Question

You are the head of the engineering department in a certain company. your department has been allocated an annual budget of R2.6 million for this year. it is now towards the endof the financial year and your department has overspent by 25%. your senior manager wants you to justify why this is so. YOur task is to present a report showing all the expense of your department for the year and analyse them in a form of a Pareto analysis and a drill down analysis. in your analysis, ensure that you highlight the cause of your over expenditure, including the failure modes of the equipment. Justify ypur financial over spend with things that affect maintenance such as economic factors (macro and micro), poor workmanship from contractors, shift arrangements, poor quality spares, emergency work that had to be done etc. your report must include at least 3 internet sources and 3 textbook sources.

please include graphs for pareto and drill down analysis or onstructions on how to go about doing it

Answer 1

Given data is

The annual budget of department has being allocated = R2.6 Million

The department has overspent by 25%

i.e., 0.65 Million more

Hence the total expenditure = 2.6+.65

= R3.25Million

Hence the Expenditure overshot by 25% and hence the expenses totally went up.

.The following is the reason which it was caused due to-

1             Change in the government policies making the older machineries redundant and which led to         leasing new machines, which was not an estimated coat in the budget. The total extra cost for leasing   the machines was R.30 Million. Hence this problem caused us .30/.65=46% of the over cost than the estimated.

making of change in the government policies has became the older machines redundant and thus    thus which lead to new machines of leasing,in the budget it is not estimated.i.e.,Extra cost for machines was R.30 Million

Hence this problem caused us .30/.65=46% of the over cost than the estimated.

The department has spent R.10 million for maintaince of wear and tear of lease machines which was 15% of total extra cost. . However if this maintenance were not done then our lease would have been revoked and no production would have happened

.

1.     In the previous financial year there was a strike of labour. Due to which the stalemate cost rose to R.15million which is 24% of the extra cost. Therefore there was a huge demand for labour and higher wages and labour were not there for work
2. To satisfy the demands of the labor the company had to pay a wage hike and which cost the department R.10 million accumulating to 15% of the total cost.

As per pareto analysis we see that 80% of the problems were caused by Machine changes and labor strike. Hence the over expenditure can be explained by these two reasons.