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BUDGET AND BUDGETARY CONTROL
SUBMITTED By
S.SANDEEP
(HT. No 2129-09-672-016 )
A Project submitted in partial fulfillment for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
DEPARTMENT OF BUSINESS ADMINISTRATION
INFORMATION AND RESEARCH INSTITUTION OF
AURORA,MOOSARAMBAGH
(AFFILIATED TO OSMANIA UNIVERSITY)
(2009-2011)
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INFORMATION AND RESEARCH INSTITUTE OF AURORAMOOSARAMBAGH
CERTIFICATE
This is to certify that the project entitled “BUDGET AND RUDGETARY
CONTROL TA BEVCON PVT LTD” submitted to the Osmania University in
partial fulfillment for the award of degree of Master of Business
Administration has been carried out by S.SANDEEP Hall-Ticket Number
2129-09-672-016, who is a bonafide student of Information and Research
Institute of Aurora ,Moosarambagh, Hyderabad for the academic year 2009-11.
HEADOF THE INTERNAL
DEPARTMENT GUIDE PRINCIPAL
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DECLARATION
I hereby declare that this Project Report entitled “BUDGET AND
BUDGETARY CONTROL” done at BEVCON WAYORS submitted by me in partial
fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION at
INFORMATION AND RESEARCH INSTITUTE OF AURORA
I further declare that this work is not been copied or lent and it is not submitted to any
other university or institution for the award of any degree/diploma/certificate or published any
time before.
Name & Address of the student Signature of the Student
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ABSTRACT
Operational management needs to know the causes of off-standard performance in order to
improve operations. The knowledge of variances (real result versus budget) will aid control, at
least if and when these variances are understood well enough. The only criterion for the
calculation of a variance is it usefulness.Ofcurce variances must be calculated immediately
After the event and one ahould act upon them adequately.
Budget processes in many cases actually exemplify what is harming companies instead of
helping them Jensen,2001,describeswhat is happening in practice. Measuring performance, by
whether or not achieving set targets for the period or missing them, is ridiculous. Budgets and
targets mean nothing without thorough detailed budgetary control; how should it be
conducted
Variance analysis, the way it is taught at many schools and universities, in accordance with a
wide variety of textbooks, is put to the test. This paper presents a few examples, with quotes
from various textbooks and examinations. Problem definitions are quoted literally. Working-
outs as explained by famous writers/lecturers/consultants are given where necessary and
otherwise they are available at the quoted places in literature. The author's opinion is that
these working-outs cannot stand the test. Anyway my opinion is not important, the reader
decides. I give my elaboration in full detail, in reaction to the corresponding working-out
published in well-known textbooks/examination papers, and may the best one prevail. Of
course the elaborations of others and myself have a lot in common, but the discrepancies are
at stake. Wrong, incomplete, unclear analyses will lead to mismanagement. In literature a so-
called Dutch method is advocated versus what is supposed to be the American way to handle
variance analysis i.e. solving the problem of budgeting and budgetary control. The author's
opinion is that only one calculating method can be the right one. Only the best integral
working-out is the essential base to better (operational) management.
Ofcourse variance analysis is but a means to an end. A deeper understanding of the state of
the company is the ultimate goal of all representations in budgeting and budgetary control.
Management's task is to find the reasons for the variances and to take proper action to bring
operations into line with the budget. Maybe the variances and trends indicate that the
standards need amendment.
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ACKNOWLEDGEMENT
I would like to express my gratitude for all the people, who extended unending
support at all stages of my project.
I wish to express my sincere thanks to Head of the Department Mr.G.N.SATISH
and my internal guide Mrs.Srinivas and also the management and staff of my
college for providing the guidance and support.
I express my sincere gratitude to my guide Mr.M.RAMESH of BEVCON
WAYORS PVT LTD,Hyderabad for sparing his valuable time in the valuable
information and suggestions all through, for the successful completion of the project.
Last but not least, I express my sincere gratitude to all the employees at BEVCON
WAYORS PVT LTD,. who has directly or indirectly contributed to the successful
completion of the project.
(S.SANDEEP)
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LIST OF CONTENTS
Chapters Description Pg.No.
1 Introduction
Need for the study 01
Scope of the study 02
Objectives of the study 03
Research Methodology 04
2 Review of Literature 6-35
3 Company profile 36-64
1. Company profile 36-40
2.Industry profile 41-53
4 Data Analysis & Interpretations 54-78
5 Summary and conclusion 79-82
Findings 79
Suggestions 80
Conclusions 81
Limitations 82
6 Bibliography 83
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CHAPTER – 1
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INTRODUCTION
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INTRODUCTION
Budget is essential in every walk of our life – national, domestic and business. A
budget is prepared to have effective utilization of funds and for the realization of objectives as
efficiently, as possible. Budget is a widely practiced technique and most of us use budgets in
some way or the other.
Budget is one of the emphasized terms used in efficient methods of planning and
control. It is employed, no doubt, in large business houses, but even the small businesses are
using it, in some informal manner. Budget in common parlance is understood as planning for
expenditure.
A budget is defined as a comprehensive and Co-ordinate plan expressed in
financial terms, for the operations and resources of an enterprise for some specified period in
the future.
In the views of E. H. Graham of the Chrysler Corporation, “Of the management
tools used by Chrysler Corporation, including computers, PERT, Operations Research (OR)
and system analysis and so on, budgets are un doubly the most important tool”.
Budget is always expressed in terms of money and quantity. The techniques of
budgeting are important applications of Management accounting.
Budgets are set in large business houses as well as in families. It is basically a
statement of expected income & expense under certain anticipated operating conditions.
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NEED AND IMPORTANCE OF THE STUDY
Budget schedule is so essential and must because during this period for which a budget is
prepared and employed. In terms of time, budget can be short and Long-terms Budget. Short-
term Budget is prepared on the basis of day-to-day administrations. They are generally
prepared in physical as well as in monitory. Long-term Budget is designed for a long period.
This is prepared in the case of major projects schemes to know in advances the probable
capital commitments
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SCOPE OF THE STUDY
The scope of the study is very wide as it ranges from the various specific budgets of
each department to the Master Budget and Performance Budget of the organization.
Master Budget is a “Summary of the budget schedules in capsule form made for the
purpose of presenting in one report the highlights of the budget forecast”. Performance
Budget involves evaluation of the performance of the organization in the context of both
specific as well as overall objectives of the organization. According to the National Institute
of bank Management Performance Budgeting technique is, “The process of analyzing,
identifying, simplifying and crystallizing specific performance objectives of a job to be
achieved over a period in the frame work of the organization objectives, the purpose and
objectives of the job. The technique is characteristic by its specific directions towards the
business objectives of the organization”.
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OBJECTIVES OF THE STUDY
1. To study the various aspects of budget and budgetary control.
2. To study the performance of the organization in terms of profitability.
3. To study revenue receipt and revenue expenditure of the organization
4. To study the actual performance with budget performance.
5. To facilitate centralized control with delegated authority and responsibility.
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RESEARCH METHODOLOGY
Case study method has been adopted to carry out the study. Both primary and
secondary data have been used to complete the study.
Primary data: Primary data was collected through interaction with personnel who are
working in finance and Accounts Departments of the organization.
Secondary data: Secondary data was collected from the company annual reports & other
relevant records. Afterwards, the data collected is processed and analyzed by using
appropriate analytical tools and techniques so as to examine the efficiency. The present study
was carried out for a period of thirty days in a prestigious organization i.e. Bevcon Wayors
Pvt. Ltd.
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2.1 “Budgetary control and performance evolution system in
corporaration in barain” by
- Author: Tamilmani.
Article from: The journal of accounting and
Finance.
Article date: year: Oct 2006-march 07.
Abstract:
This study examines some aspects of budgetary control and performance valuation systems by
utilizing data based on a questionnaire survey of 42 medium and large size companies located
in the state of Bahrin. The study finds that the conventional from of budget controllability
principle is practiced to a great extent managers end to greate slack to meet future
uncertainty the focus is on short-term performance evolution style is followed budget
variances are used to evauate manager’s ability, and for cost control purpose. Bonus is
affected by budget performance along with new assignments, but not salary.
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2.2 “Corporate budget planning, control and performance evaluation in
Bahrain” by
Author: P. L. Joshi,
Jawahar Al-Mudhaki
Article from: MCB UP Ltd
Article date:year:2008. volume:23
Abstract:
Budget planning:
Implementation and performance evaluation practices by utilizing a questionnaire
survey of 54 medium and large sized companies located in Bahrain. Most of the companies
prepare long-range plans and operating budgets, and they follow a definite budget procedure
and implementation methodology. Uses budget variances to measure a manager’s ability, for
timely recognition of problems, and to improve the next period’s budget. While both the listed
and non-listed companies have reported many similar budget practices, the main differences
were specific purposes served by budgets, degree of budget participation, periodicity of
variance reporting, and purposes and authority to evaluate budget variance reports. In certain
cases, firm size influences budgeting practices. Contributes toward filling a gap in the
literature on the use of budgets as a planning and control tool in developing countries. Most
prior studies were mainly confined to advanced countries. The study findings suggest the need
for research on attitudes held by the budgeters towards the use of budget variances in the
context of advanced management accounting techniques.
