ABSTRACT

Budgeting is closely connected with control the excise of control in the organization

with the help of budget is known as budgetary control

The objective of the study seeks to review and evaluate the existing frame work of

budgetary control with preparation and implementations the processed study itself could

confined the following a specific objective:

To analyze the budget preparation in Heritage DAIRY Products

To review the process of budget control system in ‘Heritage DAIRY

Products’

The suggest the ways for providing effective budgetary control system in

‘Heritage DAIRY Products’

The source of data used for the study collected and compiled frame published and

unpublished data of source the main source under published data is annual report of

Heritage DAIRY Products

The involvement of technical department in preparation and allotment operations

and maintenance budget is more applicable since the operations and maintenance work

basically involves technical knowledge.

To prepare annual budgets in such a manner those managers at various levels in

organization carry out periodical exercise in respect of each contact or responsible centre

for physical planning and matching resources broke up into monthly targets or cash

flows.

To introduce and operate responsible for achievement of specified targets with the

recourses allocated for the purpose.

The budget period or annual begets should with the financial year. In October

every year the budget should drawn up for the ensuring the financial year in the form of

Budget estimates financial year in the form of Revised Estimates [R.E].In addition the

budgets are to be reviewed on monthly basis by project review teams, in the light of

actual expenditure and projections in the budget period. Budegt should indicate monthly

phasing of. Expenditure and targets for the first and quarterly phasing for the second half

of the year. At the time of review of the budget estimates to frame revised estimates the

quarterly Phasing should be broken up into monthly phasing.

CONTENTS

CONTENT NAME PAGE NO.

CHAPTER-1

INTRODUCTION 2

OBJECTIVES OF THE STUDY 3

SOURCES 4

METHODOLOGY 4

LIMITATION 5

CHAPTER-2

REVIEW OF LITERATURE 6-22

CHAPTER-3

ORGANISATION PROFILE 23-32

CHAPTER-4

BUDGETED AND BUDGETARY SYSTEM IN

HERITAGE FOODS INDIA LIMITED

33-47

CHAPTER-5

ANALYSIS AND INTERPRETATIONS 48-57

CHAPTER-6

CONCLUSIONS AND SUGGESTIONS 58-61

BIBLIOGRAPHY 62

CHAPTER-1

INTRODUCTION

INTRODUCTION TO BUDGET AND BUDGETARY CONROL

BUDGET:

Budget is essential in every walk of our life – national, domestic and Business. A

budget is prepared to have effective utilization of funds and for the realization of

objective as efficiently as possible. Budgeting is a powerful tool to the management for

performing its functions i.e., formulation plans, coordination activities and controlling

operations etc., efficiently. For efficient and effective management planning and control

are tow highly essential functions. Budget and budgetary control provide a set of basic

techniques for planning and control.

A budget fixes a target in terms of rupees or quantities against which the actual

performance is measured. A budget is closely related to both the management function as

well as the accounting function of an organization.

As the size of the organization increases, the need for budgeting is

correspondingly more because a budget is an effective tool of planning and control.

Budget is helpful in coordinating the various activities (such as production, sales,

purchase etc) of the organization with result that all the activities precede according to the

objective. Budgets are means of communication. Ideas of the top management are given

the practical shape. As the activities of various department heads are coordinated at the

much needed for the very success of an organization. Budget is necessary to future to

motivate the staff associated, to coordinate the activities of different departments and to

control the performance of various persons operating at different levels.

Budgets may be divided into two basic classes. Capital and operating budgets.

Capital budget are directed towards proposed expenditure for new projects and often

require special financing.

The operating budgets are directed towards achieving short-term operational goals

of the organization for instance, production or profit goals in a business firm. Operating

budgets may be sub-divided into various departmental of functional budgets.

Definitions of Budget:

According to Institute of Charted Management Accountants, England “ A plan

quantified in monetary term prepared and approved prior to a defined period of time

usually showing planned income to be generated and / or to be incurred during that

period and the capital to be employed to attain a given objective.”

According to ICMA, England, a budget is, “a financial and/or quantitative

statement, prepared and approved prior to a defined period of time, of the policy to be

pursed during the period for the purpose of attaining a given objective.”

It is also defined as, “a blue print of projected plan of a action of a business for a

definite period of time.”

BUDGETARY CONTROL:

No system of planning can be successful without having an effective and efficient

system of control. Budgeting is closely connected with control. The exercise of control in

the organization with the help of budgets is known as budgetary control. The process of

budgetary control includes.

1. Establishment of budget for each function and section of the organization.

2. Executive responsibility in order to perform the specific tasks so that objectives of

the enterprise may be attained.

3. Continues comparison of the actual performance with that of the budget and

placing the responsibility of executives for failure to achieve the desired result a

given in the budget.

4. Taking suitable remedial action to achieve the desired objective if there is a

variation of the actual performance from the budgeted performance.

5. Revision of budgets in the light of changed circumstances.

Definitions of Budgetary Control:

According to the Brown and Howard “Budgetary control is the system of

controlling costs which includes the preparation of Budgets, co-coordinating the

department and establishing the responsibilities, comparing the actual performance with

the budgeted and acing upon the results to achieve the maximum profitability”

According to the J.Betty: “A system which uses budgets as a means of planning

and controlling all aspects of producing and / or selling commodities and services”

According to the CIMA, London, “Budgetary control is the establishment of

budgets relating to responsibilities of executives to the requirement of a policy, and the

continuous comparison of actual with budged results, either to secure by individual action

the objective of that policy or to provide a basis for revision.

OBJECTIVES OF STUDY

THE STUDY HAS THE FOLLOWING:

To provide a theoretical framework of budget, and budgetary control.

To describe the profile of the organization as a backdrop for undertaking a study of

budgetary control system.

To analyze the budgetary system in practice in Heritage Foods India Limited with

particular reference to their objectives and phases of organizational and re-

appropriation.

In addition to the analysis of the conventional budgetary system in practice in

Heritage DAIRY PRODUCT Industries limited. The study aims at evaluation and

modification to the budgetary system with reference to the various types of budgets.

The scope in the formulation of performance budget is also studied.

SOURCES OF DATA:

The data of Basant Nagar, HERITAGE FOODS (INDIA) LIMITED, have been

collected mainly from secondary sources viz…

From the concerned officers of the Heritage Foods India Limited

Heritage Foods India Limited– Journals.

Accounting books, records

Key books of concerned title.

Statistical records

Heritage Foods India Limited library.

METHODOLOGY OF THE STUDY:

The study is based on the both primary and secondary data

The primary data has been collected through structured questionnaire reflecting

budget management practice of Heritage DAIRY Products

The collected data is tabulated and suitable interpretation has been made by

considering the data collection through secondary data like annual reports.

LIMITATIONS:

Estimates are used as basis for budget plan and estimates are based on available

facts and best managerial judgment

Budgetary control cannot reduce the managerial function to a formula. It is only

a managerial Tool which increase effectiveness of managerial control

The use of budget may lead to restricted use of resources.

Efforts may therefore not be made to exceed the performance beyond the

budgeted targets.

Frequent changes may be called for in budgets due to fast changing industrial

climate.

In order that a system may be successful, adequate budget education should be

imparted at least through the formative period. Sufficient training programs

should be arranged to make employees gibe positive response to budgetary

activities.

The study is the limited up to the date and information provided by Heritage

Foods India Limited and its annual reports

CHAPTER-II

REVIEW OF LITERATURE

INTORDUCTION TO BUDGET IN BUDGETORY CONTROL:

The management is efficient if it is able to accomplish the objectives of the enterprise It

is effective when it accomplish the objectives with minimum effort and most in

attain long-range efficiency and systematic approach in facilitate effective

management performance is profit planning and control or budgeting .Budgeting is

therefore an integral part historical combination of a” goal setting machine for

increasing an enterprises profits and a goal achieving machine for facilitating

generational coordination and planning while achieving the budgeted gets”

EARNING OF BUDGET:

It is a financial and quantitative statement prepared and approved or to a defined

period of time of policy to be pursued during that period purpose of attaining a given

objective it may include income expenditure and employment capital

In other words it is a pre-defined detailed plan of action development distributed as guide

operations and as a partial basis for subsequent evolution of performance

PLANNING OF BUDGETING:

The process of planning all flows of financial resources into within from an entity

during some specified future period it includes providing detailed allocation of

available future resources to projects ,responsibilities and time periods

From above definition I it clear that budgeting Is the actual act of caring the budget

it is the process of evolving the final statement yet is the end product of budgeting

ESSENTIALS OF GOOD BUDGET:

1. It is prepared prior to a defined period of time

2. It is prepared for the definite future period

3. The policy to followed to attain the given objectivities must be laid before the

budget.

4. It is monetary and/or quantitative statements of the policy

MEANING OF BUDGETARY CONTROL:

It is the process of establishing of departmental budget relating the responsibilities

of executives to the requirements of a policy and the continuous comparison of

actual with budgeted results either to secure by individual action the objectives

of that policy or to provide a firm basis for revision First of all budgets are prepared

and then actual results are the comparison of budgeted and actual figures will

enable the management to out discrepancies and take remedial measures at a

proper time the budgetary control is a continuous process which helps in planning

and coordination it provides a method of control too .A budget is means and

budgetary control is the end result.

