DRAFTING, ANALYZING AND CONTROLLING PRODUCTION BUDGETS
3 Exceeding capacity 11.520
4 Lack of capacity 2656
5 Work load degree (1:2) 0,758 1,105
We can note that the assembly unit has a lack of capacity of 2656 hours which is a restraint for the potential production.
The manufacture unit has an exceeding capacity of 11.520 hours which causes a work load degree of 75, 80%
c) Adjusting the needed capacity for the two units
Having in mind the constraint related to the simultaneous production of 8 pieces X to 4 pieces of Y, the result is that the assembly unit has the following consumption in terms of hours:
(8 x 2) + (4 x 3) = 28 hours
Therefore the number of base combinations regarding the available capacity for the assembly unit is: 25.344: 28 =905 combinations.
The adjusted production volume is: 8 x 905 =7.240 pieces. X 4 x 905 =3.620 pieces. Y
The adjusted needed capacity for the manufacturing unit (hours)
Product
Adjusted quantity (pieces)
Manufacturing time per unit (hours/
piece)
Total
manufacturing time
(Hours)
X 7.240 2 14.480
Y 3.620 5 18.100
Total 32.580
The manufacturing unit available capacity is of 47.520 hours, therefore there is an exceeding capacity of 14.940 hours and a work load rate of
47520 32580
=0,686
The adjusted needed capacity for the assembly unit (hours)
Product Adjusted
quantity (pieces)
Assembly time per unit (hours/ piece)
Total
assembly time (Hours)
X 7.240 2 14.480
Y 3.620 3 10.860
Total 25.340
After adjusting the production level to the assembly unit capacity, the following situation presents itself:
• The assembly unit works at full capacity (the work load rate is 25344
25340
=0,999, approximately. 1);
• On the other hand, the manufacturing unit is not working for 14.940 hours.
d) Scheduling the production program that generates the biggest global margin.
To achieve the biggest global margin we must eliminate the time when the assembly unit is not working by producing different quantities for the two products.
Therefore, the simultaneous production condition is no longer followed and the order of the products in the production program is determined based in the biggest hourly variable costs margin (VCM).
d1) determining the order of the products based on the biggest hourly VCM The margin per product and manufacturing hours in the manufacturing unit
Denomination Product X Product Y
Manufacturing time (hours) 2 3
VCM per product (m.u.) 120 270
VCM per hour (m.u.) 120/2=60 270/3=90
The order of products based on the biggest hourly VCM Second First d2) the production program in the assembly unit and the global margin
Quantities Needed time
(hours) Available time Variable cost margin 4000 Y 4000 x3 =12.000 25.344 -12.000=13
344
4000 x 90
=360.000 X =13344/2=
6672 13 344 0 6672 x 60
=400.320
Global margin 760.320
It is obvious that this production program ensures the full use of the assembly unit capacity (25.344 hours).
Also, there is an improvement in the use of the manufacturing unit capacity, as in the table below:
Manufacturing time for the manufacturing unit (hours) Product Quantity Manufacturing time
per unit (hours/ pieces)
Total manufacturing time
(hours)
X 6672 2 13.344
Y 4000 5 20.000
Total 33.344
Available
capacity 47.520
Work load
rate 0,702
It can be observed that the work load rate increases from 0,686 to 0, 702 compared to the previous situation when the simultaneous production restriction was taken into account.
●Analysis and control
The achievement of production targets will be controlled during the actual manufacturing and deviations from initial targets will be observed, the causes will be analysed and correcting measures will be put into action.
Analysis and control of the predetermined direct costs is differentiated per types of costs and causes.
Biography:
1.Alazard,C, Separi „Contrôle de gestion”Paris, Dunod, 1998
2. Albu, N, Albu, C „Bugetele între mândria unităţii organizaţionale şi prejudecata caducităţii”, Simpozionul Facultăţii de Contabilitate şi Informatică de Gestiune, ASE Bucureşti., 2002.
