A PROJECT REPORT

ON

A COMPREHENSIVE BUDGETING ANALYSIS OF HASSAN MILK UNION

IN THE SUBJECT

Advanced Cost Accountancy

PREPARED BY

Name: Shahnawaz Patel

Roll No.36 Div: A

UNDER THE GUIDANCE OF

Prof. Kedar Bhide

TO

UNIVERSITY OF MUMBAI
FOR MASTER OF COMMERCE PROGRAMME (SEMESTER - I) YEAR: 2012-13 SVKMS NARSEE MONJEE COLLEGE OF COMMERCE & ECONOMICS VILE PARLE (W), MUMBAI 400056

EVALUATION CERTIFICATE
This is to certify that the undersigned have assessed and evaluated the project A COMPREHENSIVE BUDGETING ANALYSIS OF HASSAN MILK UNION submitted by Shahnawaz Patel student of M.Com. Part - I (Semester I) for the academic year 2012-13. This project is original to the best of our knowledge and has been accepted for Internal Assessment.

Name & Signature of Internal Examiner

Name & Signature of External Examiner

PRINCIPAL Shri Sunil B. Mantri

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DECLARATION BY THE STUDENT

I, Shahnawaz Patel, student of M.Com. (Part I) Roll No.: 36 hereby declare that the project titled A COMPREHENSIVE BUDGETING ANALYSIS OF HASSAN MILK UNION for the subject Advanced Cost Accounting submitted by me for Semester I of the academic year 2012-13, is based on actual work carried out by me under the guidance and supervision of Prof. Kedar Bhide. I further state that this work is original and not submitted anywhere else for any examination.

Place:

Date:

Name & Signature of Student

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ACKNOWLEDGEMENT
I am thankful to Karnataka Co-operative Milk Producers Federation (KMC) for giving me an opportunity to conduct research work in their esteemed organization. I am honored to take this opportunity to sincerely thank Mr. Unni Krishnan, Assistant Manager, KMC, for his keen interest, guidance, continuous encouragement, support and help throughout the period of the project. I wish to express my sincere gratitude to Prof. Kedar Bhide for having helped me get a better perspective of the subject matter and conduct the study effectively.

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Executive Summary
Hassan Milk Union is the producer of milk and various milk products and prepares a budget estimating the various expenses and income for each financial year. The budget is prepared by the accounts department in consultation with the various other departments. However, the estimated figure does not match with the actual figures always. Milk procurement is based on population of milch animal, availability of green fodder. It is almost impossible to predict the exact figures and so deviations are bound to occur. Thus, it becomes necessary to identify the deviations and analyse the reasons for the same. Thus, this study focuses on the calculation of the deviation and ascertaining the reasons for the same.

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CONTENTS
Section. 1 TITLE Objectives Scope of the Study Research Methodology Data Collection Method Introduction Elements of Successful Budget Plan Budgeting Process Fixed and Flexible Budgeting Budgetary Control o Management Tool o Calculation of Variances o Limitations Industry Scenario Origin of Dairying in India History of Indian Milk Market Dairy industry in Karnataka o Background Profile of HCM PSU o Mission o Vision o Aims and Objectives o Role o Functions o Growth o Activities o Product Profile o Production Department o Procurement Department o Purchase Department o MIS o Production Department o Achievements o SWOT Analysis PAGE NO. 8-9

10-17

18-36

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Section. 4

TITLE Budget 2010-11 Budget Process Analysis of the Budget Computing Variances Estimates of the Budget Findings Suggestions Conclusion Bibliography

PAGE NO. 37-51

52 53 54 55

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1.1 Objectives
An effective budgeting system is very vital to the success of any organization. Thus a detailed study on the budget and the budgetary system is being carried out with the following objectives: 1. The main objective is to study about the budgetary system which is being followed at Hassan Milk Union and evaluate the same to know the limitations in the existing system. 2. Computation and analysis of variances for the purpose of control and performance evaluation. 3. Basis on which the yearly budgets are prepared and measures taken to control in variances. Thus, the detail study on the budgetary control system would give a knowledge on how controlling is carried out in an organization.

1.2 Scope of the Study

The study is extended to the accounts department of Hassan Milk Union. The data has been collected for the financial year 2008-09 and has been analysed using pictorial diagrams like graphs, bar and column charts etc. Most of the data has been collected from secondary sources.

1.3 Research Methodology

The study is conducted at Hassan co-operative Milk Producers Societies union Limited, which is situated at B M Road, Hassan over a period of 10 weeks.

1.4 Data Collection Method

In order to fulfil the objectives of the study the data has been collected from both Primary Data Secondary Data

Primary Data To generate primary data for the analysis, discussion was made with company assistant manager of finance, accountants and other officials from the accounts department.

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The data collected from such discussions are coordinated, analyzed and integrated in this study.

Secondary Data For gathering secondary data various other sources were used, which are Different accounting records of the company Magazines and journals Internets and other publication

Limitations of the Study

There are bound to be certain limitations while carrying out a study in an organisation. Due to busy schedule of the employees, it was not possible to get access to each and every, information. Due to certain constraints, current data could not be disclosed.

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2.1 Introduction
One the primary functions of the management is planning. Most of the planning relates to individual situations and individual proposals. However, this has to be supplemented and reinforced by overall periodic planning followed by continuous comparison of the actual performance with the planned performance. Budgetary control has, therefore, become as essential tool of management for controlling costs and maximizing Budget and Budgeting are concepts traceable to the bible days, precisely the days of Joseph in Egypt. It was reported that nothing was given out of the treasure without a written order. History has it that Joseph budgeted and stored grains which lasted the Egyptians throughout the seven years of famine. Budgets were first introduced in the 1920s as a tool to manage costs and cash flows in large industrial organizations. Johnson states that it was during the 1960s that companies began to use budgets to dictate what people needed to do. In the 1970s performance improvement was based on meeting financial targets rather than effectiveness. Companies then faced problems in the 1980s and 1990s when they were not willing to spend money on innovations in order to stay with the rigid budgets; they were no longer concerned about how customers were being treated; only meeting sales targets became essential. Budgeting in business organizations is formally associated with the advent of industrial capitalism for the industrial revolution of the eighteenth century, which presented a challenge for industrial management. Glautier and Under (1987) state that the emergence of scientific management philosophy with its emphasis on detailed info as a basis for taking decision provided a tremendous impetus for the development of management accounting and indeed budgeting techniques. However, budgeting at the early stage of its development was concerned with preparing and presenting credible information to legitimize accountability and to permit correct performance evaluation and consequently, rewards. Over the years, the function and focus of budgeting has shifted considerably and business organization became more complex and their environment became dynamic coupled with the emergence trend, the term budget and budgeting have been differently defined and examined by various scholars in several ways. The Institute Of Cost and Management Accountants (UK) defines a budget as a financial and/ or quantitative statement, prepared and approved prior to a defined period of

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time, of the policy to be pursued during that period for the purpose of attaining a given objective. It may include income, expenditure and the employment of capital.

