SUMMER INTERNSHIP PROJECT REPORT

ON
BUDGETARY CONTROL AND FUTURE
FORECAST
For
ASHOK LEYLAND LTD.

By
POOJA SAHNI
ROLL NO. 85

In partial fulfilment for the award of the degree

Post Graduate Diploma In Management
Batch- 2017-19

Specialization: Finance and Marketing

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CERTIFICATE FROM THE COMPANY

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 ACKNOWLEDGEMENT

I would like to express my gratitude to everyone who supported me

throughout my summer internship project. I am thankful for their aspiring
guidance, invaluably constructive criticism and friendly advice during the
project work. I am sincerely grateful to them for sharing their truthful and
illuminating views on number of issues related to the project.

I would like to express my very great thanks to my industry guide (Mr.

Raman) for his valuable and constructive suggestions during the planning and
development of this research work. His willingness to give his time so
generously has been very much appreciated.
I would like to thank to my mentor (Mr Gaurav) who have always supported
me, ready to review my work and planning for my learning, made the data and
other resources available to complete my project.
My special thanks to the HR of the organization (Mr. Rohit Arora) whose
guidance made me confident about the ability and opportunity which one can
get and grab.
Lastly, I would like to thank my institution for giving me opportunity to know
about the corporate before I actually starts working. Thanks to my parents for
always supporting me.

Thank you.

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DECLARATION

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 INDEX

 Executive Summary……………….………………………………………….6
 About the Company………………………………………………………….7
 Objective & Significance of Study…………………………………………..22
 Literature Review………………………………….…………………………23
 Limitation & constraints……………………………………………………..35
 Research Methodology………………………………………………………35
 Data collection & Analysis…………………………………………………..36
 Templates of budgeting process……………………………………………..45
 Finding & Analysis…………………………………………………………..53
 Future of Ashok Leyland…………………………………………………….55
 Conclusion……………………………………………………………………57
 Bibliography………………………………………………………………….58

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 EXECUTIVE SUMMARY

This report focuses on the financial analysis of Ashok Leyland ltd north zone.
This report is on the sales of the north zone as this zone mainly focus on the
sales and related expenses. The topic which is assigned to me is the Budgetary
control and future forecast of the North Zone of Ashok Leyland. In this I come to
know about the various facts and figure which company implements to achieve
the target. The different strategy which helps the company to be ahead from the
other competitors from the market. The analysis of financial statement and
various expanded administrative expenses build the clear understanding about
the practical way of working.

Budget of any organisation helps to plan and forecast the finance required which
helps them to meet the target. It’s a systematic plan for the utilization of
manpower and material resources. A budget identifies the planned expenditure
for a project, program or portfolio. It is used as a baseline against which the
actual expenditure and predicted eventual cost of the work can be reported.

At north zone office of ASHOK LEYLAND LTD the focus on the sales of
commercial vehicles. Here they plan to promote the product and plans the next
contribution that the company is going to contribute in the economy.

Control of expenses is the most essential element which a company needs to

control to achieve its best output and profit. The report will focus on the trend of
sales and the trends of expenses which helps to make the strategy for the next
plan.

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Page 7 of 58
 ABOUT THE COMPANY

ASHOK LEYLAND is the 2nd largest manufacturer of commercial vehicles in

India, the 4th largest manufacturer of buses in the world and the 12th largest
manufacturer of trucks globally.

With a turnover, more than US $ 3.3 billion (2016-17) and a footprint that
extends across 50 countries, we are one of the most fully-integrated
manufacturing companies this side of the globe.

Millions of passengers use buses to get to their destinations every day while over
700,000 trucks keep the wheels of economies moving. With the largest fleet of
logistics vehicles deployed in the Indian Army and significant partnerships with
armed forces across the globe, we help keep borders secure.

Headquartered in Chennai, India, manufacturing footprint spreads across the

globe with 9 plants; including one each at Great Britain and Ras Al Khaimah
(UAE). Our Joint Venture partners include John Deere (USA) for Construction
Equipment, Continental AG (Germany) for Automotive Infotronics and the AL
teams Group for the manufacture of high-press die-casting extruded aluminium
components for the automotive and telecommunications sectors.

Hinduja Group was founded Late Mr. Parmanand Deep Chand Hinduja &
currently this group is operating in 35 countries, it’s product & services are
wide-spreaded in more than 100 countries. This group has employed more than
72,000 personnel.

Guiding Principle :

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ASHOK LEYLAND LIMITED A SUBSIDARY OF HINDUJA GROUP

Hinduja Group is a multi-billion dollars, transnational conglomerate. The Group

was founded by Shri P.D. Hinduja in 1914 whose credo was "My duty is to work
so that I can give."

The Group's activities span across three core areas: Investment Banking,
International Trading and Global Investments. It also supports charitable and
philanthropic activities across the world through the Hinduja Foundation. As part
of its Global investments, the Group owns businesses in Automotive,
Information Technology, Media, Entertainment & Communications, Banking &
Finance Services, Infrastructure Project Development, Oil and Gas, Power, Real
Estate, Trading and Healthcare. With operations across 37 countries, the Group
employs over 70,000 people worldwide.

Vision & Mission of Ashok Leyland :

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Evolution of Ashok Leyland :

The history of Ashok Leyland can best be illustrated with the use of a timeline
for better comprehension. Following is the history timeline of Ashok Leyland
Ltd.:

 1948: The history of Ashok Leyland goes all the way back to 1948 when it
was founded by Mr. Raghunandan Saran in collaboration with the Austin
Motor Company on September 7th as Ashok Motors for the assembly of
Austin cars.
 1949: Production starts in the month of September and the first Austin A40 is
successfully assembled at a factory in Ennore, which is situated North of
Madras.
 1950 can be considered one of the most significant years on the timeline as
during this year Ashok Motors collaborates with Leyland, UK getting sole
rights to import, assemble and progressively manufacture Leyland trucks for
7 years.

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 1954: This was another big year for the company as during this year, the firm
got government approval to progressively manufacture Leyland commercial
vehicles and acquired the license to manufacture 1,000 units per year.
 1955: In this year, Ashok Motors officially becomes Ashok Leyland with
equity participation from Leyland Motors Ltd.
 1969: Ashok Leyland is the first to introduce power steering in commercial
vehicles across India.
 1970: The company specially designs 1000 vehicles for the Indian Army
named the “Hippo Tipper” based on specific requirements.
 1972: The company is granted license to manufacture 10,000 units per year.
This grant can be said to be anticipated given the positive relationship the
company held with the government.
 1974: 1974 is a record year as the company exceeded the annual turnover of
Rs.1000 million for the first time.
 1976: This year facilitated a technological breakthrough as the company
releases the ‘Viking’ which is the first bus ever to have an alternator and had
a front entry. An Alternator is an electric generator that converts mechanical
energy into electrical energy and is used in automobiles to recharge the
battery while the engine is running and run all its electrical systems.
 1978: Another technological breakthrough as the company unleashes the
‘Cheetah’, the first bus with a rear engine. This helped with the heat
dissipation process thereby, making the bus more efficient in its operation.
 1980: the company expands and inaugurates the new Hosur Plant. The plant
was inaugurated by the then Chief Minister of Tamil Nadu, Mr. M.G
Ramachandran. Also, 1980 is an important year in the company’s timeline as
they introduced two new trucks: The ‘Tusker’ which was India’s first 13-ton
truck which was powered by a 125hp engine and the ‘Taurus’ which was
India’s first multi-axle truck.