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CHAPTER – 2
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REVIEW OF
LITERATURE
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2.3 “Budgetary fairness and governmental program heads' turnover intention”
-Author: A. Blair Staley,
Article from: Emerald Group
Publishing Limited
Article date: 2009 september
Purpose – Empirical evidence from governmental budgeting and related organizational
decision-making contexts suggests that program heads will be less likely to leave their
governmental unit when they feel that governmental budgeting is fair. The purpose of this
study is to examine relationships between three forms of fairness in governmental budgeting –
distributive fairness, procedural fairness, and interactional fairness – and program heads'
intention to leave the governmental unit.
Design/methodology/approach – Questionnaire data were gathered from 87 US federal
government program heads with budget responsibility and analyzed with multiple regression.
Findings – Interactional budgetary fairness had a significant and positive unique
relationship with intent to leave after controlling for the other two forms of budgetary fairness
and three demographic variables. Neither distributive budgetary fairness nor procedural
budgetary fairness had a significant unique relationship with intent to leave.
Practical implications – Budgetary decision makers and budget staff in governmental
units can reduce program heads' intention to leave the governmental unit by promoting
interactional budgetary fairness through steps such as treating the program heads with
kindness and respect during budgeting and providing clear and adequate explanations for
budgetary decisions.
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Originality/value – This study is the first to examine relationships between the three forms
of organizational decision-making fairness and turnover intention in a governmental
budgeting context.
2.4 “Budgetary control of Australian police services and the new governance of security”
Author: Benoit DuPont Article from: University de Montréal, Canada. Article date: Oct 2009.
Abstract
Through the example of the Australian police services, this article examines the impact
of the New Public Management tools on strengthening administrative accountability.
Governments, faced with increasing social demand for security, have launched into political
auctions on the themes of police activity and social control. Relationships between the
authorities and the police administrators have been redefined, mainly through more rigorous
budgetary control. After a rapid examination of the administrative context that led to the
implementation of programme budgeting -the main government tool in this area -the article
examines the tensions that resulted from its introduction. Particular emphasis is placed upon
the limitations of such a tool in the field of security, which is undergoing profound
reconfiguration as a result of increasingly frequent cooperation between public, private and
hybrid actors.
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2.5 “Union budget 2008-09” By
P.Chidambaram.
article from ;: finance India.
Article date : 2008. volume: 22.
Page: 1-30.
Abstract:
India economy, in the past three years, has shown sustained growth in GDP with an
increase from 7.5% to 9.4% and 9.6%, resulting in an unprecedented average growth rate of
8.8%. Agriculture is at a disappointing note with a growth rate at only 2.65. A cause of
concern for economy has been raising prices of crude oil, commodities and food grains.
These are inflationary and put a pressure on domestic price. Keeping check on inflation
remains one of the corner stones for government’s policy. Economics has witnessed capital
inflows that are far in excess of the current account deficit. The budget has provided a much
needed support to agriculture by waiving the loans of farmers and doubling the agriculture
credit. The labor class has been provided insurance support along with support to mid-day
meal and providing health centers in rural areas. The salaries class has been conforted with
raise rise the minimum exemption limit and upward shift of slab rates.
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2.6 “Examine the importance of budgetary control.” By
Author: Mayor,
Article date: 2004 September.
Budgetary control in management is a critical component of the success of any business.
Mayors’s 7s, of project management (staff, skills, style, and stakeholder) all play a role in the
ability of a budget officer to maintain budgetary control. This paper shows that a clearly
defined budget, both during the early management planning stages and day-to-day working
budgets, is important. Further, a series of mile stones and out comes can help the budget
officer to maintain budgetary control. The paper explains that the responsibility for
overspreading can alternatively lie with customers, the budget management team, or
unforeseen outside influences, depending on the reason for the over spending. However, a
good budget officer always has some degree of responsibility for overspending and can help
control this process by effectively using milestones to help control the budgetary control
process
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DEFINITION OF BUDGET
The term “Budget” appears to have been derived from the French word “Baguette”
which means “Little Bag” or a container of documents and accounts. A budget can be seen as
an “Economic plan” for a given period of time.
CONCEPT OF BUDGET
Budget is as quantified plan for future activities – quantitative blueprint for action. It is
referred as a plan relating to period of time expressed in monetary and in quantitative terms.
The Charted institute of Management Accountants, (CIMA) defined budget as
follows: -
A plan expressed in money. It is prepared and approved prior to the budget period and
may show income, expenditure of the capital to be employed, may be drawn up showing
incremental effects a former budgeted or actual figures.
According to Gordon shilling law, “A business budget is pre-determined detailed plan
of action, developed and distributed as a guide to current operations and as a partial basis for
subsequent evaluation of performance”.
The Essentials of a Budget are:-
Financial and quantitative statement of the action plan.
It is planning device and also serves as a bases for performance evaluation and control.
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It is laid down prior to the budget period during which it is followed and based on
rights policy.
BUDGET MANUAL
A budget Manual lays down the details of the organizational set up, the routine
procedures and programmers to be followed for developing budgets for various items and the
duties and responsibilities of the executives regarding the operation of the budgetary control
system.
A budget manual is defined as a document schedule or booklet which sets out, inter
alia, the responsibilities or the persons engaged in the routine of and the forms and records
required for budgetary control. Budgets are to be drawn keeping in view the objectives of the
organization given in the budget manual.
The following are some of the most important matters covered in a Budget Manual:-
Introduction and brief explanation of the objectives, benefits and principles of
budgetary control.
Organization chart giving the titles of different personnel’s with full explanation of
the duties and each to operating systems and preparation of departmental and
functional budgets.
The entire process of budgeting programmer including the timetable for periodical
reporting.
Length of budget periods and control periods should be clearly states.
Procedures to be followed throughout the system should be explained in clear terms.
Outline of main budgets and their accounting relationships.
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Explanation of Key budgets.
The advantages to be derived from the use of budget manual are:
Every one knows in writing that what is his role, what is to be done and how it is to be done in the system of budgetary control.
As every thing is in writing. Ambiguity is avoided and reliance on memory is eliminated.
As one of the objectives of budgeting is communication, it is important to have budget
manual so that everyone in the organization can refer to it for guidance and
information about the budgetary process.
ADMINISTRATION OF BUDGETS
Budgeting takes up a lot of management time. Top managers want lower level
managers to participate in the budget process, because lower-level managers have valuable
knowledge about the day-to-day aspects of running the business. They also Creates greater
commitment and responsibility towards the budget among lower level managers.
The prevalence of budgets indicates that the advantages of budgeting systems
outweigh their cost. To gain the benefits of budgeting. Management at all levels of the
company should understand and support the budget and all aspects of the management control
system.
Budgets should not be administered rigidly. Changing conditions usually call for
changes in plans. A manager may commit to the budget, but a situation might develop in
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which some unplanned repairs or an unplanned advertising program would better serve them
in interest of the company.
BUDGETING
It is concerned with the implementation of the approved programmed within the
long-range plan. It is the act of preparing budgets. Budgeting is a way of managing Business
and Industry
CLASSIFICATION OF BUDGETS
The budgets are usually classified to their nature. The following are the types of
budgets, which are commonly used.
1. Classification according to Time
Long – term Budgets
Short – term Budgets
Current Budgets
2. Classification on the basis of Functions
Operating Budgets
Financial Budgets
Master Budgets
3. Classifications on the basis of Flexibility
Fixed Budgets
Flexible Budgets
1) CLASSIFICATION ACCORDING TO TIME
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Long – Term Budgets:
The budgets are prepared to depict long-term planning of the business. The period of
long-term budgets varies from five to ten years. The long-term planning is done by top level
management. Long time budgets are prepared for some sectors of the concern such as capital
expenditure, research and development, long-term finances etc. These budgets are useful for
those industries where gestation period is ling i.e. machinery, electricity, engineering etc.
Short-term Budgets:
These budgets are generally for one or two years and are in the form of
monetary terms. The consumer’s goods industries like sugar, cotton, etc., Use short-term
budgets.
Current Budgets:
The period of current budget is generally of months and weeks. These budgets
relate to the current activities of the business. According to Institute of Cost and Works
Accounts., London “Current Budget is a budget which is established for use over a short
period of time and is related to current conditions.
2) CLASSIFICATION ON THE BASIS OF FUNCTIONS
Operating Budget:
These budgets relate to different activities or operations of a firm. The number of
such budget depends upon the size and nature of the business. The commonly used operating
budgets are:
Sales Budget
Production Budget
Production cost Budget
Purchase Budget
Raw Material Budget
Labour Budget
Plan Utilization Budget
Manufacturing Expense or Works Overhead Budget
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Administration and Selling Expenses Budget etc.
The Operating Budget for a firm may be constructed in terms of programme or
responsibility areas, and hence consists of:
Programme Budget
Responsibility Budget.
Programme Budget:
It consists of expected revenues and costs of various products or projects that are
termed as the major programmes of the firm such as budget can prepared for each product line
or project showing revenues, costs and the relative profitability of the various programmes.
Programme Budgets are useful in locating areas where efforts may be required to reduce costs
and increase revenues. They are also useful in determining imbalances and inadequacies in
programme so that corrective action may be taken in future.
