000076819 APPLICATION OF BUDGETING IN VIETNAM: A CASE STUDY OF DONG DO PROCESS-FOOD LIMITED LIABILITY COMPANY (DONG DO PROFOCO. LTD) ỨNG DỤNG NGÂN SÁCH TẠI VIỆT NAM: NGHIÊN CỨU TRƯỜNG HỢP CỦA CÔNG TY TNHH CHẾ BIẾN THỰC PHẨM ĐÔNG ĐỎ (ĐÔNG ĐỎ PROFOCO. LTD)
INTRODUCTION
Background
Against the backdrop of globalization and rising competition, manufacturing firms must seek every possible edge Budgeting, with a focus on manufacturing expenditures, stands out as a critical tool for building competitive advantage Since manufacturing costs are the input costs of the production process, a precise and well-managed budget for these expenses enables tighter cost control and smarter resource allocation A sound manufacturing budgeting approach lowers unit costs, enhances customer satisfaction, and drives higher profitability by aligning production with demand and reducing waste.
Budgeting systems for manufacturing expenditures are standard in every business, yet the way this information serves different user groups depends on how the system is designed and implemented Worldwide, international accounting standards provide a clear general budgeting basis to guide businesses As a result, many large corporations have adopted modern, effective general budgeting systems that deliver a wide range of actionable information for internal management, supporting planning, scheduling, and the ongoing monitoring and evaluation of results.
Vietnam currently lacks a precise standard for a general budgeting basis, so every business must design its own budgeting system aligned with its unique characteristics, such as market type and product mix This diversity underscores the need to research a representative budgeting model specifically for manufacturing expenditures within a defined manufacturing corporation The proposed thesis topic, therefore, centers on identifying and proposing a typical budgeting system for manufacturing expenditure that can serve as a practical framework for similar firms operating in Vietnam.
This study, titled “Application of Budgeting in Vietnam: A Case Study of Dong Do Process-Food Limited Liability Company,” has been selected as my graduation thesis, focusing on budgeting practices in Vietnam The research centers on Dong Do Process-Food Limited Liability Company, and the reason for its selection will be stated in Chapter X.
Data were collected through interviews and secondary sources, with the analysis presented in Chapters 4 and 5 and the conclusions drawn in Chapter 6 The study offers foundational answers to key questions: how a typical company applies international budgeting standards within its own context, what new budgeting methods are being adopted in this company, and how the budgeting system can be evaluated with actionable recommendations.
1.2 The purpose and objective of the study
This study investigates the budgeting system for manufacturing costs at Dong do profoco.LTD and identifies the most suitable practices based on both literature and empirical findings It notes that Vietnamese manufacturing firms need to develop and implement a robust budgeting framework to stay competitive in a dynamic business environment By aligning budgeting with strategic objectives, budgeting can verify that the company is on track to achieve the strategic breakthroughs outlined in year one of its strategic plan.
This thesis presents a practical budgeting system for manufacturing expenditures in a typical manufacturing corporation, demonstrates how Dong do Profoco.LTD applies international budgeting standards within its system and evaluates their method, and shows how the budgeting framework can be improved and finalized to be most suitable and effective for Vietnamese manufacturing corporations.
The thesis consists of six chapters The first chapter will introduce the thesis, purpose and objective of the thesis The second chapter will review involving
Research contribution
This thesis presents a practical budgeting system for manufacturing expenditures within a typical manufacturing corporation It demonstrates how Dong do Profoco.LTD applies international budgeting standards within their system and evaluates the effectiveness of their method The work aims to refine and finalize a budgeting framework that is best suited for Vietnamese manufacturing corporations.
Research structure
The thesis consists of six chapters The first chapter will introduce the thesis, purpose and objective of the thesis The second chapter will review involving
This thesis uses literature as the basis for the study, with Chapter 3 detailing the research methodology—design and data collection methods Chapter 4 presents the findings, Chapter 5 analyzes the data, and Chapter 6 delivers the conclusions along with recommendations.