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 1982: This year saw the expansion of the company into the North by
inaugurating two new manufacturing facilities at Bhandara (Maharashtra) and
Alwar (Rajasthan) in March and August respectively.
 1990: The company’s first Technical Centre is established on the outskirts of
Madras for essential testing of trucks before they are sold for commercial
purposes.
 1993: Ashok Leyland is the first automobile company to receive an ISO 9002
certification in 1993. This certification is an industry standard provided to
organizations by the ‘International Organization for Standardization.
 1995: The first driver training facility is launched at Nammakal, Tamil Nadu.
 1996: the second plant at Hosur is inaugurated by Prime Minister Deve
Gowda in December.
 1997: The ‘Stallion’, an all-terrain logistics vehicle was inducted into the
Indian Army.
 2002: The company develops its first Electric-Hybrid vehicle which is
showcased at Auto Expo 2002.
 2006: The company acquires the Czech Republic based truck manufacturer
‘AVIA’. Also, the company comes into an agreement with the Ras Al
Khaimah Investment Authority to set up its manufacturing plant in UAE.
 2007: The company goes into a Joint Venture with AG Continental, a
German based engineering company for the development of automotive
infotronics. Also, the company decides to go into a joint venture with a
Finnish based company for the production of High pressure die casting
extruded aluminium components.
 2008: The company goes into a joint venture with John Deere, USA for the
manufacture of construction equipment products.
 2010: The company inaugurated its Pantnagar plant which was supposedly its
largest plant with the capacity to touch 75,000 vehicles. Also, the company
bought a 26% stake in Opt are Plc, a well-known bus maker in the UK.

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 2011: the company makes its mark in the Light Commercial Vehicle segment
by introducing the DOST. Also, October 2011 saw the introduction of a new
brand- ‘LEYLAND DEERE’ which brought the company into the
construction equipment space with the introduction of the ‘435 Backhoe
Loader’
 2012: The company introduces the “Jan Bus” the world’s first single-step,
front engine, fully flat door bus unveiled by union Minister Shri Kamal Nath.
 2013: This year saw the launch of the Neptune engine which is essentially a
future ready electronic fuel efficient engine with CRS which is protected up
to BS-VI. This year also saw the launch of the BOSS truck which is the next
generation intermediate commercial vehicle. Lastly, this year also the launch
of the STILE which is a stylish multi-purpose vehicle and the most fuel
efficient in its category.
 2014: This year essentially saw the launch of multiple vehicles used for
various commercial purposes. (Ashok Leyland Ltd., 2018)

Leadership Team :

Mr. Dheeraj G. Dr. Andrew Dr. Andreas Mr. D. J. Mr. Jean

Hinduja C Palmer H Biagosch Balaji Rao Brunol

Mrs. Mr.
Mr. Jose Maria Manisha Mr. Sanjay Sudhindar K. Mr. Vinod
Alapont Girotra K. Asher Khanna K. Dasari

AUDIT COMMITTEE
Mr. Sanjay K. Asher (Chairman)
Mr. D.J. Balaji Rao
Mr. Jean Brunol
Mr. Sudhindar K. Khanna

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STAKEHOLDERS RELATIONSHIP COMMITTEE
Mr. Sanjay K. Asher (Chairman)
Mr. D. J. Balaji Rao
Ms. Manisha Girotra
NOMINATION AND REMUNERATION
COMMITTEE
Mr. D. J. Balaji Rao (Chairman)
Mr. Dheeraj G.
Hinduja
Mr. Jose Maria Alapont
Ms. Manisha Girotra
CORPORATE SOCIAL RESPONSIBILITY
COMMITTEE
Mr. Dheeraj G. Hinduja (Chairman)
Ms. Manisha Girotra
Mr. Vinod K. Dasari
TECHNOLOGY
COMMITTEE
Dr. Andrew C Palmer (Chairman)
Dr. Andreas H Biagosch
Mr. Jean Brunol
Mr. Jose Maria Alapont
INVESTMENT
COMMITTEE
Mr. Dheeraj G Hinduja (Chairman)
Dr. Andreas H Biagosch
Mr. Jean Brunol
Mr. Jose Maria Alapont
RISK MANAGEMENT COMMITTEE
Dr. Andreas H. Biagosch (Chairman)
Mr. D J Balaji Rao
Mr. Sanjay K Asher
Mr. Gopal Mahadevan

Mr. N Ramanathan is the Secretary for all the Committees.

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 Gopal
Dr. Seshu NV Venkatesh Vikram Batra TV
M ahadevan Rajesh R
Bhagavathula Balachandar Anuj Kathuria Natarajan Vice President, Venkataraman
M r. Dheeraj M r. Vinod K. President, Head, Power
Chief President-HR, President, Senior Vice Corporate Head, Internal
G. Hinduja- Dasari- CEO Finance & Solutions
Technology Communicatio Global Trucks President, IT / Strategy and Audit and Risk
Chairman & MD Chief Financial Business
Officer n and CSR CIO Planning M anagement
Office

Dr. N Harihar P R Sivanesan Balasubramoni

Rajive Saharia T
Saravanan Senior Vice Senior Vice am E
Nitin Seth President, Venkataraman Amandeep N Ramanathan
Senior Vice President, President, Senior Vice
President, Global Sales Senior Vice Singh Company
President, M anufacturing Quality, President,
LCV and President, Head, Defence Secretary
Product and Project Sourcing and Special
Distribution Global Buses
Development Planning Supply Chain Projects

Organization Structure :

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Products & Services :

Contemporary Trucks

Buses (16-80 Seaters):

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Engineering Support :

Defense Business :

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Sales & Service Outlets :

Products Portfolio :

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Financial Performance of Ashok Leyland:

BalanceSheet - Ashok Leyland Ltd.

Rs (in Crores)

Particulars Mar'18 Mar'17 Mar'16 Mar'15 Mar'14

Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months

Share Capital 292.71 284.59 284.59 284.59 266.07

Reserves & Surplus 6872.09 5841.48 5122.56 3812.30 3007.89

Net Worth 7164.80 6126.07 5407.15 5118.69 4447.88

Secured Loan 100.00 603.77 674.13 910.00 1937.30

Unsecured Loan 415.69 741.19 1171.91 1681.34 1946.61

TOTAL LIABILITIES 7680.48 7471.03 7253.19 7710.03 8331.80

Assets

Gross Block 6102.56 5715.78 5207.33 8135.65 8327.87

(-) Acc. Depreciation 1128.34 744.97 415.35 2880.10 2668.00

Net Block 4974.22 4970.81 4791.99 4233.74 4485.94

Capital Work in Progress 401.24 205.86 75.86 120.14 181.53

Investments 5802.63 2878.86 1980.44 2648.83 2789.69

Inventories 1709.88 2631.03 1625.01 1398.53 1188.70

Sundry Debtors 980.48 1064.39 1250.95 1257.69 1299.01

Cash and Bank 1004.40 911.97 1593.13 751.29 11.69

Loans and Advances 1713.23 1377.16 1456.38 1879.45 1677.51

Total Current Assets 5407.99 5984.55 5925.47 5286.96 4176.92

Current Liabilities 8034.32 5918.18 5208.70 5266.80 4320.21

Provisions 871.28 650.86 311.86 334.66 155.99

Total Current Liabilities 8905.60 6569.04 5520.56 5601.46 4476.20

NET CURRENT ASSETS -3497.60 -584.50 404.91 -314.50 -299.28

Misc. Expenses .00 .00 .00 .00 .00

TOTAL ASSETS(A+B+C+D+E) 7680.48 7471.03 7253.19 7710.03 8331.80

Rs (in Crores)

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Profit & Loss - Ashok Leyland Ltd.Rs (in Crores)
Mar'18 Mar'17 Mar'16 Mar'15 Mar'14

12Months 12Months 12Months 12Months 12Months

INCOME:

Sales Turnover 26524.51 21453.14 19992.97 14485.93 9943.43

Excise Duty 276.60 1313.01 1055.67 923.75 .00

NET SALES 26247.91 20140.13 18937.30 13562.18 9943.43

Other Income 0 0 0 0 0

TOTAL INCOME 26437.67 20276.40 19054.92 13686.65 10009.95

EXPENDITURE:

