SALES BUDGET AND ITS IMPACT ON PROFITABILITY

OF UNILEVER NEPAL LIMITED

By:
MAHENDRA SINGH MAHARA
Shanker Dev Campus
T.U. Registration No: 7-2-327-345-2003
Campus Roll No: 229/063

A Thesis Submitted to:

Office of the Dean
Faculty of Management
Tribhuvan University

In partial fulfillment of the requirement for the Degree of

Master of Business Studies (M.B.S)

Kathmandu, Nepal
February, 2010
 RECOMMENDATION
This is to certify that the Thesis

Submitted by:
MAHENDRA SINGH MAHARA

Entitled:
SALES BUDGET AND ITS IMPACT ON PROFITABILITY
OF UNILEVER NEPAL LIMITED
has been prepared as approved by this Department in the prescribed format of the
Faculty of Management. This thesis is forwarded for examination.

…..……..…….……… .……………....……………. ……….…..……….………

Yamesh Man Singh Prof. Bisheshwor Man Shrestha Prof. Dr. Kamal Deep Dhakal
(Thesis Supervisor) (Head of Research Department) (Campus Chief)

2
 VIVA-VOCE SHEET

We have conducted the viva –voce of the thesis presented

by
MAHENDRA SINGH MAHARA

Entitled:
SALES BUDGET AND ITS IMPACT ON PROFITABILITY
OF UNILEVER NEPAL LIMITED
And found the thesis to be the original work of the student and written
according to the prescribed format. We recommend the thesis to
be accepted as partial fulfillment of the requirement for
Master Degree of Business Studies (M.B.S.)

Viva-Voce Committee

Head, Research Department …………………….………

Member (Thesis Supervisor) …..………………………..

Member (External Expert) …..………………………..

 TRIBHUVAN UNIVERSITY

Faculty of Management

Shanker Dev Campus

DECLARATION

I hereby declare that the work reported in this thesis entitled “SALES BUDGET AND
ITS IMPACT ON PROFITABILITY OF UNILEVER NEPAL LIMITED”
submitted to Office of the Dean, Faculty of Management, Tribhuvan University, is my
original work done in the form of partial fulfillment of the requirement for the Master’s
Degree in Business Study (M.B.S.) under the supervision of Yamesh Man Singh of
Shanker Dev Campus.

………………………………
Mahendra Singh Mahara
Researcher
T.U. Regd. No. : 7-2-327-345-2003
Campus Roll No. : 229/063
 ACKNOWLEDGEMENT

I express my gratitude to Yamesh Man Singh for his excellent guidance throughout my
study and providing me the great support in completing this thesis.

I am also indebted to various faculty member of Shanker Dev Campus who helped me in
enhancing my knowledge and skill relating of the subject matter under study.

I am also very thankful to all the official of Unilever Nepal Limited for providing me the
necessary information.

I would like to thank my friends whose contributions in various ways have helped greatly
to complete this thesis.

Finally I would like to thank all my family members and friends for giving their
consistent support, suggestion and motivation to complete this thesis.

Mahendra Singh Mahara

 ABBREVIATIONS
A/C - Account
AD - Anno Domini
AM - Arithmetic Mean
BEP - Break Even Point
BES - Break Even Sales
BS - Bikram Sambat
CBS - Central Bureau of Statistics
Co. - Company
CV - Coefficient of Variation
CVP - Cost Volume Profit
FC Fixed Cost
FDI - Foreign Direct Investment
FITTA - Foreign Investment and Technology Transfer Act
FY - Fiscal Year
GDP - Gross Domestic Product
i.e. - That is
Ltd. - Limited
MBS - Master of Business Studies
MNC - Multi National Company
MT - Metric Tones
NLL - Nepal Lever Limited
No. Number
P&L A/C - Profit & loss Account
P.E. - Probable Error
P/L - Profit / (Loss)
P/V Ratio - Profit Volume Ratio
PES - Public Enterprises
PPC - Profit Planning and Control
Prof. - Professeor
Pvt. - Private
RDL - Royal Drugs Limited
Rs. - Rupees
S&D Selling & Distribution
S.D. - Standard Deviation
TU - Tribhuvan University
UNL - Unilever Nepal Limited
V/V Ratio - Variable Volume Ratio
VC - Variable Cost
VCD - Village Development Committee
TABLE OF CONTENTS
Viva-Voce Sheet
Recommendation
Declaration
Acknowledgement
Abbreviations
Table of Contents
List of Tables
List of Figures
Page No.
CHAPTER – I INTRODUCTION
1.1 Background of the Study 1
1.2 Evolution of Industry in Nepal 2
1.3 Foreign Investment Policy of Nepal 4
1.4 Brief Overview of Unilever Nepal Ltd 6
1.4.1 The Current Plan and Policy of UNL by the Report of the
Board of Directors 8
1.4.2The Corporate Purpose of UNL 12
1.4.3 Organizational Structure 13
1.5 Statement of the Problems 13
1.6 Objectives of the Study 14
1.7 Significance of the Study 15
1.8 Limitations of the Study 15
1.9 Organization of the Study 16

CHAPTER – II REVIEW OF LITERATURE

2.1 Development of Budgeting 17
2.2 Objectives of Budgeting 18
2.3 Characteristics of Good Budgeting 18
2.4 Budgetary Control 18
2.5 Limitation of Budgeting 19
2.6 Profit Planning and Control Process 20
2.7 Components of Comprehensive Sales Planning 21
2.8 Purposes of Sales Plan 22
2.9 Step of Developing a Comprehensive Sales Plan 22
2.10 Sales Planning vs Sales Forecasting 23
2.11 Setting Inventory Policy 24
2.12 Production Plan or Budget 24
2.13 Material Purchase Budget 25
2.14 Labor Budget 26
2.15 Cash Budget 26
2.16 Review of the Previous Related Research Works 27

CHAPTER – III RESEARCH METHODOLOGY

3.1 Research Design 33
3.2 Nature and Source of Data 33
3.3 Period Covered 33
3.4 Research Variables 33
3.5 Statistical Tools Used 33

CHAPTER – IV DATA PRESENTATION AND ANAYSIS

4.1 Sales Budget of UNL 34
4.2 Difference between Budged Sales and Actual Sales 35
4.2.1 Statistical Tools Used 37
4.2.2 Sales Budget of UNL by Territory 42
4.2.3 Sales Budget of UNL by product 44
4.3 Comparison of Actual Sales with Operating Profit / (Loss) of the UNL 45
4.3.1 Statistical Tools Used 46
4.4 Relation between Actual Sales and Net Profit 48
4.5 Production Plan of UNL 49
4.5.1 Comparison between Actual sales & Actual Production 49
4.6 Identification of Cost Variability 52
4.7 Cost Volume Profit Analysis 53
4.8 Profit and Loss A/c Trend of UNL 54
4.9 Income Statement 56
4.9.1 Comparison of Sales with Cost of Sales & Other Expenses 56
4.10 Cash Flow Statement of UNL 57
4.10.1 Comparison of Actual Sales with Operating Cash Flow 57
4.11 Analysis of Primary Data 58
4.12 Major Findings 59

CHAPTER – V SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary 61
5.2 Conclusion 62
5.3 Recommendations 63

Bibliography
Appendix
 LIST OF TABLES

Table No. Title Page No.

2.1 Components of Comprehensive Sales Plan 21
4.1 Sales Budget & Achievement 35
4.2 Statistical Calculation of Budgeted and Actual Sales 37
4.3 Summary of Arithmetic Mean, Standard Deviation, Coefficient
of Variation, Correlation, Probable Error of Budgeted Sales and
Actual Sales 39
4.4 Calculation of Trend 40
4.5 Actual Sales by Territories 43
4.6 Actual Sales by Products 45
4.7 Sales and Operating Profit/ (Loss) 45
4.8 Calculation of Correlation Coefficient of Actual Sales
with Operating Profit /Loss 46
4.9 Relation between Actual Sales and Net Profit 48
4.10 Comparison between Actual Sales & Actual Production 50
4.11 Summary of Mean, Standard Deviation, Coefficient of Variation of
Actual Production and Actual Sales 51
4.12 Cost Classification of UNL 52
4.13 Profit or Loss Trend in UNL 55
4.14 Comparison of Sales, Cost of Sales and Other Expenses 56
4.15 Sales & Operating Cash flow 58
 LIST OF FIGURES

Figure No. Title Page No.

4.1 Statement of Actual Sales and Budgeted Sales 36
4.2 Statement of Territorial Sales 44
4.3 Statement of Actual Sales and Actual Production 50
4.4 Trends of Profitability 55
 CHAPTER – I
INTRODUCTION

1.1 Background of the Study

Nepal is a developing country in the world. Nepal is located between the latitude of 26o
22’ North to 30o 27’ North and longitude of 80o 40’ East to 88o 12’ East. The country is
surrounded by the two countries, India in the east, west and south and China in the north.
Nepal is a landlord country. Geographically, the country is divided in three regions like
Mountain, Hill and Terai. There are 5 development regions and 75 administrative
districts. Districts are further divided into smaller units, called village development
committee, municipality.

Industrialization is the most essence elements of rapid economic development of Nepal.

Industrialization increases value of agricultural products and helps to shift the labor force
from agriculture to industries. Handicrafts and cottage industry in Nepal is existence from
the very old days, but development of modern industries is of recent origin.

Nepal has sufficient resources, but the important point is that the reason behind Nepal’s
slow economic development is due to lack of proper utilization of available recourses.
For the productive and effective utilization of resources, there must be proper plan and
control system. Profit planning and control is as an important tool for the same purpose
which helps to achieve desired goals and objectives according to its plan and control
standard.

Sales plan is the starting point in preparing profit plan, which displays the sales in units
and rupees. The sales planning process is an essential component. It is an organized
approach for developing comprehensive profit plan. If sales plan is not realistic and
relevant, all the other components of overall profit plan will not realistic.
1.2 Evolution of Industry in Nepal
Handicrafts and cottage industries in Nepal are in existence from the very old days, but
development of modem industries is of recent origin. In 1935 A.D. an Industrial Board,
named 'Udhyog Parishad' was formed with a view to produce goods under medium and
large industry. The first Company Act was promulgated in 1936 A.D. and in the same
year Biratnagar Jute Mill, Nepal's first joint stock company, came into being. A few years
later the same group of industrialists started the Morang Cotton Mills at Biratnagar.
Nepal Bank Ltd was established in 1937A.D.in order to provide financial assistance to
industry and trade.

The years that followed witnessed further acceleration in industrial growth. New ventures
like the Morang Sugar mills (1964), the Raghupati Jute Mills (1946).The Juddha Match
Factory (1946) were initiated. Surprisingly enough, within a short period of 10 years as
many as 63 industrial units were opened with a total capital investment of Rs. 72 million.
However, most of them went into liquidation after the World war. A company Act was
enacted in 2007 B.S.

During the first five year (1956-61) period, Industrial Policy (2014), private Firm
Registration Act (2014), and Factory and Factory's Worker's Act (2016) were published
and Nepal Industrial Development Corporation was established in 2016.

In the 2nth plan (63-65) period sugar, metals, handicrafts, hotels, match, textile, biscuit
and confectionery industries including Janakpur Cigarette fctory, Birgung Sugar Factory
and Bansbari Leather and Shoe Factory were established in the public sector.

During the third plan (1965-70) vegetable ghee, flour mill, soap, cold storage, bakery
industries were established in the private sector, while Hetauda and Balaju Textile
Industries were established in the public sector under the assistance of Chinese
government. During the same period, New Industrial policy and Industrial Enterprises
Act (2030) were enacted and Industrial Services Centre (2031) was set up.
During the fourth plan (1970-75) flour mill, soap, cold storage, bakery industries were
also established in the private sector. Total 1830 Km length road constructed & Total
10850 telephone lines distributed.

In the fifth plan (1975-80), period, only 3 industries were established, while a few small
industries, such as, flour mill, sugar, cotton, soap, polythene pipe, etc. were established in
the private sector. Security Exchange Centre (2033) came into existence.

During the sixth plan (1980-85) period, biscuit and confectionery, shoes and sandal, rice
mills, brick factories were established in the private sector. Hetauda Cement Industry,
Bhrikuti Paper Factory, Nepal Orient Magnetite and Nepal Metal Industry were under
construction phase; However, Industrial Policy (2037), Industrial Enterprises Act (2038),
foreign investment and Technology Act (2038) were formulated.

In the seventh Plan (1985-90) period, industries established in the private sector were
woolen carpets, ready made garments, beer, distillery, cement, cigarette, etc. Lumbini
Sugar Factory, Udayapur Cement Factory, Industrial District Management Ltd and
Economic Services Center Ltd. were set up in public sector.

With in the eighth Plan (1992-97), period, HMG has adopted open and liberal economic
polices. As a result, Industrial Policy (2049), Industrial Enterprises Act. (2049), Foreign
Investment and Technology Transfer Act (2050) were reviewed. During the plan period,
medicines, soap and detergent powder industries were set up under foreign collaboration.
HMG has already privatized 16 public enterprises.

The ninth Plan (1997-2002) had targeted to privatize 30 more public enterprises during
the plan period but which could not be done as per the target.