Responsibility Budget:
When the budget of a firm is constructed in terms of responsibility areas it is
called the responsibility budget. Such shows the plan in terms of persons responsible for
achieving them. It is used by the management as a control device to evaluate the performance
of executives who are in-charge of various cost centers. Their performance is compared to the
targets (Budgets), set for them and proper action is taken for adverse result, if any. The kinds
of responsibility areas depend upon the size and nature of business activities and the
organizational structure. However, responsibility area may be classified under three broad
categories:
Cost / Expense Centre
Profit Centre
Investment Centre
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Financial Budget:
Financial Budgets are concerned with case receipt and disbursements, working
capital expenditure, financial position and results of business operations.
The commonly used financial budgets are:
Cash Budget
Working Capital Budget
Capital Expenditure Budget
Income statement Budget
Statement or Retained Earnings budget
Budgeted Balance Sheet or position statement Budget
Master Budget:
Various functional budgets are integrated into Master Budget. The Budget is
prepared by the ultimate integration of separate functional Budget. According to Institute
of Cost and Works Accounts, London, “The Master Budget is the summary Budget
incorporating its functional Budget”. The Budget Officer prepares Master Budget and it
remains with the top-level management. This budget is used to co-ordinate the activities
of various functional department and also to help as a control device.
3) CLASSIFICATION ON THE BASIS OF FLEXIBILITY
Fixed Budget:
The fixed budgets are prepared for a given level of activity the budget is
prepared before beginning of the financial year. If the financial year starts in January then
budget will be prepare a month or two months earlier(November or December). The
changes in expenditure arising out of the anticipate changes will not be adjusted in the
Budget. These is a difference of about twelve months in the budgeted an actual figures.
According Institute of Cost and works Accounts, London, “Fixed Budget is a budget
which is designed to remain unchanged irrespective of the level of the activity actually
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attained”. Fixed budget are suitable under static conditions. If sales expenses and costs can
be forecasted with greater accuracy then this budget can be advantageously used.
Flexible Budget:
A flexible budget consists of series of Budgets for different level of activity.
It therefore, varies with the level of activity attained. A flexible Budget is prepared after
taking into consideration unforeseen changes in the conditions of the business.
A flexible Budget is defined as Budget which by recognizing the difference between
fixed, semi-fixed and variable cost is designed to change in relation to the level of activity.
The flexible budgets will be useful where level of activity changes from time to time. When
the forecasting of demand is uncertain and the undertaking operate under shortage of
materials, labour etc. this Budget will be more suited.
OPERATING BUDGETS
1) Sales Budget:
A Sales Budget is an estimate of expected sales during a Budget period. A sales
Budget is known as a nerve center or backbone of the enterprise. The degree of accuracy with
which sales are estimated will determine the practicability of operating Budgets. A sales
Budget is the starting points on which other budgets are also bases. A sales Budget lay down
potential sales figures in value as in quantity. It lays down a comprehensive plan and
programme for sales department. The sales manger is made responsible for preparing Sale
Budget. He uses all possible factors to be taken into account while preparing a sales Budget.
2) Production Budget:
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Production Budget is built up in terms of quantities and money. The quantities are
entered at the beginnings and when the remainder of the Budget has been built up and the cost
of production calculated the costs are entered to compile a production cost Budget. In
preparing the production Budget the following factors should be considered.
Principal Budget factor, e.g. if the sales be the key factor then sales Budget, otherwise
other Budget.
Production planning and determination of optimum capacity.
The opening and closing stocks.
Management policy regarding make or buy of components.
3) Production Cost Budget:
A purchase Budget gives the details of the purchases which must be made to meet
the needs of the business. It includes all items of purchase, such as raw materials, indirect
materials and other equipment. However, purchase Budget for raw materials is the most
important and the following are required to be considering in preparing this Budget.
4) Purchase Budget:
A Purchase budget gives the details of the purchases which must be made to
meet the needs of the business. It includes all items of purchase, such as raw materials,
indirect materials and other equipments. However, purchase Budget for raw materials is the
most important and the following factors are required to be considering in preparing this
Budget.
Opening and closing stocks
Unfulfilled orders at the beginning of the budget period.
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Storage space, economic buying quantity and financial resources.
The prices to be paid.
5) Material Budget:
A Materials Budget shows the estimated quantities as well costs of raw
materials and components required for producing goods as per production Budget. At the
stage of preparation of materials Budget is used to obtain the cost of each material consumed.
It serves the following purposes.
It assists purchasing department in planning the purchases.
It helps in the preparation of purchase Budget
It provides data for raw materials control.
6) Labour Budget:
This Budget gives and estimates the requirements of directs labour essential to
meet the production target. This Budget may be classified into “Labour requirement budget”
and “Labour Requirement Budget”. The purpose of Labour Budget is to assist in the provision
of the correct number and type of Employee for the projected output. Once the preliminary
classification of labour into its principal grades has been carried out, the labour requirements
for each product are then set with the help of time and motion studies. From the total mean-
hour required for production labour requirements are ascertained and from the estimated rate
per hour, labour cost per hour, labour cost per unit is determined.
7) Plant Utilization Budget:
This budget indicates that the plan and machinery requirement to meet the
budgeted production during the period. Such a budget will detail the machine load in every
department and indicate the extent of under or over loading. Thus management may get useful
information regarding the effective utilization of plants and machinery in an organization.
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8) Manufacturing Overheads Budget:
This Budget gives an estimate of the works overhead expenses to be incurred
in a budget period to achieve the production target. The budget includes the cost of indirect
materials, indirect labour and indirect works expenses. The budget may be classified into
fixed cost, variable cost and semi-variable cost. It can be broken into departmental overhead
can be estimated on the basis of past information after taking into consideration the expected
changes which may occur during the Budget period. Variable expenses are estimated on the
basis of the budgeted output because these expenses are bound to change with the changes in
output.
9) Administration Cost Budget:
All the administration costs relating to each Budget center should be separately
and then incorporated in the administration cost Budget. A very important aspect of
predetermining administration costs is to make sure that all administrative functions are
carried out as effectively as possible. Thus, this budget represents forecast of the cost of
selling and Distribution for Budget represents forecast of the cost of selling and distribution of
budget period and is clearly related to the sales Budget. All expenses relating to selling and
distribution of the various products as indicated in the sales budget are included in it. These
expenses are based on the volume of sales distribution overhead. Long-term expenses
advertisement are divided into fixed and variable categories with reference to volume of sale,
separate Budgets are of selling and distribution costs as cost of transport department are
included in the departmental production cost Budget form control point view rather than
including in selling and distribution costs Budget.
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FINANCIAL BUDGET
1) Cash Budget:
This Budget gives and estimate of the anticipated receipts and payment of each
during the Budget period. So, this Budget is divided into two parts, one showing the estimated
cash receipt on account of cash sales, credit collections and miscellaneous receipt and the
other showing the estimate disbursement on account of cash purchases, amount payable to
creditors, wages payable to workers, indirect expenses payable, Budgeted, wages payable to
workers, indirect expenses payable, budgeted capital expenditure etc. In short, every factor
which affects the receipts and payments of cash are taken into accounts in the preparation of
this Budget.
2) Capital Expenditure Budget:
The Capital Expenditure Budget gives an estimate of the amount of capital that
may be needed for acquiring the fixed assets required for fulfilling production requirements as
specified in the production budget. The Budget is prepared after taking into consideration the
available productive capacities, probable reallocation of the existing assets and possible
improvement in production techniques. Separates Budget may be prepared for different items
of assets such as plant and equipment Budget, building budget, etc.
The capital expenditure Budget is an important Budget providing for acquisition of
assets, necessitated by the following factors:
Replacement of existing assets.
Purchase of additional assets because of starting up of new lines of production.
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Purchase of additional assets to meet a proposed increases in production due to
increase in demand.
Installation of an improved type of machinery so as to reduce cost of production.
Thus, Capital Expenditure Budget enables one to know what new fixed assets are
needed and what will their costs rate of return.
Purposes:
The objectives of Capital Expenditure Budget are stated below:
To enable the company to establish system of priorities in expenditure
To correct capacity imbalances.
To provide a tool for controlling capital expenditure.
To make proper financial provision to meet planned expenditure.
To provide Budget of depreciation and maintenance costs for inclusion in the
department expense Budgets.
PERFORMANCE BUDGETING
“Performance Budgeting” had its origin in the U.S.A after Second World War. It
tries to rectify some of the shortcomings in the traditional Budget. In the traditional Budgets
amounts are earmarked for the objects of expenditures such as salaries, travel, office
expenses, grant-in-aid etc. In such system of Budgeting the money concept was given more
prominence i.e. estimating or projecting rupee value for the various accounting heads or
classification of revenue and cost. Such system of budgeting was more popularly used in
government department and many business enterprises. But such system Budgeting control of
performance in terms of physical units or the related costs cannot be achieved.
These days Budgets are established in such a way so that item of expenditure is related
to specific responsibility center and is closely linked with performance of that standard.
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Developing work programs and performance expectations by assigned responsibility is the
achievement and objects of the enterprise. Thus, in performance Budgeting classification of
expenditure follows a three-tier pattern viz. Function-Programme - Activity.
Advantages of Performance Budgeting:
The following are the main advantages of performance Budgeting.
It presents clearly the purpose and objectives for which funds are required.
It gives better appreciation of Budgeting by legislature.
It improves Budget formulation process.
It enhances accountability of the executives.