2.2 Elements of a Successful Budget Plan

The success of the budgeting process in an organization depends on the following essential elements: Accurate forecasting of business activities. Coordinating business activities. Communicating the budgets. Acceptance and cooperation. Reasonable flexibility. Providing a framework for evaluation.

2.3 Budgeting Process

The budgeting process varies widely from one organization to another. Differences in management styles, organization objectives, structure of competition and such other factors affect the procedures companies adopt in budget preparations. However, the common steps are as follows: Obtaining estimates of sales, production levels, expected costs and availability of resources from each sub-unit/division/department. Coordinating estimates. Communicating the budget to responsible managers and the concerned departments. Implementing the budget plan. Reporting the interim progress towards budgeted objectives.

2.4 Fixed and Flexible Budgeting Fixed Budgeting

Fixed Budgeting The Institute of Cost and Management Accountants, London, defines a fixed budget as the budget which is designed to remain unchanged irrespective of the level of activity actually attained. It is based on a single level of activity. Fixed budgets do not change when production level changes. This budget is rarely used as the actual output is often significantly different from the budgeted output.
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Flexible Budgeting A flexible budget is a budget that is prepared for a range, i.e., for more than one level of activity. It is a set of alternative budgets to different expected levels of activity. This budget is also known as variable budget, dynamic budget, step budget, sliding scale budget, expense formula budget and expense control budget. The underlying principle of a flexible budget is that every business is dynamic, ever-changing and never static. A flexible budget has the following features:

1. It covers a range of activity. 2. It is flexible and facilitates performance measurement and evaluation.

2.5 Types of Budget

Budgets are the end process of the budgeting process. The number and types of budgets in a business enterprise depends on the size and nature of business. However, in a manufacturing concern, the following budgets are generally prepared: (A) Operating and Functional Budgets: 1. Sales budget. 2. Production budget. 3. Production cost budget. (i) Direct material budget. (ii) Direct labour budget. (iii) Factory overhead budget. 4. Ending inventories budget. 5. Cost of goods sold budget. 6. Selling expense budget. 7. Administrative expense budget. 8. Budgeted income statement. (B) Financial budgets: 1. Capital expenditure budget. 2. Research and development budget. 3. Cash budget. 4. Budgeted balance sheet.

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5. Budgeted statement of changes in financial position.

Sales Budget The most important budget, which all other budgets are contingent upon, is the sales budget. Sales budget forecasts the future sales. The information about past performance is the starting point for sales forecasting. After collecting all relevant information sales budget is prepared.

Production Budget After preparing sales budget, the production budget is prepared. A production budget is stated in physical units. It specifies the number of units of each product that must be produced to satisfy the sales forecasts and to achieve the desired level of closing finished goods inventory. Units to produce= budgeted sales + desired closing inventory of finished goods beginning inventory of finished goods.

Production Cost Budget A production cost budget summarizes material budget, labour budget, the factory overhead budget and may be expressed and analysed by departments and or products.

Ending Inventories Budget An inventory budget can be prepared to find out the values of direct materials and finished goods inventory.

Cost of Goods Sold Budget A cost of goods sold budget summarizes direct material, direct labour, factory overhead and ending inventory.

Selling Expense Budget This budget shows the budgeted cost of promoting sales for the budget period. It is also known as marketing expense budget.

Administrative Expense Budget

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This budget covers the administrative costs for non-manufacturing business activities. It contains expenses like directors remuneration, legal charges, audit fees, salaries, rent, office expenses, postage, telephone etc.

Budgeted Income Statement A budgeted income statement summarizes all the individual budgets, i.e., sales budget, cost of goods sold budget, selling budget and administrative expense budget.

Capital Expenditure Budget The budgeting of capital expenditure is one of the important areas of managerial decisions. Capital expenditure budgets are prepared for both short and long- range projects depending on the requirements of the business firm. Short- range projects are implemented during the accounting period. Long-range projects are not executed in the current period; they are expressed only in general terms. They become budget commitments only when the time for their implementation approach

Cash Budget A cash budget contains detailed estimates of cash receipts (cash inflows) and disbursements (cash outflows) for the budget period or some other specific period. Such a budget helps to ascertain the cash requirements needed for a plant or equipment expansion programme. It shows the availability of funds for a given period of time and thus helps to make financial decisions.

Projected Balance Sheet A projected balance sheet represents the expected financial position at a particular date. The projected balance sheet automatically determines the arithmetical accuracy of other budgets since they are used in preparing the forecasted balance sheet.

Budgeted Statement of Changes in Financial Position The projected statement of changes in financial position is usually prepared from data in the budgeted income statement and changes between the projected balance sheet at the beginning of the budget period and projected balance sheet at the end of the budget period. This projected statement is very useful to management in the financial planning process.

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2.6 Budgetary Control

Budgetary control is a means of control in which the actual state affairs is compared with the budget so that appropriate action may be taken with regard to any deviations before it is too late. The use of a budget to control a firms activities is known as budgetary control. Budgetary control has the following main objectives: 1. To provide an organized procedure for planning. It provides a detailed plan of action for a business over a definite period of time. 2. To coordinate all the activities of various departments of a business firm in such a manner that the maximum profit will be achieved for the minimum use of resources. 3. To provide a means of determining the responsibility for all deviations from the plan (budget) and to supply information on the basis of which necessary corrective action may be taken. Thus, budgetary control has the objective of controlling cost.

2.6.1 Budgetary Control as a Management Tool

Budgetary control has become an essential tool of management for controlling costs and maximizing profits. It may be conceived as one of the supreme examples of the rationality in management. It is a useful management tool in comparing the current performance with the pre-planned performance with a view to attain equilibrium between ends and means, output and effort. It corrects the deviations from pre-planned path through the media of observation, research planning, control and decision-making and thus helps in the performance of the future activities in an orderly way. It uncovers uneconomies in operations, weaknesses in the organization structure and minimizes wasteful spending. It acts as a friend, philosopher and guide to the management. Its advantages to the management can be summarized as follows: i. Brings Economy in Working It brings efficiency and economy in the working of the business enterprise. Budget helps to achieve a goal and attain the target. The budget helps to bring about efficiency in the results. ii. Establishes Coordination It coordinates the various divisions of a business, namely, the production, marketing, financial and administrative divisions. It forces the executives to think and think as a group. This results in smoother operation of the entire unit.

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iii.