The main objective of Tenth plan (2003-2008) is to make economic sector of country
effective healthy, dynamic and competitive by maximum utilization of available
resources. The plan conceives to expand the role of private sector for higher economic
growth and effective operation of poverty alleviation programme sector is as follows
(Tenth plan, 2002-2007, National planning commission, HMG Nepal: 108).
1. Emphasis on investor friendly environment for forward economic improvement by
policy wise guarantee
2. Provision of entry and drawback of private investment in the every sector of
economy by defining the role of private sector.
3. Increase in competitive capacity by providing facilities and benefits to the
investment sector.
4. Acceleration of privatization programmed effectively

1.3 Foreign Investment Policy of Nepal

The government formulated Foreign Investment and One window policy, 1992 to
encourage foreign direct investment. Technology transfer benefits, can be expected
because generally foreign investment is linked with technology transfer. The legal
provisions relating to foreign Investment Policy are contained in Foreign Investment and
Technology Transfer Act, 1992 (amended 1997).

Salient Features
Foreign Investment
It refers, to the following investments made by foreign investors in any Industry:-
1. Investment in Share (Equity)
2. Re-investment of the earnings derived from the investment.
3. Investment made in the form of loan or loan facilities.

Technology Transfer
It means transfer of any technology made under an agreement between an industry and a
foreign investment on the following matters: -
1. Use of any technical right, specialization, formula, process, patent or technical
know-how of foreign origin.
2. Use of any trademark of foreign ownership.
3. Acquiring any foreign technical consultancy, management and marketing services.
Foreign Investor
Any foreign individual, firm, company or corporate body including foreign government
or international agency involved in foreign investment or technology transfer is called
foreign investor.

Permission Should be Obtained

Though foreign investment and technology are required to promote and develop
industries, the government of Nepal is not bound to accept foreign investment and
technology for all sorts of industries in the country. The Act has mentioned a list of
industries for which no permission for foreign investment shall be granted. Before
acquiring investment and technology transfer from the foreign Investors one should get
permission from the Department of Industry-sec.3 (1).

Facilities and Concessions Provided to Foreign Investors

A) Income Tax Facility
i. No income tax shall be imposed on a foreign investor on the interest earned from
foreign loan.
ii. On Whatever income the foreign investor earns from foreign technical as well as
management service fees and royalty.

B) Facility to take away the Foreign Currencies from Nepal

A foreign investor making investment in foreign currency may repatriate the following
sums outside Nepal: -
i. The amount received by sale of shares of foreign investment as a whole or any part
thereof.
ii. The amount received as profit or dividend on account of foreign investment.
iii. The amount received as a payment of principal and interest on any foreign loan.
iv. The amount received under an agreement for the transfer of technology.
C) Provisions Relating Visa
Act has made the following 3 types of visa provisions for the foreign investors:
i. Non-tourist Visa
ii. Business visa
iii. Residential visa (Agrawal, 2000: 445).

1.4 Brief Overview of Unilever Nepal Ltd:

Nepal Lever Ltd was established in 1992 A.D. in collaboration with Hindustan lever ltd.
It has changed its name into Unilever Nepal Ltd in 2006 A.D. from the 12th annual
general meetings. Unilever Nepal ltd was established to deliver the services to the
customer and earn profit but now a days Unilever Nepal Ltd provides social service also.
The management of the Unilever Nepal Ltd is fully dedicated for the satisfaction of the
customer. It is true that the development of country depends upon economic growth.
Among the various benefits of economic growth, the development of company of firm is
one of the most important benefits. In another words there is no possibility of economic
development without industrial development. It helps in increasing national income. It
provides customer by producing quality goods and fixed rate. Unilever Nepal Limited has
a Board of director comprising of seven members. They are as follow:

DIRECTORS:
1. Mr. Dhaval Buch. – Chairman
2. Mr. Ravi Bhakta Shrestha – Director
3. Mr. Shambhu Prasad Poudyal – Director
4. Mr. Ashok Gupta. – Director
5. Mr. Shreejeet Mishra. – Director
6. Mr. Bharat Bahadur Thapa - Independent Director
7. Mr. Kamran Bakr - Managing Director

COMPANY SECRETARY:
Mr. Ambar Bahadur Thapa - Company Secretary
AUDITORS:
Mr. R. Bajracharya & Company - Chartered Accountant

Unilever Nepal Ltd registered office and factory is located in Basmadi V.D.C. -5,
Hetauda, Makwanpur district, Nepal. Its corporate office is located in Heritage plaza-II, C
and D Block, Kamaladi, Kathmandu, Nepal. It was registered in NIDC capital markets
ltd, Kamalpokhari, Ktm, Nepal. Its bankers or Unilever Lever Limited obtains loan from
reputed eight banks. They are as follows: -
1. Standard Chartered Bank Nepal Limited
2. Nepal SBI Bank Limited
3. Nabil Bank Limited
4. Nepal Bank Limited
5. Himalyan Bank Limited
6. Bank of Kathmandu Limited
7. Rastriaya Banijya Bank
8. Everest Bank Limited

UNL was established as per the following capital structure:

Authorized share capital Amounts (in NRS)
30,00,000 ordinary shares of Rs 100 each. 30,00,00,000
Issued, subscribed, and paid up Capital.
9,20,700 ordinary shares of Rs 100 each. 9,20,70,000

Out of the Above Issued Shares:

1. 736,560 shares are held by Hindustan Lever Limited.
2. 46,035 shares are held by Sibkrim Land and Industrial Co. Pvt. Ltd., the Nepal
collaborator.
3. 138,105 shares are held by the public.

Unilever Nepal Ltd registered a strong performance in term of growth of volume, sales
and profits. Nepal India chamber of commerce and industry awarded the- NICCI award –
to Unilever Nepal Ltd in 1999 AD for its excellent all round performance among large
industries. Again, the company has been awarded – Best presented accounts awarded for
2003\04 category – industrial sector- by the institute of charted accountants of Nepal.

The objectives of Unilever Nepal Ltd are to establish and carry on the business of Shops,
Detergents, Cosmetics, Toiletries and personal care product, Toothpaste and household
cleaners to export and otherwise deal with the product and to perform all such other
activities, which may be related and to carry out other objectives as set in the
memorandum of Association and Articles of Association of the company. As present, the
current product of Unilever Nepal Ltd are as follows:-
 Detergents
 Toilet Soap
 Oral care
 Scourers skin cream
 Soap Noodles
 Laundry soaps
 Hair care
 Food and beverage

Even if different products have supplied their goods in the market in the competition with
the goods of Unilever Nepal ltd., it has considerable area in the market.

1.4.1 The Current Plan and Policy of UNL by the Report of the Board of Directors
 The Business Operations of UNL
The Company continued its strong focus on serving the domestic market and this is
reflected in the domestic business growth of 27%. The company nurtured last year's
innovations as well as launched and re-launched a number of new products in the course
of year. Domestic manufacture of Surf Excel was commenced. This helped expand the
premium detergent powder category in Nepal. Locally produced Surf Excel has been
launched in a convenient single use pack for Rs. 3.00 .High quality laundry soap- Surf
72% was launched at an affordable price of Rs. 8.00 in an endeavor to make good quality
products available to all section of the population at affordable prices. A number of
variants of Fair & Lovely, Oil control, Anti Marks have been launched to offer additional
benefits and choices to the consumer. Lifeboy Gold was successfully launched. Close up,
Clinic Plus and Wheel were re-launched with enhanced consumer-relevant propositions
and improved formulations.

In a bid to bring the company's brands alive in the consumer's mind-apart from investing
heavily in media the company also organized a number of exciting events. Sun silk
Fashion week was held and gave Nepal's fashion designers an opportunity to show their
collections and art. It also provided an opportunity to several new upcoming models to be
noticed on e ramp. The 'Close up Sassy Zone' theme parties and website continued to
provide a fun way for young people to interact with each other and get to know each
other. The website has become very popular amongst the urban youth of Nepal. A new
website pepsodentcare.com was launched. This interactive website allows consumers to
direct their dental problems to a qualified dentist who responds to them. In association
with cash awards and gained recognition amongst the key persons of Nepal, thereby
helping them to launch their careers.

The company continued to invest heavily in improving outdoor and in-shop visibility of
its brands. Most cities and highways of Nepal continue to be dotted with our billboards
and wall paintings that provide very good visibility for our brands. In-shop visibility was
driven through brand image windows in various key accounts. The company continued
its distribution expansion appointing distributors in the interiors of Nepal, carrying our
products to within arm's reach of consumers even in far flung remote areas of the
country.

The Company continued to innovate in sales and distribution practices. To strengthen the
distribution system, additional distributors were appointed in the main towns. The price
list was split between the distributors, thereby creating competition and strengthening
position in the market. The company made significant inputs in the training and
development of distributors', salesman to enhance market working and improve
merchandising. The company continued its unrelenting focus on unearthing and
eliminating all non-value-adding costs. Supply chain costs were reduced through a
process re-design, local vendor development, identification of global low cost sources
and procurement from them. The company also continued to invest manufacturing
capabilities by up gradation of machinery for manufacture of low unit price packs, viz.
Shampoo sachets, Washing Powder sachets etc. Further plans are in hand for local
manufacture of hair oils and the very popular nozzle sachet packs for Fair & Lovely.

 The Safety, Environment and Energy Conservation

The Company's factory at Hetauda has completed 4.0 million men-hours without any lost
time accident. This excellent Safety Record is a reflection of the Factory’s managerial
focus on safety. Several workshops were undertaken during the course of the year, and
initiatives focused on development of a safety conscious culture and to bring about
change in employee behavior. This included regular Safety Behavioral Audits which
served to improve the safety consciousness of employees.

The company continues to adhere to high standards of pollution control to ensure that the
environment impact of its operations is minimized. Global Unilever Nepal norms were
followed for treatment of effluent and emissions. The factory team is continuously
working on reducing the water consumption and this has resulted in 9% drop in water
consumption by last quarter of current year over previous year. Energy conservation
remained a key deliverable & company achieved 15% reduction in Furnace Oil
consumption per tone of soaps by end of the current year. Focused efforts in energy
conservation have yielded a further 4% reduction in specific energy consumption. This
has been achieved through rigorous implementation of a number of wastage control
measures as well as optimization of processes. The company is committed to further
reducing the energy consumption to reduce manufacturing costs and environmental
impact.

 Corporate Social Responsibility of UNL

The company strives to be a trusted corporate citizen maintaining high standard of
corporate governance and fulfilling its responsibility to the societies and communities in
which it operates. Direct employments to over 135 Nepalese citizens were provided and
generated indirect employment for over 20 times that number through network of
suppliers and distributors. The company is already one of the largest corporate taxpayer
to Nepal government.

The company has been involved in various social projects which are as follows:-
 A mobile Medical Unit provided by the UNL employee trust is used extensively for
providing emergency medical assistance in the Makwanpur district.
 During the year the company extended help to 4 medical campuses held in &
around Hetauda and donated Oral care products.
 The company supported the United Nation program on hygiene through washing of
hands. Through this program the company and UN educate the general public on
the importance of hand washing to prevent the spread of Diarrhea and other
infections diseases.
 A bus shelter has been erected in Makwanpur to provide shade to travelers.
 The company has donated Stitching Machines, and assisted the Deaf & Dumb
Association at Hetauda in organizing stitching classes/training to its members.

 Trade Relation
The Board wishes to place on record its appreciation of the support and co operation that
the company received from all its trading partners-suppliers, processors, carrying and
forwarding agents, redistribution stockiest, Rural distributors, transporters, Wholesalers,
retailers and service providers. The company regards them as partners in progress and
happily shares with them the rewards of the growth.

 Personnel
The company has always recorded a very priority to improving the skills and capabilities
of its employees and considers employee training and development as a key corner stone
for superior performance. Employees at all levels received training through classroom
instruction, coaching and functional visits to other companies to benchmark and learn
from their best practices and personnel.
 Finance
During the financial year the company continued to generate strong cash flows. The
surplus funds were prudently deployed on secured fixed deposits

 Security
The security situation in the country continues to be a cause for concern. On 28Aug.2004
armed persons attacked the factory and detonated three powerful bombs, causing
extensive damage to buildings and machinery. The damage was rectified and the factory
commenced production after a brief shut down. The security situation in Hetauda
continues to be tense and uncertain. UNL has kept the government authorities informed
to their concerns.

 Dividend
The Board had recommended paying out a dividend of Rs. 275 per share for the fiscal
year ending 32nd Ashad 2064. This will amount. to Rs. 253.2 millions. If approved the
dividend will be paid to the shareholder who are registered in the book of the company
within seven days from the book closure date, which will be noticed.

 Future Outlook
Despite a daunting business climate the company remains committed to actively
participating in the development of Nepal and to delighting it's. Even if different
producers have supplied their goods in the competition with the goods of Unilever Nepal
Ltd. it has been able to covered significant area of the market. At present company is able
to cover 60% market of Tooth Paste, 50% of Toilet Soaps, 80 % of detergent powder and
45% of skin cream. It could also cover 30 % market of shampoo.

1.4.2 The Corporate Purpose of UNL

The corporate purpose of Unilever Nepal Ltd. is to meet the everyday needs of people
everywhere- to anticipate the aspiration of our consumer and to respond creativity and
competitively with the branded product and services which raise the quality of life.
The deep roots in local cultures and markets are unparallel inheritance and the foundation
for future growth. Its objectives are to bring wealth of knowledge and international
expertise to the service of local consumer. The long term success requires a total
commitment to exceptional standards of performance and productivity, to work together
effectively and to a willingness to embrace new ideas and to learn continuously

1.4.4 Organizational Structure

Total no. of 200 personnel’s (Administration and production) are engaged in this
company. The Organizational structure of the company is as follows.

Organizational Chart

Chairman

Managing Director

Personal Dept Production Dept Finance Dept Marketing Dept.