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A Systematic Approach to develop the performance budget
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Objective Structure
DevelopFunctionPrograms
Execution&
Record Keeping
Review &
Control
Organizational
StructureDevelop Physical
Targets
ZERO BASE BUDGETING
Under Zero Base Budgeting methods, before preparing a Budget a base determined
form which the Budget process begins. Quite often current year’s Budget is taken as the base
or the starting point for preparing the next year’s Budget. The figures in the base are charged
as per the plan for the next year. This approach of preparing Budget is called “Incremental
Budgeting” since the Budget process is concerned mainly with the increases or changes in
operations that are likely to occur during the Budget period. For example, sales of the current
year’s Budget for sales will be current year’s sales plus and allowance for price increases and
expected changes in sales volumes. The main drawback of this approach is that it perpetuates
the past inefficiencies.
Zero Base Budgeting is an alternative to Incremental Budgeting. It was introduced at
Texas Instruments in USA in 1969 by peter pyre, who is known as the father of Zero Base
Budgeting. It is managerial tool and is steadily gaining acceptance in the business community.
Zero Base Budgeting is not based on Incremental approach and precious figures are not taken
as the base for preparing next year’s budget. Instead, the Budget figures are developed with
zero as the base, which means that a budget will be prepared as if it is being prepare for a new
company for the first time.
In Zero Base budgeting, budget requests for appropriation are accepted on the basis of
cost / benefit approach, which ensures vale for money. If question long-standing assumptions
and systematically examines and perhaps abandons any unproductive projects.
This means that those activities which are of no value find no value in the forthcoming
Budget even though these might have been an integral part of the past budget prepared under
the traditional approach. Zero Base budgeting in way are tries to locate those activities not
essential.
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The important steps in Zero Base Budgeting are:-
Identification of decision units in order to justify expenditure in their proposed
Budget.
Preparation of Decision Packages. Each package is a separate and Identifiable
activity. These packages are linked with corporate objectives.
Ranking of decision packages based on cost benefit analysis.
Allotment of funds based on the above resulting by following pyramid-ranking system
to ensure optimum results.
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ZERO BASED BUDGETING
TRADITIONAL BUDGETING
41
This is my previous level of expenditure
MANAGER
These are the Additions requires to meet the inflationary effects and expansion programs.
This is what I want for forthcoming period, for reasons enumerated.
TOP MANAGEMENT
MANAGER
TOP MANAGEMENT
This Expenditure will lead to these AdvertisementsIf the Proposal is discarded, the result
CONCEPT OF BUDGETARY CONTROL
Budgetary Control and Budgeting are often used inter changeably to refer to a system
of management control. “Budgetary Control” implies the use of a comprehensive system of
budgeting to aid management in carrying out its functions like planning, co-ordination and
control. According to C.I.M.A, London “Budgetary Control is the establishment of budget
42
A Certain amount to Sanction for a decision Unit.
relating to the responsibilities of executive of a policy and to continuous comparison of the
actual with the budgeted results, either to secure by individual action the objection of policy
or to provide a basis for its revision”.
According to Brown and Howard “Budgetary Control is a system of controlling costs
which includes the preparation of budgets, co-ordinating the debts and establishing
responsibilities, comparing actual performance with the Budget and acting upon results to
achieve maximum profitability.
Characteristics of Budgetary Control:
The Main Characteristics are as follows:
Establishment of Budgets for each function or department f the organization.
Comparison of actual performance with the Budgets on continuous basis.
Analysis of variations of actual performance form that of the budgeted
performance to know the reasons there of.
Co-Ordinal Features:
The three Co-Ordinal features of a “Budgetary Control” are as follows:
Planning
Co-ordination
Control
Therefore, Budgetary control embraces all and in addition includes sciences of
planning the Budgets to effects an overall management tool for the business planning and
control, quotes Rowland and William.
Objective of Budgeting Control
Budgetary control improves planning and in co-ordination and helps in control. The
reasons for producing budgets are as follows:
1) To aid planning of annual operation.
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2) To co-ordinate the activities of various parts and to ensure harmonious conditions
prevails in the organization with each other.
3) To communicates plans to the various responsibility center managers.
4) To motivate managers to strive to achieve the organizational goals.
5) To control activities.
6) To evaluate the performance of managers.
7)
Characteristics of a good budgeting
1) Budgeting process should be backed and supported by the chief executive of an
organization.
2) The Organization goal should be qualified and clearly stated. These goals should be
within the frame work of organization in plans.
3) There should be proper fixation and delegation of authority and responsibility.
4) The persons for execution of budget should participate in budget preparation.
5) The Budget should be realistic. It should present goals that are reasonably attainable.
6) A good system of accounting is also essential to make the budgeting successful.
7) The budget should cover all the phases of the organization and be continuous exercise.
8) Periodic report should be prepared. Comparing budget and actual results i.e.., there
should be effective follow up.
9) Clear-cut organizational lines should be established and the employees should be
impaired budgeting education.
10) The budgeting system should be bases on information, communication and
participation.
Requisites for a Successful Budgetary Control System
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1) The budgets are used to realize objectives of the business. In the absence of clear
goals, the budgets will also be unrealistic.
2) Budget preparation and control is done at every level of management. Every though
budgets are finalized at top level but the involvement of person form lower levels of
management is essential for their success. This necessitates proper delegations of
authority and responsibility.
3) An effective system of communication is required for a successful budgetary control.
4) Budgetary control may not be taken only as control device by the employees but it
should be used as a tool improves their efficiency.
5) Budgeting is done4 for every segment of the business. It will also require the active
participation and involvement of all employees. The success of budgetary control
systems depends upon the participation of all employees of the organizations.
6) Flexibility in budgets is required to make them suitable under changed circumstances.
Budgets are prepared for the future, which is always uncertain. Flexibility will make
the budgets more appropriate and realistic.
7) All persons should be motivated to improve their working so that budgeting is
successful. A proper system of motivation should be introduced for making this
system a success.
Advantages of Budgetary Control
The Budget programme forces the managers into plan ahead.
45
In forces early consideration of basic policies.
All members of top management participate in budget committee. For this reason even
planning a departmental level gets benefits of experience of seasoned executives.
Management is forces to put down in cold figures, what is means by satisfactory
results.
It demands the most economical use of labour, materials, facilities and capital.
In inculcates a habit of timely, careful, adequate considerations of all factors before
reaching important decisions.
The use of budget promotes understanding of the problems of co-workers.
It facilitates period self-analysis of the organization.
The use of budgets removes clouds of uncertainties for lower levels of management
regarding basic policies and objectives.
Management is forced to give timely and adequate attention to the effect of changing
business conditions.
Budgeting co-ordinates the activities of various department and functions of the
business.
Budgeting control aims at maximization of profits through careful planning and
control.
It directs capital expenditure in maximization of profits through careful planning and
control
It directs capital expenditure in the most profitable direction.
Budgetary control system creates necessary conditions for the introduction of standard
casting techniques.
A budgetary control system assists in delegation of authority and assignment of
responsibility.
Limitations of Budgeting
Budgeting cannot take place of management but is only a tool of management the
budget should be regarded not as a master, but as a servant.
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A budget programme must be dynamic and continuously deal with the chaining
business conditions. Budgets will lose much of their usefulness if they acquire rigidity
and are not revised with the changing circumstances
Budgeting is an expensive technique. The installation and operation of the budgetary
control system is costly affair as it requires the employment of specialized staff and
involves other expenditure which small concern may find difficult to incur.
Estimates are used as basis for budget plan and estimates are based mostly on
available facts and beset managerial judgments. Since a lot of human element is
involved in exercising managerial judgment. It is but natural to give some allowance
interpretation and utilization of estimated results. Budgeting based on inaccurate
forecasts is use less as a yardstick for the measuring of the actual performance.
The circumstances are constantly changing and therefore budgets and budgetary
techniques will not be useful, till they are continually adapted.
Budgetary control cannot reduce the managerial function to a formals. It is only a
managerial tool, which increase effectiveness of managerial control.
The use of budgets may lead to restricted use of resources. Budgets are often taken as
limits. Efforts may, therefore, not be made to exceed the performance beyond the
budgeted targets, even though it may be physically possible.
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CHAPTER – 3
48
INDUSTRY PROFILE
COMPANY PROFILE
About Thermo Engineers
49
Thermo Engineers Company, A Veteran in the E. P. S. Plant Industry with the
inception in 1998, launched manufacturing of E.P.S. Molding Plant, equipments at I-95 Site-
C, Surajpur Industrial Area, Greater Noida, Distt. Gautam Budh Nagar (U.P.)-201306. The
unit is situated at a distance of approx.
25 km from Delhi, one of the largest and fully equipped engineering unit suitable for Design,
Manufacturing and Molding of E. P. S. Plant (Machine, Mould, Filling Gun, Ejector, Water
cooling System, Power Pack, Boiler Cyclone & ID Fan etc.) Heat Exchangers, Pressure
Vessels, Structures and various E.P.S. Molding related equipment according to Client’s
requirements. These molds are manufacture for various types of packing and insulation.
Our design team consists of project managers and AUTOCAD operators. This department
engineers, designs, draws plan and writes specifications for the total project, including
equipment, piping, insulation, ductwork and controls. We utilize AutoCAD in all our jobs.
Systems are designed to meet or exceed current indoor air quality and energy standards. We
also offer Professional Engineering Consulting Services.
The equipments are being fabricated in the workshop shed located on the existing plot area of
600 Sq Metre. Due to phenomenal increases in domestic and international demand of these
equipments, we propose to increase our manufacturing capacity as well as our client’s also.
