ABSTRACT
The growth of the business as a whole had been increasing steadily for some years. The project originated because the high level of work in progress in the factory was causing growing concern to management and the terms of reference were to examine the existing production planning and control procedures with the aim of reducing congestion and increasing the return on capital. A phased capital budget was thus constructed and, by comparing the cash requirements with the company’s cash flow and liquidity, it was possible to assess the need for new capital to finance the expansion programme. In this way the necessary facts were made available to enable the decision to be taken to proceed with the expansion programme. The analysis showed that those items representing a small fraction of a turnover were being batched too frequently, while too few batches were being issued for the faster-moving items.