In the words of J.A.scolt “budgetary control is the system of management control and

accounting in which all operations are forecast so as possible planned ahead and

actual results compared with the forecast and the planned ones

ESSENTIALS OF BUDGETARY CONTROL:

1. Budgetary of the process of preparing the budget is the starting point for

budgetary point for budgetary control.

2. Distribution of budgets pertaining to each function to all the relevant section with

in organization

3. Collection of actual data pertaining to all budgeted activities

4. Continuous comparison of actual performance with budgeted performance

5. Analysis of variances in actual performance and budgeted performance

6. Initiation of corrective action to ensure that actual performance is inline with

budgeted performance

7. Revision of budgeted if it is felt that the budgets prepared are no longer relevant

on account of unforeseen developments

OBJECTIVES OF BUDGETARY CONTROL:

The primary objective of budgetary controls to help the management in

systematic planning and controlling the operations of the enterprises the primary

objective can be met only if there is proper communication and coordination amongst

different organization thus the objectivities can be stated as:

1. COORDINATION:

Coordination is a managerial function under which all factors of production and

all departmental activities are departmental are balanced and integrated to achieve the

objectivities of the organization budgeting provides the basis for organization

objectivities can be realized executives are forced to think of the relationship

between their department and the company as a whole this removes unconscious

biases against other departments it also helps to identify weakness in the organization

structure.

2. COMMUNICATION:

All people in the organization must know the objectivities polices and

performances of the organizations they must have a clear understanding of their part in

the organization goals this is made possible by ensuring their participation in the

budgeting process.

3. CONTROLS AND PERFORMANCE EVALUTION:

Control ensures control by continuous comparison of actual performance with the

budgeted performance variances are highlighted and corrective action can be

initiated budgets also from the basis if performance evolution in an organization as

they reflect realistic estimates of acceptable and expected performance.

BUDGET BUDGETING AND BUDGETRY CONTROL:

A budget is a blue print of a plan expressed in a quantitative terms budgeting Is

a technique budgetary control terms to the principles procedures and practice of

achieving given objectivities through budgets.

From the above definitions we can differentiated the three terms as budgets

are the individual objectivities of a department etc where as budgeting may be said to

act of building budgets

Budgetary control embraces all and in addition includes the science of Planning the

budgets to effect on overall management tool the business planning and control.

ESSENTIALS OF BUDEGTRY CONTROL

1. ORGANISATION FOR BUDGETRY CONTROL:

The proper organization is essential for the successful preparation maintenance

and administration of budgets A budgetary committee is formed which comprises

the departmental heads of various departments All the functional heads are entrusted

with the responsibility if ensuring proper implementation of their respective

departmental budgets.

The chief executive is the overall in the charge of budgetary system he

constitutes a budget committee for preparing realistic budgets A budget officer is the

convener of the budget committee who co-ordinates the budgets of different

departments responsible fro their departmental budgets.

2. BUDGET OFFICER:

The chief executives appoints the budget officer such budget officer also called as

Budget controller or budget Director “ thus rank should be equal to other functional

managers.

The Budget officer does not have the direct responsibility of preparing the

budgets the various functional managers prepare the budgets his role is that of a

supervisor the budget officer has the specific duty of the budgeting activity by

various departments and for co-ordination between them so that there is a proper link

between them He is empowered to scrutinize the budgets prepared by different

functional heads and to make changes in them if the situation so demands.

The budget officer works as a coordinator among different departments he

continuously monitors the actual performance different department’s steps to rectify the

defiance if any he also informs the top management about the performance of different

departments.

The budget officer will be able to carry out his work only if he is versant with the

working of all the departments he must have technical knowledge of the business and

should also process accounting knowledge.

BUDGET COMMITTEE:

A budget committee is formed to assist the budget officer. The heads all the

important departments are made members of this committee. The committee is

responsible for preparation and execution of budgets. The chambers of this committee put

up the case of their respective departments to help the committee to take collective

decisions if necessary. The budget committees responsible for reviewing the budgets

prepared by various functional heads coordinate all the budgets and approve the final

budgets. The budget officer acts as a coordinate of this committee all the functional heads

are entrusted with the responsibility of ensuring proper implementation of their respective

final departmental budgets.

BUDGETS CENTERS:

A budget center is the part of the organization for which the budget is prepared. A

budget creator may be a department section of department or any other part of department

ideally, the head of every center should be a member of the budget committee. However

it must be ensured that each budget center at least has an indirect representation in the

budget committee.

The establishment of budget centers is essential for covering all parts of the organization

becomes easy when different centers are established the budget centers are also

necessary for cost control purpose.

BUDGET MANUAL:

A budget manual is a document that spells out duties and responsible the various

executives conquered with it specifies among various functional areas A budget manual

covers the following matters.

1. A budget manual clarity defines the objectivities of budgetary control systems it

also gives the benefits and principles of this system.

2. the duties and responsibilities of various persons dealing with preparation and

execution of budgets are also given in the budget manual it enables the

management to know the persons dealing with various aspects to budgets and

provides clarity on their duties and responsibilities it gives the information

about the sanctioning authorities of various budgets the financial powers of

sanctioning authorities of various budgets the financial powers of different

manages are given in the manual for enabling the spending amount on various

expenses

3. A dropper table for budgets including the sending of performance reports is drawn

so that every work starts in the and a systematic control is exercised.

4. the specimen forms and number of copies to be lased fro ore oaring budget

reports is also stated budget centers involved should be clearly stated.

5. the length of various budget periods and control points is clearly given

6. The problem follow all in the centre system clearly stated.

7. A method of accounting to be used for various expenditures is also stated in the

manual.

8. A budget manual helps the documentation the role of every employee his duties

responsibilities the ways of undertaking various tasks etc thus it also helps n

reducing ambiguity at any point of time

BUDGET PERIOD:

A budget period is the length of time for which a budget is prepared upon a number of

factors the choice of a budget period depends upon the following considerations the type

of budget (long\short).

The nature of demand for the products

The timing for the availability of the finance

The construction situation of the cycles

All the above mentioned factors are taken into account while fixing the period of budgets

In this budgeting process the financial decision on the budgets

The financial manager usually responsible for organizing this budget he must

perform the following functions.

To decide the general polices and guidelines

To offer technical advice.

To suggest changes.

To receive and review individual budget estimates.

To reconcile divergent with or without revisions.

To coordinate budgeting activities.

To approve budgets with or without revisions.

To scrutinize control reports later on

To scrutinize to budget reports later on.

To disseminate these guidelines.

After finalizing the budget proposal the budget committee subjects the final budget to the

Board of Directories or Budget Director for approval.

CONTINUOUS BUDGETING SYSTEM:

A continuous budgeting system is a method of having two different budget

periods within the sane budget the purpose of having this system is to have greater

control in terms of operational activities without losing sight is have greater control

in terms of it results in incorporating the effect of changes in the short term on the

long-term targets of the organization

DETERMINATION OF KEY FACTOR:

The budgets are prepared for all functional areas these budgets are dependent

and inter-related A proper co-ordination among different budgets is necessary for

budgetary control to be successful The constraints some budgets too A factor which

influences all other budgets is known as “key factor or principal factor”.

The key factor may not necessarily remain the same the raw materials may be

limited at one time but it may be easily available at another similarly other factors

may also improve at different times. The key factor highlights the limitations of the

enterprise. This will enable the management to improve the working of those departments

we here scope for improvement exists.

1. OUISITES FOR A SUCCESSFUL BUDGETARY CONTROL SYSTEM.

Making budgetary control system successful requisites are required.

2. CLARIFYING OBJECTIVES.

The budgets are used to realize objectives of the business. The objectives must be clearly

spelt out so that budgets are properly prepared. In the sense of clear goals, the budgets

will also be unrealistic.

3. PROPER DELEGATION OF AUTHORITY AND RESPONSIBILITY.

Budget preparation and control is done at every level of management. Even though

budgets are finalized at top level but involvement of persons. In lower levels of

management is essential for their success. This Hesitates proper delegation and

responsibility.

4. PROPER COMMUNICATIONS SYSTEM.

An effective system of communication is required for a successful budgetary control. The

flow of information regarding budgets should be quick so that these are implemented.

The upward communication will help in knowing the difficulties in implementation of

budgets. The performance reports of various levels will help top management in

budgetary control.

5. BUDGET EDUCATION.

The employees should be educated about the benefits of budgeting system the

should be the benefits of budgeting system they should be educate about their roles in the

success of this system. Budgetary control may not be taken only as a control device by

the employees but it should be used as a tool to improve their efficiency.

6. FLEXIBILITY.

Flexibility in budgets is required to make them suitable under changed

circumstances. Budgets are prepared for the future, which is always uncertain, even

though budgets are prepared by considering the future possibilities but still some

adjustments. Flexible makes the budgets more appropriate and realistic.

7. MOTIVATION

Budgets are implemented by human beings. Their successful implementation will

depend upon the interest shown by the employees. All persons should be motivated to

improve their working so that budgeting is successful. A proper system of motivation be

introduced for making is system a success.

8. TYPES OF BUDGETS.

LONG TERM BUDGETS:

The long-term budgets are the budgets prepared for a long period of five to years.