Manufacturing Expenses 228.74 168.73 115.96 82.49 61.04

Material Consumed 18729.57 14065.06 13271.11 10026.35 7652.84

Personal Expenses 1811.92 1480.05 1385.06 1184.00 999.67

Selling Expenses .00 .00 .00 .00 .00

Administrative Expenses 2738.70 2223.76 1910.53 1242.70 1063.31

Expenses Capitalised .00 .00 .00 .00 .00

Provisions Made .00 .00 .00 .00 .00

TOTAL EXPENDITURE 23508.93 17937.59 16682.67 12535.55 9776.86

Operating Profit 2738.98 2202.54 2254.63 1026.63 166.56

EBITDA 2928.75 2338.81 2372.25 1151.11 233.08

Depreciation 554.61 517.89 487.90 416.34 377.04

Other Write-offs .00 .00 .00 .00 .00

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EBIT 2374.14 1820.91 1884.35 734.77 -143.95

Interest 131.25 155.38 247.64 393.51 452.92

EBT 2242.89 1665.53 1636.71 341.26 -596.88

Taxes 668.13 107.01 436.94 107.39 -120.60

Profit and Loss for the Year 1574.76 1558.53 1199.77 233.87 -476.28

Non Recurring Items -34.70 -336.66 -819.12 100.94 505.66

Other Non Cash Adjustments .00 .00 .00 .00 .00

Other Adjustments 22.52 1.21 8.95 .00 .00

REPORTED PAT 1562.59 1223.08 389.60 334.81 29.38

KEY ITEMS

Preference Dividend .00 .00 .00 .00 .00

Equity Dividend 549.48 325.40 154.14 101.99 .00

Equity Dividend (%) 187.72 114.33 54.16 35.83 .00

Shares in Issue (Lakhs) 29271.04 28458.77 28458.77 28458.77 26606.77

EPS - Annualised (Rs) 5.34 4.30 1.37 1.18 .11

Rs (in Crores)

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Joint Ventures:

With our JV with John Deere, USA, we aim to seize the opportunities of the robustly growing
construction equipment sector with products like Backhoe Loaders, Four-wheel-drive Loaders,
Skid Steers and Excavators under both the Ashok Leyland and John Deere brands.

Ashley Alteams is a JV with the Alteams Group, Finland, and is in the business of producing
High Pressure Die Casting (HPDC) aluminium components pre-dominantly for telecom and
automotive sectors.

CSR Activities:

Fun Bus

Driver Care Green Mission

CSR
Community
AIDS Awareness
Services

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 OBJECTIVE OF STUDY
In carrying out this research work, the research intends to achieve the following
objectives.
 Whether attainment of organizational goal (Providing Effective Services)
is a direct result of appropriate budgeting planning & controlling process
 The importance of budgeting & budgetary control in the activity of Ashok
Leyland as is it important in decision-making
 The implication of Annual Budgets in Ashok Leyland
 Examine the relationship between budgeting & budgetary control
 Study the benefits of budgetary control in government owned companies
 Examine the budgetary system and the realization of their policy
objectives
It is believed that an adherence to the recommendation as may be seen later in
the study based on the findings of this research will act as a guide or tool and
suggest polices aimed at rectifying the negative effects of the existing budgetary
system on the development of Ashok Leyland Ltd.

SIGNIFICANCE OF STUDY
In general the study will be of great significance to managers and financial
analysts and particularly to the organization itself. The organization can
basically, with the outcome of the study restructure and encourage effectiveness
and efficiency of budgeting and budgetary control as a tool for managerial
appraisal in its circumference. This would facilitate the organization to look at a
bigger picture to make the further strategies & to achieve it short-term & long-
term goals.
The public individuals and institutions will on its part be relieved of the
problems inefficient or ineffective budgeting since it is true that they constitute
the major sources of these funds, if nothing it places the shareholders of
commercial venture that seeing their investments being well utilized, budgeted
and accounted for by management. The citizens and institution will regard their
investment in the form of the equity they have traded.

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 SCOPE OF STUDY
Budgeting and budgetary control is a vital issue in every organization whether
profits oriented or otherwise. However, being a researcher my intends to study
Budgeting and Budgetary Control of Ashok Leyland Ltd has been to understand
the scope of this tool to help in efficient decision-making.

LITERATURE REVIEW

Budgeting is an instrument which helps organizations in planning & controlling

both in short-term & long-term. There may be chances of varying degree of
extensiveness for both small organizations & big corporate houses. With the help
of budget organizations enables themselves to propose the future prospects of its
operation & expansion strategies. Budgeting process is an extension of
Management Accounting. Budgetary control helps organizations to efficient
Finance/Operational/Activity management. It support organization in sustainable
business by coping with the inflation, changing Government policies in terms of
regulations & make them prepare for uncertainty avoidance.

Definition of Budget :

As per The Chartered Institute of Management Accountants, England, defines

budget as :

“A financial and/or quantitative statement, prepared and approved prior to

define period of time, the policy to be pursued during that period for the purpose
of attaining a given objective."

According to Brown & Howard of Management Accountants:

"A budget is a predetermined statement of managerial policy during the given

period which provides a standard for comparison with the results actually
achieved."

K. Amjaroen in his book “5 Essential of successful budgeting” stated that :

“Budgeting is straightforward, easy to do with a spreadsheet, and more an

exercise of persistence than anything else”.

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 “In a nutshell, budgeting means that investors don't spend more than they make.
It is also known as "living below one's means" and seems to be a concept lost on
lots of individuals in societies their system encourage to live largely on
indebtedness through credit card”

In General Budget is a systematic plan for the utilization of manpower and

material resources. A budget identifies the planned expenditure for a project,
program or portfolio. It is used as a baseline against which the actual expenditure
and predicted eventual cost of the work can be reported.

A budget is a quantified expectation for what a business wants to achieve. Its

characteristics are:

 The budget is a detailed representation of the future results, financial position,

and cash flows that management wants the business to achieve during a certain
period.
 The budget may only be updated once a year, depending on how frequently
senior management wants to revise information.
 The budget is compared to actual results to determine variances from expected
performance.
 Management takes remedial steps to bring actual results back into line with the
budget.
 The budget to actual comparison can trigger changes in performance-based
compensation paid to employees.

Businesses need to plan. In large businesses, such planning is very formal while,
for smaller businesses, it will be less formal. Planning for the future falls into
three time scales:

Classification on the basis of Time :

 Long-Term Budgets : Long-term budgets are prepared for a longer period

varies between five to ten years. It is usually developed by the top level
management. These budgets summarise the general plan of operations and its
expected consequences. Long-Term Budgets are prepared for important
activities like composition of its capital expenditure, new product development
and research, long-term finance etc.
 Short-Term Budgets : These budgets are usually prepared for a period of one
year. Sometimes they may be prepared for shorter period as for quarterly or half
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 yearly. The scope of budgeting activity may vary considerably among different
organization.
 Current Budgets : Current budgets are prepared for the current operations of
the business. The planning period of a budget generally in months or weeks. As
per ICMA London, "Current budget is a budget which is established for use over
a short period of time and related to current conditions."

Classification on the basis of Function:

 Functional Budgets :

The functional budget is one which relates to any of the functions of an

organization. The number of functional budgets depend upon the size and nature
of business. The following are the commonly used:

 Purchase Budget
 Sales(Revenue)
 Production
 Labour Cost Budget
 Trade Receivable Budget
 Trade Payable Budget
 Cash Budget
 Selling & Distribution Cost Budget
 Capital Expenditure Budget

Sales budget: The sales budget as setting forth the sales departments objectives
for the budgetary period. The sales budget is the key to the overall industry
budget, because the anticipated sales volume is used as a basis to 18 determine
amount of goods to be produced, the labour equipment and capital required and
the natural and amount of various selling administrative and financial expenses
needed. Sales estimates are based on past performances and on the forecast of
business conditions for the coming period.

Production budget : After the sale budget has been determined, a production
budget can be made to meet requirements of sale budget. The actual number of
units to be completed is computed from the following data units to be sold,
desired size of ending inventory and units in the beginning inventory.

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 Direct materials: The material budget is developed to indicate the material to be
purchased and materials usage for the period. It shows the estimated raw
materials volume that would be used to meet the requirements of the production
budget for the budget period. It is usually prepared to show the quantity and
value of materials required for the production programmed. The material budget
is extremely important in determining future cash requirements.