1.5 Statement of the Problems

Sustainable economic development is important for economic prosperity of every
country. For the attainment of economic development in the country, industrialization is
as important as that of agriculture and other primary sector, public enterprise services to
produce required goods in the country, to increase export items, to help in controlling
price situation, to create opportunities for employment and to contribute significantly in
the nation’s economic development.

There are various manufacturing concern established in Nepal under the foreign
investment. Out of them Unilever Nepal Ltd has played vital role for economic
development of the country. However, Unilever Nepal could not achieve the result as
expected.

The successful operation of an enterprise largely depends upon planning and control
system. Profit planning and control is one of the most important managerial techniques
that plays key role for effective formulation and implementation of strategic as well as
tactical plans of an organization. PPC system requires the effective coordination between
various functional budgets of an organization.

So, this study tries to answer the following Research Questions

 How effective is the sales budget prepared by Unilever Nepal ltd ?
 What is the variance between planned and actual sales?
 What is the ratio between sales and profit
 What steps should be taken in sales planning to improve the profitability of the
company?

This research study attempted to show the relationship of sales plan, their achievement
besides their effective application with in the conceptual framework of PPC for solving
the problem that has occurred in Unilever Nepal Ltd.

1.7 Objectives of the Study

The fundamental objectives of the present study are to analyze the current practices of
sales budgeting including price – cost – volume analysis.
1. To analysis the sales budgets prepared by Unilever Nepal Ltd.
2. To evaluate the variance between planned and actual sales.
3. To make comparison of sales with profit of the Unilever Nepal Ltd.
4. To examine the Variance between the actual sales & actual production
5. To forecast future Sales and future Profit of Unilever Nepal Limited.
6. To provide the appropriate suggestions and recommendation for improvement of
planning system of Unilever Nepal ltd
1.7 Significance of the Study
Sales plan is one of the most important plans for both manufacturing and non
manufacturing enterprises to achieve their goals. In the context of Nepal, most of the
manufacturing enterprises are suffering from performance due to the lack of proper
management of sales plan. Proper sales plan is the most important for every enterprise to
earn profit. Therefore, sales plan should be prepared by every business organization.
Unilever Nepal produces different types of products or diversified products group to
meet everyday need of people everywhere. It has been producing the products since last
thirteen years. Being a manufacturing company it spend a lot of time and effort to earn
profit. Therefore the researcher is very much interested to examine its sales plan. Sales
plan has been important tool for managerial decision in an enterprise. This study would
be very useful for entrepreneurs, decision makers and researcher because it deals with all
the aspect of budgeting and profit planning. The need of this study is really to examine
whether the Unilever Nepal is applying sales planning system properly or not by
analyzing if there is any drawbacks in profit planning system of Unilever Nepal Ltd.

1.8 Limitations of the Study

The study attempt to find out the problem Nepal lever Limited. There for the following
will be major limitation of the study.
1. The study covered only the sales budgeting and it’s impact on profitability.
2. This study covered sales budgeting of five fiscal years from the fiscal year
2061/062 to 2065/066.
3. The study is concentrated on sales budgeting and some aspects from managerial,
financial and accounting point of view which does not cover the other area of these
aspects of the enterprise.
4. This study is based on the data provided from companies and other available
resources. Hence, this study is based on primary and secondary data.
1.9 Organization of the Study
This study was organized into five chapters:

Chapter – I Introduction
This chapter consisted of Background of the study, Overview of company, statement of
the problem, Objectives, significance of the study and Limitation of the study.

Chapter – II Review of Literature

The second chapter dealt with development of budgeting, Objectives of Budgeting,
Characteristics of good Budgeting, Budgetary control, Limitation of Budgeting, Profit
planning and control process, Sales Budget, Components of comprehensive sales
planning, Purposes of sales plan, step of developing a comprehensive sales plan, sales
planning vs. sales forecasting, setting inventory policies, Production plan or Budget,
Material purchase Budget, labor Budget, Cash Budget and Review of previous Related
Research works

Chapter – III Research Methodology

The third chapter included Introduction of research methodology, Research Design,
Nature and Source of Data, Period covered, Research variables and Statistical Tools used.

Chapter – IV Data Presentation and Analysis

In the fourth chapter data presentation, interpretation analysis of data were made with the
help of selected statistical tools and techniques, Major findings were drawn on the basis
of analysis of data.

Chapter – V Summary, Conclusion & Recommendations

This is the last chapter of the study. The whole picture of the study was presented in a
summary. This part consist, issues and gaps: action plans and put forward
recommendation to improve the existing situation.
 CHAPTER - II
REVIEW OF LITERATURE

2.1 Development of Budgeting

A budget is a quantitative expression of a plan of action and an aid to coordinate and
implement the plan of action. Budget may be formulated for an organization as a whole
or may be for a sub unit. Budgeting includes sales, production, distribution and financial
aspects of an organization. Budget programs are designed to carry out a variety of
functions comprising, planning, evaluating, performance, coordinating activities by
implementing plans, communicating, motivating and authority. Charles, T. Horngren
further states that it is quantitative expression of plan of action and an aid to coordinate
and control. A Budget is a written plan for the future. The managers of a firm, which use
budgets, are forced to plan ahead, thus anticipate problems before they occur. A firm
without financial goals may find it difficult to make proper decisions. A firm with
specific goals in the form of a budget helps a firm to control its cost by setting guideline
for spending money because they know all costs will be compared with the budgeted
amount. If costs exceed the budgeted cost an explanation will be required. Frequently
exceeding the budget helps to motivate employee help in setting in the budget. The
complete budget for a firm is often called the master budget "The master budget consists
of many functional budgets. These budgets include a sales budget, a production budget, a
purchase budgets, an expense budget, an equipment purchase budget, and a cash budget.
Once all of these budgets are completed, the master budget for the entire firm is
prepared" (Flesher and Tonyak, 1960: 406).

"Budget as a tool of planning and control in clearly related to the broader system of
planning and control in an organization. Planning involves the specification of basis
objectives that will guide it, in operation terms. It involves the step of setting objectives,
specifying goals, formulating strategies and expressing budgets. A budget is a
comprehensive and coordinated plan" (Khan and Jain, 1993: 296).
"The concept of comprehensive budget covers its use in planning, organizing and
controlling all the financial and operating activities of the firm in the forthcoming period.
Budgeting summarize the estimated results of the future transaction for the entire
company in much the same manner as the accounting process records and summarize the
results of completed transactions" (Richard, 1994: 142).

2.12 Objectives of Budgeting

The main objectives of budgeting are as follows.
 It is a plan, which reflects the policy of a business in financial terms.
 It is a control document by which management can monitor actual performance.
 It is the plan to forecast for future to avoid loss and to maximize profit.
 It defined the objectives for all the executives’ communication.
 It facts as motivator of employees.
 It provides as means of coordination and communication.
 It is a measure against which to evaluate the quality or management.
 Budgets facilities centralize control with delegated authority and responsibility
(Ojha & Gautam, 2008:7-8).

2.13 Characteristics of Good Budgeting

The Characteristics of good Budgeting: are as follows:-
 Budgets may be formulated for the organization as a whole or for any sub units.
 A good system of accounting is also essential to make the budgeting useful.
 A budget is a quantitative expression of a plan of action and aid to coordination and
implementation.
 Budgets are designed to carryout a variety of functions, planning evaluating
activities, implementation plans, communicating, motivating and authorizing
actions (Pandey, 1994: 21-22).

2.14 Budgetary Control

Budgetary control is a system of controlling cost, which includes the preparation of
budgets coordinating the departments and establishing responsibilities, comparing actual
performance with the budgeted and outline upon results to achieve maximum profitability
(Sharma and Gupta, 1982: 782).
 Preparing the budgets.
 The actual figures are recorded.
 The budgeted and actual figures are compared for studying the performance of
different cost centers.
 If actual performance is less than the budgeted norms a remedial action is taken
immediately.
 The business is divided into various responsibility centers for preparing various
budgets.

2.15 Limitation of Budgeting

Profit planning and control is an important tool for management. However, each tool
suffers some limitations and its use is fruitful within these limits.

The major limitations of budgeting are as follows: (Ojha & Gautam, 2008:8)
 Budgeting is not an exact science. It’s sources depends upon precision of estimates.
 The installation of a perfect system of budgeting is not possible in a short period.
Budgeting has to be a continuous exercise. It is dynamic process.
 Budgeting will be ineffective and expensive, if it is unnecessary detailed &
complicated. It should be flexible and rigid in application.
 The success of a budgeting system totally depends upon the efficient management
& administration.
 Budgeting is a management tool. It is not a substitute for the management.
 The installation of Budgeting is costly, so that, small organization can not afford to
it.
 For finding out the inefficiencies, proper evaluation should be made. In the absence
of proper evaluation, budgeting will hide inefficiencies.
 Budgeting will lower moral and productivity if unrealistic targets are set and if it is
used as a pressure tactics.
2.16 Profit Planning and Control Process
Components of PPC program (Welsch, 1999:74)
#The Substantive Plan:
I) Broad objectives of the enterprise.
II) Specific enterprise goals.
III) Enterprise strategies.
IV) Executive management planning instruction.

#The Financial Plan:

I. Strategic Long Range Profit Plan
a. Sales, cost and profit projection.
b. Major projects and capital additions.
c. Cash flow and financing.
d. Personal requirement.

II. Tactical Short Range (Annual) Profit Plan:

a) Operating plan: planned income statement
 Sales plan
 Production plan
 Administrative expenses budget
 Distribution expenses budget
b) Financial position plan: planned Balance sheet
 Assets
 Liabilities
 Owners equity
 Cash flow plan

# Variable Expenses Budget: output expenses budget

# Supplementary Data ( C-V-P analysis, ratio analysis)
# Performance report
# Follow up, corrective actions and Re- planning reports
 Sales Budget
The starting point in preparing profit plan is the sales plan, which displays the projected
sales in units and rupees. The sales planning process is an essential component of profit
plan and control because, it provides for the basic management decisions about marketing
and based on these decisions, it is an organized approach for developing a comprehensive
profit plan. If sales plan is not realistic and relevant, all of the other parts of over all profit
plans are also not realistic. Therefore, if the management believes that a realistic sales
plan can not be developed; there is little justification for ppc.

The sales plan is the foundation for periodic planning in the firm because practically all
other enterprise’s planning is built on it. The primary source of cash is sales; the need of
capital addition, the manpower requirement, production level and other important
operational aspect depend on the volume of sales includes two separate but related plan-
the strategic and tactical sales plan. A comprehensive sales plan incorporates such
management decisions as objectives, goals, strategies and premises. Both long
term/strategic and short term – tactical plans must be developed in harmony with
comprehensive profit plan (Ojha & Gautam, 2008:38).

2.17 Components of Comprehensive Sales Planning

The major components of comprehensive sales plan are as under:-
Table 2.1
Components of Comprehensive Sales Plan
Components Strategic plan Tactical plan
1. Marketing policy assumptions. Broad and general Detailed and specific for the year
2. Marketing plan (sales & serviceAnnual amounts; major Detailed; by product and
revenue) groups. responsibility.
3. Advertising & promotion plan. General; by year. Detailed and specific for the year.
4. Distribution & selling expensesTotal fixed and Total Fixed and variable expenses; by
budget variable expenses; by month & by responsibilities.
year.
Source: Ojha & Gautam, 2008: 6
(a) Strategic Sales Plan
Strategic sales plan is the long range sales plan of enterprises. Usually, it is of 5 to 10
year. It is broad and general. It is usually developed by year and annual amounts. It is
prepared by considering future market potentials, population changes, state of economy,
industry projections, company objectives and long term strategies because they affect in
such areas as pricing, development of new product line, innovation of product, expansion
and distribution channel, cost pattern etc.

(b) Tactical Sales Plan

Tactical sales plan is a short range sales plan. It is developed for a short period of time
usually a year, initially by quarters and by months for the first quarter. The tactical sales
plan includes a detailed plan for each major product and for grouping of minor products.
Tactical sales plans are usually developed in terms of physical units and in sales rupees.

2.18 Purposes of Sales Plan

The main purpose of sales planning is as follows:- (Ojha & Gautam, 2008:13)
 To reduce uncertainty about future revenues.
 To incorporate management judgment and decisions into the planning process.
 To provide necessary information for developing other elements of comprehensive
sales plan.
 To facilities management control of sales activities.

2.19 Step of Developing a Comprehensive Sales Plan:

The steps of developing a comprehensive sales plan are as follows: [Welch, 1999:176],
Step- 1
Develop management guidelines for sales planning.
Step- 2
Prepare sales forecast
Step- 3
Assemble all relevant data which are as follows:-
a. Manufacturing Capacity
 b. Sources of raw material and supplies.
c. Availability of key people and labor force
d. Capital availability
e. Availability of alternative distribution channels
Step- 4
Develop a strategic and tactical sales budget
Step- 5
Top management must be fully committed to attaining the sales goals that are specified in
the approved sales plan. The commitment requires full communication to the sales
managers of the goals, approved marketing plan and strategic by responsibilities. The
commitment must be strong and ever present in day to day operations.

2.20 Sales Planning vs Sales Forecasting

A sales planning is not a sales forecast. It is a planning and control document, which
shows what management, intends to accomplish.

The sales budget is the most important functional budgets. If sales figure is incorrect,
practically all functional budget and consequently master budget will be affected.

A sales forecast is converted to a sales plan when management has brought to bear
management judgments, planned strategies, and commitment to aggressive actions to
attain the goals.