LITERATURE REVIEW 1 Overview of management accounting
Budgeting
Over the past two decades, budgets have become the common currency in managers' vocabulary, shaping both action and inaction across organizations The budget is often the chosen tool—and sometimes the shield—for decisions by management and staff across the public, private, and third sectors Across all levels, people routinely retreat behind phrases like "the budget does not permit us to" or "it's not in our budget" when challenged So what does the writer understand by the term "budget" and how does it influence organizational decision-making?
A budget is the quantified expression of management’s proposed plan of action for a defined period, designed to coordinate the steps needed to put that plan into action It is also a plan that should be measurable and timely, turning strategic aims into concrete, trackable targets and resource allocations.
For the purpose of my thesis, a budget is a quantitative statement for a defined period that outlines planned revenues, expenses, assets, liabilities, and cash flows It provides a clear focus for the organization, supports the coordination of activities, guides the allocation of resources, and directs the course of operations, while enabling effective control over financial performance.
Merchant (1981) defines a budgeting system as the integrated set of information flows and administrative processes and procedures that typically constitutes a core component of an organization's short-range planning and control system, enabling timely decision‑making, performance monitoring, and coordinated resource management.
Budget definitions identify three key components: the planning aspect, the measurability, and the time horizon The planning aspect views the budget as a statement of the organization's intent or goals Measurability enables the plan to be quantified and tracked, making it possible to assess progress The time horizon sets a deadline or period, showing whether the plan has been achieved within a specified timeframe.
The use of budgets
Budgets are a core component of management control systems, serving four main purposes: planning, facilitating coordination and communication, controlling operations, and evaluating performance As planning tools, budgets translate strategic decisions into quantified action plans and assign responsibilities across the organization The budget process also drives extensive meetings and information exchange among departments, thereby enhancing coordination and communication among managers and employees In performance evaluation, budgets provide a framework for judging results by comparing actual performance with budgeted targets at the individual, divisional, and organizational levels Beyond control, budgeting functions as a motivational device: specific, challenging targets can raise performance, but motivation declines when targets are deemed unattainable; therefore the highest motivational benefits arise when budgets are tight yet achievable, with the exact level varying among individuals and contexts Achieving maximum motivation with budget targets often implies an anticipated adverse variance, a factor to consider in setting budgets.
Types of budget
C Adams et al (2003) identified five different classes of budgets They are activity based budgeting, zero based budgeting, value based budgeting, profit planning and rolling budgets and forecasts.
C Adam et al (2003) illustrated that activity based budgeting is similar to activity based costing and activity based management It actually involves planning and controlling along the lines of value adding activities and processes Activity based budgeting can be applied in all industries and functions It can be mostly used in manufacturing The key features of the activity based budgeting include a planning process linked to the organization’s strategic objectives, a use of well-proven analysis techniques-the heart of all activity based budgeting systems, identification o f cost improvement opportunities, analysis of discretionary spending options and priority ranking, establishment o f performance targets for control, integration with activity planning and accounting to provide effective control, a participative process to control and sustain continuous improvement Activity based budgeting will highlight the cost of activities, put resource allocation in the context of rising or falling activity levels, encourage new thinking, enable trend analysis and benchmarking of costs to take place and can be used for day-to-day operational control.
According to C Adam et al (2003), zero-based budgeting requires expenditures to be re-justified in every budgeting cycle rather than being based on prior years or periods It does not rely on inefficiencies or inaccuracies of past history, ensuring that resources are allocated based on current needs Therefore, the value of zero-based budgeting depends on the stability of the operating environment.
This formal, systematic framework aims to create shareholder value over time by evaluating every expenditure as a project and assessing the value it will generate for shareholders By linking strategy to value creation and tying these assessments to planning and budgeting, it ensures that financial decisions support long-term shareholder objectives.
