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    Cheema Boilers LTD.: Performance Analysis Report For

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    Saurabh Singh
    This performance analysis report summarizes two cases for Cheema Boilers Ltd. Case 1 involves installing a new manufacturing plant in a backward region to take advantage of tax breaks. This would require new infrastructure and skilled labor but costs could remain under control. Case 2 involves outsourcing finished product manufacturing to other companies, which could reduce overhead costs but introduce variable transportation costs and quality control challenges due to reliance on external vendors' capacities and standards. The report analyzes each case's expected organizational changes, cost behavior, and risks to the company's reputation and profitability.

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    Cheema Boilers LTD.: Performance Analysis Report For

    Uploaded by

    Saurabh Singh
    447 views6 pages
    This performance analysis report summarizes two cases for Cheema Boilers Ltd. Case 1 involves installing a new manufacturing plant in a backward region to take advantage of tax breaks. This would require new infrastructure and skilled labor but costs could remain under control. Case 2 involves outsourcing finished product manufacturing to other companies, which could reduce overhead costs but introduce variable transportation costs and quality control challenges due to reliance on external vendors' capacities and standards. The report analyzes each case's expected organizational changes, cost behavior, and risks to the company's reputation and profitability.

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    Cheema Boilers Ltd

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    This performance analysis report summarizes two cases for Cheema Boilers Ltd. Case 1 involves installing a new manufacturing plant in a backward region to take advantage of tax breaks. This would require new infrastructure and skilled labor but costs could remain under control. Case 2 involves outsourcing finished product manufacturing to other companies, which could reduce overhead costs but introduce variable transportation costs and quality control challenges due to reliance on external vendors' capacities and standards. The report analyzes each case's expected organizational changes, cost behavior, and risks to the company's reputation and profitability.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    447 views6 pages

    Cheema Boilers LTD.: Performance Analysis Report For

    Uploaded by

    Saurabh Singh
    This performance analysis report summarizes two cases for Cheema Boilers Ltd. Case 1 involves installing a new manufacturing plant in a backward region to take advantage of tax breaks. This would require new infrastructure and skilled labor but costs could remain under control. Case 2 involves outsourcing finished product manufacturing to other companies, which could reduce overhead costs but introduce variable transportation costs and quality control challenges due to reliance on external vendors' capacities and standards. The report analyzes each case's expected organizational changes, cost behavior, and risks to the company's reputation and profitability.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6

    Performance analysis report for

    Cheema Boilers Ltd.

    Submitted By:-

    Student ID:-

    1|Page
    Content

    1. INTRODUCTION 2
    2. BACKGROUND 2
    3. SITUATIONAL ANALYSIS 2
    4. CONCLUSION 2
    5. RECOMMENDATIONS 2
    6. FORECAST 2
    7. REFERENCES 2

    2|Page
    1. Introduction:-

    It is the process of identifying, measuring, accumulating, analyzing, preparing, interpreting,


    and communicating information that managers use to fulfill organizational objectives. Basic
    purpose of management accounting is
    ➢use information for short-term planning and controlling routine operations.
    ➢use information for making non-routine decisions and formulating overall policies and
    long-range plans.
    ➢use information for making decisions about the company
    Management accounting assists as a mechanism or provides a control device in that
    particular situation where the members of one organization do the work for accomplishing
    the same goal. Today’s technology is very much advanced and the traditional technology is
    questioned between among of us.

    2. Background:-

    Cheema Boilers Limited is a renowned name in field of process and power boilers. The
    company came into existence in the year 1998 and since then has shown multifold growth.
    The turnover has increased form INR 1 Cr. in year 2002 to 232 Cr. In year 2009 Company
    acquires international market in African continent apart from successful establishment in
    Asian continent. With northern India’s largest in-house manufacturing plant, two new units
    are waiting to be operational by year 2012. Company eyes at a turnover of more than INR
    350 Cr in this financial year.

    3. SITUATIONAL ANALYSIS:-

    Cheema Boilers Limited along with its current manufacturing units is looking to take
    advantage of tax free operation for next 10 years in a backward region. The new
    manufacturing plant is 30 miles away from its current manufacturing plant. Also company
    proposes not to install a new plant and outsource the manufactured products instead.

    CASE ONE: - INSTALLATION OF NEW PLANT.

