MITSOB

ACCOUNTING ASSIGNMENT
NEHA GARUD-2803217
MITSOB

10

INTRODUCTION

HINDUSTAN LEVER LTD. (HLL) IS INDIAS LARGEST FAST MOVING CONSUMER GOODS (FMCG) COMPANY.THESE PRODUCT IS MANUFACTURED OVER 40 FACTORIES ACROSS INDIA AND THE ASSOCIATE OPERATIONS INVOLVE OVER 2000 SUPPLIES AND ASSOCIATES. HLLS BRANDS LIKE LUX, SURF EXCEL, RIN, WHEEL, PONDS, SUNSILK, CLINIC, PEPSODENT, CLOSE-UP, ETC.

VARIANCE
VARIANCE ANALYSIS IS AN IMPORTANT CENTRAL POINT IN THE SYSTEM OF STANDARD COSTING.THE VARIANCE ANALYSIS WHICH COMPLETES THE PROCESS OF STANDARD COSTING AND HELPS IN ACHIEVING THE OBJECTIVES OF STANDARD COSTING. VARIANCE MEANS DIFFERENCE BETWEEN STANDARD LEVEL AND ACTUAL PERFORMANCE.THE TERM VARIANCE ANALYSIS REFERS TOTHE SYSTEMATIC EVALUATION OF VARIANCES IN AN ATTEMPT TO PROVIDE MANAGERS WITH USEFUL INFORMATION FOR MEASURING EFFICIENCY AND IMPROVING PERFORMANCE. THE PROCESS OF ANALYSIS IS DONE BY;1) COMPUTATION OF VARIANCE 2) DETERMINATION OF CAUSES OF VARIANCE 3) DISPOSITION OF VARIANCES
PARTICULARS(2009) NET FIXED ASSETS LAND AND BUILDING INVENTORIES MARKETABLE INVESTMENT INVESMENTS CASH AND BANK BALANCE DEBTORS RECIEVABLES PLANT AND MACHINERY NET INCOME ADVERTISING PAT PBDIT WAGES AND SALARIES RAW MATERIALS DISTRIBUTION DIVIDENDS BUDGETED 721.5 223.7 903.4 76.3 328.6 203.3 143.5 720.8 628 7137.8 283 402.8 707.5 ACTUAL 794 278.3 1044.6 183.5 544.5 574.5 145.4 582.11 636.5 8363.3 490.6 567.1 928.8 DIFFERENCE 72.5(10%) 54.6(24.41%) 141.2(15.6%) 107.2(140.49%) 215.9(65.70%) 371.2(182.58%) 1.9(1.32%) -138.69(19.24%) 8.5(1.35%) 1225.5(17.16%) 207.6(73.35%) 164.3(40.79%) 221.3(31.28%) 63.7(16.55%) 668.5(14.75%) 9.9(3.5%) 110.54(42.21%) OUTCOME FAVOURABLE FAVOURABLE UNFAVOURABLE FAVOURABLE FAVOURABLE FAVOURABLE FAVOURABLE FAVOURABLES FAVOURABLE FAVOURABLE UNFAVOURABLE FAVOURABLE FAVOURABLE UNFAVOURABLE UNFAVOURABLE FAVOURABLE FAVOURABLE

385 4533.4 279.2

261.9

448.7 5201.9 289.1

372.44

NON-RECURRING INCOME

137.8

50.4

87.4(63.43%)

FAVOURABLE

ANALYSIS
1-THE NET FIXED ASSEST OF BUDGETED YEAR IS 721.5 AND FOR ACTUAL YEAR IS 794, SO THE CALCULATED VARIANCE IS 10% .BECAUSE IT HAS BEEN MORE INCREASE OF THE LAND AND BUILDING BY 54.6 CRORE OR 24% THEN THE OTHER FIXED ASSETS AS PLANT AND MACHINERY AND OTHER ASSETS. 2- THE LAND AND BUILDING OF BUDGETED YEAR IS 203.3 AND FOR ACTUAL YEAR IS 574.5, SO THE CALCULATED VARIANCE IS 182.58%.THIS IS BECAUSE OF THE INCREASE PRODUCTIVITY OF THE COMPANY. 3- THE INVESTMENT OF THE BUDGETED YEAR IS 328.6 AND THE ACTUAL YEAR IS 544.5, SO THE CALCULATED VARIANCE IS 65.70%.THIS IS BECAUSE THE COMPANY HAS INVESTED MORE THEN THE BUDGETED PLAN. 4-THE MARKETABLE INVESTMENT OF THE BUDGETED YEAR IS 76.3 AND ACTUAL IS 183.5, SO THE CALCULATED VARIANCE IS 140.49%.IT HAS INCREASE THE INVESTMENT WHICH WILL INCREASE THE CURRENT ASSET OF COMPANY.THIS INCREASE WILL HELP THE COMPANY IN ADVERSE SITUATION. 5-THE INVENTORIES OF THE BUDGETED YEAR IS 903.6 AND THE ACTUAL YEAR IS 1044.6,SO THE CALCULATED VARIANCE IS 15.6%.BEING THE FMCG COMPANY IT HAS TO KEEP SOME ADVANCE STOCK FOR THE FUTURE DEMAND.AS ITS A DYNAMIC INDUSTRIES,CHANGES IN DEMAND AND SUPPLY ARE VERY MUCH EVIDENT. 6-IN THE CURRENT ASSET, BILL RECIEVABLES VARIANCE IS 19.24% AND THAT OF DEBTORS IS 1.32%.THE BILL RECIEVABLE IS DECLINE AND THE DEBTORS HAS INCREASED, THIS INDICATES THAT COMPANY IS IN GOOD DEBTORS VELOCITY. 7-THE NET INCOME OF THE BUDGETED YEAR IS 7137.8 AND THE ACTUAL YEAR IS 8363.3%, THE CALCULATED VARIANCE IS 17.16%.THIS IS BECAUSE THERE IS AN INCREAE IN THREE ACCOUNTS, ADVERTISEMENT EXPENSES IS INCREASED BY 73.35%, CONSUMPTION OF RAW MATERIAL IS 14.75%, AND WAGES AND SALARIES IS 54.55%.WHATEVER THE INCREASE IN INCOME IS OF THREE ACCOUNTS.TO INCREASE IN SALE OF COMPANY IT HAS ALMOST DOUBLE ITS ADVERTISEMENT COST.THE COMPANY HAS FAILED TO USE THE RAW MATERIAL EFFICIENTLY.