Cash flow planning for profit centers enables an organization to forecast future cash inflows and outflows, assess whether a unit generates sufficient liquidity, and determine its ability to fund operations and growth By evaluating expected cash flows, the approach reveals whether the center creates economic value and attracts adequate financing for investments It also weaves short-term and long-term prospects into financial plans, ensuring resource allocation aligns with strategic goals and financial sustainability.
Rolling budgeting, or continuous budgeting, appears to offer the most potential as a superior approach to traditional budgeting It improves forecast accuracy and eliminates the long time lag of annual budgeting by providing frequent updates It addresses the problems of infrequent budgeting and makes the organization more responsive to changing conditions, but it requires ongoing resources to administer and helps avoid the constraints of budgeting to a fixed point in time.
Master budget
According to Charles T Homgren (2009), the master budget is the consolidated expression of management’s operating and financial plans for a defined period, usually a fiscal year It serves as the initial plan outlining the company’s intended goals and activities for the budget period, guiding resource allocation, performance targets, and cross‑department coordination to achieve overall organizational objectives.
Below is the general master budget cycle for a manufacturing corporation.
An effective budgeting process for a manufacturing firm begins with planning the company’s overall performance and that of its subunits through a sales budget and a production budget After the production budget is set, estimated manufacturing costs—comprising direct labor, direct materials, and manufacturing overhead—are used to determine the budgeted cost of goods sold In addition, selling and administrative expenses are forecast to produce the final budgeted income statement and budgeted balance sheet This study focuses on the budget systems for revenue, production, and manufacturing costs, and offers evaluation and recommendations to improve budgeting practices in a typical manufacturing corporation.
Manufacturing expenditures
It is a fact that a manufacturing corporation is a normal business which directly produces a variety of products to satisfy consumption requirement of the whole society In order to conduct the manufacturing process, it is essential for almost all businesses to spend expenditures of labor sources, means of production, external service costs and other monetary expenditures Therefore, to obtain the total expenditures spent by a corporation, all costs and other expenditures are finally converted into monetary meter named as manufacturing expenditures From this fact, Herath and Indriani (2007) have defined the manufacturing expenditures as monetary meter of total expenditures from humanitarian labor and object labor involving with the production process that the corporation has spent in particular period (such as a month, a quarter or a year) Stating manufacturing expenditures, it is crucial to distinguish manufacturing expenditures and total business expenditures
Business expenditures are all costs spent on a variety o f reason including production as general in a typical period Manufacturing expenditure is a smaller definition inside business expenditures.
There are a variety of ways to classify manufacturing expenditures In the thesis, some of typical ways will be introduced as follow:
❖ According to the expenditures elements: In this method, total expenditures that have the same economic feature are arranged in a group regardless of place and reason these costs infer The expenditures are arranged as below:
Material elements include main materials, auxiliary materials, and replacement accessories used directly in production, while excluding materials that are unused and returned to the warehouse and waste materials collected.
> Fuel and motive elements: including fuel and motive elements that are used directly for production (also except for those are unused and put back in warehouse and wasted ones).
> Salary and compensation elements: including total salary and compensations that are paid to company’s staff.
> Insurance elements: those costs are extracted based on the standard percentage of the total salary and compensation as stated by the labor law.
> Fix asset’s depreciation elements: total fix asset’s depreciations are deducted from whole fix assets value used in the period.
> Expenditures elements of external purchase services: total costs of external services purchased for production process.
> Other monetary costs: total monetary costs that are not recorded in above element groups.
This method clearly demonstrates the composition and relative share of each expenditure type, making it easier to establish and analyze norms for floating capital, and to assess and control the budgeting system.
❖ According to expenditure elements in unit price:
> Direct material costs: including all costs of material, fuel and motive directly spent on producing products or conducting services.
> Direct labor costs: including salary, compensation and other costs extracted based on percentage regulated (such as social insurances, medial insurances, ect)
> Manufacturing overhead expenditures: General expenditures besides o f direct material and direct labor costs It includes general manufacturing expenditures, selling and administrative costs.
This method brings us the convenience to calculate the unit price, based on the use o f costs and allocation for each item.