They are concerned with planning the operations of a firm over a considerably long

period of time. The financial “Controller” exclusively for top management usually

prepares long-term budgets. These budgets are useful in terms of physical units (i.e.…..

quantities) or percentages, the accurate values may be difficult to forecast over such long

period. Initial expenditure, research and development budgets, etc, are examples long-

term budgets.

SHORT TERM BUDGETS.

Short –term budgets are budgets prepared for a short period of one to two is. They

are prepared for those activities the trend in which cannot be seen easily over long

periods. These budgets are very useful are very useful in case of consumer goods

industries such as sugar, cotton, textiles, etc. they are generally, prepared in terms of

physical units (i.e., Quantities) as well as monetary units (i.e., values..) Materials budget,

cash budget. Etc are examples of short-term budgets. They are useful to lower level of

management for control purpose.

CURRENT BUDGETS.

A current budget is a budget, which is established for use over a short period of

time and is related to current conditions. Thus current budgets are essentially short term

budgets adjusted to current (i.e., present or prevailing) conditions or circumstances. They

are prepared, for a very short period. Say, a quarter or a month. They relate to current

activities of the budgets.

INTERIM BUDGETS:

Interim budgets are budgets, which are prepared in between two budgets periods.

These budgets may get integrated with the budgets of the following period.

CLASSIFICATION OF BUDGETS ACCORDING TO CONTENT:

Budget may be classified into budgets in physical terms and into budgets in monetary

terms.

A) BUDGETS IN PHYSICAL TERMS:

Budgets in physical terms are budgeted that budget in terms of quantities only.

They do not include corresponding rupee value. Long –term budgets are usually in

prepared in physical terms. Examples of such budgets are production budget, materials

budget, etc.

B) BUDGETS IN MONETAY TERMS:

Budgets in monetary terms are budgets that budget in terms of quantities as well

as their corresponding rupee value. Sales budget, purchase budget, etc are examples of

such budgets. Budgets such as cash budget, capital expenditure budget, etc that may not

have physical quantities also from part of budgets in Monetary terms.

CLASSIFCATION OF BUDGETS ACCORDING TO FUNCTION:

Budgets can be classified into:

1. Operating Budgets

2. Financial Budgets

3. Master Budget

1) OPERATING BUDETS.

These budgets relate to different activities or operations of a firm. The number of

such budgets depends upon the size and nature of the business, The commonly used

operation budgets are:

i) Sales Budgets

ii) Purchase Budget

iii) Raw Materials Budget

iv) Lab our Budget

v) Factory Utilization Budget

vi) Manufacturing Expenses or Works overhead budget

vii) Administrative and Selling Expenses Budget etc.

The operating budget for a film may be constructed in terms of programmers or

responsibility areas, and hence may consist of:

A) Programmed Budget

B) Responsibility Budget

A) PROGRAMME BUDGET

It Consists of expected revenues and costs of various products or projects that are termed

as the major programmers of the firm, Such a budget can be prepared for each product

line or project showing revenues, Cost and the relative profitability of the various in

locating areas where efforts may be required to reduce COST5 ad increase revenues.

They are so useful in determining imbalances and inadequacies in programmers so at

corrective action may be taken in future.

Responsibility Budgets:

Here the operating of a firm is constructed in terms of responsibility areas. Such a budget

shows the plan in terms of person’s for achieving them. It is used by the management as a

control thus used by the management as a control device to evaluate the of executives

who are in charge of various cost centers. Their is compared to the targets (Budgets), set

for them and proper taken for adverse results.

Responsibility areas may be classified under three brand categories:

I. Cost / expense center

II. Profit center

III. Investment center

2) FINANCIAL BUDGETS

Financial budgets are concerned with cash receipts and payments, working

capital, financial position and results of business. The commonly used financial budgets

include Cash budget, Capital budget, and Income statement budget, Statement of earnings

budget, Budgeted balance sheet or position statement.

3) MASTER BUDGET

The Master budget is the summary budget incorporating its functional budgets.

All the operational and financial budgets are integrated into the Master budget. The

budget officer for the benefits of the top-level management prepares this budget. This

budget is used to coordinate the activities of various functional departments. It is also

used an effective control devices.

CLASSIFICATION ON THE BASIS OF FLEXIBILITY.

A) FIXED BUDGET

According to ICMA, London “a fixed budget is a budget which is designed to

remain unchanged irrespective of the level of activity actually attained”. It is based on a

fixed volume of activity and shows one volume of output and related cost. It is not

adjusted according to the actual level of activity attained.

A fixed budget is useful only when the actual level of activity corresponds with the

budgeted level of activity. But this, generally, does not happen; as such a fixed budget is

not useful for managerial purposes.

B) FLEXIBLE VARIABLE SLIDING SCALE OR CONTROL TYPE BUDGET:

According to ICMA, London “a flexible budget is a budget which is designed to

change in accordance with the level of activity) actually attained”. Thus, a flexible budget

changes.

According to the change in the level of activity. In other words it provides the

budgeted costs at any level of activity.

Business activity cannot be accurately predicted on account of uncertainties of

business environment. A flexible budget contains several estimates for different assume

circumstances instead of just one estimate, it provides for automatic adjustments with

changes in the volume of activity. Hence, a situations operating in an unpredictable

environment.

CHAPTER-III

INDUSTRY PROFILE & COMPANY PROFILE

INDUSTRY PROFILEINDUSTRY PROFILE

India is the world's second largest producer of food next to China, and has the

potential of being the biggest with the food and agricultural sector. The total food

production in India is likely to double in the next ten years and there is an opportunity for

large investments in food and food processing technologies, skills and equipment,

especially in areas of Canning, Dairy and Food Processing, Specialty Processing,

Packaging, Frozen Food/Refrigeration and Thermo Processing. Fruits & Vegetables,

Fisheries, Milk & Milk Products, Meat & Poultry, Packaged/Convenience Foods,

Alcoholic Beverages & Soft Drinks and Grains are important sub-sectors of the food

processing industry. Health food and health food supplements is another rapidly rising

segment of this industry which is gaining vast popularity amongst the health conscious. 

India is one of the worlds major food producers but accounts for less than 1.5 per

cent of international food trade. This indicates vast scope for both investors and

exporters. Food exports in 1998 stood at US $5.8 billion whereas the world total was US

$438 billion. The Indian food industries sales turnover is Rs 140,000 crore (1 crore = 10

million) annually as at the start of year 2000. The industry has the highest number of

plants approved by the US Food and Drug Administration (FDA) outside the USA.

India's food processing sector covers fruit and vegetables; meat and poultry; milk

and milk products, alcoholic beverages, fisheries, plantation, grain processing and other

consumer product groups like confectionery, chocolates and cocoa products, Soya-based

products, mineral water, high protein foods etc. We cover an exhaustive database of an

array of suppliers, manufacturers, exporters and importers widely dealing in sectors like

the -Food Industry, Dairy processing, Indian beverage industry etc. We also cover sectors

like dairy plants, canning, bottling plants, packaging industries, process machinery etc.

The most promising sub-sectors includes -Soft-drink bottling, Confectionery

manufacture, Fishing, aquaculture, Grain-milling and grain-based products, Meat and

poultry processing, Alcoholic beverages, Milk processing, Tomato paste, Fast-food,

Ready-to-eat breakfast cereals, Food additives, flavors etc.

Food processing

The food industry is the complex, global collective of diverse businesses that

together supply much of the food energy consumed by the world population.

Only subsistence farmers, those who survive on what they grow, can be considered

outside of the scope of the modern food industry.

Food processing is the methods and techniques used to transform raw ingredients

into food for human consumption. Food processing takes clean, harvested or slaughtered

and butchered components and uses them to produce marketable food products. There are

several different ways in which food can be produced.

One Off Production This method is used when customers make an order for

something to be made to their own specifications, for example a wedding cake. The

making of One Off Products could take days depending on how intricate the design is and

also the ability of the chef making the product.

Batch Production This method is used when the size of the market for a product

is not clear, and where there is a range within a product line. A certain number of the

same goods will be produced to make up a batch or run, for example at Gregg’s Bakery

they will bake a certain number of chicken bakes. This method involves estimating the

amount of customers that will want to buy that product.

Mass production This method is used when there is a mass market for a large

number of identical products, for example, chocolate bars, ready meals and canned food.

The product passes from one stage of production to another along a production line.

Just In Time This method of production is mainly used in sandwich bars such as

Subway, it is when all the components of the product are there and the customer chooses

what they want in their product and it is made for them fresh in front of them.

WHOLESALE AND DISTRIBUTION

A vast global transportation network is required by the food industry in order to

connect its numerous parts. These include suppliers, manufacturers, warehousing,

retailers and the end consumers. There are also those companies that, during the food

processing process, add vitamins, minerals, and other necessary requirements usually lost

during preparation. Wholesale markets for fresh food products have tended to decline in

importance in OECD countries as well as in Latin America and some Asian countries as a

result of the growth of supermarkets, which procure directly from farmers or through

preferred suppliers, rather than going through markets.

The constant and uninterrupted flow of product from distribution centers to store

locations is a critical link in food industry operations. Distribution centers run more

efficiently, throughput can be increased, costs can be lowered, and manpower better

utilized if the proper steps are taken when setting up a material handling system in a

warehouse.