On the basis of the above definition the differences between sales budget and sales
forecast can be explained as follows:-
 Sales budget is the quantitative expression of business plan and policies to be
pursued in future whereas sales forecasts are just well educated inferences about
probable future events.
 Sales budgets are prepared on the basis of sales forecasting.
  Sales budgets is a control device of management as it provides standard for
comparison with results actually achieved while no control can be exercised by
forecasting, as it is just a probable inferences.

2.21 Setting Inventory Policy

While determining inventory policies for finished goods, the management should
consider the following factors:
 Quantities needed to meet sales requirements.
 Perishability of items.
 Length of the production period.
 Storage facilities.
 Cost of holding inventory.
 Protection against price increases.
 Protection against raw material shortages.

Depending upon the suitability of its nature, a firm may adopt any of the following
inventory policies:
a. Stable Inventory Policy: – An equal ending inventory is kept every time, so the
planned production fluctuates with the size of planned sales units.
b. Fluctuating Inventory Policy: - An equal production is maintained throughout the
year, so the size of inventory fluctuates with the size of planned sales units.
c. Inventory – Production Co-ordination policy: - Production and ending inventory
units are adjusted as per the change in sales units.
d. Just – in – Time Inventory Policy: - Production is made when the output is in
demand, so inventory is no kept except a very small quantity for sample display.

2.12 Production Plan or Budget

Preparation of production plan is the second step of budgeting, sales plan being first step,
manufacturing concern. The production plan is a important tool of planning, coordination
and controlling production activities in a manufacturing concern. Development of a
production plan requires conversion of sales plan into production program. It interlinks
the activities such as material planning, labour planning, overhead planning etc with sales
plan.

The production plan specifies the planned volume of each product (or groups of similar
products) to be produced for each time period through the planning period. This entails
the development of policies about efficient production levels, use of productive facilities,
and inventory levels (i.e. finished goods and work – in – process inventory). The
quantities specified in the marketing plan, adjusted to conform to production and
inventory policies, give the volume of goods that must be manufactured.

Responsibilities of preparing production plan goes to the various managers such as:-
 Chief Executive: - The responsibility of chief executive is to formulate objectives
and policies of organization, concerning to production and inventory levels.
 Sales Managers: - The input of production plan is sales plan. So, the responsibility of
a sales manager in production planning is to provide a sales plan.
 Production Manager:- The production manager is responsible to prepare production
plan for the company. He defines production system of department.
 Production Supervisor:- He/she is responsible to prepare tactical production plan
detailed by time and product for short period.
 Administrative Manager:- He/she responsible to supply optimal manpower for
production plan in time. He/ she must provide information of available manpower.
 Financial Manager:- financial manager is responsible to provide past data, standard
rate, capital addition plan etc in time (Ojha & Gautam, 2008: 41-42).

2.13 Material Purchase Budget

Material budget is prepared just after the preparation of production budget in
manufacturing company. Once production output is planned, material required for the
planned output is ascertained and than quantities of material to be purchase is estimated.
The material budget includes planning and controlling of raw material and
components/parts used in the manufacturing of finished products. Planning and
controlling purchase and material usage is the plan to maintain coordination between (i)
factory requirements for raw materials, (ii) Raw materials inventory levels, and (iii)
purchase of raw materials.

Sufficient raw materials will have to be available to meet production needs and to provide
for the desired ending raw materials inventory. However, some quantities of material
requirement will already exist in the from of beginning raw materials inventory. The
remainder will have to be purchased from suppliers.

To assure that amounts of raw materials will be on hand at the time required and to plan
for the costs of such materials, it is essential that the tactical short-term profit plan
includes. (i) detailed budgets specifying quantities and cost of material and (ii) a related
budget for raw material purchases (Ojha & Gautam, 2008: 71).

2.14 Labor Budget

Planning and controlling labour cost involve major and complex areas :(i). Human
resource needs, (ii) recruitment, (iii) Training, (iv) job evaluation and specification,(v)
performance evaluation, (vi) union negotiation, and (vii) wage and salary administration.
A comprehensive profit planning and control program should incorporate appropriate
techniques and approaches applicable to each problem area. Careful planning realistic
control of long-term and short-term labor cost will benefit both the company and its
employees.

Labor costs, in a broad sense, are composed of all expenditures incurred for employees:
top executives, middle management personnel, staff officers, supervisor, foremen, skilled
workers and unskilled workers. It is necessary to consider separately the different types
of labor costs (Ojha & Gautam, 2008: 115).

2.15 Cash Budget

Cash Budget generally indicates the cash outflow and inflow. The key point in
investment analysis is to focus. Exclusively on different in expected future cash flows are
treated the same whether they arise from operation, purchase or sales of equipment or
investment or recovery of working capital. The opportunity cost and the time value of
money are tied to cash flowing in or out of the organization not to the sources of the cash
(Khan & Jain, 1993:175).

One of the biggest challenges is determining those cash flows relevant to decision
making. Relevant cash flows are expected future cash flows that differ among
alternatives. Capital investment projects are typically having five major categories of
cash flows (Dangol & Prajapati, 2001: 837)
 Initial investment in machine and working capital.
 Cash flow current disposal of the old machine.
 Recurring operating cash flows.
 Cash flow terminal disposal of machine and recovery of working capital.
 Income tax impacts on cash flows.

2.16 Review of the Previous Related Research Works

There are very few research papers concerning this particular topic i.e. ‘Sales Budgeting’.
Most of the students of accounts group have done the research on the topic of Profit
Planning & Control of different public and non- public business enterprises. Sales
budgeting are the most important component of all types of manufacturing and non-
manufacturing business enterprises. Without sales budgeting other plan can not be
prepared.

Paudel (2003), has conducted research on “Sales Budgeting and Its Effectiveness of
Manufacturing Public Enterprises”. The study is to analyzed the present sales planning
system of RDL.

Other Objectives were as follows:-

 To analysis the sales budget prepared by RDL with theoretical prescription.
 To analysis the cause of sales fluctuation in different month and years.
 To study the relationship of sales plan with production plan, inventory and different
overhead etc. made by RDL.
 To study about variance between actual and budgeted sales.
 To evaluate the effectiveness of sales plan made by RDL.

The main findings of Paudel were as follows:-

 Semi-average method shows the sales of RDL is in decreasing trends.
 There is no significant relationship between actual and target production.
 The relationship between profit on sales is very week, even in some cases the
company get loss, rather than profit.
 RDL has high stock keeping system. They are not following flexible inventory
system as they stated, and do not consider the future demand.

On the Basic of his Findings he has Recommended the following Facts:-

 RDL needs higher sales to reduce the decreasing trends of loss. For the possibility
are, offer new medical product, discount of price, incentive to wholesaler, increases
number of dealer etc.
 They should make production target significant, by applying past achievement
production.
They should consider about better utilization of available labour, material, energy and
other expenses to increase productivity. After modifying suggested thing,
automatically RDL gets better productivity.

Mishra (2003), has carried out an investigation on the topic ‘Profit Planning and
Control in Manufacturing Company’. His research examined the present comprehensive
profit planning system applied by Nepal lever Ltd. Overall objective was to provide
future direction and prospectus to the organization.

Other Specifics Objectives of the Study were as Follows:-

 To examine the variance between the actual and the budgeted production.
 To analyze the various functional and departmental budgets adopted by Nepal lever
limited.
 To measure the efficiency of the organization in terms of capacity utilization.
 To analysis the financial performance of Nepal lever ltd.
 To highlight the ppc system adopted by various departments of Nepal lever limited.
 To forecast future production and sales of Nepal lever limited and to recommend and
suggest for improving the profit planning.

Mishra, concluded his research with some findings, his major findings were as
follows:-
 Specific goals and strategy for the organization are setup by the top level executive
and the management is totally governed by the Hindustan lever ltd.
 The company has no proper practice of segregation of cost into fixed and variable and
controllable and uncontrollable.
 Authorities and responsibilities are not clearly defined among various departmental
working managers.
 In terms of capacity utilization only 36% of install capacity is utilized by fair &
lovely.
 Application of profit plan is not realistic.
 Nepal lever limited faces a major problem in utilization of raw material. A major
portion of raw material is imported from other country; very less portion of Nepalese
raw material is consumed by the organization.

Sitaula (2006), has studied the “Sales Planning and Its Impact on Profitability”. His
research analyzed the current practices of sales Planning and its effectiveness in
manufacturing enterprises established under foreign investment.

Other objectives were as follows:-

 To analyze the sales budget prepared by unilever Nepal limited.
 To evaluate the deviation between budgeted and actual sales.
 To make comparison of sales with profit of the Unilever Nepal limited.
 To provide the appropriate suggestion and recommendation for improvement of
planning system of unilever Nepal limited.
Sitaula concluded his research with some findings and recommendation, His major
findings were as follows:-
 UNL must classify the cost according to department and products. So, that return of
each product and department can be evaluated.
 The company needs of follow certain strategy to increase export sales.
 UNL should have the competitive pricing policy according to the market situation to
increase the high market share.
 UNL should use feedback mechanism to control overall activities.
 Profit planning manuals should be communicated from top to lower levels.
 A reliable cash collection policy should be developed. It will reduce bad debts and
increase profitability.

Shrestha (2008), has carried out an investigation on the topic ‘Sales Planning & its
Impact on Profitability’. His research examined the present comprehensive Sales
planning system applied by Unilever Nepal Ltd. Overall objective was to provide future
direction and prospectus to the organization.

Other objectives were as follows:-

 To analyze the sales budget prepared by Unilever Nepal Limited.
 To evaluate the deviation between budgeted and actual sales.
 To make comparison of sales with profit of the Unilever Nepal Limited.
 To provide the appropriate suggestion and recommendation for improvement of
planning system of unilever Nepal Limited.

Shrestha concluded his research with some findings and recommendation, His
major findings were as follows:-
 UNL must classify the cost according to department and products. So, that return of
each product and department can be evaluated.
 The company needs of follow certain strategy to increase export sales.
 UNL should have the competitive pricing policy according to the market situation to
increase the high market share.
 UNL should use feedback mechanism to control overall activities.
 Profit planning manuals should be communicated from top to lower levels.

Pokhrel (2009), has studied the “Sales Planning in Nepalese Public Enterprises”. His
research analyzed the present Sales planning system applied by Dairy Development
Corporation.

The specific main objectives were as follows:-

 To identify the sales planning process of DDC.
 To examine the formulation and implementing procedure of sales plan in DDC.
 To evaluate the variance between budgeted and actual sales of the DDC.
 To examine the effectiveness of sales plan in DDC.
 To suggest and recommend for improvement of the planning system in DDC.

Pokhrel, concluded his research with some findings, his major findings were as
follows:-
 DDC is not preparing the systematic periodic performance reports detailed by
assigned responsibilities for accomplishing the planning objectives.
 By the analysis, there is no systematic and realistic sales plan. The sales planning is
rarely satisfactory for some product but not for all.
 The company prepared the sales budget without studying the environmental
scanning.
 Least square straight line sales trend of DDC shows that the sales will be gradually
increase in the future if present efforts are frequently being improved.

Research Gap
The most of the previous studies were not on operating aspect of different firms. The
previous researches did not focus on the application of profit planning system and made
recommendation for the effective implementation of profit planning system.This study so
would be of different value as it focused on specific area of overall profit planning i.e.
sales budget with special reference to UNL manufacturing enterprises.
It would be a significant step on knowing about the sales budget of Unilever Nepal
Limited. The study analyzed the sales budgeting system of the manufacturing industry.
This study would be new in the field of Sales budgeting.
 CHAPTER – III
RESEARCH METHODOLOGY

3.1 Research Design

The main objective of the study is to analyze the of application of sales planning in
Unilever Nepal Limited. For that purpose, the descriptive and quantitative methods were
applied.

3.2 Nature and Source of Data

Information is blood of every research. Both Primary and secondary information were
used in this study. Primary information was based on questionnaire, informal interview as
well as unstructured dialogues and discussions with the officials of Unilever Nepal
Limited. Secondary data were collected from the following sources:
 Financial statement of UNL.
 Previous studies made in the subject.
 Published and unpublished articles.
 Annual magazine and reports.
 Personal approach & interview, annual reports of UNL.
 Others relevant data available in this subject area.

3.4 Period Covered

The present study covered time period of five fiscal years for the purpose of trend
analysis from the FY 2060/2061 to 2064/2065.

3.4 Research Variables

The research variables of this study related with sales statement of UNL are budgeted and
actual sales in units and rupees, sales trend & pricing trend

3.5 Statistical Tools Used

For the analysis of data, various statistical and financial tools such as profitability
variance analysis, correlation, regression, percentage graphs, figures, charts, tables, etc.
were used depending upon the need.
 CHAPTER – IV
DATA PRESENTATION AND ANAYSIS

4.1 Sales Budget of UNL

Sales budget is the foundation of profit planning and control. It is the first plan or budget
to be prepared. All other planning are based on it. Sales are the main source of revenues.
The sales not only generate revenue but also incur selling cost for this reason. A
comprehensive sales planning makes forecast of total sales classified according to group
of products, sales territories and geographical locations.

UNL is a multinational company engaged in manufacturing of household consumer

goods of daily utilities. UNL has no practice of preparing long-range sales plan.
However, short-range sales plan was developed oftenly. The sales territories of the
company can be divided into two major groups’ domestic sales and export sales.
Domestic sales represent 100% of the total marketable goods and export sales represent
0%. The company has sales department but they didn't have expert personnel. Top
management fixes prices. They didn't forecast sales nor did they perform market research.
Thus UNL didn't have systematic profit planning and control.

