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Summer Project Report

On
Standard costing in Cavinkare Pvt. Ltd

(Submitted In Partial Fulfillment of the Requirements of the Degree of


Master in Business Administration)

Submitted By:
Pooja Kuckreja
MBA. (2009-11)

COER – School Of Management


Uttrakhand Technical University
Dehradun
7thK.m. Roorkee Haridwar road, Vardhman Puram, Roorkee
Session 2010-11
ACKNOWLEDGEMENT

Any work is not complete and perfect without the sincere help and guidance from various
people who affect our life directly as well as indirectly. This training report of mine would not
have reached its fulfillment hadn’t it been for the guidance and support given to me by various
people whom I came across in the organization. This report is the result of cooperation of the
officials of the various departments in the organization, without which this project wouldn’t
have been completed. So I would like to extend my sincere gratitude to all those people who
have helped me in completion of this report.

My sincere thanks to the Management of Cavinkare Pvt. Ltd for providing me the
opportunity to complete my Summer Internship Project in their esteemed organization. I
wholeheartedly acknowledge the intellectual stimulation of my esteem guide Mr. Rohit
Mishra for his continuous help and guidance throughout the training duration in spite of his
busy schedule.

I would also like to thank my faculty guide Mr. Ranit Kishore of College Of
Engineering Roorkee for his immense help in guiding me and preparing this report.

Lastly I would like to thank College Of Engineering Roorkee for providing me


with a wonderful opportunity to expose myself to the corporate world and learn the intricacies
of running a business and letting the manager within me to grow substantially.

Thank you.

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DECLARATION

I Pooja Kuckreja, a student of MBA of College Of Engineering Roorkee, under Uttarakhand


Technical University, Dehradun, uttarakhand, (2009 – 11) do hereby declare that the
Summer Project Report entitled “A study on Standard Costing” is the outcome of my own
work and the same has not been submitted to any University/Institute for the award of any
Degree/Diploma.

Under the guidance of: Prepared by:

Mr. Ranit Kishore Pooja Kuckreja

MBA (2009-2011)

Place: COER School of Management

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CERTIFICATE

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PREFACE

Practical work experience is the integral part of individual learning. An individual who is
learning management concept has to undergo this practical experience to be a future
executive.

Master of Business Administration (MBA) is two year program which inserts management
knowledge in an individual and to make individual completely practical, so practical
experience is must.

CAVINKARE Pvt. Ltd. offered me a project on “STANADARD COSTING” to understand


costing concept of the organization.

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Executive Summary

A primary objective in manufacturing a product is to minimize unit cost while achieving


certain quality specifications. Almost all products can be manufactured with a variety of
inputs that would generate the same basic output and output quality. The input choices that are
made affect the standards that are set. It can develop standards for costs and other
performance criteria to ensure consistent improvement. It provides feedback to managers by
comparing dimensions of actual service predetermined measures.

The methodology adopted was:


Data collection: I collected the data from their internal sources i.e. SAP (System Application
Program) which is ERP program used as a software for their internal working.

Data analysis: The data was analyzed through material variance report, process order status,
conversion cost reports of CavinKare, Hardwar.

Based on the data analyzed it was recommended to observe deviation from standard cost but
also measure performance of the company and this is carried out from followings:
Performance measurements:

(a) Production volume ratio = standard hours of actual output x 100


Budgeted hours of output

(b) Efficiency ratio = standard hours of actual output x 100


Actual hours worked

(c) Capacity usage ratio = actual hours worked x 100


Budgeted hours of input

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CONTENTS
Page No.

Objectives 8

Chapter 1 Company Profile 9-18

Chapter 2 SAP (System Application Program) 19-21

Chapter 3 Structure of finance departments 22-26

Chapter 4 Theoretical background 27-32

a) Standard cost
b) Basic components of cost

Chapter 5 Analysis 33-56

a) Variance Analysis
• Material variance
• Labour variance
• Overhead variance
b) Budget
c) Conversion cost component
d) Functions of costing sections
e) Costing process
f) Process to be followed by manufacturing company

Chapter 6 Research Methodology 57-58

Chapter 7 Observations / findings 59-60

Chapter 8 Suggestions / Recommendations 61-62

Chapter 9 Summary / Conclusions 63-64

Reports 65-69

• Conversion Cost Report


• Material Variance Report
• Process order status
• Product wise costing

Bibliography 70

Annexure – Standard reporting format for Variance Analysis 71

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Objectives
1. To analyze the procedure to be followed while preparing the annual budget.
2. To analyze the variances occurred in various segments of company
3. To study standard costing of materials, labor and overheads and how to set these
standards.
4. To understand significance of variance analysis to curtail cost associated with cost
components
5. To study performance measurement through variance analysis
6. To study significance of standard cost in budget preparation

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COMPANY
PROFILE

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COMPANY PROFILE

Success is a journey not a destination. CavinKare began with a young mind choosing the road
less taken. In 1983 with a single product, CavinKare started out as a small partnership firm.
The Company that began its journey as Chik India Ltd was renamed as CavinKare Pvt. Ltd
(CKPL) in 1998. With innovative Entrepreneur C.K. Ranganathan at the helm, CavinKare
emerged into a successful business enterprise.