The Indian food market is estimated at over US$ 182 billion, and accounts for

about two thirds of the total Indian retail market. Further, according to consultancy firm

McKinsey & Co, the retail food sector in India is likely to grow from around US$ 70

billion in 2011 to US$ 150 billion by 2025, accounting for a large chunk of the world

food industry, which would grow to US$ 400 billion from US$ 175 billion by 2025.

EXPORTS

Exports of agricultural products from India are expected to more than double to top US$

20.6 billion in the next five years, according to the commerce ministry.

According to estimates by the Agricultural and Processed Food Products Export

Development Authority (APEDA), the share of India's farm product exports in the global

trade will grow from 2 per cent now to over 5 per cent.

Exports of fresh and processed vegetables, fruits, livestock and cereals rose 10 per cent to

US$ 8.67 billion in 2011-2012.

SPICES

Despite a global slowdown, Indian spice exports are growing. India exported

470,520 tons of spices valued at US$ 11.68 billion—an all-time high—in 2011-2012.

During the 2011-12, 444,250 tons valued at US$ 11.01 billion were exported. Compared

with 2011-12, exports had shown an increase of 19 per cent in rupee value and six per

cent in dollar terms.

FOOD PROCESSING

The Indian packaged processed foods industry is estimated at US$ 10.87 billion –

US$ 13.05 billion, including biscuits, chocolates, ice-cream, confectionery, snacks,

cheese and butter. Growing at a healthy 14-15 per cent over the past two-three years,

major players in the sector include Britannia, Nestle, Amul, ITC Foods, Parle, Kellogg’s,

GlaxoSmithKline, Wrigley and Frito-Lay, among others.

The industry received foreign direct investments (FDI) totalling US$ 143.80

million in 2011-2012against US$ 5.70 million in the previous fiscal. The cumulative

FDI received by the industry from April 2000-August 2012 stood at US$ 878.32 million.

However, India’s share in exports of processed food in global trade is only 1.5 per

cent; whereas the size of the global processed-food market is estimated at US$ 3.2 trillion

and nearly 80 per cent of agricultural products in the developed countries get processed

and packaged.

In order to further grow the food processing industry, the government has

formulated a Vision-2015 action plan under which specific targets have been set. This

includes tripling the size of the food processing industry from around US$ 70 billion to

about US$ 210 billion, raising the level of processing of perishables from 6 per cent to 20

per cent, increasing value addition from 20 per cent to 35 per cent, and enhancing India’s

share in global food trade from 1.5 per cent to 3 per cent. This would require an

investment of US$ 20.6 billion.

According to an Ernst and Young (E&Y) presentation, the food processing

industry in India will grow 30-40 per cent as against the present 15 per cent in the next

10-years.

Prime Minister Dr Manmohan Singh on October 6, 2010 laid out a blueprint for

rapid growth in the country’s food processing sector. The Prime Minister said that this

can be achieved by simplifying the tax structure, formulating a National Food Processing

Policy and improving rural infrastructure.

Moreover, according to Union Minister for Food Processing Industries, Subodh

Kant Sahai the central government is envisaging an investment of US$ 21.50 billion in

the food processing industry over the next five years, a major chunk of which it plans to

attract from the private sector and financial institutions.

SNACKS AND CONFECTIONERY

The Indian market holds enormous growth potential for snack food, which is

estimated to be worth US$ 3 billion, with the branded snack market estimated to be

around US$ 1.34 billion, growing at 15-20 per cent a year. While the growth rate of the

US$ 1.56 billion unorganised sector is 7-8 per cent.

HEALTH FOOD

Recognizing the growth potential of the branded health food sector in India, fast

moving consumer goods (FMCG) majors are foraying into this sector in a big way. As

Hindustan Lever Ltd (HUL) is test marketing its health food brand, Kissan Amaze, in

three southern states in India, Godrej Hershey Foods & Beverages Ltd (GHFBL), a joint

venture between Godrej Beverages & Foods Ltd and Hershey Company, is planning to

introduce select brands from its international portfolio in the domestic market.

DAIRY

According to Dairy India 2012 estimates, the current size of the Indian dairy

sector is US$ 62.67 billion and has been growing at a rate of 5 per cent a year. The dairy

exports in 2011–12 rose to US$ 210.5 million against US$ 113.57 last fiscal, whereas the

domestic dairy sector is slated to cross US$ 110 billion in revenues by 2012.

India continues to be the largest producer of milk in the world. It produced 110

million tons of milk in 2011-2012.

BEVERAGES

According to industry experts, the market for carbonated drinks in India is worth

US$ 1.5 billion while the juice and juice-based drinks market accounts for US$ 0.25

billion. Growing at a rate of 25 per cent, the fruit-drinks category is one of the fastest

growing in the beverages market. Sports and energy drinks, which currently have a low

penetration in the Indian market, have sufficient potential to grow.

The market for alcoholic beverages has been growing consistently. 'The Future of

Wine', a report on the state of the wine industry over 50 years, suggests that the market

for wine in India was growing at over 25 per cent per year.

MAJOR INVESTMENTS

Private investment has been one of the key drivers for growth of the Indian food

industry. The 'India Food Report 2012', reveals that the total amount of investments in the

food processing sector in the pipeline for the next three years is about US$ 23 billion.

The government has received around 40 expressions of interest (EoI) for the

setting up of 10 MFPs with an investment of US$ 514.37 million.

Reliance Industries Ltd has invested US$ 1.25 billion in a dairy project.

Focusing on India as a rapidly growing market, US soft drinks giant Pepsico

would pump in an estimated US$ 152.30 million to set up four new food and

beverages projects by 2012.

Geneva-based food service chain Global Franchise Architects (GFA) aims to open

250 stores around the world by March 2012, of which 100 will be in India.

GOVERNMENT INITIATIVES

The new trade policy places increased focus on agro-based industries.

Food processing industries have been put in the list of priority sectors for bank

lending. The Centre has also announced a series of new initiatives which include a

separate policy at the state level, thrust on contract farming and making the sector

tax-free.

The government plans to open 30 mega food parks by the end of the 11th five

year plan (2011-2012).

Fruit and vegetable processing units have been completely exempted from paying

excise duty.

Automatic approval for foreign equity up to 100 per cent is permitted for most of

the processed food items.

Items like fruits and vegetables products, condensed milk, ice cream, meat

production have been completely exempted from Central Excise Duty.

Excise duty on ready to eat packaged foods and instant food mixes has been

brought down to 8 per cent from 16 per cent.

Excise duty on aerated drinks has been reduced to 16 per cent from 24 per cent.

The Ministry of Food Processing Industry would assist in the setting up of more

food processing units so that the industry could create 10 million jobs by 2015,

according to Mr Subodh Kant Sahai, Union Minister for Food Processing.

LOOKING AHEAD

According to the India Food and Drink Report Q3 2011 by research analysis firm

Research and Markets, by 2012, India’s processed food output is likely to grow by 44.2

per cent to touch US$ 90.1 billion, while packaged food sales will increase by 67.5 per

cent to reach US$ 21.7 billion. On a per capita basis, per capita packaged food spending

is expected to grow by 56.5 per cent to US$ 18.06 by 2012.

Moreover, according to a FICCI-E&Y study on the Indian food industry,

investment opportunities in the Indian food industry are set to shoot up by a huge 42.5

per cent to US$ 181 billion in 2015 and to US$ 318 billion by 2020.

COMPANY PROFILE

About Us (Over View of the company)

The Heritage Group, founded in 1992 by Sri Nara Chandra Babu Naidu, is one of

the fastest growing Private Sector Enterprises in India, with four-business divisions viz.,

Dairy, Retail, Agri, and Bakery under its flagship Company Heritage Foods (India)

Limited (HFIL). The annual turnover of Heritage Foods crossed Rs.1096 crores in 2011-

12.

Presently Heritage’s milk products have market presence in Andhra Pradesh,

Karnataka, Kerala, Tamil Nadu, Maharashtra and Orissa and its retail stores across

Bangalore, Chennai and Hyderabad. Integrated agri operations are in Chittoor and Medak

Districts and these are backbone to retail operations and the state of art Bakery division at

Uppal, Hyderabad, AndhraPradesh.

In the year 1994, HFIL went to Public Issue to raise resources, which was

oversubscribed 54 times and its shares are listed under B1 Category on BSE (Stock Code:

519552) and NSE (Stock Code: HERITGFOOD)

About the founder:

Sri Chandra Babu Naidu is one of the greatest Dynamic, Pragmatic, Progressive

and Visionary Leaders of the 21st Century. With an objective of bringing prosperity in to

the rural families through co-operative efforts, he along with his relatives, friends and

associates promoted Heritage Foods in the year 1992 taking opportunity from the

Industrial Policy, 1991 of the Government of India and he has been successful in his

endeavour.

At present, Heritage has market presence in all the states of South India. More

than three thousand villages and five lakh farmers are being benefited in these states. On

the other side, Heritage is serving more than 6 lakh customers needs, employing more

than 700 employees and generating indirectly employment opportunity to more than 5000

people. Beginning with a humble annual turnover of just Rs.4.38 crores in 1993-94, the

sales turnover has reached close to Rs.1096 crores during the financial year 2010-2011.