The company faced competition in soap and detergent products produced by other,
domestic companies. At the very initial stage of production, company had margin of
profit. The company sales a major portion of sales against letter of credit. Therefore, the
company had no problem of collecting credit amount.
The distribution channel adopted by the company in the earlier years is presented below-
Producer

Consumer
In recent years they are engaged in using distribution channel of: -
Producer

Dealer/Agents

Consumer

4.2 Difference between Budged Sales and Actual Sales

To know about sales trend of past and to forecast for the future, the past year's budgeted
sales of UNL & their achievement is presented in the table. The following table and
figures shows the budgeted sales and actual sales achievement from the FY 2060/061 to
2064/065
Table 4.1
Sales Budget & Achievement
(Rs. In ‘000’)
Fiscal Year Budgeted Sales (X) Actual Sales (Y) Achievement (%)
2060/061 15,55,909 15,24,901.045 98
2061/062 19,06,126 14,81,560.044 77.72
2062/063 18,26,204 14,34,942.233 78.58
2063/064 19,60,787 18,18,527.500 92.74
2064/065 22,14,640 21,44,589.477 96.83
Average 18,92,733.2 16,80,904.000 88.80
(Source: Annual Report and Sales Department of UNL)
The above table reveals the differences between the budgeted sales and actual sales. The
data clearly shows that there is a moderate fluctuation of sales achievement of UNL. The
sales achievement of the FY 2060/061is higher than the other fiscal years, it is 98%. In
the FY 2060/061 the budgeted sale target was Rs. 15, 55,909 thousand and actual sales
were Rs. 15, 24,901.045 thousand which has recorded 98% of target. The budgeted sales
target in the FY 2060/061 are quite satisfactory. The actual sales exceeded 80 percent
target meets generally is satisfactory. The FY’s 2061/62 & FY’s 2062/63 target of UNL
were quite low, because of the increasing potential disturbance in the country. The rest of
the FY’S target of UNL quite satisfactory. The above table clearly shows that there is the
difference between the budgeted and actual sales. It indicates that the company has setup
unattainable target by the top management of the company. A bit of deficit and
fluctuation of sales achievement to target sales may be due to the lack of adequate
knowledge about forecasting. The analysis of the table shows that there is no systematic
and scientific sales plan. There is neither increase sales trend to nor to decrease.

The sales budget and achievement are presented in the following figure.
Figure 4.1
Statement of Actual Sales and Budgeted Sales
 The above figure indicates that the actual sales never met the budgeted sales. In the FY
2060/061 highest achievement of 98% was recorded, in the FY 2061/062 there was a
lowest achievement of 77.72%. The other FY’s achievements were neither increasing
order nor decreasing order. Due to such fluctuating nature of sales trend, it is difficult to
project the future potential sales.

4.2.1 Statistical Tools Used

To find out the correlation between the budgeted and actual sales, Karl Pearson's
coefficient of corre1ation ‘r’ determined. For the purpose of calculation of ‘r’ budgeted
sales (x) are assumed to be independent variable and actual sales (y) are assumed to be
dependent variable. The correlation between X & Y variables should be positive. To
know the significances of the calculated value of r and probable error PE (r) is calculated
below: -

Table 4.2
Statistical Calculation of Budgeted and Actual Sales
(Rs. '00000')
Fiscal Budgeted Actual U=X- x V=Y- y UV
U2 V2
year Sales(X) Sales(Y)
2060/061 15559.1 15249.01 -3368.20 -1560.03 11345108.1 2433692.2 5254569.53
2061/062 19061.3 14815.6 133.91 -1993.44 17934.5664 3973801.28 -266961.426
2062/063 18262 14349.422 -665.33 -2459.62 442624.09 6049719.08 1636383.64
2063/064 19607.9 18185.275 680.53 1376.24 463121.081 1894022.78 936569.205
2064/065 22146.4 21445.895 3219.09 4636.85 10362347.3 21500422.2 14926313.7
N=5
 X= Y = U =0 V =0 U 2
= V 2
= UV =
94636.70 84045.20 22631135.08 35851657.49 22486874.66

I) for Budgeted Sales:-

Mean ( X ) =  X= 94636.7
= 18927.34
N 5

Standard deviation (δx) =

U 2
=
22631135.08
= 2127.4931
N 5

x
Coefficient of variations (C.VX) = X100% = 2127.4931 = 11.2403%
X 18927.34
II) For Actual Sales:-

Y  84045.20  16809.04
Mean ( Y )
= N 5

Standard deviation (δy) =   2677.747

V 2

35851657.49
7170331.498
N  5
Coefficient of variations (C.Vy) = Y
Y 2677.747
X100%   15.93 %
16809.04

Calculation of Correlation Coefficient

r (xy) =

UV 22486874.66 22486874.66

 
U 2 X V 2 22631135.08X 35851657.49 811363703498083.7492

22486874.66
 28484446.69  0.78944

The calculated value of r is 0 .78944 the value of r shows that there is positive correlation
between actual and budgeted sales. Increase in the budgeted sales will also increase
actual sales or vice versa.

Calculation of probable Error

PE(r) =

0.6745 1  r 1  (0.78944)2
X 2 
N 0.6745X 5
1  0.62321 0.37679
 0.6745X 2.23606  2.23606
 0.16850

The calculated value of probable error is 0.16850 considering probable error PE (r). It is
found that the value of r is more then PE (r) i.e. 0 .78944>0.16850 so, it can be concluded
that the calculated value of r is significant and actual sales will go in the same direction
of the budgeted sales
 Table 4.3
Summary of Arithmetic Mean, Standard Deviation, Coefficient of Variation,
Correlation, Probable Error of Budgeted sales and Actual Sales
Statistical Tools Budgeted Sales (X) Rs. In Actual Sales (Y) Rs. In
‘00000’ '00000’
Mean ( X ) 18927.34 16809.04
S.D.(δ) 2127.4931 2677.747
C.V. 11.2403% 15.93%
r (xy) 0.78944
P.E.(r) 0.16850

Since, correlation coefficient only gives the direction of the relationship in the relevant
variables; a regression line can also be fitted to show the degree of relationship between
the budgeted and actual sales, and forecast the possible actual sales with given budgeted
sales.

Then,
Budgeted sales (X) are assumed to be independent and actual sales (Y) is assumed to be
Dependent variable.

The regression Line of Y on X

y
(Y  Y )  r (XX)
x
Y 16809.04  0.78944 2677.747
X ( X 18927.34)
2127.4931
Y 16809.04  0.99362 (X -18927.34)
Y -16809.04  0.99362X -18806.58357
Y  0.99362X -18806.58357 
16809.04 Y  0.99362X -1997.54357

The Regression line of Y on X  0.99362X -1997.54357

The regression line shows that positive relationship between budgeted sales and actual
sales. It is clear that the actual sales are in increasing trend and actual sales will increase
by 0.99362 per one rupee of the budgeted sales.
Least Square Method
Another statistical tool called least square method can also be used to analyze the trend of
actual sales and to estimate the possible future sales for given time or year. A straight
trend by this method will show the relationship between time or year and actual sales of
the every, if sales trends of the previous year continue in the figure. From the above trend
equation, the actual sales for the FY 2065/066 can be estimated. The value of X for the
FY 2065/066 (Y):

Y= a+bx
Where,
Y= actual sales (Dependent variable)
b= annual rate of growth or slope of trend line
a=Y-intercept
X=time

Fitting straight line trend by least square for actual sales trend and possible future sales of
UNL.
Table 4.4
Calculation of Trend
Fiscal Year Actual Sales(y) xy
xXX x2
(X) Rs in ‘00000’
2060/061 15249.01045 -2 4 -30498.02090
2061/062 14815.60044 -1 1 -14815.60044
2062/063 14349.42233 0 0 0
2063/064 18185.27500 1 1 18185.27500
2064/065 21445.89477 2 4 42891.78954
N=5 Σy= 84045.203 Σx= 0
x 2
 10 Σxy=15763.40000

The Fiscal year 2062/063is assumed as base year. By least square method.

Y= a+bx
Where,
a=
 x  y   xy x
2

N  x  ( x) 2 2

 x  y (Σ x=0 in time series analysis due to the assumed based year)

2

N
=

x2

Y ( 2
is common in both numerator and denominator
N
x

a
 y.................................(1)
N

Again,
N  xy   x y
b=
N  x 2  ( x)2

N
xy N  (Since Σ x=0 in time series analysis due to assume base year)
x2


xy (Since, N is common both numerator and denominator)
x
2

b
 xy.............................(2)
x 2

Substituting the value in above equations:

a
 y.................................(1)
N
84045.203
a 5
a  16809.0406
Again,
b
 xy.............................(2)
x
2

15763.40000
10

b  1576.34

For fiscal year 2065/066, the value of X will be 3 due to assumed base year.

We have,
Y = a + bx
Or,

Y= 16809.0406 + 1576.34x

Where,
X= 3, then

Y= 16809.0406+1576.3 X 3

= 16809.0406 + 4729.02

= 21538.0606

Therefore, if the trend does not change, the sales for the FY 2065/066 will be Rs 215
38.06 060

4.2.2 Sales Budget of UNL by Territory

On the basis of territories the total sales of UNL can be categorized into two territories
i.e. domestic sales & export sales. The following table presents the actual condition of
sales of UNL by territories.
 Table 4.5
Actual sales by territories
Fiscal Total sales Domestic Sales Export sales

Growth Units (in %)

Growth Units (in %)

Growth Units (in

year

%)
Unit Amount Unit Amount Unit Amount
(Tonnes) (Rs) (Tonnes) (Rs) (Tonnes) (Rs)

2060/061 22624 1524901045 22.07 17746 118830306 21.16 4878 259599500 (25.5)
2061/062 21232 1481560044 (6.2) 21232 1481560044 19.6 Nil - (100)
2062/063 22409 1434942233 5.54 22409 1434942233 5.54 Nil - (100)
2063/064 26974 1818527500 20.37 26974 1818527500 20.37 Nil - (100)
2064/065 26243 2144589477 (2.71) 26243 2144589477 (2.71) Nill - (100)
(Source: Annual Report and Sales Department of UNL)

The above Table shows that in the fiscal years 2060/061 the amount of export sales of
UNL was higher than the domestic sales. After that there was an export sale. Such a
reason because of strong competition in international market as well as in domestic
market. In spite of this unfavorable condition of export trade its domestic sales is in
increasing trend. In the fiscal year 2063/064 it has increased by 20.37% and in the fiscal
year 2064/065 its unit has decreased by 2.71% but amount has increased because of
increase in price.

The total sales of UNL in the FY 2060/061 increased but sales decreased in the
FY2061/062. The total sales increased from the FY 2062/63 to 2063/64 but from the FY
2064/065 the sales units decreased but sales amount increased in Rs 2144589477.

Total sales of 5 years show that percentage of domestic sales and export sales are 21.16
and (25).19.6 and (100), 5.54 and (100). 20.37and (100). (2.71) and (100) respectively.
Thus, we can say that a main market of UNL is domestic market. So that management of
UNL should try to promote expected sales by using new techniques.
The following is the trend line representation of actual sales by territories.
 Figure 4.2
Statement of Territorial Sales

The above figure we can say that the main market of UNL is domestic market, Reason
for that is, there are strong competition in international market as well as in domestic
market because of Hindustan Unilever Ltd. I have seen Nepalese people prefer Indian
product of Unilever rather than Nepalese product of Unilever, because they believe
Indian product is good in quality. So I think UNL should focus in quality product rather
than quantity product and should try to cover the share of domestic market.

4.2.3 Sales Budget of UNL by Product

On the basis of product the total sales by UNL can be categorized into six products. The
following table presents the actual condition of sales of UNL by products.
 Table 4.6
Actual Sales by Products
For the year 2064/065
Products Units(Tonnes) Prices(Rs) Amount(Rs)
Detergents/scourers/Laundary 17917 37128.56 66,52,32,413
Toilet soaps 5902 121141.44 71,49,76,805
Personal products 2424 315338.39 76,43,80,259
Soap Noodles - -
Tea - -
Vanaspati - -
Total 26243 - 2,14,45,89,477
(Source: Annual Report and Sales Department of UNL)

The above Table shows that the Product wise sales budget of UNL for the fiscal years
2064/065.The sales of product Detergents/scourers/Laundary is higher than other product
(i.e 17,917 Tonnes). In this Year only sold of Detergents/scourers/Laundary, Toilet soaps
& Personal products but not sold of Soap Noodles, Tea & Vanaspati.

4.3 Comparison of Actual Sales with Operating Profit / (Loss) of the UNL
Profit is the excess of revenue earned over its costs. To increase the profit means
therefore to increase the revenue or to reduce the cost by not cutting down the cost rather
to increase the efficiency of cost. To earn maximum profit with optimum resource is the
main objective of any organization. Profit so highly depends on the sales turnover. The
sales and operating profit/ (loss) of the UNL is tabulated as here under: -

Table 4.7
Sales and Operating Profit/ (Loss)
Fiscal year Sales % Change in Operating Operating %Change in
(Actual) sales profit/loss profit ratio Operating profit
2060/061 1524901045 22.51 190321516 12.48 42.51
2061/062 1481560044 (2.84) 248265166 16.75 30.45
2062/063 1434942233 (3.15) 304656507 21.23 22.71
2063/064 1818527500 27 345564838 19 13.43
2064/065 2144589477 17.92 433121739 20.19 25.34
 (Source: Annual Report and Sales Department of UNL)

Note: Operating profit ratio Operating profit X100

 sales

The above table shows that there is fluctuation in the actual sales as well as the operating
profit and loss. In the FY 2061/062 and 2062/063 the actual sales is negatively fluctuated
because actual sales are in decreasing order till the FY 2062/063 from the FY
2060/061,but operating profit is in increasing order every year, but ratio of operating
profit/loss is increasing and decreasing. So, this is zigzag, not in the same ratio. In the FY
2061/062 & 2062/063, operating profit/loss isn’t negatively fluctuated but decreasing, as
the matter of fact when actual sales positively fluctuate by 27percent, the operating profit
ratio also fluctuate by 21.23 to 19 percent. The sale’s increasing rate is higher than
Operating profit/loss’s increasing rate in the FY 2063/064, but sales increasing rate is less
than Operating profit/loss increasing rate in the FY 2064/065.

