Assignment Assessment Report

Campus: Sainik Farms Year/semester 2011-12

Assignment Assignment B
Level: ACL-II
Type
Assessor’s Ms. Monica
Module Name: CMBC
Name
Reqd
Student’s
Manish Verma Submission
Name:
Date
Actual
e-mail id & Mob 9899715278/manish_verma69
Submission
No @yahoo.com
Date
Stream Business Submitted to : ewlci

Certificate by the Student:

Plagiarism is a serious College offence.
I certify that this is my own work. I have referenced all relevant materials.
Manish Verma
(Studen
t’s Name/Signatures)
Expected Assessment Grade Feedback
Outcomes Criteria based on
D,M,P,R
system
General Parameters
Clarity Clear
understanding
of the concept
Analytical Ability to
Thinking- analyze the
problem
realistically
Research Done- Research carried
out to solve the
problem
Formatting & Concise& clear
Presentation- thinking along
with
presentation
Subject Specific Parameters
 Achieved Yes/No
Grades Grade Descriptors
(Y / N)
A Pass grade is achieved by meeting all the requirements
P
defined.
Identify & apply strategies/techniques to find appropriate
M
solutions
D Demonstrate convergent, lateral and creative thinking.

Assignment Grading Summary (To be filled by the Assessor)

OVERALL ASSESSMENT
GRADE:
TUTOR’S COMMENTS ON
ASSIGNMENT:
SUGGESTED MAKE UP PLAN
(applicable in case the
student is asked
to re-do the assignment)
REVISED ASSESSMENT
GRADE
TUTOR’S COMMENT ON
REVISED
WORK (IF ANY)
Date: Assessor’s Name / Signatures:

Assignment B

Ques 1 : Each student will be given one of the under mentioned

industry for assignment work.

• Education Industry
• Manufacturing Industry
• Hospital Industry
• IT Industry
• Transport Industry

The students will have to visit a company from the assigned industry,
meet the Accounts person and do the following:-

a. Find out and understand the Cost procedures followed by the

company.
b. If possible get a sample of cost sheet or Statement of Accounts

A presentation on the above and recommendation for areas of

improvement has to be made.

Ans. Manufacturing Industry- Nestlé India Ltd.

Profile: Nestle India is a subsidiary of Nestle S.A. of Switzerland. Nestle

India manufactures a variety of food products such as infant food, milk
products, beverages, prepared dishes & cooking aids, and chocolates &
confectionary. Some of the famous brands of Nestle are NESCAFE,
MAGGI, MILKYBAR, MILO, KIT KAT, BAR-ONE, MILKMAID, NESTEA,
NESTLE TOMATO KETCHUP, NESTLE Milk, NESTLE SLIM Milk, NESTLE
Fresh 'n' Natural Dahi and NESTLE Jeera Raita

Cost procedure followed in Nestlé India Ltd.- TOMATO KETCHUP

And CHOCOLATES
A company’s production process helps in determine the best way of
accounting for its costs. Process costing works well whenever relatively
homogeneous products pass through a series of processes and they
receive similar amount of manufacturing costs. Nestle accounts for its
vast chocolate chips production by using a process costing system.
Sequential Processing: The units typically pass through a series of
manufacturing or producing departments, in each departments or
process is an operation that brings the product one step closer to
completion.
Parallel Processing: This pattern require two or more sequential
processes to produce the finished goods. Partially completed units are
worked on simultaneously in different processes and then brought
together in a final process for completion.

FLOW OF MANUFACTURING COSTS THROUGH THE ACCOUNTS OF

PROCESS COSTING
(Tomato Ketchup)

Picking Department Flavoring Department Bottling Department

Work in Progress Work in Progress Work in Progress

Materials: Transferred in from

Transferred in from
Fresh tomatoes Flavoring (includes
picking (includes all
Sugar all manufacturing
manufacturing costs)
Salt costs from picking
Distillation – and flavoring)
Materials:
Vinegar
Ketchup
Spices Materials:
Flavoring Labour
Bottles
Applied Overhead
Picking labour Bottling Labour
Applied Overhead Applied Overhead
 COST SHEET
Nestle India Ltd. (Chocolates)