❖ According to the relationship between expenditures and working volume as well as completed products, writer has three types as follow:
> Variable expenditures: All expenditures that are changed in a proportion with the completed working volume (direct labor, direct material).
> Fixed expenditures: All expenditures that are remain unchanged regardless of working volume.
Complex expenditures, often referred to as semi-variable or mixed costs, exhibit both fixed and variable components At a stable level of production or activity, these costs behave like fixed expenses, remaining largely unchanged However, when activity moves beyond the normal operating range, the variable component becomes apparent, causing total costs to rise with volume Understanding this cost behavior helps in budgeting and cost management, as managers can separate the fixed base from the variable portion to better forecast expenses across different activity levels.
Flexible budget and variances
As illustrated in part 2.3, manager can use budget system as a framework to evaluate performance of entire organization by comparing actual results and budgeted results
Variance analysis explains the gap between actual results and budgeted amounts, typically expressed as a percentage and widely used for manufacturing cost budgeting For each cost category—direct manufacturing labor, direct manufacturing materials, and manufacturing overhead—there is a distinct set of variances and a different interpretation In this thesis, all types of variances will be illustrated in a suitable and appropriate way to support understanding and cost control.
RESEARCH METHODOLOGY 1 Research design
Selection of company
Dong Do Profoco.LTD is a manufacturing company whose main product line is frozen foods, including shrimp, scads, snapper, and mackerel, along with prepared items like beef rolls and pork hash wrapped in banana leaves Its products are distributed in supermarkets, large commercial centers, and via dealers across the northern region of Vietnam, especially in Hanoi and Hai Phong As with any manufacturing operation, manufacturing expenditures and budgeting play a crucial role in cost control and company growth, so a formal budgeting system exists at Dong Do Profoco.LTD This research will investigate the budgeting procedure and evaluate parts of the system to understand its contribution to development and expansion Initially the author faced concerns about topic sensitivity and confidentiality, but the chief accountant, Mr Cuong, agreed to be interviewed for academic purposes and granted access accordingly.
Literature search
To obtain relevant information for my study, I focused on Hanoi University Library as the primary source for literature I used the library’s search software to access academic articles and other scholarly materials In addition, hard copies of books were obtained to complement the digital resources.
17 the University library especially cost accounting book Writer was also able to browse the internet using search engine such as Google for other information sources.
Research approach
Many authors have discussed the different approaches to research Holme and Solvang (1991) contend that quantitative and qualitative methods are the two primary research approaches that can be applied Bryman (2004) explains that the quantitative method focuses on quantification in data collection and analysis and on drawing a deductive link between theory and research, while qualitative research develops its own approach and relies on an inductive reasoning process.
This study adopts a mixed-methods approach, combining quantitative and qualitative methods to capture both numerical patterns and contextual insights The quantitative component collects data and analyzes it using diagrams and charts to reveal trends and relationships The qualitative component yields in-depth information about the working environment and the internal and external factors influencing the company, enriching the numeric findings with contextual understanding.
Data collection
This section describes the data collection methods used in this study The thesis uses both primary data, gathered directly for the research through instruments such as surveys, interviews, experiments, or observations, and secondary data, drawn from existing literature, reports, and databases Primary data are detailed in Section 3.2.1, which outlines the sampling design, data collection instruments, procedures for administering them, and the measures taken to ensure the reliability and validity of the collected information.
Data were collected primarily through direct interviews with the organization and via telephone interviews with select employees Phone interviews were conducted in accordance with the organization’s policies, and the names of respondents were not recorded Direct interviews were conducted with the general director and with the heads of key departments, including accounting, sales, and quality management.
To conduct the study, the author drew on the organization’s financial statements from the accounting department and essential information from textbooks, articles, and journals on budgeting and budgetary control, accessed via Google These sources provided the bulk of the information for the research and offered both data and theoretical context to support the analysis.