Direct labour budget: The direct labour budget is an estimate of the total direct
labour hours and direct labour costs required to complete the expected
production during the budgeted period.

Manufacturing overhead budget: The manufacturing overhead budget shows

the amount expected to be spent as cost running the factory. Manufacturing
overhead cost is less consistent. Some of these costs such as indirect material is
variable

Operating expenses budget : Detailed budgets are normally prepared covering

the selling and administrative expenses anticipated as a result of the estimated
sales and production operations.

Cash budget : A cash budget is one of the most important budgets prepared in
the organization. It shows in summary form, the expected cash receipts and cash
payments during the budget period The cash budget shows the effect of budgeted
activities selling, buying, paying wages, and investing in capital equipment and
so on. Cash budgets are prepared in order to ensure that there will be just
sufficient cash in hand to cope adequately with budgeted activities.

 Master Budgets :

Master Budget is summary of all functional activities into a uniform structure

which is most efficient form to adapt & employed.

Classification on the basis of Capacity:

 Fixed Budgets : A fixed budget remains unchanged irrespective of level of

activities attained or any other factor affecting the status quo

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 Flexible Budgets : A Flexible budget tends to change related to activities
attained, Flexible budget is also known as Variable Budget or Sliding Scale
Budget. Takes both fixed, Variable & Semi-fixed manufacturing cost into
account.

BENEFITS OF BUDGETS AND BUDGETARY CONTROL

Budgets provide benefits both for the business, and also for its managers and
other staff

The budget assists planning

By formalising objectives through a budget, a business can ensure that its plans
are achievable. It will be able to decide what is needed to produce the output of
goods and services, and to make sure that everything will be available at the
right time.

The budget communicates and co-ordinates

Because a budget is agreed by the business, all the relevant managers and staff
will be working towards the same end. When the budget is being set, any
anticipated problems should be resolved and any areas of potential confusion
clarified. All departments should be in a position to play their part in achieving
the overall goals.

The budget helps with decision-making

By planning ahead through budgets, a business can make decisions on how much
output – in the form of goods or services – can be achieved. At the same time,
the cost of the output can be planned and changes can be made where
appropriate.

The budget can be used to monitor and control

An important reason for producing a budget is that management is able to use
budgetary control to monitor and compare the actual results (see diagram below).
This is so that action can be taken to modify the operation of the business as time
passes, or possibly to change the budget if it becomes unachievable.

The budget can be used to motivate

A budget can be part of the techniques for motivating managers and other staff to
achieve the
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objectives of the business. The extent to which this happens will depend on how
the budget is agreed and set, and whether it is thought to be fair and achievable.
The budget may also be linked to rewards (for example, bonuses) where targets
are met or exceeded.

The Approved Plan

Master Budget provides an approved summary of results to be expected from
proposed plan of operations. It cater all the concerns of organization & serves as
torch to executive to act as a path finder to achieve the functional objective &
therefore organization’s objectives too.

SCOPE & TECHNIQUES OF STANDARD COSTING FOR BUDGETARY CONTROL

Scope :

A- Budgets are prepared keeping all the functional context into consideration
i.e. Production & Sales. Actual situation is compared & efforts are
exercised to control the same. Standards are adhered by classifying,
recording & allocation of the expenses to cost units. Actual costs are
compared with standard cost.
B- Budgets have wider coverage to the organization as a whole. Every
operation is segregated into number of elements & standards are set for
each elements respectively
C- Budgetary control comes into picture at the level of expenditure at
functional level. Standard costing is concerned with the requirement of
each element of cost
D- Budget is a projection of financial accounts whereas Standard Costing
projects the Cost Accounting.

Techniques :

Page 29 of 58
 A- Budgetary control is exercised by putting budgets & actual parallel,
Variance is not generally revealed in the accounts. Standard Costing
Variance are revealed through accounts.
B- Budgetary control system can be operated in smaller parts. E.g.
Advertisement Budget, Research & Development Budget etc. Standard
Costing is not put into operation in parts.
C- Budgetary control of expenses is broad in nature whereas Standard
Costing system is a far more technically improved system by means of
which the Variance are analysed in details.

PARAMETERS FOR EFFECTIVE BUDGETARY CONTROL

The following parameters are supposed to be the consideration for effective

Budgetary Control Process :

1- Clear cut objectives & goal should be well defined

2- The ultimate objective of realizing maximum benefits should always be
kept on supreme
3- A Budget Manual is required, Which contains all details regarding plan &
procedure for its execution. A proper time-table should be assigned to
Budget Preparation for approval, details about responsibilities & Cost
Centres etc.
4- Budget committee should be set-up for Budget preparation & efficient
execution of the plan.
5- A Budget should always be related to specified time-period
6- Support of top management is necessary in order to get the full support
and co-operation of the system of budgetary control
7- To make budgetary control successful, there should be a proper
delegation of authority and responsibility.
8- Adequate accounting system is essential to make the budgeting
successful.
9- The employees should be properly educated about the benefits of
budgeting system.
10- The Budgeting System should not cost more to operate than it is
worth
11- Key factors are limiting factors, if any, should consider before
preparation of budget

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 12- For Budgetary control to be effective, proper periodic reporting
system should be introduced.

ORGANIZATION OF BUDGETARY CONTROL

In order to introduce budgetary control system, the following are essential to be

considered for a sound and efficient organization. The important aspects to be
considered are:

1. Organisation Chart: For the purpose of effective budgetary control, it is

imperative on the part of each entity to have definite "plan of
organization." This plan of organization is embodied in the organization
chart. The organization chart explaining clearly the position of each
executive's authority and responsibility of the firm. All the functional
heads are entrusted with the responsibility of ensuring proper
implementation of their respective departmental budgets.
2. Budget Centre: A Budget Centre is defined by the terminology as "a
section of the organization of an undertaking defined for the purpose of
budgetary control." For effective budgetary control budget centre or
departments should be established for each of which budget will be set
with the help of the head of the department concerned.
3. Budget Officer: Budget Officer is usually some senior member of the
accounting staff who controls the budgetary process. He does not prepare
the budget himself, but facilitates and co-ordinates the budgeting activity.
He assists the individual departmental heads and the budget committee,
and ensures that their decisions are communicated to the appropriate
people.
4. Budget Committee: Budget Committee comprising of the Managing
Director, the Production Manager, Sales Manager and Accountant. The
main objectives of this committee is to agree on all departmental budgets,
normal standard hours and allocations. In small concerns, the Budget
Officer may co-ordinate the work for preparation and implementation of
budgets. In large-scale concern a budget committee is setup for
preparation of budgets and execution of budgetary control.
5. Budget Manual: A Budget Manual has been defined as "a document
which set out the responsibilities of persons engaged in the routine of and
the forms and records required for budgetary control." It contains all
details regarding the plan and procedures for its execution. It also
Page 31 of 58
 specifies the time table for budget preparation to approval, details about
responsibility, cost centres, constitution and organization of budget
committee, duties and responsibilities of budget officer.
6. Budget Period: A budget is always related to specified time period. The
budget period is the length of time for which a budget is prepared and
employed. The period may depend upon the type of budget. There is no
specific period as such. However, for the sake of convenience, the budget
period may be fixed depending upon the following factors Types of
Business
 Types of Budget
 Nature of the demand of the product
 Length of trade cycle
 Economic factors
 Availability of accounting period
 Availability of finance
 Control operation
7. Key Factor is also called as "Limiting Factor" or Governing Factor.
While preparing the budget, it is necessary to consider key factor for
successful budgetary control. The influence of the Key Factor which
dominates the business operations in order to ensure that the functional
budgets are reasonably capable of fulfilment.

