3 Information directionSenior material support managerMaterial mangersEngineeringThe value chain consists of a series of activities that create and builds significance in maintaining a bus. An organisation can consider the activities in its value chain and assess if they are value added activities or non-value added activities. (Understanding marketing and financial information, P. 190) This is illustrated in figure 4.Figure 4 Internal Engineering Value Chain AnalysisEQUIPMENTENVIRONMENTOTHEROTHER insertMACHINERYOUTPUTTOOLSQUALITY CHECKSREPAIR REPORTENGINEERSBUS REPAIRMANAGEMENTPARTSGARAGEOVERTIMEOTHERMATERIAL MANAGERSOTHERPROCESS good dealAs their line manager I was tasked by the head of purchasing and logistics to investigate and place corrective actions to bring this over budgeting back under control. This over- budget is illustrated in figure 5.Figure 5. Material Managers Overtime budget as of the 31 July 2010MONTHSJanuaryFebruaryMarchAprilMayJuneJulyUSERMaterial manager 1800900 light speed100445520549Material manager 20220cc220458612323Material manager 3010050046155214466Material manager 4050100110100222366Material manager 5060631100223141316Material manager 62001002 1125030044342Material manager 70600054642335559Material manager 810202000452500445Material manager 920001300452900498Material manager 105000450100626613Material manager 11100200115225100225889Material manager 12020025445252225789Material manager 132000255235231995145Material manager 1401202212285452445Material manager 15010012144200100112Total =2,1022,6502,5462,4664,5926,0416,457Budget4,0004,0004,0004,0004,0004,0004,000Cost variance1,8981,3501,4541,534-592-2,041-2,457unseemlyadverseadverseTotal Budget- 48,000Monthly allowance 4,000Daily rate- 12.60Weekend rate- 20.23AnalysisMarket cleavage is an important marketing task described by Bonomo and Shapiro (1983), cited by Sargeant (2009). It has a number of advantages which can be used to identify existing and potential customers. By placing customers into different groups by successful targeting their needs and managing their expectations.Figure 5. Organisational market segmentation criteria (Operating variables)Engineering (core activ ity) Heavy userSuppliers Medium userFinance departmentMedium userOTHERLight usersAfter speaking with the material managers and canvass their overtime sheets for the months for May, June and July submitted to payrolls. The investigation using the problem solving framework (The Managers Good Study Guide, PG 69). I found that the material managers were working more on a weekend to incur the over budget this is illustrated in figure 6 in appendix, which the daily rate is 12.60 while the weekend rate is 20.23 The budgeting system can seriously influence the level of motivation and culture of an organisation, because budgets play a central role in (Understanding marketing and financial information, P. 155).This was because of an increase of activity 40 plus financial invoices received from the finance department over May, June and July were received on a Friday and could not be completed that day because of day to day activities. These invoices needed to be resolved as in brief as possi ble and took some time to process on the data base system for recompense for the following week from finance illustrated in figure 7 . In addition, the limitation of the incremental budgeting, this budgeting type has inefficiencies and imperfections which were not noticed, until the increase of activity.Figure 7 contribute financial invoice hours to completionUsing the 4 Ps-Price- Was the increase in the usage of overtime to complete the receipt of engineering invoices which will affect the material managers long term motivation coming into work allocating resources and imposing constraints on activity (Understanding marketing and financial information, P. 155).Product- Was the volumes and frequency of the engineering invoices given on a Friday identifying those areas that require corrective action (Understanding marketing and financial information, P. 155).Promotion- The finance manager a senior manager requesting this activity be completed as soon as possible assessing how well managers have carried out their responsibilities (Understanding marketing and financial information, P. 155).Place- Is material managers working location assessing how well managers have carried out their responsibilities (Understanding marketing and financial information, P. 155).Budgeting is needed to provide managers at different levels with useful information to keep on the right road. This is illustrated in 11.2 the pyramid of purpose. This information is received for decision making. corporeal level- Provide a bus service to Transport for LondonMaterial manager overtimeSupport engineeringProvide a bus service to Transport for LondonProvide parts and technical informationBusiness level- Support engineeringOperational level-Provide parts and technical informationOperating Level-Material manager daily overtimeAnalysis of information criteria not being metThere are 10 criteria which are proposed for good-quality information for decision-making this is illustrated in figure 8. Howe ver the material managers overtime sheets were being sent directly to payroll, which added to the budget information problem.1 germane(predicate)- Their line manager had no knowledge of Material managers overtime7 Timely- No Knowledge of Material managers overtime being over budget until at the end of the month8 Communicated to the right person- Overtime sheets were sent directly to payrollsFigure 8 10 criteria which are propose for good-quality information for decision-making10Less costly than the value of the benefits it provides9 Communicated via the right channel8 Communicated to the right person7Timely6Concise5Trustworthy4Complete3Sufficiently accurate2Clear1RelevantGood-quality information for decision-makingAnalysis of the absorption costing approachFrom the cost analysis, the logistical function has a total budget figure of48,000. This is calculated by applying the average budgeted hourly rate of 12.60 which is the budgeted man (direct labour) hours per manager according to normal capacity illustrated in figure 9, by the