Chapter X presents the presentation, analysis, and interpretation of data collected during the study, following the sources and procedures outlined in Chapter 3 This section aims to address the research problem identified at the outset, answer the research questions, and validate the findings The analysis is grounded in the actual information obtained through the research process, ensuring that conclusions are drawn from empirical evidence and aligned with the study’s objectives.
4.1 Background of Dong do Profoco.LTD
4.1.1 Establishment and development of Dong do Profoco LTD
Dong Do Profoco Ltd is a limited liability company that operates under the trading names Dong Do Process-Food Ltd and Dong Do Profoco Ltd In short, it is known as Dong Do Profoco Ltd The company’s head office is located at 18 Moi Street, Chau Quy Town, Gia Lam District, Ha Noi City It received its business establishment certificate from the Department of Planning and Investment of Ha Noi City on July 26, 2001.
Dong Do Profoco.LTD is a frozen foods manufacturer with a broad portfolio that ranges from frozen seafood—shrimp, scads, snapper, and mackerel—to prepared items such as beef rolls and pork hash wrapped in banana leaves Its products are widely available across supermarkets, large retail centers, and authorized dealers in Northern Vietnam, with a strong footprint in major cities like Hanoi and Hai Phong The company focuses on high-quality frozen foods sold at premium prices, targeting higher-income customers Looking ahead, Dong Do Profoco.LTD plans to refine its product lineup and reduce prices to meet the needs of a broader range of customers.
Our company maintains a stable and extensive supplier network across Thanh Hoa, Nghe An, Ho Chi Minh City, An Giang and other key regions, providing abundant sources of fish and shrimp This diversified input base supports reliable production and steady volume growth Located in Hanoi, the strategic hub enables us to scale operations efficiently and consistently improve both the quantity and quality of our seafood products.
Dong do Profoco LTD started with a charter capital of 200 million dong After stabilizing production, the charter capital grew to 1,200 million dong in 2003 and to about 12 billion dong in 2012 From its inception to today, Dong do Profoco LTD has continually expanded production scale, increased the workforce and equipment, and modernized nearly every production phase to deliver higher-quality finished products and create a sustainable competitive advantage over rivals.
Dong Do Profoco Ltd is a leading frozen foods company in northern Vietnam, renowned for its slogan "a pair of gold chopsticks." It has built a strong reputation and a competitive brand that is widely popular in the northern market.
The company focuses on frozen, processed, or pre-treated foods and initially launched with 23 main products Its value proposition—“you’ll have a delicious dish in ten minutes”—is immediately attractive and reinforces the fast-preparation concept Since inception, the product line has expanded to more than 65 items (see Table 1), supported by abundant raw materials.
1 Bao tử cá Basa 200g 50 Packet Wrapping 12
2 Bao tử cá Basa xiên que 450g 20 Packet Wrapping 12
3 Cá giò căt khúc 200g 20 Packet Wrapping 12
4 Cá Hông fillet tâm gia vị 500g 15 Packet Wrapping 12
5 Cá Hông tâm gia vị 500g 20 Packet Wrapping 12
6 Cá Hông tâm gia vị lOOOg 10 Packet Wrapping 12
7 Cá Cam căt khúc 500g 20 Packet Wrapping 12
8 Cá Nục ưóp riêng 500g 20 Packet Wrapping 12
9 Cá Nục uớp riềng lOOOg 10 Packet Wrapping 12
10 Nem dac biet 500g 24 Packet Wrapping 12
11 Nem dac biet lOOOg 12 Packet Wrapping 12
12 Nem thit bo 500g 24 Packet Wrapping 12
13 Nem thit ga 500g 24 Packet Wrapping 12
14 Nem tom cua 500g 24 Packet Wrapping 12
15 Nem tom cua lOOOg 12 Packet Wrapping 12
16 Nem gia dinh 24 Packet Wrapping 12
17 Nem ngon ngon 24 Packet Wrapping 12
18 Dau muc lam sach 500g 15 Packet Wrapping 12
23 Ca basa tuoi cat khuc 300g 30
24 Ca Basa tuoi cat khuc 500g 20
25 Ca Basa cat khuc lOOOg 15
27 Ca Bong bien lam sach 300g 22 M14 tray
28 Ca Thu kho tieu 300g 12 Pot 12
29 Ca Basa kho to 300g 12 Pot 12
30 Ca Hong om khe 300g 12 Pot 12