3.Albu, N „Mai sunt bugetele adaptate la mediul economic actual ?” Simpozionul Facultăţii de Contabilitate şi Informatică de Gestiune, ASE Bucureşti., 2003 4. Albu, N „Mizele Contabilităţii strategice şi implicaţii asupra controlului organizaţional” Simpozionul Facultăţii de Contabilitate şi Informatică de Gestiune, ASE Bucureşti., 2004
5.Bouquin, H, „Comptabilité de gestion,” Paris, Dalloz, 2005.
6.Caraiani, C, Dumitrana, M „Contabilitate şi Control de gestiune”, Bucureşti, Info Mega, 2005
7.Dumitru., C., Ioanăş, C,”Contabilitatea de gestiune şi evaluarea performanţelor”Ed. Universitară, Bucureşti, 2005.
8.Ionescu, I, Tiberiu, A „Control de gestiune”, Editura Economică, 2003.
9..Malo, JL Mathé, „L’essentiel du contrôle de gestion”, Paris, Les Ed d’Organisation, 2000
10.Tabără, N, Mihail, C „Controlul de gestiune în cadrul noului mediu concurenţial”, Contabilitatea , Expertiza şi Auditul Afacerilor”
THE FLEXIBILITY OF OPERATING , ESSENTIAL CONDITION OF MAINTAING THE ENTERPRISES ON THE MARKET
Conf.univ.dr.Grădinaru Puiu Conf.univ.dr.Grădinaru Doru Prep.univ. Isac Nicoleta
The flexibilility represents the capacity of adjusting a system to the expected changes or not , combined with the potential of generating fast the variation of the system parameters.
In a narrow sense , reporting on to the industrial units, the flexibility assumes the capacity of maintaining a financial equilibrium of the commercial society at unexpected variation of external medium ( the market , the inflation , legislation,etc.).The transition of romanian economy characterized once with the deregulation of the foreign trade through important market variations with bigger amplitude than in the advanced economies.
The break even point - strategic indicator of the operating. We remind you that the structure of exploitation is made up from :
- operating incomes (Vex) equal with the amount (CA)
→ operating expenses (Chex)
→ operating income : Rex due to the relation : Rex = CA - Chex .
From a structural point of view , operating expenses are variable and fixed in the report with the amount.Variable expenses are dependent on the activity volume while fixed charges are theoretically independent of the activity volume.Partially, fixed charges are the result of investment decision.Fixed charges can be assimilated by the concept of «empty performance »of the economical unit.
Mainly, fixed expenses include :
→ amortization
→ rents
→ general utilities ( zero production )
→ a quata from wage expenses (from administration), research and development expenditure ,security expenses of the firm,technological ones , the preservation of unused performances / capacities
→ a quata from the consumable material expenses ( a part used for previous current activities )
Variable expenses include :
→ raw materials , combustible materials, energy , spare parts , the costs of sold materials
→ equipment repairs ,colaborations , commissions , publicity , advertisements
→ staff wages tied to the production and repair activities
→ duties and production taxes
Defining , the break even point is the turning point when the amount covers the operating expenses and the operating income is null. The break even point is also known as the operational dead point or the critical amount.
The critical amount method takes into consideration the next relation set :
ex
CAref - reference amount (usually from the last accounting period);
ChV - variable expenses;
ChF - fixed expenses;
RV - variable expenses ratio.
The flexibility of operating Fr – in a limited way is given by the relation :
ref
The values closed to 1 correspond to the maximum flexibility and the ones closed to 0 correspond to the minimum flexibility.
The flexibility defined by the relation [1] refers to all the cases where CAref ≥ CAcr.
The higher is the flexibility , the easier can the trading company handle the variations of the external medium (the market , the inflation and the exchange rate).
It is apparent that the value CAcr must be reduced for the raise of flexibility.
If we take into account the company's maximum capacity of production characterized by the maximum amount CAmax and using the relation:
CAref =cCAmax where c – maximum amount usage , relation [1] becomes
max
cr
CA c 1 CA
F •
−
=
[2]
and constitutes the definition of flexibility in a wide way.