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Established in 1951, Elecon Engineering Company Ltd of Vallabh Vidyanagar, Gujarat, India,
pioneered the manufacture of material handling equipment in India. In more than five
decades, Elecon has designed and implemented several landmark projects in India as well as
abroad.
From a modest start of design and manufacture of Elevators and Conveyors from which
incidently, the company derives its corporate identity. viz. "Elecon". It has grown over the
years to be known as a pioneer of the concept of mechanised way of Bulk Material Handling
Equipment in India. During the span of more than 4 decades, Elecon has encompassed all the
major core sectors through its supplies of highly sophisticated equipment bearing ample
testimony of the symbolic mark of Elecon's unbeatable technology. Elecon has thus, made its
presence felt through consistent and satisfactory performance of its equipment in such core
sectors as fertilizer, cement, coal/power generation, chemical, steel plant and port
mechanisation etc., across the country.
Elecon is the first company in India to have manufactured sophisticated equipment for Bulk
Material Handling. Its product range includes design, engineering, manufacture, supply,
erection and commission of:
Wagon tipplers
Bucket wheel stacker/reclaimers
Barrel-type blender reclaimers
Fertilizer reclaiming scrapers
Limestone pre-homegenizing and blending plants
Single and twin bucket wheel bridge-type reclaimers
Crawler-mounted trippers
Stationary and shiftable conveying systems for open cast lignite mines
Integrated coal handling plants for power stations
Underground mining conveyors
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Light Lift India Pvt. Ltd. is a sister concern of the Haryana Mechanical Industries, established in the year 1966 for the manufacturing of Tiger Brand Chain Pulley blocks and Travelling Trolleys. In 1985, Haryana Mechanical Industries expanded their unit for the manufacturing of Overhead Cranes, Hoists, Hydraulic Hand Pallet Trucks, Hyd. Jib Cranes, Stackers, Drum Trolley, Delivery Tables etc. Under the Brand name of Light Lift Since then it has been one of the leaders in the field.
Light Lift is an ISO 9001: 2000 certified company accredited by ICL Certifications Ltd, New Zealand for Design, Manufacturing, Supply & Export of Material Handling Equipments.Another giant step was the establishment of the marketing unit in the name of Nagpal Marketing to market these products across India.
In 1996 Light Lift and Haryana Mechanical Industries diversified into manufacturing of Hand Tools for Electrical and Electronics Industries under the Brand Name of Nagpal. Nagpal Marketing is looking for Domestic Sales and Light Lift India Pvt. Ltd. is looking for International Sales of these Products.
Quality is of prime importance to us and our efforts to maintain the highest quality standards has helped us stay ahead of competition. Backed by strict quality control at each stage of production, with the latest in technology employed for maximum customer satisfaction.
Backed by a rich industry experience, we are able to comprehend precise requirements and cater to our clients in a most effective manner. We are engaged in offering a quality range of Industry Ovens, Conveyors, Painting Booths and Other Associated Equipment. Our range includes Material Handling Conveyor, Material Handling Conveyor & Oven, Industrial
52
Fired Oven, Diesel Fired Oven, LPG Fired Oven, Anodizing Plants and Electrical / Diesel/ LPG Fired Oven. These are fabricated using quality material & components and appreciated for their high performance, low maintenance and easy operations. Our range of Industry Ovens, Conveyors, Painting Booths and Other Associated Equipment is extensively used in various industries such as powder coating, food, rubber and chemical. Our range of Industry Ovens, Conveyors, Painting Booths and Other Associated Equipment is of optimum quality and tested at each and every level of production in order to ensure its compliance with international quality standards. Apart from the quality products, we also serve our clients with valuable services like Powder Coating Booths, Hot Air Generators & Ventilation Blowers, Imported Burners (Sales, Service & Spare Parts), and CED Coating Plants. In addition to this, we also hold expertise in offering other valuable services like Automatic Phosphating Plants, M.S. & S.S. Fabrication Works. Further, we ensure to carry out fabrication work and valuable services as per their requirements. Moreover, we have also developed a streamlined supply chain and a wide distribution network for the prompt processing of our domestic as well as international orders. All these attributes have enabled us to build a huge client base all across the globe.
Business Specifics:
Company Profile: Manufacturer, Supplier and Exporter Based at: Faridabad, Haryana (India)
Smaco Engineering Pvt. Ltd. is a preeminent Manufacturer, Supplier and Exporter of a vast range
of Material Handling Equipment. Promoted by a group of engineers, the company is actively
engaged in the production of Material handling Equipments such as EOT Cranes, Jib Cranes, Electric
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Wire Rope Hoists, Battery Operated Stacker, Cage Lifts, Hydraulic Lifting Platform and so forth. We
are strategically located in Maharashtra, India and reaching out to client based in Indonesia, Saudi
Arabia, Mauritius, the Gulf Region and other developing Asian Countries.
Capitalizing on our rich experience in this industry, we have a complete understanding of what
clients require even before they place their demands with us. With the power of modern technology,
we are able to provide highly advanced Material Handling Equipment that aid the client’s business in
many ways. Our motto has always been to maintain long-term relations with the clients for a win-win
situation with the clients, where we remain their dependable suppliers and they help us in improving
our process continuously. Along with an assurance of the finest quality from our end, clients are also
benefited with the timely delivery and the best deals in the industry for the Equipment that we
provide.
Infrastructure
Our state-of-the-art facilities are located near Navi Mumbai, equipped with the latest machinery and
tools to carry out the manufacturing, finishing and packaging of the equipments. We are located near
to the major ports, where our spacious warehousing and transportation facilities enable us to cater to
the clients in the best way.
Team
The team at ‘Smaco’ believes in pursuing excellence with the utmost perfection. We encourage a
healthy culture of innovating on a constant basis and have a group of expert engineers and
experienced technicians, which is trained regularly to keep them updates on the latest technologies
and practices in the industry.
COMPANY PROFILE
Bevcon Wayors Pvt Ltd., Hyderabad is a major Player / Manufacturer of Material
Handling Equipments in the India. Bevcon is also one of the fastest growing SME.
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Established in 1991, Bevcon had a steady growth and now have established as one of
the leading Material Handling, Crushing and Screening Systems Company in India.
Equipments Manufactured
Bevcon Wayors is into the Business of Bulk Material Handling, Crushing, and
Screening Equipment for all sectors of industries. Bevcon Wayors Designs, Manufactures,
Supplies and undertakes Erection & commissioning at customers site. All Equipments and
products undergo rigorous quality control checks and are manufactured to the highest
Engineering Standards.
VISION & MISSION OF THE ORGANIZATION
We envisage being a market leader by 2010 in Bulk Material Processing & Handling
Solutions through satisfying customers, stakeholders and employee needs.
Our Outlook for the Vision:
As a part of our vision we are bringing in the business & manufacturing expertise
from Global Players and forge new business alliances to bring in Futuristic Technologies to
Indian Markets. We have Technology tie-ups with companies such as Burwell Technologies
of Australia, Sanland - China, Friedrich & Noma - Germany, Statec – Austria, Nergeco
France-Australia, Thermostop - Canada.
Bevcon has the Professional and Competent staff with skills on par with International
Standards to gear up for the above.
Our Mission is to create smarter engineering solutions evolved by a technology
driven team. The mission is achieved by the following edicts.
Strong Engineering and Design base.
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Strict conformance and compliance to quality of equipment and work procedures.
Excellence in service to customers.
Honesty, integrity and transparency in all relationships.
Respect for the individual.
We provide Turnkey Solutions for Your Bulk Material Handling needs for
Pharma Crushing | Screening | Conveying
Our expertise is based on nearly decade and half experience in designing custom
material handling solutions for various sectors of Industry.
The Turnkey Material Handling Solutions can be a combination of Crushing - Screening
- Conveying Systems coupled with Pneumatic Handling and cartridge dust extraction system
are Engineered and Executed to your needs.
PROMOTORS:
P. SUNEEL LAKSHMAN
Managing Director
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He is the driving force behind the company and has a clear vision of making
our organization as the best Project Engineering Company in Bulk Material Handling, Dust
Extraction and Pneumatic Handling.
Y. SRINIVAS REDDY
Technical Director
A Mechanical Engineer with 20 years of experience in material handling equipments
technology. He is the founder director of the company and heads our manufacturing facility.
His forte is Design and Engineering for complex Material Handling requirements. He
is also the key force in new product development at our company.
Top of FormBEVCON WAYORS ORGANISATION STRUCTURE
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Budget Department of Bevcon
A concern must have an organization chart. This is necessary in order to have clear
idea of authority and responsibility of Chief Executive so that they may be no conflicts among
Function Executive for shrinking responsibility and making other’s responsibilities for poor
performances. In preparing, Maintaining and administrating the Budget section at SSE
consists of an Accounts Officer and two assistants guided by one Deputy Controller of
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MC MANAGEMENT
BEVCON WAYORS
Cherlapalli
BEVCON WAYORS Regulatory Board
Complete Aided institute
Research & Development
Sector
Industrial Sector Services support Sector
DEPARTMENTS OF MC
Accounts who will be supervised by joint controller (F&A) who is the responsible person
from Finance Wing to present the Budget to the Executive Committee and the Head of Unit
Viz, Chief Executive.
After the approval of the Chief Executive, the Budget proposals will be placed before
Bevcon Wayors Board. The Budget proposals will be submitted to the Department of Atomic
Energy, Mumbai for approval.