31 Ca Bong kho tieu 300g 12 Pot 12
32 Ca trung tarn rieng 450g 20 M5 tray
33 Gia dinh ca trung 32 M14 tray
35 Thit cua xay lOOg 68 M5 tray
40 Cha mire Ha Long 300g 50 Packet
42 Cha cá dac biet 300g 16 M I6 tray
43 Cha cá Ha Noi 300g 16 M I6 tray
48 Cá trúng rnróng chua cay 45Og 20 M14 tray
50 Láu Thái chua cay 500g 14 M I6 tray
51 Cá Phén hóng lám sach 500g 13
61 Canh chua cá Basa 500g 14 M14 tray
62 Cá Hồi cắt khúc 300g 30 M5 tray
64 Cọ Qỹa cọt khỹc 300g 26 M5 tray
65 Khoai mon le phô 300g 30 M l6 tray
These products are distributed through a single intermediary in a one-level distribution channel consisting of supermarkets and dealers They are now available in virtually all supermarkets and dealers across Northern Vietnam.
Currently, Dong do Profoco LTD has two different types of products They are processed seafood and preliminary processed seafood.
❖ This is the manufacturing procedure for group of processed seafood:
Diagram 1: Manufacturing procedure for group of processed seafood
Input materials undergo preliminary treatment and are processed by the Refining Group They then proceed to the Material Group for further processing, followed by the Freeze Group for freezing and preservation Finally, the product is wrapped in the Finalization Group to complete the process.
❖ This is manufacturing procedure for preliminary processed seafood:
Diagram 2: Manufacturing procedure for preliminary processed seafood
Input materials are subjected to a preliminary treatment at Refining group, then brought to Freezing group to froze and preserve It will be finally wrapped at Finalization group.
4.1.4 Managing organization of Dong do Profoco LTD
Dong do Profoco Ltd has its main office at 18 Moi Street, Chau Quy Town, Gia Lam District, Hanoi City, and a sales center at 382 Bui Xuong Trach Road, Thanh Xuan District, Hanoi City Consequently, the company's management is dispersed across locations, and its organizational structure is described below.
Board of managers consists of:
■ Director: Mr Dung Nguyen Quang
■ Deputy Director: Ms Hoang Thanh Nguyen
■ Factory Manager: Ms Vinh Vu Thi
■ Chief Accountant: Mr Cuong Dinh Cong
The director holds the final decision-making authority for the entire company, while Profoco Ltd has two partners who bear full legal responsibility for the business; in addition, the director is tasked with expanding the market and overseeing all company operations.
Under the Director’s command, the Deputy Director implements the Director’s decisions She directly engages with customers and is liable for the company’s business income She also assists the Director by researching potential markets and outlining the strategy for business development In addition, she monitors the company’s activities to identify future development opportunities When the Director is absent, she acts as the Director’s representative to oversee all company activities.
Factory manager has duty of operating factory’s activities, setting manufacturing plan everyday and making a report to director about manufacturing conditions at the factory.
Budgeting for manufacturing expenditures in particular
The diagram serves as a budget manual, illustrating the company's specific instructions and key information for preparing budgets In this work, budgeting for manufacturing expenditures is presented in a clear, step-by-step, logical sequence Budgeting for manufacturing expenditures begins with sales or revenue budgets, followed by production budgets (in units), and ends with budgeting for direct labor, materials, and manufacturing overhead costs.
Sales budgets are typically the starting point for the operating budget because production levels, inventory levels, and manufacturing overhead costs are driven by the forecasted level of unit sales and revenues By projecting sales and related revenues, management sets realistic production schedules, determines stocking requirements, and allocates overhead more accurately, ensuring the budget aligns with anticipated demand and supports profitable operations In essence, the sales forecast anchors the entire budgeting process, translating market expectations into concrete plans for production, inventory, and costs.