4.3.1 Statistical Tools Used

Table 4.8
Calculation of Correlation Coefficient of Actual Sales
with Operating Profit /Loss
(Rs ‘00000’)
Fiscal Actual Operating U=X- X V=Y- Y UV
U2 V2
year Sales(X) profit/loss
(Y)
2060/061 15249.01045 1903.21516 -1560.03015 -1140.6444 2433694.07 1301069.58 1779439.61
2061/062 14815.60044 2482.65166 -1993.44016 -561.20787 3973803.67 314954.273 1118734.31
2062/063 14349.42233 3046.56507 -2459.61827 2.70554 6049722.03 7.31994669 -6654.5956
2063/064 18185.275 3455.64838 1376.2344 411.78885 1894021.12 169570.057 566717.981
2064/065 21445.89477 4331.21739 4636.85417 1287.35786 21500416.6 1657290.26 5969290.66
N=5
 X= Y = U =0 V =0 U 2
= V 2
= UV =
84045.20299 15219.29766 35851657.5 3442891.49 9427527.96
(Source: Annual Report and Sales Department of UNL)

Assumed: X = Actual sales and independent variables

Y = Operating profit/ (loss), dependent variables
X = Actual mean for actual sales

Y =Actual mean for operating profit/ (loss)

U= X- X
V= Y- Y
r = correlation
N= Numbers of years

Calculation of mean, Standard Deviation and Coefficient of variation for actual

sales:
I) For actual sales:

Mean ( X ) =

 
84045.20299
 16809.04
X 5
N

Standard deviation (δx) =

U 2

35851657.50
 7170331.498  2677.747
N 5
x 2677.747
Coefficient of variations (C.Vx) X100%  X100  15.93 %
=
X 16809.04

II) For operating profit and loss:

Mean ( Y )
= Y  15219.29766  3043.859532
N 5

Standard deviation (δy) =

V 3442891.49
2
688578.298
 829.80618
N 5 

Coefficient of variations (C.Vy) = Y X100%  829.80618 X100  27.26%
Y 3043.859532

We have,
Calculation of correlation coefficient
r (xy) =
UV
U 2 X V 2
 9427527.96 9427527.96
 
35851657.5X 3442891.49 123433364787698.93
9427527.96  0.84855

11110056.9209
The calculation value of r is 0.84855 .The value of r shows that there is positive
correlation between sales and profit / (loss). Increase in actual sales also increase profit /
(loss) or vice versa.

4.4 Relation between Actual Sales and Net Profit

Table 4.9
Relation between Actual Sales and Net Profit
(Rs in ‘00000’)
Fiscal Actual Sales % Deviation on Net Profit % Deviation on
Year (Rs.) Average Sale Average Net Profit
2060/061 15249.01045 (9.28089) 1407.82744 (39.64687)
2061/062 14815.60044 (11.85933) 1891.99474 (18.89077)
2062/063 14349.42233 (14.63271) 2381.56507 2.09694
2063/064 18185.275 8.18746 2630.64838 12.77507
2064/065 21445.89477 27.58547 3351.21739 43.66563
Average 16809.0406 2332.6506
(Source: Annual Report and Sales Department of UNL)

Note1: % Deviation on average sale =

(Actual Sales – Average sales)/Average Sales X 100
Note2: % Deviation on average Net profit =
(Actual Net profit – average Net Profit)/Average Net profit X 100

The above table shows the relation between Actual sales and net profit from the FY
2060/061 to FY 2064/065. From the above table, it is observed that the average sales and
Average net profit during the study period are Rs. 16809.0406 and Rs. 2332.6506 Lakh
respectively.

Similarly, the above table shows the percentage deviation of sales and net profit over the
study period. The highest positive deviation from the average sales is 27.58547 percent in
the FY 2064/065 and the highest positive deviation from an average net profit is
43.66563 percent in the FY 2064/065.
The highest negative deviation from on average sales is (14.63271) percent in the FY
2062/063 and the highest negative deviation from an average net profit is (39.64687)
percent in the FY 2060/061.

From the above analysis, it is observed that sales and net profit were fluctuating during
the study period. Therefore, there is no specific policy of management on sales and net
profit.

4.5 Production Plan of UNL

UNL prepares the production budget by interim time period but it does not prepare this
budget by products. At present UNL has the licensed capacity of 81191 tonnes. The
company has sufficient capacity to produce goods to fulfill the demand of sales. The
overall production responsibility of production is upon production department. The
department manager prepares the production budget based upon the adequacy or
availability of raw material and sales trend. UNL has no practice to develop strategic
long-range production plan. There is no record of previous years regarding budgeted
production. The company has tried to develop short-range production plan since the
year2051/052.

4.5.1 Comparison between Actual sales & Actual Production

All goods are produced with a motive to sell. There is no matter if the budgeted
production is not achieved but it is most important that sales should meet production.
Therefore here past actual sales are analyzed with actual production.
 Table 4.10
Comparison between Actual sales & Actual Production
(In Tonnes)
Fiscal Year Actual Sales Actual Production Sales Achievement (In %)
2060/061 22624 22781 99.51
2061/062 21232 21644 98.09
2062/063 22409 22806 98.26
2063/064 26974 26875 100.37
2064/065 26243 26294 99.80
(Source: Annual Report and Sales Department of UNL)

Note: Sales Achievement = (Actual sales /actual Production)X100

The above table represents the actual production and actual sales made by UNL. Except
in the fiscal year 2063/064 it does not secured more than 100% achievement in actual
sales. It has fluctuation in sales over the period of five years.

We can present the actual sales and actual production more effectively by following trend
line.
Figure 4.3
Statement of Actual Sales and Actual Production
The above figure shows that the trend of actual sales and actual production. The graphical
presentation indicates that the few gap between actual sales and actual production. In the
FY 2063/064 the gap between actual sales and actual production is very high. In the FY
2061/062 a small gap between actual sales and actual production as compared to the
other years. in the figure we can see that both actual sales and actual production are in
zigzag order.
Table 4.11
Summary of Mean, Standard Deviation, Coefficient of Variation of Actual
Production and Actual Sales
Statistical tools Actual sales (in Tonnes) Actual Production (in Tonnes)
Mean 23896.4 24080
Standard Deviation 7198.40 2095.63
Coefficient of variation 30.12% 8.70%
(Sources: Appendix – 1)

The above table represents that actual production are more variable than actual sales.
Efficiency and effectiveness of any management organization can be interpreted by its
sales achievement. Sales must be increased as per the increase in production. The
correlation of coefficient is calculated to find out the relation between actual production
and actual sales. Here, Karl Pearson's formula is used to calculate correlation coefficient,
which is denoted by r. X is denoted for actual sales and Y is denoted for actual
production to be independent variable. The calculation is shown in Appendex-1 the value
of r from appendix is 0.99.

The value of X depicts the positive correlation between actual sales and actual
production. This value indicates that there is a high degree of positive correlation
between actual sales & production.

The significance of r is tested by the help of probable error or r from Appendex-1. We

have, PE equal to 0.0060. The value of r is definitely significant since r is greater than PE
0.99>0.0060).
4.6 Identification of Cost Variability
Another important aspect of management in comprehensive profit plan is identification of
cost is variable or fixed. Thus the knowledge of cost behavior is very important. In
manufacturing concern cost is classified in two types. First is variable cost, which
changes with the behavior and output of production. It changes proportionately with the
changes in output. But per unit cost remains constant in total and is calculated in yearly
basis or for a certain fixed period. Variation in output does not affect this cost. There are
some other types of cost classified as semi-variable cost, which are, nor variable neither
fixed. They posses some characteristic of both fixed and variable.

Cost classification plays most important role in profit planning and control. It helps for
the strategy formulation by the management in response to production and return. It
fragments the cost based on its nature and helps to the industry to run in profitability. But
UNL has not mentioned any clear-cut boundaries about cost classification as fixed and
variable since last five years. It does not use scientific method to classify the cost. The
classification of expense into fixed and variable provided by UNL production
Department for all products is presented below:
Table 4.12
Cost Classification of UNL
Particular Nature of cost
Raw material consumed Variable
Packing material cost Variable
Labor cost Variable
Utilities Variable
Depreciation Fixed
Interest Fixed
Rent Fixed
Staff Bonus Fixed
Processing charges Variable
Transportation of Employees Variable
Quality charges Variable
Repairs & Maintenance Variable
Administration OH Fixed
 Distribution and Advertisement Fixed
(Source: - Production Department of UNL)
4.7 Cost Volume Profit Analysis
Manufacturing enterprise always wishes to produce and sell a product till sales revenue at
least equals marginal cost plus fixed cost. Marginal costs are always connected with
volume and vary directly and proportionately with variations in volume. On the other
hand fixed costs remains constant and is not affected by the change in volume of
production. Thus the amount of profit in every manufacturing enterprise depends upon
volume of production and its cost. Thus we see that there is a close relationship between
volume-cost and profit. When is to establish this relationship that process is known as
CVP analysis. here, CVP analysis is accepted as the most significant tool of profit
planning and control.

The CVP analysis of UNL is based on the following assumptions:

 Cost Volume Structure is based on the accounting data of FY 2064 /065.
 Changes in inventories are disregarded while computing the CVP ingredients.
 Non operating incomes and non operating expenses are also excluded
from CVP relationship
 Selling prices & variable costs are assumed to be remain constant
 Consumptions are making on total basis not product wise.

Cost Volume Profit Analysis of UNL, based on FY 2064/065

1) Variable Cost- Volume Ratio (V.V. Ratio)
This ratio shows the proportion of variable cost to each Amount of sales revenue
V.V. ratio can be achieved by using the following formula

V.V. ratio=
Total Variable cost (Rs) Total material consumed  total manufactur ing expenses
TotalSales(Rs)  Total Sales (Rs)
1,19,67,41,307  19,08,38,305 1,38,75,79,613
 
2,14,45,89,477 2,14,45,89,477
= 0.64 70
= 64.70%
2) Profit -Volume Ratio (P.V. Ratio)
This ratio shows the proportion of Contribution Margin and Sales.
P.V. ratio can be calculated by using the following formula.

PV ratio = 1-V.V.ratio = 1-0.64 70

=0.353 = 35.30%

3) Break Even Point (BEP)

BEP gives the level of production at which the company runs in the condition of no profit
no loss.
Break even point can be calculated by using the following formula:
Fixedcost 5,28,10,308  1830.75 Tonnes
BEP (in unit) =
Contributi on Margin per Unit  Rs28,846.16
Where,

Contribution Margin per unit = CM Total sales - Total Variable cost


Sales Sales Unit
unit
=
2,14,45,89,477 -1,38,75,79,613 757009864
26243  26243  28846.16

CMPU = Rs28,846.16

Fixedcost  5,28,10,308  Rs149604271.95

BEP (in Rs )
P.V Ratio 0.3530
=

BEP (in Rs) = Rs 149604271.95

The result of BEP in Rs. 149604271.95 shows that if the UNL maintains the sales volume
at that particular level it can recover its fixed operations cost by contribution margin.

4.8 Profit and Loss A/c Trend of UNL

Profit earning is an owner responsibility of management. All strategies are made to earn
profit by the organization. It is major element of any firm. It is the base for survival and
reason for the establishment of any firm. Profit and loss A/c of UNL is summarized
below on the basis of P & L A /C of UNL. (P&L is shown in Appendix -2)
Table 4.13
Profit or Loss Trend in UNL
Fiscal Year Profit (Loss) % Change based on previous year
2060/061 14,07,82,743 51.10
2061/062 18,91,99,472 34.39
2062/063 26,55,33,041 40.34
2063/064 26,30,64,837 (0.92)
2064/065 335121739 27.39
(Source: Annual Report of UNL)

Note: % Change based on previous = (Current year profit – Previous year

profit)/Previous year X100

The above table shows that the net profit and loss pattern of UNL. The profit trend of
UNL has fluctuation over the period of 5 years. It has earned highest profit in the FY
2064/065. In the FY year 2063/064 it has decreased by (0.92) percent as compared to
previous year. Here we can see management must be sincere to decrease profit.
We can present the above P/L figure more effectively by following trend line.
Figure 4.4
Trends of
Profitability
Statistical tool least square method is used to analyze and examine the trend of net profit
to forecast the possible future profit for a given time. A straight line trend by this method
will show the relationship between time and actual profit of the relevant year. In this
method it is assumed that profit is consistently changed with the change in time.

