Page 21 - Cost

in most of the times are adverse and the same is being practiced by the collection
principles of management by exception are the department without any review. Te company
allergy of SBU-In-charge. Purchase manager is contemplating for diversifcation of its
is to work in conjunction with stores manager, business from manufacturing alternator parts
production managers and fnance managers of generator to manufacturing of industrial
and production managers are required to work cranes and for this purpose it needs injecting
in conjunction with marketing managers. both debt and equity in terms of Rs.1,000
Scientifc inventory management techniques crores. But it is afraid as to whether people
can help in managing inventory carrying would subscribe to the equity since for last
cost and inventory ordering cost according fve years rate of dividend payment is marginal
to the CMA. Purchase manager can help in even less than that of savings bank interest rate.
getting reasonable discount in following Currently the company has a capital base of Rs.
efective purchase policy. Work study was 2,000 crores out of which 40% is invested in
undertaken by the SBUs fve years back and working capital and remaining 60% is locked
the recommendations of work study group are up in physical and infrastructural assets.
under the cover of dust.
Te CFO of the frm is worried that operational
Finance Functions Perspectives: cost is with upward trend and revenue earning
is with downward trend and it is a very difcult
Te Finance Directorate is headed by Director situation to match revenue with escalating
(Finance) and CFO and is assisted by GM expenses. An Earnings per share is abruptly
(Finance) at corporate level and Finance low and it is difcult to earn the confdence
Function at SBU level is headed by Dy. GM of the investors under such circumstances.
(Finance) who is essentially a qualifed CMA Tere is accumulation of book debts and
as per the policy of the company. According inventory and stores and this disturbs the
to the periodical report generated by Finance short term liquidity of the business. Te
Wing, cash fow is very weak and there cost structure in terms of the cost of sales of
is irregular fow of revenue to the cofer the product comprises of 50%-material, 30%
of the company. Collection cell is under employee costs, 20% overhead and 5% of the
the administrative control of Marketing cost of sales hardly contributes to proft. CFO
Directorate and functionally responsible feels that abnormal loss in material handling
to the Finance Directorate. It violates the and overhead needs to be controlled and the
principles of unity of command and as result it performance based incentive scheme for the
causes an administrative problem for securing employees should be adopted in order to make
accountability and this has been brought to the frm fnancially solvent.
notice of the HR Directorate over time and
again but no workable solution is generated Human Resource Functions Perspectives:
so far. Financing working capital is dependent
of the strength of cash fow. Purchase Te HR Directorate is headed by Director
Department fails to secure more credit period (HR). Te Company has a full-fedged
from the sundry creditors than the collection Human Resource Directorate and it deals with
period allowed to sundry debtors and the recruitment, training and development and

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