Guards Against Undue Optimism It guards against undue optimism leading to over-expansion because the targets are fixed by executives after a careful thought. Acts as a Safety Signal It acts as a safety signal for the management. It shows when to proceed cautiously and when manufacturing can be safely undertaken. It serves as an automatic check on the judgment of the executives as losses are revealed in time which is a caution to the management to stop wastages. Optimum Mix It helps management in obtaining the most profitable combination of different factors of production. This results in a more economical use of capital. Management by Exception Budgetary control reveals variations of actual performance from budgeted performance. The variations point to the root inefficiencies and thus enabling the management to consider only the items that do not go according to plan and leave the others, i.e., to concentrate on exceptions.

iv.

v.

vi.

2.6.2 Effective Budgetary Control

In order to make the budgetary system really effective, the management should pay attention to the following aspects: Consultation with Non-financial Executives- The effective participation of nonfinancial executives should be solicited in the formulation of the budget in order to make each manager emotionally committed to the budget. Total Corporate Exercise- Budgeting should be a total corporate exercise. Piecemeal budgeting cannot be effective. True Delegation of Authority and Responsibility- There should be a true delegation of authority and responsibility beginning with top management itself. Each executive should have maximum opportunity to take decisions within the scope of his/her authority. Past Experience- Past experience is a useful guide for the future. It is, therefore, necessary that points revealed by past experience should be taken note of while formulating plans for the future.

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 Minimum Limits only- budget should be taken as only minimum and not the maximum level of performance. However, budget should not be suffocating. Sufficient freedom should be given to the concerned executives within the overall framework. Good Reporting System- Budgeting cannot be successful unless there is a proper feed-back system. The reporting system should be so devised that it not only tells about major variations but also the persons who are responsible for these variations. The causes for the variances should be analyzed and the management should be kept informed about the major and proper remedial measures should be taken by the management at appropriate level and appropriate time.

2.6.3 Calculation of the Variances in Budgetary Control

Variances = Actual yearly total Budgeted yearly total

% of variances = variance amount X 100 Budgeted yearly total

2.6.4 Limitations of Budgetary Control

The budgetary control system is not a perfect tool. It has its own limitations which are as follows: Budgeting and Changing Economy- The preparation of a budget which gives a realistic position of the firms affairs under inflationary pressure and changing government policies is really difficult. Thus, the accurate position of the business cannot be estimated. Time Factor- Accuracy in budgeting comes through experience. Management must not expect too much during the development period. Not a Substitute for Management- Budget is only a management tool. It cannot substitute management. Besides that no budgetary program can be successful unless adequate arrangements are made for supervision and administration. Cooperation Required- The success of the budgetary control depends upon the willing cooperation and teamwork. Budget officer must get co-operation from

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all departmental managers. These managers must feel the responsibility for achieving or bettering departmental goals laid down in the budget.

3.1 Industry Scenario

India is called the country of villages where it covers nearly 70% of its total area. In this relation we can say that Indian economy is base on rural activities and their development. Therefore we have to give prime importance to the rural activities. A dairy is a place for handling milk and milk products. Technology refers to the application of scientific knowledge for practical purposes. Dairy technology has been defined as that branch of dairy science which deals with the processing of milk and the milk products on an industrial scale. In developed dairying countries such as the USA the year 1850 is seen as the dividing line between farm and factory scale production. Various factors distribute to this change in these countries such as the concentration of the population in cities where the jobs are plentiful, rapid industrialization, improvement of transportation facilities, development of machines etc., The rural areas are identified for the production, urban areas are for the processing of the milk.

3.2 Origin of Dairying in India

Around 1500 BC to 2000 BC the Aryans were first to domesticate cattle. Use them for tilling their land obtain milk to be consumed as food. Again it were Aryans who priced the milk of a cow more than its meat, forbade its slaughter, created legends about it and even worshipped it. Hindus even to this day consider cow as sacred. Besides it were only the East (India/China) which domesticated buffalo as milch animal and succeeded so well that today, more than half the total production of milk in India is obtained from buffalo. Most of the farmers have one milk animal; they sell the milk through local milk contractors or middlemen. These traders have always exploited the poor and uneducated milk producers. It was in the late forties, when integrated approach for dairy development based on
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farmers owned milk co-operative was first adopted at Anand. The system includes milk procurement productions and marketing through farmer co-operatives. In India, the market milk technology may be considered to have commenced in1950 with the functioning of the Central Dairy of Aarey Milk Colony and milk product technology in 1956 with the establishment of AMUL dairy, Anand. The system of collective ownership, operation and control of milk trade by farmers came to be known as ANAND PATTERN. Anand pattern has given them an opportunity to have access to the modern technology. The Brand ' is the household name for Pure and Fresh milk and milk products. The premises institution is NDDB and IDC for application of the Anand pattern throughout the country. The whole project under which replication was envisioned, is named as operation flood. The success of Anand pattern depends as establishing a strong co operative infrastructure at the grass root level, making economically viable to strengthen. Dairy industry offers employment opportunity to the people so as to help the farmers to get fair price of milk. The farmers are provided with medical facilities to their cattle. Milk is becoming an alternative life line in our rural economy. With the advent of white revolution that is SKHEERA KRANTI in the same pattern of Denmark and Holland. Export of dairy products plays an important role in our foreign trade. It increases the foreign exchange and national income of our country and also economic development of our country.

3.3 History of Indian milk market industry:

Organized milk handling was made in India with the establishment of Military Dairy Farms Handling of milk in co operative milk unions established all over the country on a small scale in early stages. Long distance refrigerated rail-transport of milk from Anand to Bombay since 1945. Pasteurization and bottling of milk on a large scale for organized distributed was started at: Aarey - 1950 Calcutta - 1958 Delhi - 1959 Mumbai - 1961 Madras - 1963 Establishment of milk plants under the 3 year plans for dairy development all over India. They were taken up the dual object of increasing the national level of milk consumption and ensuring better returns to the primary milk producer. Now India is one of the richest milk producing country in the world. In 1999 it produced milk up to 770 laths tons and the milk valued up to 75000 cores and 13% of total production in the world is produced by India itself.

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3.4 Dairy Industry in Karnataka 3.4.1 Background

In June 1974, an integrated project was launched in Karnataka to restructure and reorganize the dairy industry on the co-operative principle and to lay foundation for a new direction in dairy development. Work on the first ever, World Bank aided dairy development project was initiated in 1975. Initially the project covered 8 southern districts of Karnataka and Karnataka Dairy Development Corporation was set up to implement the project. Dairy developmental activities was set up with dairy co operative societies at grass root level, milk unions at the middle level and dairy development corporation at state level as an apex body with the responsibility of implementing Rs.51 cores project. After the closure of operation flood II the dairy development activities which continued under operation flood III ended on 1996. The post operation flood works are financed by NDDB under different terms and conditions. KMF has 13 Milk Unions throughout the State which procure milk from Primary Dairy Cooperative Societies (DCS) and distribute milk to the consumers in various Towns/Cities/Rural markets in Karnataka. The Federation has a Board consisting representatives of Milk Producers and the Government nominees. The day to day functions of the Federation is managed by a group of professional managers headed by the Managing Director. Karnataka Cooperative Milk Producers' Federation Limited (KMF) is the Apex Body in Karnataka representing Dairy Farmers' Co-operatives. It is the second largest dairy cooperative amongst the dairy cooperatives in the country. In South India it stands first in terms of procurement as well as sales. One of the core functions of the Federation is marketing of Milk and Milk Products.

