BCS Solution Summary(i) Budget Budget is statement of future expenses and income. So from rising resources and proper allocation to various dept. is very important to operate successfully and smoothly. As at current we are making loss of 5,71,250 INR per month. But industry prospective is looking very good in upcoming years. So I plan to use debt fund as interest rate are low and govt. policy is supportive providing tax concession for start up. So we have taken 1 Cr loan under credit guarantee Scheme. Under this scheme central govt. provides collateral free loan upto 2 Cr. And with coordinate to other dept. and their requirements I have provide funds for their operation and also for capital expenditure is provide. We will incur 36,00,000 as capital expenditure in IT system, Quality.We have deficit of 63,52,875 in FY 2020-21. (ii) Financial Plan As in current FY(2019-20) we are making loss of 5,71,250 INR per month. But as per Estimated P&L Ac shows loss of 5,15,270 per Month. And in this we have taken huge expenditure of Training, Marketing as a revenue expenditure but these expense will benefit in long run. The reason for loss is training and development program expenditure, Marketing activities like free products, coupons, Gift etc for capturing market share. But by the ending of FY 2021-22 we will reach at brake even point or little profit. Then we will look to big investment in cold storage, warehouse, hiring more Human Power, increasing presence in more cities, increasing product portfolio etc. by rising funds from angel investor, Private players, or venture capital as per that market condition.

Solution

(i)Budget for Next Financial Year

Master Annual Budget for 2020-21

Master Annual Budget for 2020-21
Sources of Fund			Amt		Application of fund			Amt
Revenue from operation			157164750		Purchase of Material			140000000
Loan from Bank for 4 years			10000000		Marketing Dept.			4000000
Deficit			6352875		HR Dept.			15698000
					Finance/admin/Acc Dept.			5100000
					IT Dept.			3350000
					Advisory fee			100000
					Quality Management			1000000
					Capital Expenditure			3600000
					Other Activities			669625
Total			173517625		Total			173517625

Notes:

Revenue from operation: It is based on monthly Sales forecast which is given in below table:

Month\Product Name Cow Milk( IN INR) Buffalo Milk(IN INR) Parneer(IN INR) Curd(IN INR) Total Apr 2020 29,70,000 67,20,000 1,98,750 9,54,000 1,08,42,750 May 2020 30,24,000 69,00,000 2,02,500 9,72,000 1,10,98,500 June 2020 31,05,000 72,00,000 2,11,875 10,08,000 1,15,24,875 July 2020 31,86,000 75,00,000 2,17,500 10,35,000 1,19,38,500 Aug 2020 32,94,000 78,00,000 2,25,000 10,62,000 1,23,81,000 Sep 2020 34,02,000 80,40,000 2,28,750 10,80,000 1,27,50,750 Oct 2020 35,10,000 84,00,000 2,34,375 10,98,000 1,32,42,375 Nov 2020 36,45,000 87,00,000 2,40,000 11,25,000 1,37,10,000 Dec 2020 38,34,000 90,00,000 2,51,250 11,70,000 1,42,55,250 Jan 2021 39,15,000 93,00,000 2,58,750 11,97,000 1,46,70,750 Feb 2021 40,50,000 96,00,000 2,68,125 12,15,000 1,51,33,125 Mar 2021 41,85,000 99,00,000 2,71,875 12,60,000 1,56,16,875 Total 4,21,20,000 9,90,60,000 28,08,750 1,31,76,000 15,71,64,750

Budgets of respective department.

Marketing Dept.

Marketing Dept.
Resource			Amt			Application			Amt
By Master budget Allocation			4000000			Digital Marketing			1000000
						Advertise			1000000
						Customers Coupons/Gift etc			500000
						Offers at festival Occasion			800000
						Promo code			500000
						Other Activities			200000
Total			4000000			Total			4000000

I consult with Marketing dept. then I allocated fund for above mention purpose.

HR Dept.