Sri Naidu held various coveted and honorable positions including Chief Minister

of Andhra Pradesh, Minister for Finance & Revenue, Minister for Archives &

Cinematography, Member of the A.P. Legislative Assembly, Director of A.P. Small

Industries Development Corporation, and Chairman of Karshaka Parishad.

Sri Naidu has won numerous awards including " Member of the World Economic

Forum's Dream Cabinet" (Time Asia ), "South Asian of the Year " (Time Asia ), "

Business Person of the Year " (Economic Times), and " IT Indian of the Millennium "

( India Today).

Sri Naidu was chosen as one of 50 leaders at the forefront of change in the year

2000 by the Business Week magazine for being an unflinching proponent of technology

and for his drive to transform the State of Andhra Pradesh .

Forward looking statements: “We have grown, and intended to grow, focusing on

harnessing our willingness to experiment and innovate our ability to transform our drive

towards excellence in quality, our people first attitude and our strategic direction.

Mission & vision

Mission

Bringing prosperity into rural families of India through co-operative efforts and providing

customers with hygienic, affordable and convenient supply of "Fresh and Healthy" food

products.

Vision

To be a progressive billion dollar organization with a pan India foot print by 2015.

To achieve this by delighting customers with "Fresh and Healthy" food products, those

are a benchmark for quality in the industry.

We are committed to enhanced prosperity and the empowerment of the farming

community through our unique "Relationship Farming" Model.

To be a preferred employer by nurturing entrepreneurship, managing career aspirations

and providing innovative avenues for enhanced employee prosperity.

Heritage Slogan:

When you are healthy, we are healthy

When you are happy, we are happy

We live for your "HEALTH & HAPPINESS"

PROMOTERS (HINT: - CEO, DIRECTORS)

Board Of Directors

Sri D. Seetharamiah Chairman

Dr. A. Appa Rao Director

Dr. V. Nagaraja Naidu Director

Dr. N. R Sivaswamy Director

Sri N. P Ramakrishna Director

Smt N. Bhuvaneswari Vice-Chairman & Managing Director

Sri Lokesh Nara Executive Director

Core Management Team

Dr. M. SambaSiva Rao President

CA A Prabhakara Naidu Vice President

Umakanta Barik Company Secretary

K Durga Prasada Rao Chief Operating Officer

S Jagdish Krishnan Chief Operating Officer

Anil Kumar Srivastava Chief Operating Officer

Quality policy of HFIL:

We are committed to achieve customer satisfaction through hygienically

processed and packed Milk and Milk Products. We strive to continually improve the

quality of our products and services through upgradation of technologies and systems.

Heritage's soul has always been imbibed with an unwritten perpetual commitment

to itself, to always produce and provide quality products with continuous efforts to

improve the process and environment.

Adhering to its moral commitment and its continuous drive to achieve excellence

in quality of Milk, Milk products & Systems, Heritage has always been laying emphasis

on not only reviewing & re-defining quality standards, but also in implementing them

successfully. All activities of Processing, Quality control, Purchase, Stores, Marketing

and Training have been documented with detailed quality plans in each of the

departments.

Today Heritage feels that the ISO certificate is not only an epitome of achieved

targets, but also a scale to identify & reckon, what is yet to be achieved on a continuous

basis. Though, it is a beginning, Heritage has initiated the process of standardizing and

adopting similar quality systems at most of its other plants.

Commitments:

Milk Producers:

Change in life styles of rural families in terms of:

Regular high income through co-operative efforts.

Women participation in income generation .

Saved from price exploitation by un-organized sector .

Remunerative prices for milk.

Increase of milk productivity through input and extension activities

Shift from risky agriculture to dairy farming

Heritage

Financial support for purchase of cattle; insuring cattle

Establishment of Cattle Health Care Centers

Supplying high quality Cattle feed

Organizing "Rythu Sadasu" and Video programmes for educating the farmers in

dairy farming

Customers:

Timely Supply of Quality & Healthy Products

Supply high quality milk and milk products at affordable prices

Focused on Nutritional Foods

More than 4 lakh happy customers

High customer satisfaction

24 hours help lines ( <10 complaints a day)

Employees:

Enhancing the Technical and Managerial skills of Employees through continuous

training and development

Best appraisal systems to motivate employees

Incentive, bonus and reward systems to encourage employees

Heritage forges ahead with a motto "add value to everything you do"

Shareholders:

Returns:

Consistent Dividend Payment since Public Issue (January 1995)

Service:

Highest impotence to investor service; no notice from any regulatory authority

since 2001 in respect of investor service

Very transparent disclosures

Suppliers:

Doehlar: technical collaboration in Milk drinks, yogurts drinks and fruit

flavoured drinks Alfa-Laval: supplier of high-end machinery and technical support

Focusing on Tetra pack association for products package.

QUALITIES OF MANAGEMENT PRINCIPLES:

1. Customer focus to understand and meet the changing needs and expectations of

customers.

2. People involvement to promote team work and tap the potential of people.

3. Leadership to set constancy of purpose and promote quality culture trough out the

organization.

4. Process approach to assess the efficiency and effectiveness of each process.

5. Systems approach to understand the sequence and interaction of process.

6. Factual approach to decision making to ensure its accuracy.

7. Continual improvement processes for improved business results.

8. Development of suppliers to get right product and services in right time at right

place.

Fact Sheet (Milestones)

Awards & Recognition

1st prize in Energy Conservation

Main Dairy Plant, Gokul, near Kasipentla on Tirupati- Chittoor Highway had won

the Prestigious 1st prize in Energy Conservation for the Year 2010 at the National Level

for it's outstanding performance in conserving the Natural Resources through the most

efficient use of Energy.

THE GREAT INDIAN ICE CREAM CONTEST 2009

Contact us (Hint :- Address Of the company or plant location “Head Office”)

Corporate Office

Heritage Foods (India) Limited

6-3-541/C, Panjagutta,

Hyderabad, AP.

Phone : 040 - 23391221/222

Fax : 040 - 23318090

Email : hfil@heritagefoods.co.in

Products of the company (For Marketing Projects with Logo if it is possible)

Milk

1.Toned Milk

2.Full Cream

Milk

3.Double

Toned Milk

4.Golden Cow

Milk

5.Standardise

d Milk

6.Slim

Milk

7.UHT Toned

Milk

8.UHT Slim

Milk

9.Smart

Milk

10.Manjunath

a Milk

11.Ezhumalai

Milk

12.Padman

abha Milk

Milk Products - Fresh

1.Toned Milk

Curd Cup

2.Full Cream

Milk Curd

Cup

3.Curd

Pouch

4.Fruit n Curd

Cup 5.Butter Milk

6.Jeera

Butter

Milk

7.Garlic

Butter Milk 8.Paneer

9.Cooking

Butter

10.Pasturised

Table Butter

11.Cheese

Chiplets

12.Cheese

Slice

13.Cheese -

Carton & Tin

Packs 14.Doodhpeda

15.Milk

Cake

16.Malai

Laddu 17.Sunundalu

18.Soan

Papidi

Milk Products - Long Shelf Life

1.Ghee

Polypack -

Cow &

Buffalo

2.Ghee Alu

Foil - Cow &

Buffalo

3.Ghee Jar -

Cow

4.Ghee Tin -

Buffalo

5.Skimmed

Milk Powder

6.Dairy

Whitener

Ice Cream

1.Small Cup 2.Large Cup 3.Kulfi 4.Twin Bars 5.Sundae

6.Noveltie

s

7.Celebration

Cone 8.Chocobars

9.Bar

Novelties 10.Juicy Bar

11.Sundae

Magic

12.Home

Packs

13.Eco-Packs

14.Premium

Tubs

15.Utsav

Packs

16.Party

Packs    

Beverages

1.Packaged

Drinking

Water

2.Premium

Tea

3.Popular

Tea

4.Flavoured Milk

- Bottles

5.Flavoured

Milk -

Tetrapack

6.Swee

t Lassi

7.Fruit Lassi

8.Instant

Coffee

9.Ground

Coffee      

Cleaning Aids

1.Utensil

Cleaners

2.Toilet

Cleaners

3.Solid

Freshener

4.Glass/Other

Cleaners

5.Bar

Detergents

6.Floor

Cleaner

s

Daily Fresh Needs

1.Poultry

Eggs

2.Heritage

Milk Bread

3.Heritage

Brown

Bread

4.Heritage

Premium Milk

Bread

5.Heritage

Sandwich

Bread

6.Herit

age

Fruit

Bread

7.Heritage

Mumbai Pav

8.Instant Mix

Food      

General Merchandise

1.Toilet 2.Paper 3.Face 4.Candles 5.Agarbatti 6.Kitch

Tissues Towels Tissues

en

Towels

Health & Beauty

1.Hair Oils

2.Liquid Hand

Wash

3.Tooth

Brush      

Instant Food

1.Appalams 2.Cereal Based 3.Fryums

4.North Indian

Ready Mixes 5.Papads

6.South

Indian

Ready

Mixes

7.Vermicelli          

Ready Foods

1.Chilly/Soya

Based 2.Honey

3.Indian

Sweets

4.Jams/

Marmalades 5.Namkeens

6.Pickl

e

7.Tomato

Based  

CHAPTER-IV

BUDGETED AND BUDGETART SYSTEM INHERITAGE FOODS (INDIA) LTD

ZERO BASED BUDGETING:

Zero budgeting is the latest technique of budgeting and it has increased use as a

material tool. This technique was first used in America in 1962, by the former president

America, Jimmy Carter.