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Mother Dairy, Bangalore, a Unit of KMF, is set up by NDDB on 7.12.1984. The Dairy which has expanded from 4LLPD to capacity of 7.00 LLPD has a unique nature of homogenising the milk and selling to its consumers through 50 Automatic Bulk Vending Booths, 83 Shoppers and 70 FRP tanks. The Dairy also caters Milk in sachets and Milk Products through its 289 retailers. The average sale of milk per day is 2.60 Lakh litres during the year 2008-09. The entire requirement of milk is procured from Kolar Milk Union. The Dairy produces Butter, Ghee, Curds, and Ice Cream & Skim Milk Powder. The activities of all the Departments at Mother Dairy are being carried out through an on- line computer system

3.5 Profile of Hassan Co-Operative Milk Producers Societies Union Ltd. 3.5.1 Introduction
The Union was registered on 30th March 1977 with the operational jurisdiction extended to 3 Districts namely Hassan, Kodagu &Chikkamagalur. The Dairy was setup under the Operation Flood II & III and has a processing capacity of 1.2 Lakh Litres of milk per day. The Union also has a Dairy at Kudige with a capacity of 50,000 litres per day which is the first Dairy in Karnataka State started during January 1955. The Union has three Chilling Centres at Birur, Holenarasipur and channarayapatna with chilling capacity of 20000 liters per day at Birur and Holenarasipura and 100000 liters per day at Channarayapatna. The Union also produces Ghee, Peda, Curds, Khova and Butter Milk. The Union procures on an average 4.07 Lakh litres of milk and sells 1.04 Lakh litres per day. There are 5 Bulk Milk Coolers & 46 Automatic Milk Collection Units in the Union. Hassan Dairy was established under the World Bank aid with an initial handling capacity of 60,000 KGPD and was being managed by Karnataka dairy development corporation. In the year 1987 with an idea of bringing all milk allied activities such as milk procurement, milk processing and milk marketing the Hassan dairy and the Kudige dairy (the first commission dairy plant) were handed over to Hassan Co operative Milk Producers Societies Union. The integrated system of monitoring the milk procurement, processing and marketing activities by milk producers themselves was established.

3.5.2 Mission Statement

Hassan milk union aims to render the best services at normal cost to its members to increase milk production and produce good quality milk by paying remunerative price

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throughout the year, thereby improving their economic and social condition while ensuring high quality milk and milk products to the delighted level of the consumers at competitive price. 3.5.3 Vision Statement The union thrives hard to adopt the modern and eco friendly technologies to produce milk and milk products of international standards to make our presence prominent in the global market.

3.5.4 Aims and Objectives Hassan Co-Operative Milk Producers Societies Union is completely an autonomous body consisting of representatives from milk producers as policy makers To produce continuous and remunerative market for the surplus milk in the rural areas. To supply quality milk to customers in the urban areas at a competitive price. To provide the technical inputs necessary to produce good quality milk and to facilitate increase in milk yield. To provide self employment to rural folk and to make them economically self sustainable by which the migration of rural folk to urban areas is minimized. To prevent the role of the middle men in the milk business and to increase their returns. To establish a bridge between rural and urban folk and to play a vital role in changing he social and economic status of the rural folk.

3.5.5 Role of Diary Co-Operative Society

The dairy co operatives are organized in rural areas for the milk producers keeping in view the domestic principles and values. These societies educate, guide, and support the milk producers in dairy development activities.

3.5.6 Functioning of Diary Co-Operatives

The dairy co operative function all through the year in two shifts, this will provide continuous market for the surplus milk produced and the payment for the milk supplied will be distributed to the producers on the predetermined day. Input activities include: Veterinary services like regular vaccination

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 Artificial insemination services Supply of balanced cattle feed and fodder slips Training facilities

3.5.7 Growth of the Union

The milk union which was established in the year 1977 with 100 functional dairy co operatives collecting 10,300 Kgs of milk per day is procuring on an average 386462 Kgs per day from 1122 co operatives as on date with the increase in milk production the Hassan dairy with the initial capacity of 60,000 KGPD was expanded to 120000 KGPD during 1996.The union has also established three chilling centers with a chilling capacity of 20,000 KPD and 100000 KPD.

3.5.8 Activities of Hassan Milk Union

1. Organization of dairy co operative societies: As at the end of March 2010, 1197 societies have been registered. Out of functional societies, 330 women societies are functioning. 2. Membership Enrolment: As on 31st March 2010 173396 members have been enrolled of which 71046 are small farmer48866 are marginal farmers, 22199 are agriculture labourers and 31285 are other big farmers. 3. Milk procurement activities: The present average milk procurement from 1122 milk societies is 386462 Kgs/day.

3.5.9 Product Profile

Milk is marketed under Nandini brand name in different types. The pricing adopted is mainly on four categories namely: Double Toned Milk Rs 14 /1000ml Toned Milk Rs 16 /1000ml Standardized (homogenized) Milk Rs 18 /1000ml Full Cream Milk Rs 20 /1000ml Apart from this, milk is marketed in 3 variants Nandini Goodlife with 3.5% fat and 8.5% SNF Nandini Smart with 1.5% fat and 9% SNF Nandini Goodlife Slim with 0.5% fat and 9% SNF

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Types of milk and milk products marketing by HAMUL

Nandini Toned Milk

Karnatakas most favourite milk, Nandini Toned Milk is a Fresh and pure milk containing 3.0% fat and 8.5% SNF. Available in 500ml and 1 litter packs. Better to use within a day from the date of pack. Maximum Retail Price is Rs. 13/- per litre.

Nandini Homogenized Toned Milk

Nandini Homogenized Milk is pure milk containing 3% Fat and 8.5% SNF. This is homogenized and pasteurized. Consistent right through, it gives you more cups of tea or coffee and is easily digestible. Available in 500 ml packets.

Nandini Full Cream Milk

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Nandini Full Cream Milk, Contains 6% Fat and 9% SNF. A rich, creamier and tastier milk, ideal for preparing home-made sweets and savouries- available in 500ml and 1 litre packs. MRP Rs. 15/- per litre

Good life

Cow's pure milk, UHT processed bacteria free in a tamper-proof tetra-fino pack which keeps this milk fresh for 60 days without refrigeration until opened. Available in 500 ml Fino and in 200ml bricks at premium stores across the state.