ADVANTAGE OF BUDGETARY CONTROL

The advantages of budgetary control may be summarized as follows:

1. It facilitates reduction of cost.

2. Budgetary control guides the management in planning and formulation of
policies.
3. Budgetary control facilitates effective co-ordination of activities of the
various departments and functions by setting their limits and goals.
4. It ensures maximization of profits through cost control and optimum
utilization of resources.
5. It evaluates for the continuous review of performance of different budget
centres.
6. It helps to the management efficient and economic production control.

Page 32 of 58
 7. It facilitates corrective actions, whenever there is inefficiencies and
weaknesses comparing actual performance with budget.
8. It guides management in research and development.
9. It ensures economy in working
10.It helps to adopt the Principles of Standard Costing

LIMITATIONS OF BUDGETS AND BUDGETARY CONTROL

Whilst most businesses will benefit from the use of budgets, there are a number
of limitations of budgets to be aware of:

The benefit of the budget must exceed the cost

Budgeting is a fairly complex process and some businesses – particularly small
ones – may find that the task is too much of a burden in terms of time and other
resources, with only limited benefits. Nevertheless, many lenders – such as
banks – often require the production of budgets as part of the business plan. As a
general rule, the benefit of producing the budget must exceed its cost.

Budget information may not be accurate

It is essential that the information going into budgets should be as accurate as
possible. Anybody can produce a budget, but the more inaccurate it is, the less
use it is to the business as a planning and control mechanism. Great care needs to
be taken with estimates of sales – often the starting point of the budgeting
process – and costs. Budgetary control is used to compare the budget against
what actually happened – the budget may need to be changed if it becomes
unachievable.

The budget may demotivate

Employees who have had no part in agreeing and setting a budget which is
imposed upon them, will feel that they do not own it. As a consequence, the staff
may be demotivated. Another limitation is that employees may see budgets as
either a ‘carrot’ or a ‘stick’, i.e. as a form of encouragement to achieve the
targets set, or as a form of punishment if targets are missed.

Budgets may lead to dis functional management

A limitation that can occur is that employees in one department of the business
may over-achieve against their budget and create problems elsewhere. For
example, a production department might achieve extra output that the sales
department finds difficult to sell. To avoid such, dis functional management,

Page 33 of 58
 budgets need to be set at realistic levels and linked and co-ordinated across all
departments within the business.

Budgets may be set at too low a level

Where the budget is too easy to achieve, it will be of no benefit to the business
and may, in fact, lead to lower levels of output and higher costs than before the
budget was established. Budgets should be set at realistic levels, which make the
best use of the resources available.

FORECASTING

 A forecast is an estimate of what will actually be achieved. A forecast that

tracks the expected performance of the business, so that timely decisions can be
taken to address shortfalls against target, or maximise merging opportunity Its
characteristics are:
 The forecast is typically limited to major revenue and expense line items. There
is usually no forecast for financial position, though cash flows may be
forecasted.
 The forecast is updated at regular intervals, perhaps monthly or quarterly.
 The forecast may be used for short-term operational considerations, such as
adjustments to staffing, inventory levels, and the production plan.
 There is no variance analysis that compares the forecast to actual results.
 Changes in the forecast do not impact performance-based compensation paid to
employees.

TYPES OF FORECASTING

Time Series
Analysis &
Qualitative Projection
Technique

Causal Models

Forecasting

Page 34 of 58
 QUALITATIVE TECHNIQUES:

The first uses qualitative data (expert opinion, for example) and information
about special events of the kind already mentioned, and may or may not take the
past into consideration. Primarily, these are used when data are scarce—for
example, when a product is first introduced into a market. They use human
judgment and rating schemes to turn qualitative information into quantitative
estimates.

TIME SERIES ANALYSIS AND PROJECTION

The second, on the other hand, focuses entirely on patterns and pattern changes,
and thus relies entirely on historical data. These are statistical techniques used
when several years’ data for a product or product line are available and when
relationships and trends are both clear and relatively stable.
One of the basic principles of statistical forecasting—indeed, of all forecasting
when historical data are available—is that the forecaster should use the data on
past performance to get a “speedometer reading” of the current rate (of sales,
say) and of how fast this rate is increasing or decreasing. The current rate and
changes in the rate—“acceleration” and “deceleration”—constitute the basis of
forecasting. Once they are known, various mathematical techniques can develop
projections from them.

Time series analysis helps to identify and explain:

 Any regularity or systematic variation in the series of data which is due to

seasonality—the “seasonal ”
 Cyclical patterns that repeat any two or three years or more.
 Trends in the data.
 Growth rates of these trends.

CAUSAL MODELS

The third uses highly refined and specific information about relationships
between system elements, and is powerful enough to take special events formally
into account. As with time series analysis and projection techniques, the past is
important to causal models. When historical data are available and enough
analysis has been performed to spell out explicitly the relationships between the
factor to be forecast and other factors (such as related businesses, economic

Page 35 of 58
forces, and socioeconomic factors), the forecaster often constructs a causal
model.
A causal model is the most sophisticated kind of forecasting tool. It expresses
mathematically the relevant causal relationships, and may include pipeline
considerations (i.e., inventories) and market survey information.

LIMITATIONS & CONSTRAINTS

As my study has been focused on the financial performance of Ashok Leyland
Ltd which need critical data to be explored, in continuance of this study the
challenges faced is summarized bellow:

 As the confidentiality of data allowed me to have a very limited access to it

 Limited resources has created much difficulty to create an information pool
for further study
 The sessions has been conducted on related situations rather than actual
populated data of organization
 In addition to progress of project, there has been a high probability of
exploring multiple sources to retrieve the relevant data of organizational
financial performance
 Study has been conducted based on secondary data which leave little scope
of innovation in recommendation process to current designed system of
Budgeting Planning & Controlling

RESEARCH METHDOLOGY

RESEARCH HYPOTHESIS

The following hypothesis will be tested for this study.

Null Hypothesis (H0): That budgets are effective means of planning
organizational activities.
Alternative Hypothesis (H1): Budgets are not effective means of planning
organizational activitics.
Null Hypothesis (H0): Budget controls and aids management in decision
making.
Alternative Hypothesis (H1): Budget does not controls and aids management in
decision making.

Page 36 of 58
Null Hypothesis (H0): Department heads are not properly educated on the
budgeting and budgetary control system.
Alternative Hypothesis (H1) That Departmental heads are properly educated on
the budgeting and budgetary control system.
Data Collection & Data Analysis :

As data collection is a big time challenge when it comes to financials of any

organization, so is the case with Ashok Leyland too. The critical information is
quite limited & which was not supposed to be publically shared with trainee.
There is a method of “Descriptive Exploratory” character involved in this study.
For data treatment , A quantitative & qualitative approach is considered, since
the data were tabulated & treated through a descriptive statistics & data analysis.
The data were collected & treated in excel spreadsheets. Since there is a concern
of describing the data collection method, in order to allow their replicability &
temporal analysis, which is one of the concerns regarding qualitative &
quantitative research.
Though in pursuance of this project following methods of data collection has
been adapted enormously:

 Survey: The survey was developed with the help of my mentor in a

structured format. The survey has been highlighted with the features
aligned to the review of literature. The survey was submitted to a pilot test
in which items were found that were inserted & adjusted to a better
understanding & do not generate doubts about the questions. The issues
were elaborated from the practices identified in the literature search. The
application of the survey is divided into two phases; the first includes
characterization of company including 3 issues, the second phase involved
10 questions about the Planning of Budget, 5 topics regarding
implementation of Budget, With the use of Likert Scale, & 7 objective
questions about the evaluation & performance control. The survey has
been circulated through Google Doc Platform. Survey was well explained
to participants. The collection period has been for 20 days.
 Interview: In order to establish a methodological triangulation, after the
application of survey, a semi-structured interview was carried out with the
coordination of the process of Budget. The methodological triangulation
allows the establishment of measures of reliability & validity. The
interview approached aspects of the practices different than those usually
Page 37 of 58
 highlighted in literature, such as the period of preparation of budget, & the
purpose of control, among others. The interview aimed at deepening the
knowledge on the use of budgeting in ports, with the identification of the
reason, or reasons, as well as key explanatory factors of the use of
practices other than those mentioned in the literature on the topic.
 Presentation : Presentation on Budgeting process has been conducted
from the mentor which encompasses budgeting principles & practices in
organization. The presentation session has been accompanied with one-o-
one session which enable us to cross check the validity of literature on
which we have established this research.