The 38 budget results from detailed information gathering and discussions among the heads of the sales departments and sales representatives across each sales channel, who have a thorough understanding of customer needs, market potential, and competitors’ products At the December 18 annual meeting, the manager and the head of the division consider a wide range of factors, including recent sales volume, macroeconomic and industry conditions, market research findings, pricing policies, advertising and sales promotions, competitive dynamics, and regulatory policies to determine the forecasted sales for the coming year Specifically, on December 18, 2011, there was a periodic meeting with participants including the manager Nguyen Quang Dung, chief accountant Dinh Cong Cuong, head of the sales department Nguyen Trong Phuc, and numerous sales representatives from each channel (Bui Hong Chuyen, Do Thi Lan Phuong, etc.) to set the 2012 sales budget However, starting in 2012, Dong Do Profoco Ltd began budgeting quarterly rather than annually, a shift driven by the distinctive characteristics of their material inputs and finished products.
Market research and the 2011 sales report show that the third and fourth quarters accounted for the majority of annual revenue, with 565,026 and 498,831 products sold respectively out of a total of 1,618,781 products for the four quarters (more than 65.7%) Accordingly, the budgeting plan should be renewed on a quarterly basis to meet each quarter's requirements The following section presents the budgeted and actual sales by quarter for 2011, along with the budgeted quantities for 2012 and the actual quantities for 2011, as summarized by the selling accountant of Dong Do Profoco Ltd on December 16.
2012 to be the basis for 2013 budgeting.
BUDGETED AND ACTUAL SALE REPORT
Types of products: All Legal representatives: All
No Products' code Products' name Quantities of 2011
11 1:0138 CÁ HỒNG TẤM GIA VỊ
26 120869 CA HONG TAM GIA VỊ
28 121012 BAO TỬ CÁ BASA XIÊN ỌUE 450G 245 582 742 160
December 16th, 2012 Schedule former General accountant Chief accountant
Table 4: Sale report of the first quarter.
BUDGETED AND ACTUAL SALE REPORT IN DETAIL OF
Types of products: All Legal representatives: All
December 16th, 2012 Schedule former General accountant Chief accountant
Table 5: Sale report of the second quarter
BUDGETED AND ACTUAL SALE REPORT IN DETAIL
Types of products: All Legal representaives: All
December 16th, 2012 Schedule former General accountant Chief accountant
Table 6: Sale report of the third quarter
BUDGETED AND ACTUAL SALE REPORT IN
Types o f products: All Legal representatives: All
Schedule former General Chief accountant accountant
Table 7: Sale report of the fourth quarter
Diagram 7: Budgeted sales and actual sales of four quarters of 2012 (in units)
1st q u a r te r 2 nd q u a rte r 3 rd q u a r te r 4 th q u a rte r
From the four tables and the accompanying diagram, static budget variances shrink steadily from the first to the fourth quarter of 2012 In the first quarter, unfamiliarity with quarterly budgeting led the sales department to underestimate the quantities of shrimp, scads, fish, and meat rolls, totaling 34,701 units In the second and fourth quarters, the underestimations decreased to 13,511 and 28,853 units, respectively Facing weak demand in the second quarter (April–June), the sales department reduced the quarterly selling target to 257,176 units, underestimating by 13,511 units (actual results 270,187 units) In short, statistical analysis is one input to forecast sales, while the final sales forecast should reflect the collective experience and judgment of the sales manager and the head of the sales department.
Step 2: Prepare the Production budget.
After revenues are budgeted, the manufacturing department prepares the production budget The production budget is driven by the budgeted units sold and the expected changes in inventory levels, ensuring manufacturing output matches demand while maintaining appropriate stock levels In short, it translates sales projections into production plans by adjusting for anticipated changes in inventory.
Budget production = Budgeted sale + Target ending finished goods - Beginning finished goods.