Smart

Cow's pure milk, homogenized, double toned UHT processed milk bacteria free in a tamper proof tetra fino pack which keep the milk fresh for 60days without refrigeration until opened. At present the milk is being directly home delivered on request? Available in 500ml Pack.

Slim

Cow's pure milk, homogenized, Skimmed. UHT processed milk bacteria free in a tamper proof tetra-fino pack which keep the milk fresh for 60 days without refrigeration until

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opened. Nandini Goodlife slim skimmed milk is 99.5% fat free. Available in 500ml Fino and in200ml bricks at premium stores across the state.

Shubham

Buffalo's milk, 100% pure pasteurized processed and packed hygienically. This milk has 5% fat and 9% SNF. Available in 500ml and litre, packs.

Mysore pak

Fresh and tasty, Nandini Mysore Pak is made from quality Bengal Gram, Nandini Ghee and Sugar. It's a delicious way to relish a sweet moment. Available in 250gms.PP container shrink packed to preserve freshness. Can be kept for 7 days. Advised to consume fresh to enjoy its excellent taste.

Nandini Curd

Nandini Curd made from pure milk. Its thick and delicious giving you all the goodness of homemade curds. Available in 200 grams and 500 grams packs. Nandini butter is rich smooth and delicious.

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Nandini Ghee

A taste of purity, Nandini Ghee made from pure butter. It is fresh and pure with a delicious flavour. Hygienically manufactured and packed in a special pack to retain the goodness of pure ghee, having Shelf life of 6 months at ambient temperatures. Available in 200ml, 500ml, 1000ml, and sachets and also in 5lts tins and 15.0 kg tins.

Nandini Butter

Nandini spiced buttermilk is a refreshing health drink. It is made from quality curds and is blended with fresh green chillies, green coriander leaves, asafoetida and fresh ginger. Nandini spiced butter promotes health and easy digestion. It is available in 200ml packs and is priced at most competitive rates, so that it is affordable to all sections of people.

Nandini Butter Milk

Nandini butter milk is Rich, smooth and delicious. Available in 100 grams (salted), 200 grams and 500 grams cartons both salted and unsalted.

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Cheese

Delicious Cheese, processed with utmost care to ensure the smooth and rich taste of pure cheese. It's highly nutritious an excellent source of milk proteins and a rich source of calcium. Need to be kept under refrigeration. Available in 100gms carton

Paneer

Pure and tasty dishes with Nandini Paneer! A fresh, nutritive product made by coagulating pure milk, it is an excellent source of milk protein. Nandini Paneer is ideal for vegetarian dishes such as mutter Paneer, sag Paneer and various other dishes. Refrigerated storage in preferable. Available in 200gms pack, specially packed in a five layer film and vacuum packed to preserve its quality. Bulk packings are also available.

Flavoured milk

Sterilized flavoured milk, a nutritious and healthy drink and an all-season wholesome drink available in five different flavours - pineapple, rose, badam, pista and natural orange. Apart from refreshing energy. Available in 200ml.

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Nandini Peda

No matter what you are celebrating! Made from pure milk, Nandini Peda is a delicious treat for the family. It is maintained at room temperature, for approximately 7 days. Available in 250grams pack containing 10 pieces each.

3.5.10 Production Department Every morning by 9.30am, the scheduled is drawn depending on the consolidation of all the information from different units. Entire milk has to dispatched before the next raw milk comes in. All the availability options should be weighed and instant decisions have to be taken. Presently the day to procurement on an average comes up to 2,50,000 litres per day. All the indents are moved there by 11am and this has to be intimated to the packing division. Packing material purchase is based on the integrated business plan. The rolls have to be weighed and bought out because by the end of the month the statement has to be prepared if the loss is 2% over and above the loss is recovered from the suppliers. If the loss is >1% and <2% that loss is recovered from the packing contractor. For each and every product the organization has fixed some standard. For 500ml it is 45-55 micron. For 1000ml it is 55-65 micron. This comes in pre-printed rolls but the date of packing, batch number and machine number is printed on the time of packing. After the packing being done, it is handed over to the finished goods section then dispatch starts. The longest route is Hassan to Kudremukh (180km) through an insulated vehicle. The document from the last point has to be bought back. No credit services. Day to day payments is being made. Only for milk pourers it is 7 days and sometime it even goes up to 15 days. The statement is being made deducting the commission and the next days indent also has to be collected. In case of any eventualities other than natural calamities, it is accepted. Suppose any negligence, accidents penalty is fixed.

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3.5.11 Marketing Department Marketing should be considered as the core business function in this competitive world as it establishes, develops, and commercializes long term customer relationships and helps in meeting organizational goals. Pricing is a federal policy and KMF decides the marketing price of the milk end the milk products. KMF has adopted pricing mainly on four categories namely Double Toned Milk Rs 14/100ml Toned Milk Rs 16/1000ml Standardized (homogenized) Milk Rs 18/1000ml Full Cream Milk Rs 20/1000ml As Hassan Milk Union is procuring 4 Lakh milk per day and its local market requirement is 1.2 Lakh Kgs/day. As such the excess milk is being sent to sister unions and Interstate federations and balance if any will be sent for conversion into butter and SNP. 3

3.5.12 Procurement Department The milk co operative societies will be organized in villages where there is excess milk production. The extension staff of the union will visit the villages and conducts the survey about the village population, animal population and the availability of the surplus milk and report to the office for consideration. The office will issue necessary instructions to organize the societies. Then the first Gramasabha meeting will be conducted and select the promoters to promote the Dairy cooperative in the village and with the permission of Registrar of Cooperative with the recommendation of Milk union the Village Chief promoter will permitted to collect the share capital and with all fulfilment of required norms then proposal will be sent to registrar of co operative department for registration. On registration, milk co operative society will be commissioned and starts procuring milk from the producers. The milk procured will be transported through trucks to nearby chilling centers and dairy where milk is processed further. The society will be provided with veterinary services, AH services, feed and fader services, and training and extension services. The village dairy Cooperatives will receives payments for the milk supplied to Union once in a week and the same will be distributed among its produce members every week and day is fixed which is convenient to the concerned village.

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3.5.13 Stores/ Purchase Department

Purchase Purchase/stores Officer Sub staff Hassan Milk Union is having a separate purchase department and purchases are made based on the requirements of various department and purchases are made as per the relation laid out. Hassan Milk Union is having full pledged stores which supplies materials to various based on the indents or requirements and the people who are working in the stores are very well worked in inventory management. Both purchase and store departments are working under the supervision of manager dairy.