8-THE BUDGETED YER OF PBDIT IS 707.5 AND THE ACTUAL IS 928.8 THE VARIANCE IS 31.28%, AND THE BUDGETED YEAR OF PAT IS 402.8 AND THE ACTUAL IS 567.1, THE CALCULATED VARIANCE IS 40.79%.THE ASSETS WERE MAINTAINED PROPERLY AND THIS LEAD TO INCREASE IN PBDIT AND PAT. 9-THE DISTRIBUTION OF BUDGETED YEAR IS 279.2 AND THE ACTUAL YEAR IS 289.1, SO THE CALCULATED VARIANCE IS 3.5%.IT IMPLIES THAT COMPANIES HAS ACHIEVED ECONOMIES IN DISTRIBUTION CHANNELS.THE COMPANY HAS RESTRUCTURED ITS SUPPLY CHAIN MANAGEMENT. 10-THE NON-RECURRING INCOME 137.8 AND THE ACTUAL IS 50.4, SO THE VARIANCE IS 63.43%.BECAUSE THERE IS NO PAYMENTS TOWARDS THE LAWSUITS AND LOSS OF SALE OF ASSETS. 11-THE DIVIDEND OF BUDGETED YEAR IS 261.9 AND THE ACTUAL YEAR IS 372.44, SO THE CALCULATED VARIANCE IS 42.21%.THE INCREASE IN THE DIVIDEND WILL INCREASE THE GOODWILL AND INVESTMENT OF THE COMPANY.

TREND ANALYSIS
AN ASPECT OF TECHNICAL ANALYSIS THAT TRIES TO PREDICT THE FUTURE MOVEMENT OF A STOCK BASED ON PAST DATA.TREND ANALYSIS IS BASED ON THE IDEA THAT WHAT IS HAPPENED IN THE PAST GIVES TRADERS AN IDEA OF WHAT WILL HAPPEN IN FUTURE. THE THREE MAIN TYPES OF TREND ARE;1) SHORT TERM 2) INTERMEDIATE 3) LONG TERM

TREND PERCENTAGE
HORIZONTAL ANALYSIS OF FINANCIAL STATEMENT CAN ALSO BE CARRIED OUT BY COMPUTING TREND PERCENTAGE.TREND PERCENTAGE STATES SEVERAL YEARS FIANACIAL DATA IN TERMS OF A BASE YEAR.THE BASE YEAR EQUALS 100%, WITH ALL OTHER YEARS STATED IN SOME PERCENTAGE OF THIS BASE. THE STEPS ARE;1-SELECT THE BASE YEAR.

2- DIVIDE THE AMOUNT IN EACH NONBASE YEAR BY THE AMOUNT IN THE BASE YEAR AND MULTIPLY BY 100.

CALCULATION OF TREND PERCENTAGE1.Inventories 2.Receivables 3.Cash & Bank balance 4.Land & Building 5.Net Worth 6.Marketable Investments 7.Current liabilities 8.Reserves & Surplus 1998 1145.68 803.16 659.88 347.91 1713.03 370.5 1858.02 1493.46 1999 1309.8 860.4 810.3 385.6 2102.5 523.8 2143.4 1883 2000 1181.8 1054.8 522 425.3 2488 935.6 2233.9 2268 2001 1240.05 1268.7 913.15 504.97 3043.69 586.83 2410.42 2823.57

TREND PERCENTAGE (100%) 1.Inventories 2.Cash & Bank balance 3.Receivables 4.Land & Building 5.Net Worth 6.Current liabilities 7.Marketable Investments 8.Reserves & Surplus 1998 100 100 100 100 100 100 100 100 1999 114.33 122.80 107.13 110.83 122.74 115.36 141.38 126.08 2000 103.15 79.11 131.33 122.24 145.24 120.23 252.52 151.86 2001 108.24 138.38 157.96 145.14 189.06 129.73 158.39 189.06

CALCULATION1-THE BASE YEAR TREND PERCENTAGE IS 100%.THE TREND PERCENTAGE LESS THEN 100% MEANS THE BALANCE HAS DECREASED BELOW THE BASE YEAR LEVEL IN THAT PARTICULAR YEAR.GREATER THEN 100% MEANS INCREASED OVER THE YEAR.A NEGATIVE TRENDS SHOWS NEGATIVE NUMBER. 2-IF THE BASE YEAR IS NEGATIVE OR ZERO, THE TREND PERCENTAGE CALCULATED WILL NOT BE MEANINGFUL.