Data reprsentations & it’s analysis

Overview : Financial Performance

UNDERESTING OF SALES OF ASHOK LEYLAND LTD. (NORTH ZONE)

According to the data provided by the company, the tabular and graphical
representation of the sales trend is highlighted.
YEAR BUS TRUCK TOTAL % Inc.% Dec

2013-2014 1345 3740 5085 5.86

2014-2015 770 4901 5671 51.84

2015-2016 1142 9713 10855 6.6

2016-2017 1558 9957 11515 -10.8

2017-2018 1100 9335 10435 -104.35

Table-I

Page 38 of 58
 SALES TRENDS
14000

12000

10000

8000

6000

4000

2000

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

BUS TRUCK TOTAL

Fig: I

15000
SALES INCREASE DECREASE TRENDS
10000

5000

0
BUS TRUCK TOTAL % Inc.%Dec
-5000
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Fig: II

The above table is the description of sales in which it is shown that the sales of
vehicles increase during a period of next year and a massive increase and
decrease in commercial vehicle market .Lets have a look of market condition
which influenced it.

Page 39 of 58
Ratio Analysis:
Balance Sheet

Page 40 of 58
Profit & Loss Account:

Profitability Ratios
Gross Profit Ratio
Gross Profit Ratio= [Gross Profit/Net Sales]x100
= [Rs.827296.71 Lakhs/Rs.2133166.91 Lakhs]x100
= 38.78%
Operating Profit Ratio
Operating Profit Ratio= [Operating Profit/Net sales]x100
= [Rs.148546.49 Lakhs/Rs.2133166.91 Lakhs]x100
= 6.96%

Page 41 of 58
Interpretation:
Profitability Ratio
When investors look to analyze the financial standing on an organization, they
mainly look at the profitability ratios to get a clear-cut understanding on whether
their money will be in safe hands. This is because these ratios indicate the
operational efficiency of the organization.

The Gross Profit ratio and the Operating Profit ratio of Ashok Leyland Ltd. is
38.78% and 6.96% respectively. This tell us that the company makes a 39%
profit on sales before considering the operating expenses or indirect expenses of
the firm. This figure is outstanding as the margin is ascertained by only
considering the direct expenses of manufacturing. But, when we look at the
operating profit ratio, we find the figure to slide down quite drastically to a mere
7%. This indicates that the organization has huge amounts of operating expenses
or indirect expenses thereby reducing the profit margin. But, this margin is
acceptable as the industry standard of operating profit ratio stands at 6.5-7%
(ICRA, 2017). Going be these standards, Ashok Leyland Ltd. seems to be doing
quite well.

The Return on Investment ratio mainly focuses on the level of return a

shareholder can expect by investing their funds in an organization. This is one of
the most widely used ratio to ascertain whether an investment is feasible. For
Ashok Leyland Ltd., this figure stands at 19.96%. With Tata Motors indicating a
return on investment ratio of negative 11.91% (Dion Global Solutions Limited,
2017), Eicher Motors having a ratio of 39.77% (Dion Global Solutions Limited,
2017), SML Isuzu establishing a ratio of 15.60% (Dion Global Solutions
Limited, 2017) and Force Motors having a ratio of 10.8% (Dion Global
Solutions Limited, 2017), we find that the industry average for this ratio of these
companies comes to roughly about 14.85%. In comparison to this, Ashok

Page 42 of 58
Leyland stands above the industry average and that may very well be a good sign
for investors.

Next, we have the Return on Capital Employed ratio which as the name
suggests, indicates what percentage of the total capital employed in the firm is
gotten back through earnings in a financial year. Ashok Leyland has a ratio of
16.05%. Tata Motors maintains a ratio on negative 1.86% (Dion Global
Solutions Limited, 2017), Eicher Motors a ratio of 58.11% (Dion Global
Solutions Limited, 2017), Force Motors a ratio of 12.85% (Dion Global
Solutions Limited, 2017) and SML Isuzu a ratio of 20.08% (Dion Global
Solutions Limited, 2017). This brings us an industry average of roughly about
21%. This shows that the company should look into how efficiently it is
employing its capital to run the business and it falls significantly behind the
industry average.

Comparative Profit and Loss Statement (2016-17)

Following is the comparative statement of Profit and Loss for the year ended 31st
March 2017.

Income
Revenue from Operations 2231957.88 2406834.78 174876.9 8%
Other income 16362.07 13069.22 3292.85 20%
Total Income 2248319.95 2419904 171584.05 8%
Expenses
Cost of materials and
1282193.74 1397946.87 115753.13 9%
services consumed
Purchases of stock-in-trade 161603.34 142786.74 18816.6 12%
Changes in inventories of
finished goods, stock-in-trade -46417.79 -68974.42 22556.63 -49%
and work-in-progress
Excise duty on sale of goods 105967.66 131885.56 25917.9 24%
Employee benefits expense 171066.68 190088.07 19021.39 11%
Finance costs 92504.99 104879.96 12374.97 13%

Page 43 of 58
Depreciation and
52393.78 57278.88 4885.1 9%
amortization expense
Other expenses 259651.45 283708.56 24057.11 9%
Total Expenses 2078963.85 2239600.22 160636.37 8%
Profit before exchange gain
on swap contracts / Share of
169356.1 180303.78 10947.68 6%
loss of joint ventures and
associates
Exchange gain on swap
504.8 1539.74 1034.94 205%
contracts
Share of loss of joint
-7849.12 -986.5 6862.62 87%
ventures and associates (net)
Profit before exceptional
162011.78 180857.02 18845.24 12%
items and tax
Exceptional items -41137.34 2469.23 43606.57 106%
Profit before tax 120874.44 183326.25 62451.81 52%
Tax expense:
Current tax 51363.24 44002.58 7360.66 14%
Deferred tax -1706.1 -24390.67 22684.57 1330%
Profit for the year from
71217.3 163714.34 92497.04 130%
continuing operations
Loss from discontinued
0 -423.31 423.31
operations
Profit for the year 71217.3 163291.03 92073.73 129%

The first thing we notice in the above statement is the 129% increase in the
Profit for the year in 2017. We will try to break down how this result has been
achieved.

Firstly, we see that the company has a total increase in tis expenses and revenues
by 8% which is quite normal. The major change is brought in by the exchange
gain on swap contracts which results in a 205% increase in comparison. Also,
there has been a 106% increase in the income generated from exceptional items
which has played a major role in the overall increase in the profit since 2016.

Therefore, we can say that there has not been a significant change I the working
of the organization to increase its revenue through sales or any effort from the

Page 44 of 58
organizations side to decrease the expenses of the firm. Rather, it has been
majorly due to the involvement of the company in activities other than its core
competencies that has resulted in the major increase in the profits from 2016.

UNDERESTING OF EXPENSES OFASHOK LEYLAND LTD (NORTH

ZONE)
The tabular presentation and graphical representation of expenses which helps to
estimate the profitability as well as the control of the expenses.