using the incremental budgeting principle.Figure 9 cost assignment is both confirmative cost- variableOvertime brought on by finance invoicesCost objectBus repair unionize cost- fixed hebdomadal overtime to provide parts and technical information to engineeringThe indirect and direct costs are equally distributed illustrated in figure 10, using the absorption costing approach which all cost is allocated to the main budget. This prevents observe of actual hours against theactual spend within the budget. The resulting variancesshould have enabled the logistical function to monitor the productivity and efficiency of all the managers.Hopefully, you can then see if there is a pattern or a reason for persistent adverse variance. The analysis will provide you with some clues about incentivize or modifysuch behaviour via the budget building process.Figure 10 Relationship between costsDirect costVariable costOvertime brought on by finance in voices 20.23Fixed costWeekly overtime to technical information to engineering 12.60Indirect costBreak-even analysisBreak-even analysis identifies the level of activity and risk at which an organisation can generates no surplus or deficit. In the case of an over-budgeting write out it relates to the point where the logistical function is in budget and will not be penalized for being over spent illustrated in figure 11.TotalJanuaryFebruaryMarchAprilMayJuneJuly2,1022,6502,5462,4664,5926,0416,457Over BudgetNet Total = 26,854Total Budget- 48,000Monthly allowance 4,000= 48000-26,854 = 21,14621,146(Fixed cost)/ 6 months = 3,524 per month in overtime remaining3,524/ 15 material managers= 234.93 per managerDirect cost 234.93/ 12.60 = 18.64(Contribution) weekly hours per monthorIndirect cost 234.93/ 20.23 = 11.61(Contribution) weekend hours per monthFigure 11 Break-even analysisConclusionFrom the analysis, there is a clear budget information problem within the logistical function the problem solving frame work has identified several problem areas. By Using the 4 Ps to illustrate Material managers working more on a weekend which has a higher premium rate than daily working. The limitations of the incremental budgeting as an effective forecasting tool. 10 criteria which are essential for good-quality information for decision-making. In which 3 criteria are not being met. In addition, not identifying true cost drivers within the budget. In which material managers that are working more on a weekend are not identified. These factors combined have affected the logistical function staying within their overtime budget.RecommendationBudgeting is part of the control process in organisations the control loop (Understanding marketing and financial information, P. 134). The setting objectives, planning and implementing tasks, monitoring progress, reviewing results and adjusting tasks are crucial in staying and planning budgets illustrated in figure 12. Based on the investigative ex amination and analysis of the problems these recommendations should improve the over- budget situation and recurrence productivity.Figure 12 recommendations within the budget control loopCheck against overtime sheets past weeksIf not working- restart from the begin of the loopOperational levelProvide parts and technical informationUse recommendation outlined in action plan to control material manger overtime budget- budget building processUsing the SMART framework from (Understanding marketing and financial information, Pg 122) the action plan will be outlined as the followingRecommendationTimelineStrengthsWeaknessesOpportunitiesThreats(Price)Material manager weekly overtime sheets sent to senior material manager1 week to startGiving back control to the line manager by improving the Relevant, Communicated to the right person and Timely elements of information accession of Senior material manager workloadTo start a new process, which can be adapted throughout the company and monitor usage for next year budget reviewMaterial managers capacity feel disempowered which might affect there motivation(Place)Weekend overtime needs pre-approval1 week to startGiving back control to line manager by improving the control element of the budgeting loop. In addition the material having to work on a weekend might increase their moraleIncrease of Senior material manager workloadTo start a new process, which can be adapted throughout the company and monitor usage for efficiency of material mangersIdentification of cost driversControl of weekend working (indirect labour)Material managers might feel disempowered which might affect their motivation(Product) + PromotionFinance manager with child(p) the invoices on a Monday instead of a Friday2 weeks to startSpread the work load of the material managerDirect labour costIncrease of material managers weekly workloadWeekend overtime can be used to complete other essential engineering taskBuild up of daily work that carried over from day to dayRolling budgetsNext financial yearFlexibility is built into the budgeting system to deal with any changes arising from day to day activitiesUpdated much more frequently increasing work loadIt encourage a high level of learning and flexibilityRolling budget can be expensive in terms of management and administrating time. Which might affect management morale and less time to manageActivity based costingNext financial yearUnderstand what and where is driving costsVery time consuming, checking each material managers overtime sheet for cost driversUnderstand of cost driversbefore an informed decision can be reachedIf inappropriate drivers are selected. then it could lead to incorrect decisionsresulting in loss of efficiency,de-motivation of staff and ultimate failure of the businessWork shredding to engineering giving medication clerks2 weeksReduce in material manager weekend overtime- It asserts, on quite strong evidence, that 80% of our results are generally produced by 20% of our effort and that the remaining 80% of our effort is swallowed up in achieving that last 20% of our resultsIncrease inadministration clerksworkloadTraining have to be provided- costTraining and developmentIncrease in errors by new users. 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