The Department after receipt of proposals scrutinizes the requirements of each unit
and after a detailed discussion, compiled proposal of the department as a whole will be places
before Atomic Energy Commission. In respect of the capital projects the approval of the
planning Commission has to be obtained before execution of any ongoing for new project.
Function of Budget Wing at SSE
Issue of Budget Circular.
Collection of data relating to actual Receipts and Expenditure of previous year.
Compilation of estimates of Receipts and Expenditure received from various authorities
Preparation of various supporting break-up statement of Receipts and Expenditure Compilation of budget Estimates in respect of Receipts, Revenue Expenditure, Capital
Expenditure, Loans and advances, Provident Fund (Receipts and Payments) etc.
Monthly / Quarterly phasing of receipts and expenditure for periodical review and
financial control.
Preparation of monthly report of Receipts and Expenditure with supportive breakup
statements.
Preparation of Annual plan proposals in respect of Capital Projects (both ongoing and
new) for approval of Department as well as planning Commission.
Intimation of progress of expenditure in respect of Capital Projects to the concerned
project Co-ordinates.
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Review of receipts Expenditure for final grant of expenditure and surrender of funds.
If any.
Preparation of Appropriation Account (budget Estimate and Actual Expenditure and
Variations and the reasons there of)
Correspondence with concerned authorities in respect of all the above.
Preparation of budget at Bevcon
In SSE, the Budget of the organization is being prepared for the following. A detailed
estimate of the following is taken into consideration.
Receipts
Expenditure on Revenue Account
The Expenditure on Capital Account
The Budget estimates shall give the anticipated receipts and expenditure for the
ensuring financial year under each major, minor, sub and detailed heads of accounts.
Budget Period in Bevcon
Budget period is the period for which a budget is prepared and employed. In terms of
time, budget can be short and Long-terms Budget. Short-term Budget is prepared on the basis
of day-to-day administrations. They are generally prepared in physical as well as in monitory.
Long-term Budget is designed for a long period. This is prepared in the case of major projects
schemes to know in advances the probable capital commitments.
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In SSE, Budget is prepared for both Long-term (Five years plan), short-term (One year
Plan) and is reviewed periodically.
The Long - Terms Budget is made generally for the capital projects both for ongoing
and new projects and action plans will be drawn up for setting up of new projects with
a view to attain the predetermined objects to meet the future requirements. The plan
project, have to be first approved for the projects, will be as need based and revised as
per the availability of funds.
While preparing the Budget estimates for the ensuring year, a review of Budget
proposals made for the current year will be taken up during mid July and August or
each year. Any revision in the estimates will be proposed based on the anticipated
expenditure till end of financial year, this is known as Revised Estimates for the
current year.
Pre-requisites Met By Bevcon Wayors for Effective budgetary Control System
In order to ensure effective and successful implementation of budgetary control
system in organization, Bevcon Wayors Management has fulfilled the following pre-
requisites.
The objectives, plans and polices of the organization are spelt out in clear cut terms
without ambiguity.
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The organization chart in SSE, clearly defines the duties and responsibilities for each
level of executives.
In Bevcon Wayors the output level for which Budgets are fixed are spelled out clearly.
A Budget committee is constituted for effective functioning of Budgeting and
budgetary control system.
There is a well defined system of communication and reporting between various levels
of managements
Management has nominated Head of Finance as Budget Controller who is capable to
share his ideas with various authorities and. Co-ordinates the activities.
There is a Budget manual in Bevcon, clearly defining the plans, procedures etc., for
operation of Budget and control.
The Budget will be prepared for all related activates tasks in the firm, that they
represent completeness.
Budgets are prepared for all related activities / tasks in the firm, tat they represent
completeness.
Support of top management for effective implementation of budgetary system and
controls also exists at Bevcon.
Types of Budgets Prepared in Bevcon
Types of Budgets prepared in Bevcon, Hyderabad are:
1) Capital budget
2) Revenue budget and Receipt Budget.
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3) Public Accounts Budget.
1. Capital Budget: This consists of expenditure in capital projects proposals by Bevcon.
The Capital Budget is prepared based on the sanctioned cost of the project approved in the
five year plan quality. Capital payments consist of capital expenditure on acquisition of assets
like land, building, machinery, equipment and other establishment charges. For Capital
Projects the approval of the planning Commission has to be obtained before execution of any
Ongoing/New Project.
The Budget Estimates under the Capital Head will have to be made separately for
each project according to the aims and objects of the project and necessary requirements for
the same. The allocation of funds will depending upon the progress of the
2. Revenue and Receipt Budget: Revenue Budget consists of the expenditure in
connection with operating the plants. It consists of the expenditure relating to the following
items:
Purchase of raw materials.
Purchase of Consumables
Purchase of Spares and tools.
Establishment Charges.
Cost of fuel and maintenance of Vehicles.
Depreciation.
Interest.Revenue budget is proposed on a yearly basis. It is prepared based on
the production schedule for a particular year.
In Bevcon, the Revenue Expenditure is made for various operational facilities, they are:
Fuel fabrication Facilities: This deals with manufacture of Fuel components.
Tube plants: - Which deals with manufacture of Zircalloy and Structural Tubes for
the fuel requirements.
Estate Management: - This deals with the expenditure to wares maintenance of
Housing Colony of the employees.
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Department Canteen: - the expenditure to wares manpower and other related
expenditure Budget in maintaining canteen for the employees will be classified
under this head.
In addition to the above, expenditure towards security and transportation of the
employees etc., will fall under Revenue Head of the Organization.
Revenue Receipts: Revenue Receipts Budget is prepared based on the production
schedule and anticipated scale of products for the year. The receipts are projected based on
the requirement of the fuel boundless (PHWR & BEVCONR) by the operating reactors of
Nuclear Power Corporation and likely job works from private parties and sale of effluents,
special material etc.
3. Public Account budget: Besides the normal Receipts and Expenditure, Government
of India acts as custodian in respect of funds collected form its employees and also from
public.
For example, transaction relating to provident funds, small savings collections and
other security deposits etc., the money thus received is kept in the public account till their
final settlement as the money, generally speaking, does not belong to the government and has
to be paid back sometime or the other to the person and authorities who deposited on
fulfillments of the rules and regulation laid down by the government.
Action at Bevcon Wayors at Unit Level
Since the time of submission of the Budget proposals is standard, the unit has to
initiate action well in advance by calling for the requirements for the various agencies during
June of each year and collect the data by the end of the month. Various performs are designed
for the collection data. The important ones are:
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1) Man Power Budget
2) Machinery and Equipment
3) Supplies and materials
4) Motor Vehicles
5) Minor/Maintenance Works
6) Major Civil / Electrical Works for construction of capital projects.
7) Office and other administrative expenditure.
8) Interest and Depreciation Reserves etc.
The requirement of data in respect of machinery items, supplies and materials, major
works are being obtained form plants through online in various formats, which will be
compiled to assess the total expenditure under these heads for the unit as while. All the
information on plan projects is distinctive and will be scrutinized for utilization.
The Revenue Expenditure is granted for utilizations within the year ending 31 st
March of every year and any unspent amount will lapse and not available for the next unless
provided afresh while submission of revised proposals.
Whereas in respect of capital project the project cost is sanctioned for completion of
the project and the unspent could be spilled over to next year by making provision in Revised
Estimates. The revenue Expenditure depends upon the requirement during the year towards
the operational cost of the complete projects and there are no lower or upper limits whereas
the Capital Expenditure is limited to the sanctioned cost of the project as well as the approved
outlay during the Five year period.
Compilation of all the information object-wise and the draft proposals of provisions
required by each plant with reference to the draft proposals of provision required by each
plant with reference to the proposed production and overall requirement for the unit will be
submitted for approval of Chief Executive.
The major requirements for the unit are:
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Raw materials for production.
Toward power and Water expenditure payable to the local municipal.
Towards Transportation of staff, payment of APSRTC / PVT transporters.
Towards Diesel Oil required for both plants, power unit and also for vehicles.
Magnesium, zircon Sand, Zirconium Sponge etc.
Provision for these items will be cross matched with the production targets, previous
year, stock available, prevailing rates and likely time taken for delivery of items etc. All
general expenditure like office and administrative expenditure, taxed etc., Will be assessed
based on the actual requirement for the financial year and comparison will also be made with
the actual expenditure during the previous financial year.
Requirement of overtime will be provided as per the production targets and manpower
availability and will be restricted based on the direction of the Ministry of Finance etc. The
requirement of each plant will be reviewed and discussed with the concerned authorities,
possibility of incurring expenditure, postponement of requirement of next year etc., and
finally the entire requirement the unit will be formulated.
Manufacture seamless stainless steel an special alloy tubes for atomic Energy, Defense,
space and other private industries, Zirconium Alloy Components for Non-Nuclear application
such as fertilizer and heavy chemical industries and also high purity and advanced materials
for various hi-tech applications
Nearly decades of experience in the manufacture of products meeting stringent
quality requirement and continuous in house technology up-gradation has developed expertise
in design, has build a number of sophisticated equipment such as special chemical process
reactor high temperature sintering finances and pilger mills, made rapid strides furnaces in the
field of mechanical material handling and process automation. A few of this equipment have
been supplied to interested customers.