4.9 Income Statement

Income statement contains expenses and revenue for the certain period. It provides the
information about cost of sales, operating expenses, non operating expenses, operating
incomes and non incomes. The main objectives of preparing incomes statement is to
known about net income or net loss of an accounting year. Income statement of five years
is shown in Appendix-2

4.9.1 Comparison of Sales with Cost of Sales & Other Expenses

Cost of sales includes total material consumed, total work in progress and total other
manufacturing expenses. Other expenses includes Housing Fund, Administrative OH,
Advertisement &Promotional exp, Distributions cost, Provision Bonus, Preliminary
expenses & loss on the sales of fixed assets.
Table 4.14
Comparison of Sales, Cost of Sales and Other Expenses
 Fiscal Sales % Cost of Sales Cost of Other Other
Year (Actual) Change Sales Expenses Expenses
in sales Ratio (%) Ratio (%)
2060/061 1524901045 22.51 96,91,08,810 63.55 38,77,73,903 25.42
2061/062 1481560044 (2.84) 93,78,17,684 63.56 32,90,91,459 22.21
2062/063 1434942233 (3.15) 94,02,36,391 65.52 23,80,01,307 16.58
2063/064 1818527500 27 1,28,16,20,007 70.47 27,80,62,510 15.29
2064/065 2144589477 17.92 1,37,02,11,891 63.89 39,55,16,388 18.44
(Source: Annual Report and Sales Department of UNL)

Note: - Cost of sales ratio Cost of sales

 sales X100

- Other expenses ratio Other expenses X100

 sales
The above table shows that there is fluctuation in the actual sales as well as the cost of
sales & other expenses. In the FY 2061/062 and 2062/063 the actual sales is negatively
fluctuated because actual sales are in decreasing order till the FY 2062/063 from the FY
2060/061, but ratio of cost of sales & other expenses is increasing and decreasing. So,
this is zigzag, not in the same ratio. Cost of sales ratio is increasing but other expenses
ratio is decreasing order till the FY 2063/064 from the FY 2060/061. When the actual
sales positively fluctuate by 27 percent, the cost of sales ratio also fluctuates by 65.52 to
70.47 percent & other expenses by 16.58 to 15.29 percent. The sale’s increasing rate is
lower than cost of sales increasing rate and higher than other expenses increasing rate in
the FY 2063/064, but sales increasing rate is less than other expenses increasing rate in
the FY 2064/065.

4.10 Cash Flow Statement of UNL

Cash flow statement shows the cash and liquidity position of any organization. The
planning and control of inflow and outflow, and the related financing is important in all
enterprise. Cash flow statement is of great importance to both financing and investing
activities of a business enterprise and the consequent changes in its financial position for
a period. Cash flow of three years is shown in Appendix-3
4.10.1 Comparison of Actual Sales with Operating Cash Flow
Cash flow from operating activities are primarily derived from the principal revenue
producing activities of the enterprise. To increase the operating cash flow means
therefore to increase the revenue or to reduce the cost by not cutting down the cost rather
to increase the efficiency of cost. To earn maximum operating cash flow with optimum
resource is the main objective of any organization. Operating cash flow depends on the
sales turnover. The sales and operating cash flow of the UNL is tabulated as here under: -
 Table 4.15
Sales & Operating Cash flow
Fiscal Sales % Change Operating Operating Change in
year (Actual) in Cash flow Cash Flow Operating Cash
Sales Ratio (%) Flow (%)
2062/063 1434942233 (3.15) 20,61,54,571 14.36 30.02
2063/064 1818527500 27 25,06,07,550 13.78 21.56
2064/065 2144589477 17.92 23,25,13,451 10.84 -7.22
(Source: Annual Report of UNL)

Note: Operating Cash Flow Operating Cash Flow

 Sales  100
Ratio

The above table shows that there is fluctuation in the actual sales as well as the operating
cash flow. In the FY 2062/063 the actual sales is negatively fluctuated because actual
sales are in decreasing order till the FY 2062/063 from the FY 2060/061,but operating
cash flow is in increasing order till the FY 2063/064 & after decreasing but ratio of
operating cash flow is decreasing. So, this is zigzag, not in the same ratio. The sale’s
increasing rate is higher than Operating cash flow increasing rate in the FY 2063/064 &
2064/065, but sales increasing rate is less than Operating cash flow increasing rate in the
FY 2062/063.

4.11 Analysis of Primary Data

The primary data were collected from 10 managerial staff of UNL. Out of 10
Respondents, 6 respondents responded. The structured questions were given to them.
The responses have become much helpful to know about the opinion of the managerial
staff and their view about the budgeting system, especially sales budgeting system.

The analysis of primary data depicts these conclusions: -

 100 percent of the respondents think that high level is responsible for budget
preparation of UNL.
 100 percent of the respondents think that is the wages payment system of UNL
should be on monthly basis.
  100 percent of respondents gave their opinion that UNL purchased the raw
materials from the Domestic and International market both.
 100 percent respondents replied that the company has flexible production policy.
 100 percent of the respondents think that the responsible person for sales
forecasting is the sales manager.
 84 percent of the respondents think that market studies were method used for
sales forecasting. Rest 16 percent of the respondents thinks that statistical method
were used for sales forecasting.
 100% of the respondents think that sales budget is prepared on product wise basis.
 60 percent of the respondents think that the cost plus pricing method used. Rest
40 percent of the respondents opinions that market oriented pricing method was
used.
 85 percent of the respondents think that consumer promotion criteria was used for
sales promotion. Again 15 percent gave their opinion that sales promotion was
used.
 100 percent of the respondents think that the local market is the main market for
the company’s product.
 100 percent of the respondents think that the sales were on cash and credit.
 All the respondents are very much ready to help for better future of UNL

4.12 Major Findings

The major findings of this study are drawn on the basis of primary and secondary data
which are as follows: -
 The company did not have practice of preparing sales budget although there was
tentative sales budget.
 The Actual sales were below the budgeted sales (i.e. Rs 16,80,904 < Rs
18,92,733.2)
 The correlation between the budgeted and actual sales showed a positive
correlation ( i.e. 0.78944). It means that the company can meet its sales goals as
specified in annual program.
 There was no cost classification system in the company. The costs were not
segregated into fixed and variable in systematic manner.
 The company has no practice of systematic sales forecasting. Sales forecasting is
not based on realistic approach. It has no practice of using statistical techniques in
sales forecasting.
 Sales territories of UNL can be divided into domestic and export sales. From the
FY 2061/062, the domestic sale were 100% of total sales and export sales were
nil.
 Mainly 8 different types of consumer product lines were produced by UNL
 The company has also given the priority to rural market by packing the product in
mini packets affordable to the rural citizens.
 UNL has no planning department. So it can be said that no proper practice of
profit plan has been exercised in UNL.
 Net profits earned by UNL were fluctuating trend. Net profit earned in the FY
2064/065 has increased by Rs 720.56901 lakhs as compared to the previous fiscal
year.
 The average credit collection period is 10 to 15 days against letter of credit.
 Both the production and sales are fluctuating over the period of 5 fiscal years.
 Internal and external variables providing opportunities, threats and strength and
weakness are not identified by the top management.
 The final products of the organization are made available to the consumer in three
steps i.e. Producer ------- Dealer consumer.
 CHAPTER - V
SUMMAR Y, CONCLUSION AND RECOMMENDATIONS

5.1 Summary
A business firm is rational economic agent. The rationality refers to maximization of
profit. Profit is the excess of revenue earned over its cost. To increase profit, a firm
should increase the revenue or reduce the cost or both simultaneous. The maximization of
profit by running organization in much efficient way is the sole goal of business
organization. The generation of profit with allocation of optimum resource is the main
objective of profit planning study.

Profit planning represents an overall operation. It covers a definite period of time. Profit
plans are prepared in two dimensions; strategic long range plan covering a period of five
to ten years and tactical short range plan for a year detailed by interim time periods. A
sales budget reduces the uncertainties of future revenue and is the cornerstone of
preparing all the other budgets. All budget except sales budgets are related with cost. On
the basis of sales budget, production budget or planning is made. The production
planning depends on the capacity of the plant. And all other functional budgets are
prepared on the basis of the production budget.

Nepal is a land-locked country. It is fully dependent upon the agriculture sector. The
country is back ward in Industrial sector. Thus, industrial sector must be developed for
economic development of the country. Nepal has started economic planning for economic
development from 2013 B.S. after launching first five year plan in 2013 B.S. Industrial
policy was formally announced in 1957.Because of the different shortcomings to this the
new industrial policy was declared in 1992 to attract the FDI the foreign investment,
Nepal Lever Limited (Now Unilever Nepal Limited) is the one formed as the subsidiary
companies of Unilever Group of company of England.
UniIever Nepal Limited, a leading manufacturing company in Nepal is a pioneering
company. UNL is a large scale enterprise established with a motive to serve Nepalese
consumer by producing various commodities required for their daily use such as
detergents, toothpaste, skin cream etc. UNL was registered in the year 1992(In the name
of Nepal Lever limited and now change its name and used the name Unilever Nepal
Limited) and production started in the year 1994. The total capital employed by the
company is Rs.300million Nepalese currency. The annual production capacity of the
company is 38,000 metric tones.

The basic objectives of the present study are to analyze the current practices and
application of sales budgeting system and its impact on profitability of UNL. For this
purpose the data of five FY 2060/061 to 2064/065 were taken. Both primary and
secondary data mainly research done previously and the annual report of the company
were also used in this study. The data were analyzed with the help of various statistical
techniques like mean, standard deviation, percentage, graph, correlation, regression,
coefficient of variance, probable error, time series analysis and financial tools like BEP
analysis, ratio analysis are used. From the analysis of sales budget and actual sales reports
of the UNL, it was found that the actual sales were always less than the budgeted sales.

5.2 Conclusion
Analysis and study of the practice of sales budget of UNL helped a lot to draw the
following conclusion.

UNL has not practiced systematic & scientific sales budgeting and was not practicing
profit planning. The Company did not prepare strategies and policies for long term. Even
though it has mentioned clear objective of serving people everyday and everywhere, it
was not in implementation. UNL tried to achieve social needs of the common people by
organizing various programs. UNL has not used statistical tools in sales forecasting.
Regression equation about budgeted sales & actual sales indicated positive correlation
between the budgeted and actual sales. Production cost in UNL was not segmented into
products and departments. UNL was unable to maintain a proper coordination, among
various departments. The company has ignored the environmental factors and it has also
not adequately considered controllable and non-controllable variables affecting the
company’s profit. Moreover, the company has detected analysis of the strengths,
weakness and. threats. The study has attempted to show the strength and weakness of
UNL. UNL failed to discharge the corporate social responsibility and could not make
public interest expenditure on the sales related promotional activity. Some of the raw
materials were purchased from the international market. So the products costs were too
high. Production policy was not stable. Flexible production policy has increased the cost
of production. There was no definite target to earn profit.

Strengths:
 Availability of raw material
 Sufficient manpower
 Non-polluted environment
 Despite of different difficult situation, the company has achieved a satisfactory
sale target.

Weakness/Threats:
 High cost of local raw material
 Lack of participatory management
 Lack of autonomy
 Tough competition in local market

5.3 Recommendations
Based on the major findings of the study of sales budgeting of UNL some suggestions
were made. It seems necessary to develop, implement and improve the process of
preparing sales budget. It is hoped that these recommendations will prove useful for the
management if being brought into effective.
 UNL must classify the cost according to departments and products. So the return
of each product and department can be evaluated.
 Lower level management participation should be encouraged for decision making
in UNL. UNL should hire qualified and technical manpower to utilize its idle
capacity.
 The annual report of UNL shows that the top executives are frequently changed,
due to which overall work became difficult. So for a positive performance it is
required to appoint the top executives for a specific period. These executives
should make plan on the prevailing environment.
 There must be a separate planning department and the experts should be
appointed for making plans. The company has to adopt the certain planning
procedure. Both the long term as well as the short term plan should be prepared
and the proper evaluation and analysis must be done frequently.
 The company needs to follow certain strategy to increase the export sales.
 UNL should made detail analysis of the company's strength and weakness. It
should try to overcome its weakness by using the strengths.
 Sales forecasting should be made after analyzing all variables that effect the
market of the company, effective promotional program should be introduced to
increase sales.
 UNL should implement profit planning, in all the areas. It should timely evaluate
its relevant variables and besides, organization adaptation, responsibility
accounting, full communication realistic expectation; time dimensions, flexible
application, behavioral view point and follow up program should be made more
effective.
 MBO i.e. management by objective technique should be followed with
coordination and cooperation with all levels of personnel of all the departments.
 UNL should have the competitive pricing policy according to the market situation
to increase the, market share.
 UNL should develop its overhead budget in a well-classified and scientific way.
All expenses related with production and purchase should be included in
manufacturing overhead and similarly, administrative overhead and selling and
distribution overhead should be categorized systematically.
 UNL should apply feedback mechanism to control overall activities.
  The Company lacks the adequate expense on sales related research and
development. It is recommended that certain amount of profit should be, allocated
for the sales promotional research and development.
 The company should develop a policy to earn certain profit in a specific period.
 Profit planning manuals should be communicated from top to lower levels.
 A reliable cash collection policy should be developed. It will reduce bad debts and
increase profit.

