Professional Documents
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SHAHTAJ TEXTILE
Submitted by:
Abdullah Majeed
MBA II - A
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Executive Summary
This report presents the financial analysis of “Shahtaj Textile Ltd.” for the year ending 2018. The
approach taken is benchmarking against past performance to identify the areas of improvement
and concerns, which are hampering the performance of the company. The scope involves basic
introduction of Shahtaj Textile Ltd. and its areas of business. As the scope of the report primarily
revolves around management costing so some basic advantages of cost management and strategy
are discussed to highlight areas of differentiation.
Scheduling of Budgeting is done by incorporating numerous variables like inflation and increase
in production to reach at approximated figures for 2019.
Some recommendations are also made to highlight areas of improvement and focus in brief this
report is an effort to dissect systems and strategy of Shahtaj Textile Ltd.
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Budgeting
Sales Budgets
Shahtaj Textile Ltd. make sales budget on the basis of the historical data. Hence, we took the
assumption that the company considers the past year sales and then make budget by adding 20%
of the last year sales to the last year sales and assume it as coming year sales. They also are
increasing the selling price by 5% compared to that of last year to maintain their expected revenue
as the cost is increasing due to dollar fluctuations.
Shirts
Units 105,200
Assumption
3) The units are assumed according to the Sales Figure according to the assumed growth rate of
5%
4) The growth rate of units is assumed to be 3%
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Workings
Production Budget
As Shahtaj Textile Ltd. uses Job Order Costing and only make to order so the company produces
only the number of products that are being ordered.
Assumption
1) We have assumed that they keep low target inventory of finished units that is 0.03% of total
sales.
Working
Revenue 0.15%
Schedule 3:
Cost Budget
In Rupees In Meters
Available from beginning direct material inventory 520,220,000 88,882
To be purchased and used this period 2,982,131,850 750,593
Direct materials to be used this period 3,502,351,850 839,475
Assumptions
1) We have calculated the per meter cost by using a standard requirement of a shirt
2) We used the Total Raw Material Consumed in FY2018 to calculate the raw material
consumed per unit
3) We have assumed that raw material cost per meter will remain constant
Working
Material Cost
Total Raw Material Consumed 2982131850
Number of Units 106320
28048.64419
Schedule 3B
Working
Calculation of Beginning
Inventory
Assumptions
1) We have assumed that wage rates are persistent over period of time
2) We have assumed that total number of hours per unit have remained constant
We have assumed in a month there are 192 hours in total (8 working hours per day and 24 days in a
month
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Working
Calculation of Direct Manufacturing labor-hours per unit
Total Cost of Direct Manufacturing labor in Rupees 1,913,760,000
Hourly Wage Rate 120
Total Number of hours 1,5984,000
Number of units 106320
Hours per unit 154
Schedule 5
Variable Costs
Travelling 35,687,832
Transportation 5,443,679
Insurance 38,899,664
Communication 2,595,723
Subscription 494,128
Fixed
Costs
Depreciation 1,509,613,000
Schedule 7
Total
Schedule 8
Percentage 1+Percentage
2017 2018 Change Change 2019
Salaries,
allowances and
other benefits 334,891 392,357 0.172 1.17 459,684
Rent, rates and
taxes 2,135 2,641 0.237 1.24 3,267
Insurance 30,043 34,818 0.159 1.16 40,352
Repairs and
maintenance 68,905 70,339 0.021 1.02 71,803
Depreciation 21,946 33,974 0.548 1.55 52,594
Amortization 6,037 22,439 2.717 3.72 83,404
Travelling 62,834 75,023 0.194 1.19 89,577
Legal and
professional 207,084 185,039 -0.106 0.89 165,341
Director fee 1,125 1,250 0.111 1.11 1,389
Vehicle
running 15,267 16,696 0.094 1.09 18,259
Communication 15,777 14,297 -0.094 0.91 12,956
Printing,
Stationery and
office supplies 3,222 2,587 -0.197 0.80 2,077
Staff training 81,600 87,632 0.074 1.07 94,110
Staff transport
and canteen 32,528 63,579 0.955 1.95 124,271
Security 32,523 37,162 0.143 1.14 42,463
Subscription 3,893 3,592 -0.077 0.92 3,314
Utilities 1,002 451 -0.550 0.45 203
Share registrar
and related
expenses 7,728 8,139 0.053 1.05 8,572
Others 2,260 1,271 -0.438 0.56 715
Total 930,800 1,053,286 1,274,349
Assumption
Income Statement
Revenues 126,674,508,300
Variance Analysis
Purchasing officer negotiated more skillfully than was planned in the budget,
Purchasing manager bought in larger lot sizes than budgeted, thus obtaining quantity
discounts,
Materials prices decreased unexpectedly due to, say, industry oversupply,
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Budgeted purchase prices were set without careful analysis of the market,
The hiring and use of under skilled workers,
Inefficient scheduling of work so that the workforce was not optimally occupied;
Poor maintenance of machines resulting in a high proportion of non-value-added labor;
Unrealistic time standards.
Conclusion
Firms in Pakistan should start adopting new techniques of running a company, whether it’s related
to production, management, finance etc. because these new techniques help companies to become
efficient and more productive in every form.