    Organizational changes expected: - in case of installation of new plant new manpower,


    infrastructure and machinery will be required. To run such a kind of machinery highly
    skilled labour is the other important aspect. But as company already runs similar business
    since last 10 years, appropriate sources of direct and indirect labour are known to them.

    Cost behavior in relation to activity: - cost will remain under direct control of company
    in this case. Already raw material is bought in bulk quantity at discounted prices, so

    3|Page
    additional inventory may be needed in special cases only. With more increase in activity
    better cost control is expected.

    Cost, volume and profit analysis:-

    Fixed cost: - this report observes fixed cost to be high in form of labour, testing, and
    manufacturing cost.

    Variable cost: - variable cost are calculated based on the variable such as units produced
    as cost increases

    Semi fixed cost:- semi fixed cost consist of expenses such as timely subscriptions etc. in
    this case electricity, water, telephone, internet expenses will constitute these expenses.

    Risk and sensitivity analysis: - like every coin has two sides, there are always
    disadvantages along with any opportunities. Under slow market conditions and with
    advent of new technologies now days, market trends are changing day by day.

    CASE TWO: - OUTSOURCING FINISHED PRODUCTS

    Organizational changes expected: - The Company is manufacturing all its products under
    certain standards across national and international organizations; it needs to get its
    products manufactured from only such companies which adhere to those standards. So
    need of very sharp control over quality control is needed. It needs highly skilled personnel
    in quality control to be deployed. Also a separate vendor development team is needed to
    ensure smoother working with them.

    Cost behavior in relation to activity: - cost varies from different vendor to vendor as each
    vendor manufactures on variable scale of manufacturing. Labour costs vary from INR 6 to
    INR 9 per kg of item with the market. So a variation of approximate 35% exists in market,
    which makes cost calculation a bit cumbersome process. High activity in this case does not
    ensure a discount as vendors management structure may be different compared to Cheems
    Boilers Limited.

    Cost, volume and profit analysis: - with a decrease in overhead costs, total cost may
    reduce but extra transportation costs are supposed to cut some profits. Higher volumes
    with a single vendor may be seldom useful. Various aspects of cost, volume and profit
    analysis are explained below.

    Fixed cost: - most of the vendors work generally on labour basis and not on material and
    labour basis. So the fixed cost is cost of material and labour cost.

    4|Page
    Variable cost: - while outsourcing products from different vendors, transportation cost is
    major variable cost which fluctuates with the volume of production, world fuel prices,
    economic and political factors.

    Semi fixed cost: - semi fixed costs are similar to those in case one.

    Risk and sensitivity analysis: - this type of business greatly depends on production
    capacities of vendors. In case more volume of production is needed, the production
    capacities of vendor may not be sufficient to meet the requirements. In such a case either a
    new vendor is looker after or vendor is paid high prices to make ensure project completes
    in specified time. In certain cases financial condition of vendor is not strong enough to
    execute order. This may negatively impact the reputation of company and badly impact
    order book and profits.

    4. CONCLUSION

    From above report we may conclude that cheema boilers limited has the continuous large
    growth in the field of power boilers. This company wants to take the advantage of its
    background region which has the 10 years experience in this field. From this, cheema
    boilers have a plan to setup a new plant and also want to do the outsourcing of the finished
    goods. For testing these proposals certain principals are established for measuring their
    effectiveness. In case one, if company established a new plant then effective labour,
    machinery and certain aspects are required so this is very easy to collect for cheema boilers
    because this industry is in the same business from past many years. The other criteria of
    cost are also in the hand of the cheema boilers. But this proposal also have the negative
    side if the construction work will take too much time then it become very difficult to
    manage between the old technology and new technology.

    In the case two, if the outsourcing of finished goods is going to start then the quality
    standards must be very high of these products. Other criteria of cost are also take place. For
    this numerous vendors are required. But if cheema boilers want to do the cost cutting then
    only one vendor should be preferred for this work. In this case the risk is that one vendor
    does not have the quality to provide the full material, so the need of second vendor is
    generally arise in this case.

    5|Page
    7. References: -

    www.cheemaboilers.com

    http://www.duncanwil.co.uk/manacc/trial/trial2.htm

    Aman khan, Case studies in public budgeting and financial management, 2007

    6|Page

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