Production budgeting targets the expected ending finished goods, and Dong do Profoco Ltd assigns this duty to the selling accountant Because the tables are long and varied, the budgets for ending finished goods and for the manufacturing units across the four quarters are provided in the appendix There are four tables, one for each quarter; in every table Dong do Profoco Ltd presents the budgets for ending finished goods and the manufacturing units by product type within a consistent group Specifically, eight groups are covered: shrimp, all types of fish, cuttlefish, crab and shellfish, hotpot and soup, grilled chopped fish and meat balls, meat rolls, and braised fish.
Given the wide variety of product types, this article presents a production budget that allocates direct material costs, direct labor costs, and manufacturing overhead to groups of products, supported by two key assumptions: first, materials that are similar across products within a group are treated as identical; and second, a single price is assigned to those similar materials to standardize cost estimation across the group.
Step 3: Prepare direct material usage and direct material purchases budget
The planned production quantity, calculated earlier, is the key driver of direct materials usage in both quantity and cost Material quantities used depend on how efficiently materials are consumed to produce output In budgeting, managers continuously seek process improvements that enhance quality and reduce waste, thereby lowering direct material usage and overall costs.
Like many manufacturers, Dong do Profoco Ltd maintains a bill of materials (BOM) in its accounting software, which is updated quarterly The BOM details how each product is manufactured, listing all materials—both auxiliary and main components—the sequence in which materials are used, the quantities required per finished unit, and the work centers where each operation takes place Since 2012, these BOM tables are renewed after every quarter The materials required in each quarter for a given product type are calculated from the planned number of finished goods After determining total material requirements, the purchasing department prepares the budgeted direct materials purchases based on the budgeted direct materials to be used, incorporating the beginning inventory of direct materials and the target ending inventory.
Purchase of direct materials = Direct materials used in production + Targeted ending inventory of direct materials - Beginning inventory of direct materials
In the first quarter, the total budgeted finished goods for shrimp 06/08 450g are 1,412, based on a budgeted selling of 2,879, an ending inventory of 4,057, and a beginning inventory of 5,524 This finished-goods quantity provides the basis for estimating manufacturing materials The budgeting table for shrimp 06/08 450g separates costs into direct materials, direct labor, and manufacturing overhead The budgeted materials per unit of 1 shrimp 06/08 450g include 0.45 shrimp, a bag PA 22x30 of 1, a tray M16 of 1, a label of this product type of 1.14, a carton of 0.07, and sticking-plaster of 0.002 Multiplying these per-unit amounts by 1,412 yields the total material quantities needed The chief accountant and the store accountant will then estimate ending materials and beginning materials to calculate the total materials to buy for each finished product type.
Step 4: Prepare the direct manufacturing labor cost budget
In Dong do Profoco LTD, direct manufacturing labor cost budget is calculated together with direct materials and manufacturing overhead cost in a table The manager and chief accountant have assigned a standard table to calculate the direct manufacturing and manufacturing overhead cost for each type of product The direct labors include plating employees, wrapping employees and loading employees Normally, the budgeting amounts for these workers are 0.45; 1 and o.45 per unit of finished products respectively The costs of direct materials depend on wage rates, production methods, process and efficiency improvements and hiring plans Those tables are presented in appendices part at the end of thesis.
Step 5: Prepare the manufacturing overhead costs budget
Unlike other international corporations, Dong do Profoco LTD does not divide manufacturing overhead costs into variable and fixed ones They prepare manufacturing overhead cost budget in the same table with direct manufacturing cost budget Those costs include fixed assets depreciation costs, electric costs, telecommunication service costs, lunch allowances, office stationeries, administrative salary, social insurance fees, bonds and other costs To set table of manufacturing overhead cost budget for each quarter, the manager and chief accountant of Dong do Profoco LTD have to consider the actual manufacturing overhead cost data from past period, data from other companies that have similar processes Although the manufacturing overhead cost budget of Dong do profoco. LTD is nearly the same with actual cost ones, the fact that variable and fixed