Stores:

The storage place for almost all necessary goods which come into the factory premises: But here the store is the place where all these are there: 1. Packing materials 2. Stationery 3. Spares 4. Oil and lubricants 5. Sugar 6. Testing chemicals 7. Cleaning acids 8. Uniforms and Shoes 9. Cans for societies 10. Ledgers

The activity takes place in stores:

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Requisition letter: First the manager of concerned department depending upon the need for the goods sends a requisition letter to the manager dairy and then once approved the same reaches the stores in charge; the purchase section places an order.

Purchase order: But for the goods regular nature depending upon the stock level, the stores in charge takes up the responsibility to place order and have the materials ready when ever required. Here in the co operative sector as per the transparency act if the goods and where the capital expenditure is involved, the enquire letters are sent the suppliers and who ever quotes the least and also with quality gets the order. And the same purchase order copy goes to 1. The supplier 2. The store in charge 3. Accounts section 4. Concerned user section

Purchase order also includes 1. Mode of payment after and before supply 2. Terms and conditions (taxes) 3. Delivery period 4. Mode of dispatch

Invoice Against the purchase order the concerned supplier gives the invoice. Once the invoice is received the cross checking of materials as per the specifications purchase order is done. The concerned department communicated about the goods and the concerned person gives a user section remark on the quality of the product. Hence the goods received note is sent to concerned user section.

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3.5.14 MIS

Management Information System Assistant Manager System Officer Support Staff The main activity of the MIS department in the organization is to act as the information source for all the levels of management for the decision making in different situation. Hence to say the integration of information from all the departments for the decision making for all the three levels which exist in the organization: 1. Top level 2. Middle level 3. Lower level The information collected from the dairy and various chilling units on on-line and information collected from Marketing on every day will be processed and send to KMF every day and also monthly procurement and input wing and the data related to artificial insemination and progress achieved in Fodder and Feeds division are collected and necessary information will be prepared and sent to various department as well will be submitted to CEO and other section heads to enable them to take necessary action and also with the help of these data MIS department will prepare the annual Targets to the Dept of Procurement and Input and Marketing. Also, all these data is given to the MIS department and the integration on monthly basis is taken up and the report as sent to the managing director and same place before the monthly meetings held of all the milk unions.

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3.5.15 Production Department:

The dairy works in 3 shifts to receive milk in the morning and evening shifts. The milk received from DCS in cans will be tested for quality and weight is recorded. The payment will be made based on the quality and the quantity. The milk received in tankers will be weighed and tested and pumped into chillers and stored in insulator storage tank. The local market needed quantity will be pasteurized and stored in insulated HMST for packing toned milk, double toned milk and standardized homogenized milk. Apart from this, union also produces ghee, Peda, flavoured milk, curds and butter milk. The excess fat in the milk will be separated in the form of cream and issued for butter making. The cream breaks into butter and butter milk where butter is issued for ghee making and butter milk is tested for fat/COB (clout on boiling) and it will be reprocessed or will be drained out. Based on the market demand, butter is drawn for ghee production and sale will be packed as per requirement.

3.5.16 Achievements
Hassan milk union is procuring milk from all the 13 taluks of three districts and selling quality milk in all the taluks and small towns. The union and all the dairy co operatives are being managed by the democratically elected boards from among the milk producers. The technical input to dairy co operatives and the dairy plants are managed by well trained, committed professionals and technical team. 91% of the milk co operative societies are operating under profit The union has successfully implemented the animal induction program for SC ST and OBC since 1996 with the financial assistance from central and state governments and rendered direct loans to the beneficiaries at lower interest rates. 254 women dairy co operatives (as on May 2009) have been organized since 1997 under support training and education program(STEP) The union has also implemented mini dairy scheme and bring entrepreneurial environment in the rural area. The union has set up Artificial insemination facilities for dairy co operatives. The union has rendered emergency veterinary services round the clock. The union has implemented foot and mouth disease control program(FMDCP)

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Fertility camps are being conducted once in three months by inviting experts in the field. The union supplies quality fodder slips and seeds through the year and facilitates the availability of green fodder. The union is insuring the life of milk producers and dairy co operative staff with the co ordination from Life Insurance Corporation and National insurance company since 1997-1998 under samajika suraksha yojana.

The union has launched the YESHASHVINI program to the milk producers wherein the milk producers are provided with the best available medical facility at free of cost.

Smokeless chula have been provided to the milk producers with an intention of improving the health of rural women folk. The union has successfully implemented the Total energy management program and Total quality management program (quality excellence from cow to consumer) since 2001 respectively.

Quality awareness programs are being conducted regularly for school children, house wives and consumers. The union has got ISO 9001:2000 certification from TUV India, Mumbai. The union has got Energy Conservation Award

3.5.19 SWOT Analysis

Strengths Procurement and Input( P&I) network Goodwill ISO 9001:2000 certified Second largest producer Vast market

Weaknesses WTO standards Advertisement execution in its early Early stages of automation and computerization

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Opportunities Enter rural market Neutraceuticals Exports

Threats Entry of big players WTO standards Government policies

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4.1 Budget 2008-09 of the Union

The first objective of this study is to analyze the budget of the organization. The budget of the organization is prepared by a budget committee with consultation with the various departments. The budget is prepared on the basis of the estimations given by each department and the same is consolidated into a yearly budget by taking into consideration the various sources of income and expenditure. For the purpose of analysis, the budget of 2008-09 of Hassan Milk Union is considered wherein the current year figures are compared with the actual of the year to obtain the variations thereof.

4.2 Budget Process at Hassan Milk Union

The budget prepared by any organization is an estimate of the various sources through which revenue would be generated and the various expenditures which would be incurred during the year. Excess of income over expenditure would result in net profit and excess of expenditure over income results in net loss during the year. At Hassan Milk Union, the budget is prepared by the accounts department with consultation from various other departments.

Estimation of Procurement of Milk from Various Societies The budget of Hassan Milk Union mainly depends on the procurement of milk from its various societies. Thus the estimation of the same plays a vital role in the budget process. The accounts department obtains estimation on the quantity of procurement from the MIS department based on the past experience and the trend. Procurement of milk depends on the seasonal fluctuations. In the milk industry, a period from October to January is considered as a flesh period during which there is abnormal procurement i.e. over and above the normal procurement. A period of 3 months from March to June is considered as lean period during which the quantity of milk obtained is less. The remaining months in the year generate normal procurement. Also in the milk industry, once in 3 years is considered as lean period wherein the procurement of milk reduces in all the diaries throughout the country. However, there has been a change in the trend recently wherein in November the procurement is normal and May to August is a period when the procurement is abnormal and January to April has turned out to be lean period. Based on these trends, the MIS department estimates the procurement and that is the basis on which the yearly budget is based.