HR Department
Resource			Amt			Application			Amt
By Master budget Allocation			3938000			Cost of employee			14208000
By Revenue from operation			11760000			(i) Fixed cost			11760000
						(ii) Incentive scheme			2448000
						Bonus			240000
						Training and Devolpement			800000
						Recreational, Annual function			350000
						Other Activities			100000
Total			15698000			Total			15698000

 

Note : Please look at uploaded pdf for the all calculation reference.

Finance/Admin/Accounts Dept.

Finance/Accounts/Administratative Dept.
Resource			Amt			Application			Amt
By Master budget Allocation			5100000			Finance Cost
						(i)Interest payment of loan			1000000
						Principal amount payment			2500000
						Maintaining of Books of A/c			800000
						Documentation & Paper work by Admin			700000
						Other activities			100000
Total			5100000			Total			5100000

Note: Please look at uploaded pdf for all calculation.

IT dept.

IT dept.
Resource			Amt			Application			Amt
By Master budget Allocation			3350000			Hardware investment			1500000
						Maintainace of Hardware			150000
						Software devolpement			1000000
						Maintainace of Software			200000
						Datebase management System			500000
Total			3350000			Total			3350000

Business Advisory:

For business advisor we pay 50,000 Rs per Year to our both advisor.

For Purchase of material I calculated 85% of our revenue. So 85% of 15,71,64,750

 is 13,35,90,038. So approx 14Cr I allocated.

Quality Management and Capital expenditure is very essential for any business so I also allocate for this.

(i)Financial Plan

Before moving to our financial plan first we look to our estimated Profit & loss A/c for year ending 2020-21. And plan of capital expenditure in FY 2020-21.

Profit & loss A/c for year ending 2020-21

Estimated Profit and loss a/c for FY 2020-21
Income			Amt		Expense			Amt
Revenue from operation			157164750		Marterial			140000000
					Empolyee Cost			14208000
					Bouns			240000
					Training			800000
					Recreational, Annual function			350000
					Marketing			4000000
					IT expense			350000
					Admin			1500000
					Finance Cost			1000000
Loss			6183250		Advisory			100000
					Quality			400000
					others expense			400000
Total			163348000		Total			163348000

This is Estimated P&L A/c.

In Previous Year we are making loss of 5,71,250 INR per month but in next financial Year we will make loss 61,83,250/12=5,15,270 INR per month.

Capital expenditure

Capltal Expenditure			Amt
IT Hardware			1500000
Software development			1000000
Database management system			500000
Quality Management System			600000
Total			3600000

Notes:

1. Training cost  8,00,000 is taken as revenue expenditure in FY 2020-21 but it will benefit for long term.
2. Same for Marketing.
3. As in IT we will incur 31,00,000 we will benefit for long term.
4. In quality management we will incur  6,00,000 as capital expenditure and 400000 is allocated for it’s maintenance.
5. Material, Employee, Bonus, Training, Recreational, Annual function, Marketing is as per budget.
6. IT expense is Maintenance of Hardware and Software is 3,50,000.

Now as in next financial year(2020-21) we have developed our IT system, Skill full Human resource, Quality management system which lead to more revenue in FY 2021-22 and our company will start making profit little bit at end of FY 2021-22

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And also we will reduce our loan to 50,00,000. As on 1 Apr 2020 our loan is 1 Cr and on 31 mar 2021 we will paid 25,00,000 and on 31 mar 2022 will again paid 2500000. So on 1 Apr 2022 our loan is 50,00,000.

 

Then in 2022-23 we will try to create get funds from angel Investor or from Private player, or venture Capital etc as per market condition at that time. To future expand our business (by increasing product portfolio, reaching to other cities, cold storage, warehouse creation, etc as per of business.

Optional Assignment

ConclusionAs DND LLP is in perfect competition all firm earns normal profit. And all firm are price takers. So operating efficiently, reducing cost, increasing market share is only way to survive in the industry. As DND LLP is in Dairy product quality matters very much, perishable nature of products is big challenge that firm has to face. So to survive in longer run expenditure on quality management, cold storage, etc are needed. Customer grievances need to be solved to retain customer. Expanding business in product as well as cities to serve is going to be very crucial for next 5 Years.

Attached File Details