As the name suggests, it is starting from a "scratch”, the normal technique of

Budgeting is to use previous levels as a base for preparing this year's budget. This

method carries previous years inefficiencies to the present year because we taken last

year as a guide, and decide "what is to be done this year when this much was the

performance of the last year.

In the zero based budgeting every year is taken as new year and previous year is not

as a base, the budget for this year will have to be justified according to present situation,

zero is taken as base and likely future activities are decided according to present

situations. In zero based budgeting a manager is to justify why he wants to spend. The

performance of spending on various activities will depend upon their justification and

priority for spending will have to be that an activity is essential and the amounts asked for

are really reasonable taking into account the volume of activity.

BUDGET AND BUDGETARY SYSTEM IN HERITAGE DAIRY PRODUCT

INDUSTRIES LIMITED, BASANTH NAGAR, KARIMNAGAR

The budgeting process is used in the performance budgeting for the construction

of phase which includes pre commissioning activities. Besides meeting the essential

requirements of managerial control. The budgeting exercise also covers the long term

capital budgeting, which is presented in the form of annual plan.

OBJECTIVES OF THE BUDGETARY SYSTEM:

To prepare annual budgets in such a manner those managers at various levels in

organization carry out periodical exercise in respect of each contact or responsible centre

for physical planning and matching resources broke up into monthly targets or cash

flows.

To introduce and operate responsible for achievement of specified targets with the

recourses allocated for the purpose.

To bring about effective co-ordinate of all activities of the organization and To gear

up service divisions to meet effectively the requirements of project.

BUDGET PERIOD AND PHASING:

The budget period or annual begets should with the financial year. In October

every year the budget should drawn up for the ensuring the financial year in the form of

Budget estimates financial year in the form of Revised Estimates [R.E].In addition the

budgets are to be reviewed on monthly basis by project review teams, in the light of

actual expenditure and projections in the budget period. Budegt should indicate monthly

phasing of. Expenditure and targets for the first and quarterly phasing for the second half

of the year. At the time of review of the budget estimates to frame revised estimates the

quarterly Phasing should be broken up into monthly phasing.

While drawing up the actual budget in October every year, the long term capital

budget for ongoing and new schemes should be formulated as apart of exercise as

preparation of annual plan. The long term capital budget should indicate for a period of

six years following the budget period of six years following the budget period of six

years following the budget period wise annual phasing of the capital expenditure and

physical schedules recourse based network.

BUDGET HEADS:

For uniform accounting, it is essential that costs are collected for each of the

factory though this may involve splitting up of payments against contracts which embrace

more than one system. Allocation of the cost as system wise affords a sound basis for

cost accounting, inter-firm comparisons and provides valuable inputs to the data bank.

Budget provisions are related to project estimates and monitoring of actual expenditure

where as control variables for part control and instrumentation system.

Factory piping which includes pipelines, for ash water mains, compressed air

system and civil works piping. Auxiliary pumps for water treatment plant and civil works

system. If there are, any contracts not covered in the budget heads provisions for such

contracts should be shown against the appropriate system by head by adding code

number.

TYPES OF BUDGETS IN HERITAGE DAIRY PRODUCT INDUSTRIES

LIMITED:

According to the nature expenditure budget are classified under:

Direct capital outlay on works

Technical consultancy

incidental construction during construction

Employee cost

Other establishment expenses:

Training and recruitment

Preliminary expenses

misc.brought-out assets

cash budget

Township budget

BRIEF EXPLANATION TO THE NATURE OF EXPENDITURE INCLUDED IN

EACH BUDGET IS INDICATED BELOW:

INCIDENTAL EXPENDITURE DURING CONSTRUCTION PERSONEL

PAYMENT:

These comprises of salary, wages, allowance, contribution of PF and other funds

and other expenses such as LIC, medical reimbursement, canteen subsidy etc. any

provision of areas of salary/D.A.

OFFICE AND OTHER EXPENSES:

Expenses incidental to construction and capital works not traceable directly to

incidental expenditure, during contribution equipments, vehicle running expense, office

rent. LC and cost of drawings, traveling expenses, printing and stationary,

communication expenses, advertisement for tenders etc., are major items in the category.

TRAINING RECRUITMENT & OTHER DEFFEREDREVENUE

EXPENDITURE:

The first part of the budget consists of expenses for training executives, and Non

executive trainees, rent for training halls and expenses for management development

courses. The second part consists of expenses for recruitment such as advertisement for

recruitment, interview expenses, T.A. candidate etc. the third part combines preliminary

expenses including registration fees and research ad development expenses.

MISCELLANEOUS BOUGHT OUTPASSES:

Vehicles, furniture and fixtures equipments, hospital and medical equipment.

Miscellaneous assesses township figure in the budget.

REVIEW OF PROJECT BUDGET:

MONTHLY REVIEW:

At monthly intervals, the budget should be reviewed by project review committee

[PRC]. Project budget should report actual expenditure against budget heads. Work heads

and corporate budget by the 7th of month following the report month. The monthly

review should be examined by project review team [PRT], who should record variations

for any variations and proposed for expending works in the minutes of the meetings

reasons for any variations in the case of budget heads exceeding 10% of the budget

estimates revised estimates or whichever is Rs.5 lakhs should be analyzed and report

upon.

QUTERLY REVIEW:

PRT should conduct a quarterly budget review with a view to projecting

anticipated expenditure during the year against approved budget estimates/revised

estimates. As time is essence of such review, only a quick review of anticipated

expenditure for individual budget heads involving provisions exceeding Rs.50 lakhs in

each case should be made and reported in minutes to PRT. For this purpose, project

budget should furnish all the relevant data to project manager [project] and planning and

system by the 10th,of the month following the quarter project budget committee should

review the actual expenditure and assess anticipated expenditure contract

co-ordination/engineers in charge. The assessments of anticipated expenditure should be

furnished by the project budget committee to General Manager [project] by the 30 th of the

month following the quarter under review.

BUDGET OF SERVICE DIVISION/CORPORATE BUDGETS:

A review of budgets of service and corporate divisions should be conducted at

quarterly intervals by corporate budget committee[CS'C].For this purpose corporate

accounts should report actual expenditure up to the Ned of the quarter by the 10th of the

month following quarter to corporate budget and budget-coordination of the remaining

period of the year should be sent to the corporate budget should put up a consolidated

report division wise and project wise to corporate budget committee[CBC] by the 15th of

the may, August, November and February every year.

OBJECTIVES OF THE CURRENT BUDGETARY CONTROL SYSTEM IN

HERITAGE DAIRY PRODUCT INDUSTRIES LIMITED, BASANTH NAGAR:

The current budgetary control system-operating phase has been compiled to

achieve the following objectives.

To control actual performance with reference to standards/norms adapted

in the budget ascertain the deviations analyze and establish the reasons.

To identify constraints in generational and timely action for estimation

constraints.

To monitor the generation of internal recourses so as to ensure

the availability of adequate funds.

To prepare the revenue budget so as to forecasting the periodical

Profitability of the organization.

To develop standards/norms of performance in the various areas of

Operation and maintenance based on the experience.

To ensure effective coordinate planning of all activities so that all the

inputs and services necessary for achieving the physical targets are

available at appropriate time.

To provide data regarding operational norms and cost for the purpose of

formulating tariff.

to provide data basis for assessment of working capital requirements

To control the working capital particularly book debts spares and other

items inventory.

To improve profitability and internal recourses generation.

SCOPE OF THE PERFORAMNCE BUDGET:

The budget for operation and maintenance activities will be called performance

budget operation.

This, in effect, means that all financial targets in the budget will be based on performance

targets in physical terms.

The current budgetary control system operation pays envisages generation and

transmission line projects as independents investment canters. It becomes applicable to a

project in the year in which it plans to commercialize its first generation unit. How ever,

the budget infer expenses from the date of synchronization to the date of commercial

generation is to be taken case of in the capital budget of the respective project similarly in

the case of transmission line projects the system becomes applicable from the year in

which it plans to commissions its first line along with substation or the date commercial

generation of the first unit of generative project with which this line is associated, which

ever is later. For subsequent lines, the O&M will be prepared from the cute generation of

energisation.

The system investigates the preparation of operation and maintenance budget for

each of the cost canters as per the requirements of coatings systems.

The performance budget operation will consists of following budgets along with

the supporting schedules:

1. Budget balance sheet.

2. Budget profit and loss account.

3. Revenue budget.

In addition, separate budgets for revenue activities other than operation for

research and development consultancy contracts etc.

The expenses respect of developmental expenditure for improvements additions

replay DAIRY PRODUCT, renewals, balancing facilities etc. arc of capital nature and

will be budgeted for in the construction budget of budgetary control system-construction

pairs.

To facilitate management control the system also investigates, phasing of this

budgets into monthly targets. The actual performance then will be reasons for variation s

will be analyzed and established for taking corrective remedial actions.