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Bevcon Wayors has a continuous HRD programmes for upgrading the skills and
knowledge of manpower. It has evolved and implemented sound occupational health, safety
and environment management systems. The green environs of the premises evolved and
implemented sound occupational health, safety and environment management systems. As an
employer, provides housing assistance, medical care and educational facilities
It has drawn up plans for strengthening corporate R&D and is passed to meet the
future requirement of the Power Progamme. As regards capital projects, review of the
expenditure up to date will be taken as base for revision in the requirement and progress of
work and arrival of major equipment shipment will be discussed and the provision will be
formulated project - wise.
Revenue receipts of the unit from the sale of products produced will be assessed based
on requirement of various units, and other private parties. The requirement of the unit as a
whole under both Revenue and Capital heads would be submitted to the Board and on
approval of the same proposal will be sent to department for consideration.
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CHAPTER-4
68
DATA ANALYSIS
AND
INTERPRETATION
69
STUDY ON BUDGET PREPARATION AT BEVCON WAYORS PVT. LTD.
The study involves various aspects of budgetary done at SSE, which consists of
Revenue Expenditure for the past seven years and to identify the process involved in control
of expenditure to maximize the efficiency of Revenue Expenditure.
The Revenue Expenditure on SSE for the past five years with break-up under
expenditure are tabulated below form Table No.1 to Table No.7
TABLE NO. 1SHOWING REVENUE EXPENDITURE BUDGET 2009 - 2010
(Rupees in Lakhs)S.No. Item Budget
EstimatesActual Variation
(Amount)Variation
(Percentage)
1. Salaries andOther
7150 7032.21 117.79 1.64
70
EstablishmentCharges
2. TravelExpenses(Foreign
Trips)
70 74.40 -4.4 -6.28
3. Supplies andMaterials
26872 37477.15 -10605.15 -39.46
4. Minor works 2600 2191.55 408.45 15.70
5. Interest andDepreciation
2000 2000 0 0
6.Motor Vehicle
150 66.17 83.83 55.88
7.
Office Expenses 3536.53 -1.53 -4.37
8. AdministrativeExpenses
35 36.53 -1.53 -4.37
9. Rent, RatesAnd Taxes
35 28.60 6.4 18.28
10. Others 39 33.31 5.69 14.58
Totals 39,489 49,495.88 -10,006.88 -25.34
REVENUE EXPENDITURE BUDGET FOR YEAR 2009-2010
71
Reasons for Variation between Budget Estimate & Actual Expenditure (2009-2010)
Saving under the Head Salaries due to shifting of premises to new cities head.
Increase under supplies and materials due to upwards revision of manuals.
Saving under the head of motor vehicles due to postponement of replacement of same
vehicles for the next year.
TABLE NO. 2
72
SHOWING REVENUE EXPENDITURE BUDGET 2008 - 2009 (Rupees in Lakhs)S.No. Item Budget
EstimatesActual Variation
(Amount)Variation
(Percentage)
1. Salaries andOther
EstablishmentCharges
6650 6743.42 -93.42 -1.40
2. TravelExpenses(Foreign
Trips)
78 75.83 2.17 2.78
3. Supplies andMaterials
27052 30947 -3895 -14.39
4. Minor works 2102 2373.98 -271.98 -12.93
5. Interest andDepreciation
7300 5500 1800 24.65
6. Motor Vehicle 103 52.47 50.53 49.05
7. Office Expenses 475 503.69 -28.69 -6.04
8. AdministrativeExpenses
35 36.53 -1.53 -4.37
9. Rent, RatesAnd Taxes
35 38.5 -3.5 -4.37
10. Others 1507 1544..82 -37.82 -2.50
Totals 45,337 47,816.24 -2,479.24 -5.46
73
REVENUE EXPENDITURE BUDGET FOR YEAR 2008 -2009
Reasons for Variations between Budget Estimate & Actual Expenditure (2008 - 2009)
Increase in salaries on Account of liberated LTC provision
Increase in Office Expenses on Account of increases Transport and issue of Uniform
for Ministerial Staff
Increase in Rent, Rates & Taxes as per demand for property Tax.
74
TABLE NO. 3SHOWING REVENUE EXPENDITURE BUDGET 2007 - 2008
(Rupees in Lakhs)S.No. Item Budget
EstimatesActual Variation
(Amount)Variation
(Percentage)
1. Salaries andOther
EstablishmentCharges
6100 6216.18 -116.18 -1.90
2. TravelExpenses(Foreign
Trips)
83 34.1 48.90 58.91
3. Supplies andMaterials
28349 25497.79 2851.21 10.05
4. Minor works 2040 2102.44 -62.44 -3.06
5. Interest andDepreciation
9850 8896 954 9.68
6. Motor Vehicle 125 53.92 71.08 58.86
7. Office Expenses 506 445.90 60.1 11.87
8. AdministrativeExpenses
35 35.31 -0.31 -0.88
9. Rent, RatesAnd Taxes
26 26.20 -0.2 -0.76
10.Others 1286 1335.27 -49.27
-3.83
Totals 48,400 44,643.11 3,756.89 7.76
75
REVENUE EXPENDITURE BUDGET FOR YEAR 2007 -2008
Reasons for Variations between Budget Estimate & Actual Expenditure
(2007–2008)
Increase in Salaries due to merger of 50% of Dearness allowance on 01-04-2007.
Saving under the head traveling Expenses, Office expenses due to Economy measure.
Decrease is mainly due to MDU supply and other materials based on production
schedule.
Savings under Motor vehicles due to non-receipt of sanctions.
76
TABLE NO. 4SHOWING REVENUE EXPENDITURE BUDGET 2006-2007
(Rupees in
Lakhs)
S.No. Item BudgetEstimates
Actual Variation(Amount)
Variation(Percentage)
1. Salaries andOther
EstablishmentCharges
6231 5682.13 548.87 8.8
2. TravelExpenses(Foreign
Trips)
116 73.53 42.47 36.61
3. Supplies andMaterials
22078 25452.56 -3374.56 -15.28
4. Minor works 2288 1560.31 727.69 31.80
5. Interest andDepreciation
7500 9850 -2350 -31.33
6. Motor Vehicle 125 46.76 78.24 62.59
7. Expenses 506 424.35 81.65 16.13
8. AdministrativeExpenses
35 33.58 1.42 4.05
9. Rent, RatesAnd Taxes
18 26.80 -8.8 -48.88
10. Others 1289 1303.07 -14.07 -1.09
77
Totals 40,186 44,453.09 -4267.09 -10.61
REVENUE EXPENDITURE BUDGET FOR YEAR 2006 -2007
Reasons for Variations between Budget Estimate & Actual Expenditure (2006 – 2007)
Saving under the head Salaries due to shifting due to shifting of provision to new cities
head.
Saving under the Head Traveling Expenses, Office Expenses, foreign Expenses, due to
economy.
Increase under supplies and materials due to upward revision of manuals
Savings under the head of motor vehicles due to postponement of replacement of same
vehicles for the next year.
78
TABLE NO. 5
SHOWING REVENUE EXPENDITURE BUDGET 2005-2006
(Rupees in
Lakhs)
S.No. Item BudgetEstimates
Actual Variation(Amount)
Variation(Percentage)
1. Salaries andOther
EstablishmentCharges
6241 6686.20 -445.2 -7.13
2. TravelExpenses(Foreign
Trips)
120 72.88 47.12 39.26
3. Supplies andMaterials
21162 20844.36 317.64 1.50
4.Minor works 2234 1889.79
344.21 15.40
5. Interest andDepreciation
28200 28200-
-
6. Motor Vehicle 135 51.96 83.04 61.50
7. Expenses 500 470.98 29.02 5.80
8. AdministrativeExpenses
30 29.69 0.31 1.03
9. Rent, RatesAnd Taxes
17 25.57 -8.57 -50.4
79
10. Others 732 652.34 79.66 10.88
Totals 59,371 58,923.77 447.23 0.75
REVENUE EXPENDITURE BUDGET FOR YEAR 2005 -2006
Reasons for Variations between Budget Estimate & Actual Expenditure (2005 – 2006)
Excess under salaries due to payment of updating allowance.
Saving under the head minor works due to less rates claimed by M/s. APGPCL.
Saving under supplies and materials for postponement of procurement of certain
materials.
80
TABLE NO. 6
SHOWING REVENUE EXPENDITURE BUDGET 2004-2005
(Rupees in
Lakhs)
S.No. Item BudgetEstimates
Actual Variation(Amount)
Variation(Percentage)
1.Salaries andOtherEstablishmentCharges
6274 6087.90 186.10 2.96
2.TravelExpenses(ForeignTrips)
100 61.26 38.74 38.74
3.Supplies andMaterials
19515 16744.60 2770.4 14.19
4.Minor works
2481 2057.72 423.28 17.06
5.Interest andDepreciation
16000 16000
-
-
6.Motor Vehicle
90 109.20 -19.2 -21.33
7. Expenses 427
441.34 -14.34 -3.35
8. AdministrativeExpenses
45
23.17
21.83 48.51
9. Rent, Rates 30
81
And Taxes 12.57 17.43 58.10
10.Others
1148 956.86 191.14 16.64
Totals 46,110 42,494.62 3615.38 7.84
REVENUE EXPENDITURE BUDGET FOR YEAR 2004 -2005
Reasons for Variations between Budget Estimate & Actual Expenditure(2004-2005)
Non-revisions of the rate of prime raw materials which was anticipated and also short
supply of the same by the supplier.