Total output= 4,50,000 units

Particulars Cost per unit Total Cost
Raw Material:
Cocoa Butter=3,00,000
Sugar=3,00,000
Cocoa Solids= 3,20,000
Peanuts= 2,00,000 5.16 23,20,000
Chocolate coated resins= 4,00,000
Almonds= 3,00,000
Vanillin= 1,00,000
Honey=50,000
Boston Baked Bean= 1,50,000

Direct Labour=7,00,000 1.56 7,00,000

Carriage on Material= 2,42,500 0.53 2,42,500
Prime Cost 7.25 32,62,500
Factory Expenses:
Fixed:
Depreciation on Plants &
Machinery=2,57,500
Rent= 1,50,000
Power & Consumables
Stores=1,50,000
Factory insurance=1,50,000
Supervisors Salary=50,000 2.35 10,57,500

Variable:
Electricity charges=50,000
Power & Consumable stores=1,00,000
Running Expenses of
machines=1,50,000
Factory Cost 9.60 43,20,000
Office Administration Expenses
Office staff salary=10,00,000
Rent= 80,000
Computer=1,20,000
Furniture=3,00,000 4.40 19,80,000
Telephone= 10,000
Carriage outward=20,000
Depreciation on furniture=50,000
Salaries of administrative =3,70,000
Rent, rates & taxes=30,000
Office and Administration costs 14.00 63,00,000
Selling & Distribution Expenses
Advertisement(print & local TV
channel)=4,00,000
Petrol=1,00,000 2.00 9,00,000
Delivery Vehicles=2,50,200
Maintenance of delivering
Vehicles=2,50,200
Packing rates= 50,000
Bad Debts written off= 1,00,000

Total Cost 16.00 72,00,000

Net Profit (20% on selling price) 4.00 18,00,000

Sales
20.00 90,00,000

Ques 2 :
1. Discuss the technique of marginal costing as a key for management
problems.
2. The following is the trading and profit and loss account of M/s Prem
Industries for the year ende2d 31 st March 2000.

To Material consumed 708000 By Sales 30000 units 1500000

By Finished Stock (1000
To Direct wages 371000 units) 40000
To Works overhead 213000 By work-in-progress
To Administration overheads 95500 Material 17000
To Selling & distribution
overheads 113500 Wages 8000
To Net profit for the year 69000 Works Overhead 5000

157000
0 1570000

In manufacturing a standard unit, the company’s cost records show that:

a. Work overhead have been charged to work-in-progress at 20% on prime

cost.
b. Administration overheads have been recovered as Rs.3 per finished unit.
c. Selling and distribution overheads have been recovered as Rs.4 per unit
sold.
d. The under-absorbed or over-absorbed overheads have not been adjusted
into the costing P & L a/c.
Prepare:

1. A costing profit & loss account indicating net profits.

2. A Statement reconciling the profit as disclosed by the cost accounts and
that
Shown in the financial accounts.

Ans.
Techniques of Marginal costing:

Profit/volume ratio (P/V Ratio)

When the contribution from sales is expressed as a percentage of sales
value, it is known as Profit/Volume ratio (or P/V ratio). It expresses
relationship between contribution and sales. Better P/V ratio is an index
of sound ‘financial health’ of a company’s product. This ratio reflects
change in profit due to change in volume. Broadly speaking, it shows
how large the contribution will appear, if it is expressed on equal
footing with sales.

P/V ratio may be expressed as:

P/V ratio = (Sales - Marginal cost of sales)/Sales
or = Contribution/Sales
or = Change in contribution/Change in sales
or = Change in profit/Change in sales

Marginal Costing and CVP Analysis

Cost-Volume -Profit analysis is an important tool for profit planning. It
provides information about the following matters:

a) The behavior of cost in relation to volume.

b) Volume of production or sales, where the business will break-
even.
c) Sensitivity of profits due to variation in output.
d) Amount for profit for a projected sales volume.
e) Quantity of production and sales for a target profit level.

Cost-Volume-Profit analysis may therefore be defined as a managerial

tool showing the relationship between profit planning, viz., cost (both
fixed and variable), selling price and volume of activity.