STAGES IN THE FORMULATION OF PERFORMANCE BUDGET:

The system provides for a two stages formulation for performance budget

operation the stages are given below:

INITIAL PROPOSAL:

In the initial proposal the project is required to indicate yearly targets. In the

addition to furnishing basic information like Pasteurization and commercial generation

dates.

Constraint and coal operation at less than the designed specification calorific value

of raw material and milk, material consumptions. In physical terms for items whose

consumption value in Rs.5 lakhs or more planned shutdown for a maintenance and

overhauling and norms for serious operating parameters provided for designs

specifications and in the tariff agreements to the corporate budget committee.

In the initial proposals is planned to be submitted after considering else factors and

keeping in view the perspective plan of the organization, as well as norms for various

operating parameters. These targets and terms are then communicated to all stations and

transmissions line offices of the last week of July to be used for formulating detailed

budget in the final proposal

FINAL PROPOSAL:

Budgeted balance sheet. Budgeted profit and loss account and budgets in the form of

cash budget along with the final proposal will consist of detailed supporting schedules for

each of the investment centre/cost centre. This final proposal needs to be submitted to

corporate centre with in three weeks of receiving approval for initial proposal.

The final proposal, after approval by board, will become the basis of monitoring

performance for cost centers and investment centers.

The frequency and extent review and monitoring will be done is under:

1. The monitoring of actual performance against budgeted target for investment

center/profit center on monthly basis and for cost centers on quarterly for

remedial/corrective action.

2. The review of performance budget on quarterly basis to assess the anticipated

profitability.

The first step in the preparation of performance budget, O&M is formulation of

maintenance and overhauling schedules for boiler and TO with generation, then

considering the grid demand, the availability or inputs and factory problems, if any. The

utilization of capacity will be worked out on month-month basis for the budget period the

gross generation targets can be worked and accordingly.

NET GENERATION:

The sales value will be determined from quantum of net generation

[i.e., grass generation aux. consumption].

AUXILLARY CONSUMPTION / CONSUMPTION BY UTILITIES:

The DAIRY PRODUCT consumption by each of the cost centers for individual unit

auxiliaries, station auxiliaries as well as transformer losses are to be estimated separately

based on designed specification and added in order to work out total auxiliary

consumption rather than fixing overall percentage similarly consumption by utilities will

also need to be indicated by concerned cost centers like township and construction

department this will be valued at cost net generation to arrive at the sales values for owns

consumption.

CHEMICAL CONSUMPTION:

The chemicals are used by many cost centers by many cost centers for treatment of

water. The consumption of chemicals will be co-related with volume of water certain

norms will have to be developed for different type of chemicals and different type of

treatment.

Based on these norms each of the cost centers will indicate

Consumptions of chemicals in quantitative as well as financial terms the most centre wise

requirement will be consolidated to arrive at total chemicals consumption to be charged

to profit and loss account.

EMPLOYEE COST:

The basis of employee cost will be the approved manpower budget effective of

respective years of budget period. The estimation of employee cost is to be done for each

grade considering mid-point as the scale as basis pay and after reading various

allowances like "D.A., H.R.A., C.C.A" project allowance etc. admissible in respective

grades. This is to be worked 49 out or each of the budget periods based on existing

strength (at the time of estimation) in each grade and additions during each quarter

(taking 70% satisfaction for additions).

The provisions of LTC medical reimbursement, PF and other welfare expenses in

previous years and taking into account polices changes, if any. the details of welfare

expenses like liveries and uniforms, safety expenses, accident compensation, games &

sports, canteen subsidy etc. are to list out as per chart of account .the provisions for

incentive, bonus and payments of one time nature are to be shown separately based on

total employee cost for executives, supervisors and non-supervisors and total man power

in these categories, separates of cost per employee will be worked out for each of theses

categories as under.

1. Salaries and allowance

2. Contribution of PF and other funds

3. Welfare expenses

The cost centre of employee cost will be worked out based on these rates

separately for theses executives, supervisors and non-supervisors. This will again be

consolidated separately for operations, maintenance and common [service] function. The

employee cost of common functions will be appropriated between construction and O&M

budgets in ratio of capital expenditure and sales during respective years.

REPAIRS & MAINTAINENCE:

In line, with costing system following three activities can represent major

classification of repairs and maintenance.

1. Major overhaul

2. Preventive maintenanc

3. Breakdown maintenance

Normally, budgeting will be done for the former two; under each activity separate

estimates will be prepared for consumption of materials and maintenance jobs. This

estimation will be done at ach of sub cost centre wise details are required to be

mentioned.

The consumption material for repairs and maintenance will be classified into

spares, lubricant; loose tools and plants, consumables and others.

The cost centre totals separately for three activities will be added to arrive at

summary of material consumption and maintenance jobs, which will be reflected in the

profile & loss account.

The material consumption, especially of spares, can be estimated based on the

expected life of various components/spares in the installed equipment the frequency of

breakdowns in the past and the requirement for preventive Maintenance and major

overhauls. The actual life of components may be different from that indicated in the

manufacturer's specification. Therefore, it is very difficult to estimate requirements of

spares. But this estimation will become Gradually accurate as more experience is gained.

For new stations it will be advisable to collect such information from old stations that

have gained experience in this field.

Normally, maintenance of equipment through contractors should be avoided. But

in certain areas, if the expertise and in house capability or sufficient man power is not

available, maintenance jobs can be got done through contractors. Such contracts will

need to be listed out separately .If owner supply items are covered in such contracts the

cost of theses items will be included in the material cost.

FACTORY & GENERAL OVERHEADS:

All the items of an expenditures under this head will be estimated based on past

trend with due adjustment for policy changes. The estimates will be given by cost centre

needs for items identified with respective cost centers. The total

Administrative cost of service cost centers will be allocated between construction and

O&M in the ratio of capital expenditure and sales during respective years.

DEPRECIATION:

This is to be charged as per ES act from the year following the year in

which assets have been capitalized value an4, rates of depreciation furnished by the site

finance and account for different categories of assets. Cost centre-wise

Depreciation will be added to arrive at total deprecation for the investment centre.

INTEREST ON FIXED CAPITAL:

As per existing accounting policy, the interest is to be charged to profit & loss

account based on the loan content in the capitalized assets restricted to total accrued

interests on actual loans.

For budgeting purposes, interest will be worked on equated loan content or

equated loan whichever is less.

EQUATED LOAN CONTENT:

Equated loan content is to taken as 50% of total capital cost and adjusted for number

of operating months in respective years. Incase of both generating factory and

transmission lines with associated factory, the cost for each profit centre will be taken as

per actual or anticipated capital cost.

The equated loan content is to be appollioned to individual unit’s

transmission lines separately for each of phases/stages. The total capital cost will be taken

as proposed in the performance budget-construction.

CHAPTER=V

ANALYSIS AND INTERPRETATION

HERITAGE FOODS INDIA LIMITED

REVENUE BUDGET

TABLE-I (RS IN CRORES)

No Particulars Budgeted

Estimated for

the year 2011-

12

Actual for

the year

2011-12

Amount SMTP Amount Rs\mt

1 Sales

2 Fixed and recovery 724 72.4 618 61.8

3 Variable cost

recovery

840 84.0 740 74.0

4 Fuel price adjustment

recovery

820 82.0 863 86.3

5 Own consumption 132 13.2 148 14.8

6 Total of .1 2516 251.6 2369 236.9

7 Average intensives 102 10.2 98 9.8

8 Other income 56 5.6 49 4.9

9 Grand total(1+2+3) 2674 267.4 2516 251.6

INTERPRETATION:

The data pertaining to the generation and consumption of DAIRY PRODUCT at

Heritage Foods India Limited have been obtained from the year 2011-12 and

presented in Table-1.The aspect included are total generation of DAIRY PRODUCT

in(cores Rs) and utilization for auxiliary consumption, raw material consumption and line

store respectively.

During the year 2011-12 the sales, fixed cost, variable cost, fuel price,

consumption was decreased. When the estimated budgeted, so sales consumption is

236.9% respectively.

During the year 2011-12 the average intensives are decreased 9.8%,there income

also decreased 4.9% respectively.

Finally, with regard to the result in revenue budget of Heritage DAIRY

PRODUCT industries limited, totally decreased 251.6% in the year 2011-12 respectively.

THE HERITAGE INDUSTRIES LIMITEED OPERATIONAL

EXPENDITURE BUDGET FOR THE YEAR 2011-12

TABLE-II (RS IN CRORES)

Sino Particulars Budgeted estimated

for the 2011-12

Actual for the year

2011-12

1 Variable cost Amount Rs Amount Rs

2 Raw material 420 42.0 450 45.0

3 Milk 200 20.0 220 22.0

4 Total of .1 870 87.0 920 92.0

5 Operative

maintained

cost

6 Chemicals and

water

130 13.0 150 15.0

7 Repairs &

maintenance

280 28.0 300 30.0

8 Employee cost 320 32.0 350 35.0

9 Stationary &

general

expenses

65 6.5 80 8.0

10 Rebate 11 1.1 13 1.3

11 Share of 8 0.8 10 1.0

operating

expenses

12 Total of-2 1684 168.4 903 90.3

13 Finance

charges

14 Deprecation 42 4.2 15 1.5

15 Interest on

fixed capital

18 1.8 20 2.0

16 Totalof-3 60 6.0 35 3.5

17 Gland total

(1+2+3)

1744 17.44 1916 191.6

INTERPRETATION:

Observed from the above table that the "Operational Expenditure Budget" of Heritage

Foods India Limited in the year 2011-12.