82
Partial withdrawal of increased power tariff by the State Government Non-filling of
vacant and new posts as per policy of the Government
TABLE NO.7SHOWING REVENUE EXPENDITURE BUDGET 2003-2004
(Rupees in Lakhs)
S.No. Item BudgetEstimates
Actual Variation(Amount)
Variation(Percentage)
1.Salaries andOther Establish – ment Charges
6231 5918.98 312.02 5
2.TravelExpenses(Foreign Trips)
100.1 48.45 41.65 41.55
3.Supplies andMaterials
19421 18558.61 862.39 4.44
4.Minor works
1984.1 1922.61 61.49 3.09
5.Interest andDepreciation
16 16 - -
6.Motor Vehicle
120 76.64 43.36 36.13
7.Expenses
415 403.04 11.96 2.88
8.AdministrativeExpenses
45.8 22.15 23.65 51.64
Rent, Rates
83
9. And Taxes 25 28.03 -3.03 -12.12
10.Others
1011
854.55 156.45 15.47
Totals45,353 43,843.06 1509.94 3.32
REVENUE EXPENDITURE BUDGET FOR YEAR 2003 -2004
Reasons for Variations between Budget estimate & Actual Expenditure (2003 – 2004)
Increase in the cost of raw materials/prime consumables.
Download revision in the power-tariff by state.
84
Saving on account of deferment of Leave Concession for employees by the
Government.
Salaries
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-092009-10
Variation amount 312.02 186.1 -445.2 548.87 116.18 -93.42 111.79Variation Percentage 5 2.96 -7.13 8.8 -1.9 -1.4 1.64
Interpretation:
85
The variations that need to be commented are those falling in a range above +5% or
below -5%The years in which such variations occurred are 2003-04 where the variation is
+5% on account of liberated LTC provisions and it has increased to 8.8% in 2006-07
Travel expenses
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount 41.65 38.74 47.12 42.47 48.9 2.17 -4.4Variation Percentage 41.6 38.74 39.26 36.61 58.91 2.78 -6.28
Interpretation:
86
The travel expenses had over short the budget consistently five out of seven years
under study. The range was 36 percent to 59 percent which indicated lack of control and
absence of economy measures. The company realized these facts in 2007-2008 and put in
place a package of economy measures which raised the bar for out of budget expenditure. The
measures have worked well and as a result the variance of travel expenses over and above
budget was controlled almost in 2008-2008 and more than expected 2009-10. The control was
so effective that a negative variance have set in year 2009-10 of the order of -6.28.
Supplies and materials
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount 82.39 2770.4 317.64 -3374.6 2851.21 1853 605.2Variation Percentage 4.44 14.19 1.5 -15.28 10.05 2863 4439.46
Interpretation:
87
It signifies that the trend of increase in the negative variation in last 2 years is on
account of postponement of procurement of materials in the year 2006-2007, 2008- 2009,
2009- 2010 which is not a healthy sign. Under procurements of materials points out to delay
in implementation of projects and impartial negative effects on profitability which needs to be
probed into in detail.
Minor works
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount 61.49 423.28 344.21 727.69 -62.44 -271.98 408.45Variation Percentage 3.09 17.06 15.4 31.8 -3.06 -12.93 15.7
Interpretation:
The acceptable range is + (or) - 5%. In general the variation was with in the rage
only in 2 out of 7 years. In 4 out of 7 years it was positive variation of 15% to 31% which is
88
indicative of the fact that the budgetary process was not being diligently adhered to in the case
of budgets for minor works.
Interest and Depreciation
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount 0 0 0 -2350 954 1800 0Variation Percentage 0 0 0 -31.33 9.68 24.65 0
Interpretation:
89
Acceptable range is + (or) - 10%. The variation beyond the above range is observed
in case of 2006-2007 and 2008-2009. The reason was on account of general and rapid
reduction in rates of interest charged by banks.
Motor vehicle
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount 43.36 -19.2 83.04 78.24 71.08 50.53 83.83Variation Percentage 36.13 -21.33 61.5 62.59 56.86 49.05 55.88
Interpretation:
90
The acceptable range is + (or) – 25%., As the age of vehicles stock is more, allowing
for increased expenditure in repairs and maintenance on account of age of vehicle stock it was
found that the expenditure under the head was “uncontrollable”. With the range of over
expenditure being from 36% to 63%.
Office Expenses
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount 11.96 -14.34 29.02 81.65 60.1 -28.69 -1.53Variation Percentage 2.88 -3.35 5.8 16.13 11.87 -6.04 -4.37
Interpretation:
91
The acceptable range is + (or)-5%. The variation above the range was found to be
sizable in the case of 2006-2007 and 2007-2008 due to issue of uniform to ministerial staff
and increase transport
Administrative Expenses
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount 23.65 21.83 0.31 1.42 -0.31 -1.53 -1.53Variation Percentage 51.64 48.51 1.03 4.05 -0.88 -4.37 -4.3
92
Interpretation:
The acceptable range is + (or)-5%. It was observed that the budget for administrative
expenses was periodically increased to accommodate the positive variation in previous year
during period 2004-2007. Thus the budget peaked in year 2004-2005, while the variation is
high in 2003-2004 and 2004-2005.
Rent, Rates and Taxes
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount -3.03 17.43 -8.57 -8.8 -0.2 -3.5 6.4Variation Percentage -12.12 58.1 -50.41 -48.88 -0.76 -10 18.28
93
Interpretation:
The acceptable range is + (or) - 20%. The abnormal years were observed to be 2004-
2007 which a positive variation of 58% in 2004-2005 to negative variation of around 50% in
2005-2006 and 2006-2007. This is and account of changes in government / taxes / municipal
polices and changes in valuations during the relevant years.
Others
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Variation amount 156.45 191.14 79.66 -14.07 -49.27 -37.82 5.69Variation Percentage 15.47 16.64 10.88 -1.09 -3.83 -2.5 14.58
94
Interpretation:
The acceptable range is + (or) - 20% as the item indicates miscellaneous of expenditure
the variance is found to be with in the acceptable range.
95
CHAPTER – 5
96
FINDINGS,
SUGGESTIONS and
CONCLUSION
FINDINGS
97
There is an urgent need to formulate and implement cost reduction program.
There is under procurement of materials with consequences for profitability, which
needs to be proved into in detail.
Budgetary process has been effective in case of travel expenses and in effective in case
of motor vehicle repairs and maintenance and minor works.
There is fluctuations in salaries occurred
SUGGESTIONS
The variances arising out of each factor should be correctly segregated, and reported to
the management
98
Controllable variances should be reported immediately, so that responsibility can be
fixed and action taken against the individuals responsible.
Suggestions must be taken from all departments of the organization for proper planning
and control of budgets.
It is important to have budget manual so that every one in Bevon Wayors can refer to it
for guidance and information about the budgetary process
Control the salaries fluctuations
CONCLUSIONS
99
This can be concluded that the budget and budgetary control process and how each manager
can draw out of the budgetary planning and control system concrete objective to improve the
operating performance and profitability of the business.
Bevcon Wayors Pvt. Ltd. has been achieving highest production year over the year by
rescuing the corresponding expenditure and attained no only self sufficiency but also
been supportive to the nuclear power Plants spread all over India.
With the help of proper budgetary planning and control system, Bevcon Wayors has
been able to improve operating performance and profitability of the Organization.
The financial system in Bevcon Wayors has been very quick and well planned one,
which could be implanted in other such government organization.
The organization have followed effective budget system and control for maintaining
the expenditure within the appeared Budget and it also kept the profile high and
achieving the targeted production within the appeared Budget and it also kept the
profile high and achieving the targeted production by minimum expenditure which
expenditure which is evident form the last seven years Revenue Expenditure Budget.
Form the variations between Budget Estimates and Actual Expenditure of last five
years it may be seen that the percentage of variation is becoming marginal from year
to year which reflects improved system of Budgeting as well as control of
Expenditure.
LIMITATION
100
This comparative study limits its coverage to 7 years. Information presented is
limited to the secondary data in the form of annual reports geographically the field research is
limited to the city Hyderabad and Secunderabad.
The proposed study may not be free from certain limitation. For instance the
limitation of time and cost cannot be ignored. At the time, the findings of the study can be
applied to comparable firms and not to incomparable ones. Besides this, budgeted amounts
calculated at one point of time may not be informative as they suffer from short- fluctuations.
101
CHAPTER – 6
102
BIBLIOGRAPHY
103
BIBLIOGRAPHY
1. M.Y.Khanb(2006), Indian financial system (4th edition), Tata Mc Graw-Hill Publishing
Company Limited (New Delhi)
2. John.f.marshal(2006)and vipul K.Bansal (1st edition),prentice-hall of India.
Private limited
3. joh j. Hampton, Financial Decision Making, Eastern Economic Edition.
4. S.N Maheshwari,S.K Mmaheswari, Financial accounting, Vikas publications.
5. fundamentals of Statics, S.C.Gupta, Himalaya Publishing House.
Journals Referred:
Tamilmani, The journal Of Accounting and Finance, Year:Oct 2006-March 07
Blair Staley, Nace R. Manger, Manaerial auditing journal, year 2008.
WEB SITES
www.bevcon wayors.com
www.iibf.org.in
www.emeraldinsight.com
104
105