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Marketing Plan is Set Out The Marketing department of Hassan Milk Union lays down its marketing plan which gives an estimate of the local sales of milk and various milk products. H.R.I.H.E, Hassan Page 54 55. A Study on Budgetary Control System Based on this plan, an estimate is made on the milk which is to be sent to other diaries and what quantity of milk is to be sent for conversion. Based on this, the transportation costs and conversion costs are estimated.

Target is Laid down by Different Departments Each department of the Union lays down its own targets for which has finance to be provided for by the accounts department in its budget. All this has to be incorporated for in the yearly budget.

Costs are estimated Based the plans of various departments, the total expenditure and revenue are penned down in a prescribed manner which would estimate the net profit/ loss for the year.

4.3 Analysis of Budget

Here each item of the budget is calculated as a % of sales and analyzed. The yearly figures are considered for these calculations.

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The table above shows the projected annual figures of the on various items for year 2008-09. It also shows the various incomes and expenditure as a % to sales. As per the budget, the Hassan Milk Union is expecting a net profit of Rs 31, 32,000 for the year with a net profit ratio of 0.19%. The major source of revenue is from sales of milk and milk products in local markets and inter-diaries. There are certain other sources of income as well like interest on deposits and other income. However, they contribute to only 0.15% and 0.37% respectively which indicates it is a minor source of revenue to them. The major expense projected is purchase of milk and milk products which is about 86.35% of sales. Hassan Milk Union procures milk from various societies at different rates. It is the basic raw material required for processing into Skimmed Milk Pouches and for conversion to various milk products like ghee, butter, Peda, buttermilk etc, The graph depicts the budget in a diagrammatic manner. The graph shows that the main items in the budget are sales and purchases. All the remaining items are very minor and are thus hardly pointed on the graph.

4.4 Comparing the Actual with the Budgeted Figures and Computing the Variances.
The table on the next page shows the annual budgeted figures and the actual figures which is obtained from the audited reports of the union. The following 2 formulas have been used to calculate the variances and the % of variances.

Calculation of Variance and % of Variance Variances = Actual yearly total Budgeted yearly total

% of variances = variance amount X 100 Budgeted yearly total

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The graph shows that the estimate of sales and purchase is very less compared to the budgeted amount. The same can be shown using a pie-chart which shows the variances in the various particulars.

4.5 ANALYSIS OF VARIOUS ITEMS ESTIMATED IN THE BUDGET Opening Stock

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INTERPRETATION The chart above shows the budgeted and actual results with regard to stock of milk and various milk products at the beginning of the year. The budgeted figures were Rs 50.45 Lakh and the actual expenditure incurred was Rs 155.14 Lakh. Thus, there is a variance of Rs 104.69 Lakh. The stock at the beginning of the year depends on the closing stock at the end of previous year. The closing stock at the end of 2007-08 was Rs 155.14 Lakh which, therefore, became the opening stock of the year 2008-09.

Purchase and Material Consumption

INTERPRETATION The chart above shows the budgeted and actual results with regard to the purchases and material consumption. The budgeted figures were Rs 14167.26 Lakh and the actual expenditure incurred was Rs 18810.83 Lakh. Thus, the variance is Rs 4643.57 lakhs which is highly inconsistent.

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This variance is mainly due to high purchase of milk and milk products made during the year. The Union accepts the entire quantity of milk which it procures from the various societies at different rates depending on the profitability of the Union, and the purchases vary substantially from the budgeted amount every year.

Procurement and Transport Expenses

INTERPRETATION The chart above shows the budgeted and actual results with regard to the procurement transportation cost. The budgeted figures were Rs 372.97 lakhs and the actual expenditure incurred was Rs 637.48 lakhs. Thus, the variance of Rs 264.51 lakhs is an adverse variance. This variance is due to the addition of various routes from which the diary procures milk. The number of societies from which milk is obtained as increased and an increase in number of sources would obviously increase the transportation cost of procuring the raw milk.

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 Processing and Manufacturing Expenses

INTERPRETATION The chart above shows the budgeted and actual results with regard to the process manufacturing expenses. The budgeted figures were Rs 438.54 lakhs and the actual expenditure incurred was Rs 931.05 lakhs. Thus, the variance is Rs 492.51 lakhs which is quite high. The deviation in the process manufacturing expenses is mainly due to the variation in the conversion cost which shows a difference of Rs 174.68 lakhs. The conversion cost mainly depends on the milk procured by Hassan Milk Producers Union Society. Whenever the milk procured is in excess, there would be no market for milk. In such case, excess milk is sent to inter-diary and then after its sent for conversion to butter, SMP. As we have seen that the procurement of milk was very high during the year, the conversion cost has also varied considerably which in turn is the main cause for the process manufacturing process to deviate.

Sales

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INTERPRETATION The chart above shows the budgeted and actual results with regard to the sales generated during the year. The budgeted figures were Rs 16405.07 lakhs and the actual expenditure incurred was Rs 21852.33 lakhs. Thus, the variance of Rs 5447.26 lakhs is highly a favourable variance. Sales are the main source of revenue for any organisation. Thus, the higher sales it is the better for the organisation. The higher variance in it has a positive impact. However it becomes necessary to analyse the causes for it. The deviation in sales is mainly on account of sales to inter dairies and other states which have varied considerably. This is again due to high procurement during the year. The excess of milk has been sold to various other diaries which have been a major source of income. Also ghee has a very good demand in the local market near Hassan due to which the sales of loose and sachet ghee is much more than anticipated.

Closing Stock

INTERPRETATION The chart above shows the budgeted and actual results with regard to the closing stock at the end of the year. The budgeted figures were Rs 70.56 lakhs and the actual amount has increased by Rs 248.09 lakhs. Thus, the actual closing stock at the end of the financial year 2008-09 was Rs 318.65 lakhs. Closing stock depends on the sales generated, production during the year and also the opening stock.

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Opening Stock + Production = Sales + Closing Stock Closing Stock = Opening Stock + Production - Sales As there is a variance in the opening stock, purchase and production and also in the sales made during the year, the closing stock is bound to show variations from the anticipated figures. The closing stock of this year becomes the actual opening stock for next year.

Staff Expenses

INTERPRETATION The chart above shows the budgeted and actual results with regard to the staff expenses incurred during the year. The budgeted figures were Rs 986.77 lakhs and the actual expenses were Rs 997.8 lakhs. Thereby, there is an adverse variance of Rs 11.03 lakhs. The various expenses under this head show minor deviations from the budgeted figures. The major variance was in Leave Encashment Insurance Premium paid during the year. The deviation was due to the additional premium paid by the union during the year. The amount received at the time of maturity is used to pay the employees at the time of their retirement for the leave not availed by them during their service in the union.