In the year 2011-12 variable cost components, Raw material consumption 45%

increased and the milk consumption 47% also increased.

In operating & maintain aces cost components, chemicals & water, repair &

maintenance, employee cost, stationary & general expenses rebate and share of other

expenses in all are fluctuating expenses of the year 2011-12.how ever the total operating

maintenance costs are 90.3% decreasing respectively.

In finance charges depreciation and interest on fixed capital, has been included, the

total finance charges recording decreasing of 3.5% in the year 2011-12 respectively.

Finally with regard to the operational expenditure budget of Heritage Foods India

Limited the total profit has increase with 191.6% during the year 2011-12.

The overall budget results of Heritage DAIRY PRODUCT is industries limited is

earning more profits.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2012

CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax 3,41,78,32,892 80,92,92,132

Adjustments for:

Deprecation 58,30,64,022 51,57,16,762

Loss/profit on food assets sold/disable

Loss on sale of long term investments

5,45,85,229

3,58,952

5 ,76,15,772

-

Income from long term investments (other trades) 4,91,46,881 2,61,37,771

Interest paid/payable on loans etc 33,50,30,376 32,75,37,771

interest received/receivable on loans 2,50,55,563 9,05,21,426

provision for doubtful debts/advances/deposits 3,82,15,119 -

provision fro doubtful debts/deposits(net) - 93,92,067

debts/advances/deposits written off 5,34,50,070 55,44,394

long term investments(other than trade)written off 7,700 -

Unrealized loss/gain on foreign currency

fluctuation

2,95,96,073 19,16,075

provision for diminution in value of investments ------ 1,10,09,232

4,28,13,42,377 1,46,13,41,338

OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES

Adjustment for:

Inventories (1,21,69,75,334) (24,94,24,615)

Trade and other receivables (50,17,40,397) 2,92,62,288

Trade payable

Cash generated from operations

65,61,02,594 (20,01,35,,318)

Direct taxes/refund (93,49,80,671) 6,31,57,979

Net cash from operating activities 1,98,37,48,569 1,10,42,01,672

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2012

Cash flow from investigating activities

purchase of fixed assets (4,17,22,87,73) (2,22,09,13,891

)

Sale of fixed assets 6,22,31,087 6,83,68,985

Proceeds from sale of refractory unit 1,60,00,000 2,50,00,000

Investment in shares 2,66,224 2,01,87,974

Proceeds from sale of refractory

Unit from sale of shares 13,42,476 --

Incomefrom long team investments 4,91,46,881 2,51,37,527

Loans/deposits given 65,05,00,000 1,15,90,00,000

Registration of loans/deposits given 1,00,80,000 1,48,08,25,000

Interest received on loans 2,13,22,677 8,07,36,965

Net cashused in investing activities 3,66,50,30,842 8,07,36,965

Cash flow from financing activities

Allotment money released 3,150 4,500

Long term borrowings 3,47,00,00,000 1,93,00,00,000

Short-term borrowings 11,53,25,82,956 5,53,69,08,223

Long-term borrowings (70,31,00,557) (48,37,39,218)

Short-term borrowings (11,99,94,40,000) (5,91,42,30,841

)

Increase in cash credit and overdrafts from banks 23,36,27,575 7,66,75,770

Interest paid (48,27,22,502) (33,84,31,360)

Dividends paid (35,06,99,081) (13,05,42,125)

Net cash from financing activities 1,70,53,90,985 67,42,71,694

Net increase in cash and cash equivalents 2,41,08,712 5,04,39,979

Opening cash and cash equivalents 24,83,13,629 19,78,35,867

Cash and cash equivalents taken over

Consequent upon imagination ---- 37,783

Closing cash and cash equivalents 27,24,22,341 24,83,13,629

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2012

Schedule 2011-12 2011-12

Sales 25,16,45,89,369 18,17,81,55,294

Less excise duty 3,07,41,00,000 2,04,63,80,752

Net sales 22,06,96,60,339 16,13,17,74,542

Other income 13 49,04,06,410 53,74,29,621

22,58,00,66,749 16,66,92,64,153

EXPENDITURE

Finished goods 14 9,20,98,35,678 7,61,14,89,922

And administration expenses 15 9,03,43,03,781 7,40,51,67,576

deprecation 59,52,33,509 53,05,56,255

Less transfer from capital

reserve of asserts 1,21,74,487 1,48,449,493

Schedule 52,30,64,022 51,57,16,762

Interest 16 33, 50,30,375 32,75,37,771

PROFIT BEFORE TAXATION

Provision for current taxation 75,00,00,000 34,00,00,000

Provision for benefit tax 1,10,00,000 1,22,00,000

profit after taxation 2,65,68,32,892 45,70,92,132

PROFIT AVAILABLE FOR

APPROPRIATION

2,65,68,32,892 45,70,92,132

Proposed dividend ------ 13,72,29,954

Tax on proposed dividend ------ 1,92,46,501

Intendividend 18,29,73,272 --------

Tax on intent dividend 2,56,,62,001 -----

General resene 30,00,00,000 5,00,00,000

Balance Carried To Shcedule2 50,86,35,273 20,64,70,455

2,14,81,97,619 25,06,15,677

Earnings per share 58.08 9.99

BALANCE SHEET OF HERITAGE FOODS INDIA Ltd

(Rs.Crore)

Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Sources of funds

Owner's fund

Equity share capital 11.53 11.53 9.99 9.99 9.99

Share application

money 3.19 3.19 ---- ---- ----

Preference share

capital ---- ---- ---- ---- ----

Reserves & surplus 69.24

104.17 59.31 62.50 52.65

Loan funds

Secured loans 172.01 147.56 62.77 1.26 2.40

Unsecured loans 7.59 5.99 42.21 17.47 9.74

Total 263.55 272.43 174.28 91.23 74.78

Uses of funds

---- ---- ---- ---- ----

Fixed assets

---- ---- ---- ---- ----

Gross block 264.47 206.45 129.06 80.15 72.69

Less : revaluation

reserve ---- ---- ---- ---- ----

Less : accumulated

depreciation 60.80 44.04 33.49 26.82 22.32

Net block 203.68 162.41 95.57 53.33 50.38

Capital work-in-

progress

13.98 46.76 46.76 46.76 1.16

Investments 0.27 0.21 2.25 0.21 0.70

Net current assets

Current assets, loans

& advances

126.30 139.40 102.65 70.10 52.01

Less :

current liabilities &

provision

80.67 76.35 45.51 35.05 29.47

Total net current

assets

45.62 63.05 57.15 35.05 22.54

Miscellaneous

expenses not written ---- ---- ---- ---- ----

Total 263.55 272.43 174.28 91.23 74.78

CHAPTER-VI

CONCLUSION & SUGGESTIONS

SUGGESTIONS

Planning has become the primary function of management most of the planning

Relates to individual situations and individual proposals. Budgets are nothing but

Expressions largely in financial terms, budgetary control has, therefore become and

essential Tool of management for controlling and maximizing profits.

The company objectives organization and how they can be achieved through

budgetary control.

Time-tables for all stages of budgeting follows.

Reports, statements, forms and other record to be maintained.

Continuous comparison of actual performance with budgeted performance.

CONCLUSIONS

Every organization has predetermined set of objectives and goals, but reaching

their objectives and goals by proper planning and executing of these plans

economically.

The Heritage Foods India Limited is objectives of planning promoting and

organizing an integrated development of DAIRY PRODUCT Company.

The corporation machine of Heritage DAIRY PRODUCT industries is to make

available and quickly DAIRY PRODUCT in increasingly small quantities, the

company will spear head the process of accelerated development of DAIRY

PRODUCT sector by expeditiously.

The organization needs the capable personalities as management makes the

plans and implement of these plans are expressed in terms of budget and budgetary

control.

The Heritage Foods India Limited has budget process in two stages. one is the

capital expenditure budget and another is operating maintenance budget, the capital

expenditure budget shows the list of capital projects selected for investment along

with their estimated costs, operating maintenance budgets, the medical budgets are

rarely used in the organization like long term budgets, search & development budget

for consultancy.

The Heritage DAIRY PRODUCT industries ladies to make available and quality

DAIRY PRODUCT efficient utilization of its resource and implementation of

sophisticated technology and DAIRY PRODUCT generation and also creating

ambience of collective working of its employees.

BIBLIOGRAPHY

S.No Author Title of the Book EditionYear of

PublicationName of the Publication

1.S .KRISHNA

MURTHY

MUTUAL FUNDS IN

INDIA

Second Edition

1999 Chandra Bose

2. V.A. AVADHANIINVESTMENT

MANAGEMENTFourth Edition

2000Himalaya

publications

4.Donald E. Fischer and

Ronald J. Jordan

Security and Portfolio

Management

Sixth Edition

2006Tata McGraw

Hill.

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