The ways of increasing the operating flexibilities
Three ways of increasing the operating flexibility are known whose influences will be separately analyzed , starting from A case .
a. The reduction of fixed expenses
Table 8.1.
UM - units
Nr. crt. Denomination A case B case
1 Reference amount 100.000 100.000
2 Fixed expenses 50.000 40.000
3 Variable expenses 40.000 40.000
4 Operating profit 10.000 20.000
5 RV 0,4 0,4
6 CAcr 83.333 66.667
7 C 0,6 0,6
8 F 0,167 0,334
It is ascertain that the reduction of fixed charges with 20% leads to a double increase of the flexibility indicator.
We can say in a different way that if in the first case, the trading company can not resist without debit entry only at an amount decline of 16.7%, in the second case , the same trading company can handle a negative impact on the market of 33,4% from the amount.
b. The labor productivity development and material and energy reduction , materialized through the reduction of variable changes with 20%
We analyze the influence separately on A case in 8.2 table.
Table UM- units Nr.
crt.
Denomination A case B case
1 Reference amount 100.000 100.000
2 Fixed expenses 50.000 50.000
3 Variable expenses 40.000 32.000
4 Operating profit 10.000 18.000
5 Rv 0,40 0,32
6 CAcr 83.333 73.529
7 C 0,6 0,6
8 F 0,167 0,265
The flexibility increased from 0,167 to 0,265.
c. The amount accretion with 20 %
We analyze separately the influence on A case in the table 8.3..
Table 8.3.
UM - units
Nr. crt. Denomination A case B case
1 Reference amount 100.000 120.000
2 Fixed expenses 50.000 50.000
3 Variable expenses 40.000 48.000
4 Operating profit 10.000 22.000
5 RV 0,40 0,40
6 CAcr 83.333 83.333
7 C 0,6 0,72
8 F 0,167 0,305
The flexibility increased from 0.167 to 0.305. If the management acts simultaneously using all three ways of flexibility development , the results from table 8.4 can be obtained.
Table 8.4.
UM - units
Nr. crt. Denomination A case B case
1 Reference amount 100.000 120.000
2 Fixed expenses 50.000 40.000
3 Variable expenses 40.000 38.400
4 Operating profit 10.000 41.600
5 RV 0,40 0,32
6 CAcr 83.333 58.824
7 C 0,60 0,72
8 F 0,167 0,510
The flexibility increased from 0,167 to 0,510.
In the presented research , the simultaneous application of reducing fixed charges and variable ones with 20% and the increase of the amount with 20% as well leads to the exploitation flexibility development 3,05 times !
Simple transformations of the relation [1] lead to
max
V)c CA
R (1 1 ChF
F − •
−
= [2]
Basic structural condition at the level of the trading company for a development of operating flexibility is:
Structural condition allows steady evaluation of management quality performances establishing :
→ annual rate of decreasing fixed changes
→ annual rate of decreasing variable changes
→ annual rate of increasing the amount in comparable prices.
The operating management based on the flexibility concept The operating management based on the flexibility concept establishes a simultaneously policy of the decisional action on :
- reducing fixed charges;
- reducing variable charges;
- increasing the amount.
This assumes an accurate evaluation of the critical amount and the special measure programme on all three components.
From the perspective of organizational structure :
→
→
→
→ the programs of reducing fixed charges are elaborated by the section of strategic plan having the quality of coordinating with the contribution of investment compartment , mechanically-powered and financial-actuary.
→
→
→
→ the programs of reducing variable charges are elaborated by the compartment of organizing and production rate with the contribution of technological departments
→→
→→ the programs of increasing the amount are elaborated by the departments of marketing with the contribution of treasury department.
In way of conclusion , all the three programs lead to a development of the trading profit.
Golden rules of the operating management based on flexibility : - Every way of increasing the flexibility develops the trading profit.
- Simultaneous application of all three programs leads in all cases to a bigger trading profit.
BIBLIOGRAPHY :
1. Grădinaru, P., The Management, Publishing House : Pitesti University,