BIBLIOGRAPHY
Books:
Agrawal, G.R. (2000). Dynamics of Human Resource Management in Nepal.
Kathmandu: M.K. Publishers and Distributors.
Bajracharya, P., Goet, J., & Sharma, S. (2005). Managerial Accounting: Nepalese
Prospective. (2nd ed). Kathmandu: Asmita Books Publishers & Distributors.
Belkaoui, A.R. (2000). Accounting Theory. (4th ed). USA: Business Press (Thomson
Learning).
Dangol, R.M. & Prajapati, K. (2000). Accounting for Financial Analysis and Planning.
Kathmandu: Taleju Prakashan.
Fago, G. (2003). Profit Planning & Control. Kathmandu: Buddha Academic Publishers
& Distributors.
Gautam, C.M. & Ojha, K. (2008). Profit Planning & Control. Kathmandu: Asmita
Publishers & Distributors.
Gupta, R.L. and Sharma, N. (1992). Management Accounting. New Delhi: Agra Sahitya
Bhawan.
Hilton, R.W., Waher, M.W., & Selto, F.H. (2002), Cost Management Strategies for
Business Decision. (2nd ed). New Delhi: Tata McGraw-Hill Publishing Co. Ltd.
Joshi, S. (2000), Managerial Economics. Kathmandu: Taleju Prakashan.
Khan, M.Y. & Jain, P.K. (1993). Financial Management. New Delhi: Tata McGraw-Hill
Publishing Co. Ltd.
Lynch, R.W. & Williamson, R.W. (1991). Accounting for Management Planning and
Control. (5th ed). New Delhi: Tata McGraw-Hill Publishing Co. Ltd.
Maheshwari, S.N. (2002). Advanced Accounting. New Delhi: Vikash Publishing House
 Pvt. Ltd.
Munakarmi, S. P. (2000). Accounting for Financial Analysis and Planning. Kathmandu:
Educational Enterprises (P) Ltd.
Ojha, K., Sharma, N., Shrestha, B.P., & Singh, Y.M. (2003), Accounting for Financial
Analysis and Planning. Kathmandu: Buddha Academic Publishers and Distributors
Pvt. Ltd.
Pandey, I.M. (1994). Financial Management. New Delhi: Vikash Publishing House.
Welsch, G.A., Anthony, R.N. & Short, D.G. (1984). Fundamentals of Financial
Accounting. Homewood: Irwin.
Welsch, G.A., Hilton, R.W. & Gordon, P.N. (1999). Budgeting Profit Planning and
Control (5th ed). New Delhi: Prentice-Hall of India Pvt. Ltd.
Willsmore, A.W. (1960). Business Budget and Budgetary Control. New York: Sir Issac
Pitman and Son Ltd.

Articles:
Annual Report and Account of UNL.
CIMA (2002). Financial Reporting, UK Standards. Middlesex: Fouls Lynch Ltd.
Nepal Accounting Standards (2005). Kathmandu: Accounting Standards Board

Unpublished Master Level Thesis:

Mishra, S. (2003). Sales Budgeting and Its Effectiveness of' Manufacturing Public
Enterprises (A case Study of Nepal Lever Limited). An Unpublished Master Level
Thesis Submitted to Faculty of Management, Central Department T.U.
Pokhrel, S, (2009). Sales Planning in Nepalese Public Enterprises (A Case Study of
Dairy Development Corporation). An Unpublished Master Level Thesis Submitted to
the Faculty of Management, Central Department T.U.
Poudel, N. (2003). Sales Budgeting and Its Effectiveness of Manufacturing Public
Enterprises (A case Study of Royal Drugs Ltd.). An Unpublished Master Level
Thesis Submitted to Faculty of Management, Central Department T.U.
Shrestha, R. (2008). Sales Planning & it’s impact on Profitability (A case Study of
Unilever Nepal Limited). An Unpublished Master Level Thesis Submitted to the
Faculty of Management, Central Department T.U.
Sitaula, G. (2006). Sales Planning & It’s Impact on Profitability (A case Study of
Unilever Nepal Limited). An Unpublished Master Level Thesis Submitted to the
Faculty of Management, Central Department T.U.
 Appendix-I
Calculation of Mean, Standard Deviation and Coefficient of Variation of Actual
Sales with Actual Production
(In tons)
Fiscal Actual Actual U=X- x V=Y- y UV
U2 V2
year Sales(X) Production
(Y)
2060/061 22624 22781 -1272.4 -1299 1619001.76 1687401 1652847.6
2061/062 21232 21644 -2664.4 -2436 7099027.36 5934096 6490478.4
2062/063 22409 22806 -1487.4 -1274 2212358.76 1623076 1894947.6
2063/064 26974 26875 3077.6 2795 9471621.76 7812025 8601892
2064/065 26243 26294 2346.6 2214 5506531.56 4901796 5195372.4
N=5
 X= Y = U =0 V =0 U =2
V 2
= UV =
119482 120400 25908541.2 21958394 23835538

Assumed
X = Actual sales and independent variables
Y = Actual production and dependent variables

x = Actual mean for actual sales

y =Actual mean for Actual production

U=X- x

V=Y- y
N= Numbers of years

Calculation of mean, Standard Deviation and Coefficient of variation for actual

Sales:

1) For actual sales:

 X = 119482 = 23896.4
Mean ( X ) =
N 5

Standard deviation (δx) = = = 7198.40

U 2 25908541.2
N 5
 x
Coefficient of variations (C.VX) = X100% = 7198.40 X100 = 30.12%
X 23896.4

II) For Actual Production:-

Y  120400  24080
Mean ( Y )
= N 5

Standard deviation (δy) =

V 2
   2095.63
N
21958394
4391678.8
Y 5
Coefficient of variations (C.Vy) =
Y
2095.63
X100%  X100  8.70 % %
24080

Calculation of correlation coefficient

r (xy) =

UV 23835538 23835538

 
U 2 X V 2 25908541.2 X 21958394 568909955634832.8
23835538
 0.99
23851833.38

Calculation of probable Error (PE) of coefficient of correlation

PE(r) =
1  r2
1  (0.99)2
0.6745   0.6745 
5
N
1  0.9801 0.01342255
 0.6745  2.23606  2.23606
 0.006
 Appendix-II
Income Statement of Unilever Nepal Limited
Particulars 2060/061 2061/062 2062/063 2063/064 2064/065
Sales 1,52,49,01,045 1,48,15,60,044 1,43,49,42,233 1,81,85,27,500 2,14,45,89,477
Less: Cost of sales 96,91,08,810 93,78,17,684 94,02,36,391 1,28,16,20,007 1,37,02,11,891
Gross profit 55,57,92,235 54,37,42,360 49,47,05,842 53,69,07,493 77,43,77,586
Less: Other Expense
Housing Fund 2,54,73,529 1,49,53,186 - - -
Administrative OH 4,35,87,279 3,69,76,294 3,60,68,993 4,36,39,605 5,28,10,308
Advertisement 25,00,88,253 20,33,24,291 17,05,33,185 15,73,88,895 25,11,88,507
&Promotional exp
Distributions cost 4,63,21,659 4,02,23,424 2,73,76,534 3,75,36,753 4,82,05,399
Provision Bonus 2,15,31,416 2,84,11,083 3,04,65,651 3,45,56,484 4,33,12,174
Preliminary expenses - - - - -
Profit/ loss on the 7,71,767 52,03,181 9,33,478 49,40,773 -
sales of fixed assets
Total 38,77,73,903 32,90,91,459 23,80,01,307 27,80,62,510 39,55,16,388
Less: Other Income 2,75,51,752 4,28,13,708 7,71,18,331 8,77,79,312 5,43,89,596
Net total other 36,02,22,151 28,62,77,721 16,08,82,976 19,02,83,198 34,11,26,792
expenses
Earning before 19,55,70,084 25,74,64,639 33,38,22,866 34,66,24,295 43,32,50,794
interest & taxes
(EBIT)
Less: Interest 17,87,341 17,65,167 17,89,825 10,59,458 1,29,055
Earning before 19,37,82,743 25,56,99,472 33,20,33,041 34,55,64,837 43,31,21,739
taxes(EBT)
Less: Tax 5,30,00,000 6,65,00,000 6,65,00,000 8,25,00,000 9,80,00,000
Earning after 14,07,82,743 18,91,99,472 26,55,33,041 26,30,64,837 33,51,21,739
taxes(EAT)
Number of Share 9,20,700 9,20,700 9,20,700 9,20,700 9,20,700
outstanding
Earning per share 152.9084 250.4952 288.4034 285.7226 363.9836
(EPS)
 Appendix-III
Cash flow Statement of UNL

Fiscal year
2062/063 2063/064 2064/065
A. Cash flow From operational statement: 23,81,56,507 26,30,64,838 33,51,21,739
Net Income (Loss) prior to Income tax and extra
ordinary income tax expenditure

Adjustments
Add:-
-Depreciation 1,95,81,408 1,95,17,262 2,06,50,892
-Interest 17,89,825 10,59,458 1,29,055
-provision 8,15,27,835 5,09,92,951 10,42,42,933
-Loss in sale of fixed assets 9,33,475 49,40,773 -

Cash flow prior to change in working capital 34,19,89,053 33,95,75,282 46,01,44,620

Change in working Capital
-Decrease (Increase) in current assets (5,08,31,073) (2,21,33,323) 12,40,31,516
-Increase (Decrease) in current liabilities (1,69,28,343) 1,51,75,048 16,70,598
-Interest payments (17,89,825) (10,59,458) 1,29,055
-Provision paid - - -
-Advance Income tax paid (6,62,85,242) (8,09,50,000) 10,18,00,000
Net Change in working capital (13,58,34,483) (8,89,67,732) 22,76,31,169
Net change flow from operation 20,61,54,571 25,06,07,550 23,25,13,451
B. Cash flow from Investment
-Interest/Dividend receipt - - -
-Sale of fixed assets/Purchase of fixed assets/
Investment (3,85,14,049) (2,76,16,000) 1,19,34,631
-Increase in short term loan (Bank overdraft) - - -
-Fixed deposit 18,12,00,000 (3,00,00,000) 3,00,00,000
-Sale of govt. securities - 7,97,64,185 -
Net cash flow from Investment 14,26,85,951 2,21,48,185 1,80,65,369
Cash flow from Financial Activities
-Dividend distribution (36,82,80,000) (23,01,75,000) (2,53,192,500)
Net cash flow from Financial Activities (36,82,80,000) (23,01,75,000) (2,53,192,500)
Change in Cash(A+B+C) (1,94,39,478) 4,25,80,735 (26,13,680)
Opening cash and bank balance 7,84,61,217 5,90,21,739 10,16,02,475
Closing cash and bank balance 5,90,21,739 10,16,02,475 9,89,88,795
 Appendix-IV
Comparative Balance Sheet of UNL
(Rs. In million)
Fiscal Year 2060/061 2061/062 2062/063 2063/064 2064/065
TOTAL ASSETS (A+B+C) 939.71 1098.95 967.14 1002.55 1085.22
Current assets (A) 724.24 891.41 557.96 639.96 761.36
Cash & Bank Balance 391.53 443.31 59.01 101.60 98.98
Trade & other Receivable 97.06 157.72 138.32 136.45 148.13
Inventories 184.21 229.76 256.17 321.62 410.11
Pre paid, Advance, Loans & Deposit 51.43 60.61 74.44 80.29 104.14
Fixed assets (net)(B) 135.71 127.78 145.78 148.93 140.21
Gross Block 317.83 319.23 347.74 336.97 364.62
(Less) Depreciation 184.34 193.70 203.56 209.09 229.73
Assets under Construction 2.23 2.25 1.60 21.05 5.32
Investment:(C) 79.76 79.76 293.41 213.65 183.65
Investment in Share 79.76 79.76 0 0 0
Investment in Govt. security 0 0 79.76 0 0
Investment in Fixed deposit 0 0 213.65 213.65 183.65
TOTAL CAPITAL & 939.71 1098.95 967.14 1002.55 1085.22
LITIEESLABI (A+B+C+D)
Current Liabilities (A) 543.70 882.02 742.23 767.76 814.54
Loans & Advance 0 0 0 0 0
Trade and Other Payments 335.72 370.24 353.31 385.78 384.11
Provision for Taxation 0 0 0 0 0
Misc. Current Liabilities & Provision 207.98 511.78 388.92 381.98 430.4
Deferred Liabilities (B) 0 0 0 0 0
Long Term Loans (C) 0 0 0 0 0
Share Holders Fund (D) 396.01 216.93 224.91 234.79 270.68
Share capital 92.07 92.07 92.07 92.07 92.07
Reserve and Retained Earnings 303.94 124.86 132.84 142.72 178.61
 Research Questionnaire
Name of the Respondent:
Position:
Department:
Sex:

Would you please answer the following questions, properly? Please tick (√) for choosing
your answer.

1. Questions Related to Administration

a) Which level of management is responsible for budget preparation in your
organization?
i) High level
ii) Low level

b) Would you please mention the long range objectives of the

factory? i)............................
ii)...........................
iii).........................

2. Question Related to production

a) From which market the raw material are purchased?
i) National
ii) International

b) If the raw materials are purchased from international market from which countries are
they purchased?
i)..........................
ii)..........................
iii)........................
c) What production policy has been adopted?
i) Stable
ii) Flexible
iii) Seasonal

d) What is the wages payment system'?

i) Daily basis
ii) Monthly basis
iii) Piece work basis

3. Questions Related to Marketing and Sales

a) Who is responsible for sales forecasting'?
i) Sales manger
ii) Sales officer
iii) Marketing manager

b) What methods and tools are used for sales forecasting?

i) Survey method
ii) Market studies and experimentation method
iii) Statistical method

c) On what basis sales budget is prepared?

i) By product basis
ii) By time period basis
iii) By territories

d) What pricing methods have accepted?

i) Cost plus
ii) Geographical
iii) Market oriented
e) What promotional tools are usually used?
i) Consumer promotion
ii) Trade promotion
iii) Sales force promotion

t) What promotional Medias are usually used?

i) Print media
ii) Visual media
iii) Audio media
iv) Audio visual

g) From which market the factory face competition?

i) National market
iii) International market

h) Which is the main market for the factory?

i) Local market
ii) International market
iii) Both

i) Sales are on:

i) Credit
ii) Cash
iii) Both