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 Administrative Expenses

INTERPRETATION The chart above shows the budgeted and actual results with regard to the office and administrative expenses incurred during the year. The budgeted figures were Rs 134.06 lakhs and the actual expenditure incurred was Rs 99.06 lakhs. Thus, the actual expenditure is less than the budgeted amount by Rs 35 lakhs thereby making it a favourable variance in total.

Selling and Distribution Expenses

INTERPRETATION The chart above shows the budgeted and actual results with regard to the selling and distribution expenses. The budgeted figures were Rs 289.33 lakhs and the actual amount is Rs 358.74 lakhs. Thus, there is an adverse variance of Rs 69.41 lakhs. The major deviation was in the tanker charges incurred in the selling and distribution expenses for the year. The tanker charges had been much more than budgeted because the sale of milk and milk products to the

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various inter diaries have increased. With the increase in the sales, the cost to transport the products also increased.

Interest and Bank Charges

INTERPRETATION The column chart above shows the budgeted and actual results with regard to the expenses on interest and bank charges. The budgeted figures were Rs 18.25 lakhs whereas the actual amount incurred during the year is Rs 15.58 lakhs. Thus, there is a favourable variance of Rs 2.67 lakhs due to the reduction in expense and thereby increasing profit in total. The Union proposed to borrow loan from the bank at the beginning of the financial year and thus interest calculations were done for the entire 12 months of the year. However, the loan was borrowed mid-year and thus, the amount of interest paid was less than the budgeted figure. This caused a favourable variance in this head.

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 Depreciation

INTERPRETATION The chart above shows the budgeted and actual results with regard to the depreciation charged on the fixed assets during the year. The budgeted figures were Rs 60 lakhs and the actual expenditure incurred was Rs 133.30 lakhs. Thus, the variance is Rs 73.30 lakhs which is quite high. At the time of preparing the budget, Hassan Milk Union followed the Straight Line Method of depreciation and thus expected the monthly depreciation to be Rs 5 lakhs which amounts to Rs 60 lakhs per annum. However, during 2008-09, the union changed its method of depreciation to Written down Value Method due to which the non-cash expense has been much more than expected. The additions in the fixed assets have also lead to an increase in the amount of depreciation.

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 Other Income

INTERPRETATION The chart above shows the budgeted and actual results with regard to the income generated from other sources. The budgeted figures were Rs 61.48 lakhs and the actual amount has increased by Rs 6.24 lakhs. Thus, the total income from other sources was Rs 67.72 lakhs in total.

Interest on Deposit and Advances

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INTERPRETATION The chart above shows the budgeted and actual results with regard to the income generated from interest on deposits and advances during the year. The budgeted figures were Rs 24.18 lakhs and the actual amount was less by Rs 3.83 lakhs which was due to early withdrawal of deposits from the bank.

Net Profit/Loss

INTERPRETATION The chart above shows the budgeted and actual results with regard to the net profit earned during the year. The budgeted figures were Rs 31.32 lakhs and the actual profit incurred was Rs 117 lakhs. Thus, the variance is Rs 85.68 lakhs which is a highly positive impact. An organisation should try to maximise its various sources of revenue and at the same time it should minimise its expenses and various costs. Excess of income over expenditure indicates profit. And excess of expenditure over income results in loss. At Hassan Co-Operative Milk Producers Societies Union, they have enhanced their sales by Rs 3040.82 lakhs as against the budgeted figure. This has been the main reason for the net profit to be much more than the amount anticipated. However, a deviation in the various expenses has reduced the net profit as against the additional sales generated.

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5. Findings
After carrying out a detailed study on the budgetary control at Hassan Co- Operative Milk Producers Societies Union, Hassan, the following observations were made: Hassan Co-Operative Milk Producers Societies Union prepares a financial budget every year. However, a study on the budget of year 2008-09 shows high inconsistency. Certain expenditures and incomes show major variations. The union follows a budgetary control system. However, it is not followed strictly. Budgetary control system is strictly followed in case of items which are capital in nature. In case of revenue expenses, the organisation tries to stick to its budgetary limits. However, only in rare cases, the budgeted figures match with the actual figures for the year. Every year, after the audit of the annual reports, the accounts department prepares a report on the major variances and excess expenditure incurred during the year. The same is presented in the Annual General Body meeting for ratification for the excess of expenditure. There are certain items of revenue and expenditure which were not taken included in the budget, but however, they were incurred in actual. Due to this, the profit as per the budget format does not match with the actual profits shown in the Profit and Loss Account. The variation is due to omission in the inclusion of these items in the budget. This includes provision for tax, provision for bad and doubtful debts, dividend and bonus from KMF.

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Suggestions
After conducting a detailed study on the budgetary control system of the Union, it is evident that the budgeted amount and actual amount for the year vary substantially. However, in my view, the following points would ensure a better budgetary control system at Hassan Milk Union. The union should prepare the financial budget considering all items of probable expenses. Non-estimation of any expense in the budget may put financial constraints in the working of union as a budget helps to work out the financial plan for the year. \ The budget should be prepared in such a way that the deviations in the expenses are reduced to minimal. The higher the inconsistency in the budget, the higher the fluctuations in the financial position of the Union. The Union has changed the method of depreciation during the financial year. There should be a consistency in the method of depreciation as adopted at the time of preparation of budget and in real practice. Any change in it can put financial burden on the Union. The Hassan Milk Union should follow a strict procedure on the budgetary control technique which would ensure a proper control on the funds of the Union. The Union should involve all the other departments in the preparation of budget. It would bridge the gap between the budgeted figures and the actual figures for the year.

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Conclusion
Budgetary control is an important tool for the management to have an effective check on its working as well as the staff. However, it is seen as a time consuming technique by various organisations and thus do not pay much attention to it. This study examined the relationship between budget and performance of the financial year 2008-09 of Hassan Milk Union. The previous literature and contributions to this study and the problems associated with budgetary control have been reviewed. Through this study it was found that the budget shows high inconsistency and the actual performance varies considerably from the budgeted figures. Following the findings, it is hereby advised that all the managers and business operators to pay more attention to their budgetary control systems, while those without any should endeavour to ensure the set-up of a result-oriented system as it goes a long way in repositioning businesses and organizations from their creeping performance level to an improved and high capacity utilization point.

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Bibliography
1. S.N.Maheshwari and S.K. Maheshwari, Accounting for Management, First Edition, Vikas Publication House Pvt Ltd, Pg no 4.3- 4.7 2. Jawahar Lal, Cost Accounting, Third Edition, Tata McGraw-Hill Publishing Company Limited, Pg no- 775-784 and 798-807 3. I.M.Pandey, Financial Management, Ninth Edition, Vikas Publication House Pvt Ltd, Pg no 754-758 4.

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