SUMMERISED EXPENSES
Sum of Value in reporting currency Cost Grand
element group name Total
Advertisement & Publicity 73,681,200
Bank Charges 1,133,029
IMS Bandwidth charges, Software charges 11,243
Legal Expenses 783,383
Management Development & Suggestions 1,255,048
Meetings General 2,894,492
Postage & Telegraph 3,908,696
Power Office 9,349,807
Printing & Stationary 1,138,359
Rates & Taxes 8,664,675
Rent 6,489,040
Repairs-Fixed 34,814,668
Security Contracts 5,385,357
Transport Dept. Expenses 6,074,240
Traveling Cost 76,922,620
Grand Total 232,505,856

Page 45 of 58
 90,000,000

80,000,000

70,000,000

60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

-
Grand Total

For a company like Ashok Leyland Ltd. The second manufacturer it become
important to have their reach and presence in each and every corner of the
market. the expenses table and graph clearly states the type of expenses made to
meet the target. The maximum amount of expenses budget goes to the
advertisement expenses and repair and fix. The quality which a customer needs
to satisfy from a product or a brand is service and reach .The Company making
its full efforts and plan to achieve the target.
Templates:
Grand
Op Cost Templates
Total
Manpower Cost
Wages
Less direct labour
Net Indirecr wages
Salaries- Confidential
Salaries- Others
Salaries- MR
Total Salaries
Contributions (Exc. Gratuity)
Welfare Expenses
Contingency
Gratuity
Other Manpower Cost(As per Schedule VI)

Page 46 of 58
Total Manpower Cost
Production Related Cost
Factory Power MES
Self Generated
Total Factory Power
Inward Freight(Hire Charges/Logistic)
Consumable Tools
Consumable Stores
Repairs(Variable)
T & GSE
Total Production Related Cost
Sales Related Cost
Warantee
Campaign Related Warantee
Free Services
AMC Expenses(Incl DTC)
Chassis Rect. Expenses
Mobile Service Van Expenses
Service Training Expenses
Packing & Forwarding
Royalty
Total Sales Related Cost
Administration Cost
Power Office
Repairs(Fixed)
Advertisement & Publicity
Rates & Taxes
Insurance
Travel
Postage & telephone
Printing & Stationary
Transport Dept Expenses
Bank Charges
Research & Development
Director's Fee & Travel
Audit Fee & Expenses
Recruitment Expenses
Rent
Legal Expenses
Computer Hire Charges
Consultancy Charges
News Paper & Periodicals
Page 47 of 58
Management Development & Suggestions
Donations
Security Contracts
Transit Expenses
Shareholder's Meeting
Meetings General
Membership Subscriptions
Exchange Loss/Gain
Misc.Expenses
Provision for doubtful debts
IMS
Other Expenses (As per Schedule VI)
Total Administration Cost
Grand Total

Page 48 of 58
Region (All)
CO object name (Multiple Items)

Sum of Val.in rep.cur. Business

Area
Cost element group name Cost Element Cost element name 1000 1100 1200 2000 4000 Grand Total
Advertisement & 46505005 ADVERTISEMENT - PROD 448,880 800,244 13,500 59,000 1,321,624
Publicity
46505025 ADVERTISEMENT HOARDS 49,405 364,562 30,901 444,868
46505035 AUDIOVISUAL AND PHOT 12,800 38,332 2,000 1,500 3,577 58,209
46505040 VEHICLE DEMONSTRATIO 3,747,960 444,661 1,455 4,194,076
46505045 SALES PROMOTION 5,826,316 23,921,232 5,253,929 1,479,763 36,795 36,518,034
46505050 DEALERS & OPERATORS 11,772 8,139,883 660,813 1,228 60,163 8,873,859
46505055 TRADE FAIR PARTICIPA 7,746,777 7,941,239 148,429 15,836,445
46505065 GIVEAWAYS(SALES PROM 866,707 1,006,790 79,200 5,800 1,308,988 3,267,485
46505080 SERVICE PROMOTION EX 159,095 123,708 9,683 3,960 2,870,154 3,166,600
Bank Charges 47130005 BANK CHARGES 24,602 285 1,108,142 1,133,029
IMS Bandwidth 47115050 BANDWIDTH CHARGES DA 11,243 11,243
charges,Software
charges
Legal Expenses 47145095 LEGAL EXPENSES 647,857 22,500 6,000 39,800 67,226 783,383
Management 47145155 TRAINING - EXTERNAL - 5,712 - 5,712
Development &
Suggestions
47145160 SPONSERSHP FEES - EX 806,836 442,500 1,249,336
Meetings General 47145175 MEETINGS GENERAL 1,901,178 644,274 44,403 204,727 99,910 2,894,492
Postage & Telegraph 47115005 TELEPHONE CHARGES 870,514 (253,551) 261,475 468,976 1,898,264 3,245,679
47115025 POSTAGE CHARGES 1,856 1,749 432 2,045 6,082
47115035 COURIER CHARGES 571,387 28,133 6,905 32,974 17,536 656,934
Power Office 45905015 POWER-OFFICE PREMISE 8,144,092 - 994,034 211,681 9,349,807
Printing & Stationary 47120005 PHOTOCOPYING 132,011 9,417 5,216 1,402 11,385 159,431
47120015 OFFICE FORMS 24,502 2,189 122,500 63,160 57,319 269,670
47120025 BINDING CHARGES 105,235 2,536 3,240 111,011
47120030 COMPUTER STATIONERY 4,814 940 600 597 6,951
47120035 COMPUTER DISCS, TAP (735) (250) (985)
47120050 STATIONERY OTHERS 337,572 98,935 48,184 28,680 22,229 535,600
47120065 PRINTING STATIONERY 56,682 - 56,682
Rates & Taxes 47105020 CORPORATION AND MUNI 982,455 520 89,430 10,789 1,083,194
47105055 REGISTRATION/FILING/ 5,139,335 1,752,045 522,142 7,413,522
47105075 WATER CHARGES 9,956 3,253 13,209
47105085 RATES-OTHERS 117,150 3,250 34,350 154,750
Rent 47145090 RENT OFFICE PREMISES 5,374,125 933,115 181,800 6,489,040
Repairs-Fixed 45920010 SERVICE CONTRACTS-CI 11,725 11,725
45920025 SERVICE CONT-ELECTRI 68,072 25,000 93,072
45920050 ELECTRICAL SPARES 84,350 84,350
45920055 OTHER ELECTRICAL MAI 18,832 900 1,006 20,738
45920075 TOOLING & GENERAL SH 119,067 119,067
45920090 SERVICE CONTRACTS P 73,242 73,242
45920100 OTHER MAINTENANCE 1,607,236 228,481 26,612 600 125,671 1,988,600
45920110 FURNITURE PURCHASE < 475,371 790 65,000 541,161
45920115 OFFICE EQUIPMENT PUR 26,840 26,840
45920120 SERVICE CONTRACTS OT 16,185,155 (508,636) 6,493,543 5,266,737 27,436,799
45920135 REPAIRS AND MAINTENA 1,004 280 6,000 5,500 12,784
45920165 OFFICE PREMISES 3,353,392 111,909 15,035 919,474 6,480 4,406,290
Security Contracts 47145140 SECURITY CONTRACTS 4,238,994 (132,633) 1,278,995 5,385,357
Transport Dept 47125005 FUEL LUBRICATION BUS 4,832 4,832
47125010 FUEL LUBRICATION OWN 49,812 1,134 50,946
47125015 FUEL FOR JEEPS 305,285 830,582 556,199 2,310,017 4,002,084
47125025 MAINTENANCE OWN CARS 4,852 600 3,600 9,052
47125050 MOTOR VEHICLE INSURA 75,993 75,993
47125070 MAINTENANCE JEEPS 186,279 414,318 272,697 1,058,039 1,931,333
Traveling Cost 47110005 OUTSTATION TRAVEL - 3,501,105 1,769,144 837,049 1,128,348 3,341,763 10,577,408
47110010 CAR HIRE 1,928,284 340,806 507,672 259,772 626,524 3,663,058
47110015 CONVEYANCE 2,829,702 6,658,587 1,570,202 1,319,725 4,437,533 16,815,749
47110025 FOREIGN TRAVEL FARE 195,804 195,804
47110050 TRAVEL OTHERTHAN FAR 12,953,130 9,141,891 2,709,129 4,802,784 13,686,555 43,293,489
47110060 JOINING EXPENSES ON 988,927 438,975 101,464 411,541 442,735 2,383,642
47110070 TRAVEL EXPENSES FORE 11,398 19,000 6,894 571 (62,693) (24,830)
47110080 TRAVEL & OTHER EXPEN 3,200 15,100 18,300
Grand Total 88,251,564 69,247,918 13,691,835 22,869,587 38,444,951 232,505,855