Break –Even Analysis

Break-even analysis is a widely used technique to study Cost-volume-
profit relationship. The narrower interpretation of the term Break even
analysis is defined as a system of determination of that level of activity
where total cost equals total selling price.The broader interpretation
refers to that system of analysis which determines probable profit at
any level of activity.
Break even point (of output) = Fixed Cost/Contribution per unit
Break even point(of sales) = Fixed Cost/contribution per unit *selling
price per unit
= fixed Cost/P/V ratio

Sol.2
COSTING PROFIT AND LOSS ACCOUNT
Particulars Amount Particulars Amount(Rs.)
(Rs.)
To Material 7,08,000 By Sales 15,00,000
Consumed
To Wages 3,71,000 By Closing Stock
To Work 2,15,800 Finished Good 40,000
Overhead
To Administrative 93,000 WIP 30,000
Overhead
To Selling & 1,20,000
Distribution
To Net Profit 62,200 ________
15,70,000 15,70,000

RECONCILIATION STATEMENT
Amount(R Amount(Rs.)
s.)
Profit as per Cost Account 62,200
Add: Over absorbed Overhead
Excess Factory Overhead 2,800
Selling & Distribution 6,500 9,300
71,500
Less: Under absorbed Overhead
Administrative Expenses 2,500
Profit as per Financial Accounts 69,000

Working Notes:
COST SHEET Rs.
Material Consumed 7,08,000
Wages 3,71,000
Prime 10,79,000
Cost
Work Overhead (20% of Prime Cost) 2,15,800
Less: Cost of Work-in-progress 30,000
Work Cost 12,64,800
Add: Administrative Overhead 93,000
Cost of 13,57,800
Production
Less: Closing Stock Of Finished Goods 40,000
Cost of 13,17,800
Goods Sold
Selling & Distribution Overheads(4x30,000) 1,20,000
 _________
Cost of Sales 14,37,800

Profit 62,200

Sales 15,00,000

Total Finished good units during the year = Unit sold-Opening

stock + Closing stock
= 30000 - 0 + 1000
= 31000
Administration overheads have been recovered as Rs.3 per
finished unit
= 31000*3
= 93000

Ques 3 :

Work out in appropriate cost sheet from the unit cost per passenger km for
the year 2006-07 for a fleet of passenger buses run by a Transport Company
from the following figures extracted from its books.

5 passenger buses costing Rs.50000, Rs. 120000, Rs. 45000, Rs.55000 and
Rs.80000 respectively. Yearly depreciation of vehicles 20% of the cost.
Annual repair, maintenance and spare parts – 80% of depreciation. Wages of
10 drivers @ Rs.100 each per month, wages of Rs.20 cleaners @ Rs. 50 each
per month. Yearly rate of interest @ 4%on capital. Rent of six garages @
Rs.50 each month. Director’s fees @ Rs.400 per month, office establishment
@ Rs.1000 per month, licences and taxes @ Rs.1000 every six months,
realization by sales of old tyres and tubes @ Rs.3200 every six months, 900
passengers were carried over 1600 kms during the year.

Sol.
Cost of buses= Rs. 50,000 + 1,20,000 + 45,000 + 55,000 + 80,000
= Rs. 3,50,000
Yearly Depreciation(20% of cost) = Rs. 70,000
Yearly Repairs(80% of Depreciation) = Rs. 56,000
Operating Cost- Sheet
For the year 2006-07
Particulars Amount (Rs.) Amount (Rs.)
(A)Standing Charges
Wages of 12,000
drivers(10x100x12)
Wages of cleaners 12,000
(20x50x12) ____________ 24,000

Interest(4% on capital) 14,000

Directors fees(Rs.400x12) 4,800
Licence & Taxes(Rs. 2,000
1000x2)
Office establishment(Rs. 12,000
1000x12)
Garage rent(6x50x12) __ 3,600
60,400
(B) Maintenance Charges
Repairs, Spare parts etc. 56,000
(-) Sale proceeds from old 6,400
tyres & tubes
___________
49,600
(C) Operating Charges
Depreciation 70,000
Total(A+ B + C) 1,80,000
(E)Passenger Km. 14,40,000
Carried(900x1600)

(F) Cost per passenger Km.

Rs.(1,80,000/14,40,000) 0.125