OPS BUDGET: Comparative Analysis

2018- 2017-18 Increas % Typ

Heads Wt
19 Extrapolated e change e
ADVERTISEMENT & 38
PUBLICITY 14.09 8.84 5.24 59% % A
TRAVEL 13% 28 A

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 10.45 9.23 1.22 %
14
REPAIRS(FIXED) 5.15 4.18 0.97 23% % A

RENT 2.22 0.78 1.44 185% 6% B

SECURITY CONTRACTS 1.19 0.65 0.55 84% 3% B

POWER OFFICE 1.13 1.12 0.00 0% 3% B

TRANSPORT DEPT. EXP. 0.81 0.73 0.08 11% 2% B

POSTAGE &
TELEPHONES 0.65 0.47 0.18 39% 2% B

RATES & TAXES 0.56 1.04 (0.48) -46% 2% C

MAGMT DEV. &
SUGGESTIONS 0.17 0.15 0.02 14% 0% C

LEGAL EXPENSES 0.16 0.09 0.07 71% 0% C

MEETINGS GENERAL 0.16 0.35 (0.19) -55% 0% C

BANK CHARGES 0.15 0.14 0.01 11% 0% C

PRINTING &
STATIONERY 0.14 0.14 (0.00) -1% 0% C

Grand Total 37.01 27.90 9.11

Assumption
Area Office 16
3600
Volume 0
Annual Revenue (in crs) @
18L/Veh 6480
Employees 300

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Capital requirement plan sheet :
RO JAIPUR (WITH AOs) (Amount in Lakhs)
F
CAPITAL
Apr'1 May'1 Jun'1 Jul'1 Aug'1 Sep'1 Oct'1 Dec'1 Jan'1 Feb'1 Mar'1
REQUIREMEN Nov'18 Sub Total 2019-20 2020-21 2021-22 2022-23 Total
8 8 8 8 8 8 8 8 9 9 9
T
Jeep 06 Nos
(New 20.00 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 50.00 20.00 20.00 50.00 60.00 200.00
Requirement)
Refrigerator
Jaipur,Udaipur,Jo 1.00 1.00 0.00 0.00 1.00
dhpur,Bikaner
Projector and
screen for
1.00 0.50 0.50 2.00 0.00 0.00 2.00
Jaipur,Jodhpur,Ud
aipur,Bikaner
Air Conditioner
for
1.50 0.00 1.50 0.00 0.00 0.00 0.00 1.50
Jodhpur,Jaipur,Ud
aipur,Bikaner
Water Cooler 1.00 0.00 0.00 1.00 0.00 0.00 0.00 1.00
Coffee Vending
Machine ( 05 0.25 0.25 0.25 0.25 0.25 1.25 1.25
Nos.)
Micro Owen 0.60 0.00 0.00 0.60 0.00 0.00 0.60

TT Table 0.20 0.00 0.00 0.20 0.00 0.00 0.20

TOTAL 25.35 30.45 0.75 0.75 0.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 57.55 20.00 20.00 50.00 60.00 207.55

ALIMS (Amount in Lakhs)

CAPITAL
Apr'1 May'1 Jun'1 Jul'1 Aug'1 Sep'1 Oct'1 Dec'1 Jan'1 Feb'1 Mar'1
REQUIREMEN Nov'18 Sub Total 2019-20 2020-21 2021-22 2022-23 Total
8 8 8 8 8 8 8 8 9 9 9
T
4 No. Printers
(Mult function)
2.50 2.50 0.00 0.00 0.00 2.50
with xerox,
scanner A3 Size

UPS 2.00 2.00 2.00

New Color printer

0.35 0.00 0.35 0.35
RO JAIPUR
Total 4.85

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Impact of Budget Practices on Profitability:

Ashok Leyland has created an opportunity to grow by restructuring its cost in its
budget in year 2013 to 2014 & achieved a greater profitability through this
exercise.

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 Finding & Analysis

As this study based on input provided says that this organization has focused
more on profitability thus taken care the budgeting process via Bottom-up
approach, the concept of Bottom-up & its applicability is mentioned bellow:
The bottom-up approach of budgeting process is more inclusive in
characteristics, In the process of bottom-up upper management circulate the
general guidelines for budget however lower management cascade & formulate
the budget. Each division of organization forms its budget in accordance to the
general guidelines. In the end, budget of entire organization is compiled & form
the composite budget structure.
The bottom-up approach of budgeting is highly inclusive in nature. The
employees overall tend to be more committed & inclusive in such kind of budget
process. This is why because employees itself participated in budgeting process
& feel more related to it.

Hypothesis verification :
Null Hypothesis (H0): That budgets are effective means of planning
organizational activities.
Alternative Hypothesis (H1): Budgets are not effective means of planning
organizational activities
Explanation :
This study supports the null hypothesis as organization has tasted the success of
profitability with the help of effective budgeting process.

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Null Hypothesis (H0): Budget controls and aids management in decision
making.
Alternative Hypothesis (H1): Budget does not controls and aids management in
decision making.
Explanation :
This study supports the null hypothesis as budgeting process definitely control
the performance of the organization & help management in decision making
Null Hypothesis (H0): Department heads are not properly educated on the
budgeting and budgetary control system.
Alternative Hypothesis (H1) That Departmental heads are properly educated on
the budgeting and budgetary control system.
Explanation :
This study supports the alternative hypothesis as organization has adapted
bottom-up approach which given right spirit of freedom to departments to
prepare their budget & that makes more inclusive & aligned. Thus every
department is well educated on this point.

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 Future of Ashok Leyland

Ashok Leyland Ltd. has been at the top position in the industry for quite some
time showing consistent growth and beating their competitors at every step. But,
it is also important to consider the what the company holds for the future and
they might wish to implement to stay at the top and gain an increasing market
share in the industry.

The company is currently considering expanding its presence internationally and

moving beyond just the Indian market. Also, the company has a clear-cut
objective of becoming one the top 10 manufacturers and one of the top 5 bus
makers globally. Although the company has been successful in achieving the
latter, it still implements various strategies to really become a global presence.
That being said, the company wishes to avoid expansion into countries in the
Western Hemisphere such as the Unites States of America, Europe and Japan as
there exists high competition in these areas. Rather, the company’s main
expansion plan includes those countries where there is good potential growth
such as Africa, ASEAN and the Middle East.

One of the key strategies the company wishes to implement to achieve its
expansion plan is to ensure that their competitiveness comes from quality, cost
management and customer proximity.

The biggest challenge in achieving this goal is believed to be the implementation

of technologically improved products in the target markets. This comes as a
result of the high cost that is associated with the hybrid solutions and electric
vehicles that the company provides. In the Indian context, the company has to
find a way to bring these technological solutions to the customers at a feasible
price point. (Gopalan, 2016)

Also, to realize this goal, the company plans to invest Rs.600 Cr. as capital
expenditure to enhance engine and cabin capacity. Also, this investment includes

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setting up new assembly units in Kenya and the Ivory Coast. These African
plants would be rather small with a capacity to produce 200 units a month which
would be scalable to 400. The plant in Kenya would be used to cater to the
demand for vehicles in East Arica while the plant in Ivory Coast will do the
same in West Africa. Also, the company expects the industry to grow by 10-
15%. (The Economic Times, 2017)

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 Conclusion

As the research study says that Ashok Leyland has anchored its budgetary part
on inclusive way & thus bringing everyone at a common platform to work for
the profitability of organization. Though the departments are aligned with the
guidelines received from top management.

This study also depicts a picture about the provision for future proposition which
shows a glimpse of how budgeting itself is working in the direction of business
expansions & acquiring new dimensions of growth.

As the cut-throat competitions has forced organizations to look forward for more
sharpen strategies to sustain in the market, the excellence on departmental level
enables them to cope well up with the uncertainty.

Thus Budgetary planning & control has certainly given an edge to Ashok
Leyland to make strategies on broader proliferation of its business acumen.

Page 57 of 58
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