Smart marketing and clear product positioning not only ensured CavinKare's growth but also
helped the company broaden its product portfolio extensively. The company now markets ten
major brands. Over the years, CavinKare has achieved a competitive edge with sound
understanding of mass marketing dynamics. The company offers quality Personal care (hair
care, skin care, home care) and Food products borne out of a keen understanding of consumer
needs and keeping up company's the values of innovation and customer satisfaction.

Today, CavinKare, having established a firm foothold in the national market, is increasing its
popularity in the international arena. A dedicated Research & Development center, equipped
with latest equipment and technologies, constantly supports the various divisions in their
endeavor. The Company, which primarily relied on contract manufacturing for many years,
has now set up its own world class plant at Haridwar to cater to the demand of both domestic
and international market.

CavinKare Group has crossed a turnover of 8819 million INR in 2009-2010. The Company
has employee strength of 576, an all India network of 1300 Stockiest catering to about 25 lakh
outlets nationally. CavinKare's astute professionalism, innovative products and consistent
quality are results of its significant corporate practice.

"To succeed we believe that we need total commitment and highest standard of ethical and
corporate behaviour in order to provide the best for our consumers, stakeholders and
employees".

The other group companies of Cavinkare – Packaging India Private Limited (PPIL), and
Cavin Plastics and Chemicals Private Limited (CPL) have also established a firm foothold in
the market with their innovative packaging products and trunkey services.

Corporate Vision

"We shall achieve growth by continuously offering unique products and services that would
give customers utmost satisfaction and thereby be a role model."

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PRODUCTS MANUFACTURED AT CAVINKARE HARIDWAR

Shampoo - Chik; Nyle; Meera; karthika


Fairness Cream - Fairever
Body Lotion - Nyle
Talcum powder - Spinz
Hair dye - Indica
Hair wash powder - Meera and karthika
Toothpaste - Rize

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CHIK SHAMPOO CHIK SATIN SHAMPOO

NYLE SHAMPOO

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MEERA BADAM SHAMPOO MEERA HAIRWASH POWDER

KARTHIKHA HAIRWASH POWDER

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FAIREVER FAIRNESS CREAM FAIREVER FRUIT CREAM

SPINZ TALCUM POWDER

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NYLE COLD CREAM & WINTER LOTION

INDICA HAIR DYE

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RANGE OF CAVINKARE’S PRODUCT

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Manufacturing at CavinKare

CavinKare manufactures its entire portfolio of products through in-house Plant at Hardwar
(Uttaranchal) and as well through Contract Manufacturing by outsourcing it to Third Party
Manufacturing Units. The Third party units are located across India in places like
Pondicherry, Noida, Assam and Faridabad. These units produce and pack various products
under the different CavinKare brands. CavinKare makes sure that quality and consistency is
maintained in all of these units as per the R & D specifications and manufacturing standards.

CavinKare Pvt Ltd,


Plot no.16,17, Sector - 4
IIE, SIDCUL
Ranipur
Hardwar - 249403
Ph : 01334 239246/7 , 326156

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CKPL Plant at Haridwar

CavinKare's own Manufacturing Plant which got commissioned in 2006 is situated in


picturesque state of Uttaranchal at Sidcul Industrial Estate, Hardwar with an area of 8
acres with a built up area of around 1 lakh square feet. It is at a distance of 225 kms
from New Delhi and 52 kms from state capital Dehradun. The Plant capacity is around
5000 Metric Tons and built with an investment of INR 70 crores. The Plant is
environment friendly with effective waste management systems in place. Currently,
shampoos, creams, moisturizing lotions, hair dyes and talcum powder are being
manufactured here in various sizes and variants. The entire machinery in the Plant is
imported in order to have the best output, conforming to international manufacturing
standards.

The Strategic decision of the Company to get into manufacturing for the first time after
nearly 23 years of its existence was to have better control over quality and produce
consistent supplies. This also helps enhance capacity of production to cater to next
three years of Company growth, time management as well as to reduce freight cost.
The Plant has vertically integrated manufacturing (manufacturing to packaging) with
very minimal human intervention during the process.

The Plant has a lean organizational structure consisting of Plant Head, Resource
Leaders and Associates. Close to 199 associates are currently employed in the Plant.
Most of the associates are locals and freshly passed out students from high school.
They undergo CavinKare sponsored course in manufacturing from Dehradun Institute
of Technology for 1 month for concept development. The students have an in-Plant on
job training for 1 year before they get finally absorbed in Company rolls.

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SAP
SYSTEM
APPLICATION
PROGRAM

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SAP (SYSTEM APPLICATION PROGRAM)
It is an ERP program developed by the German Company. Its database is maintained in
Oracle, which is most secured, fastest and versatile language to maintain data. Following are
the various features of SAP:

1) It is very flexible, as organization can mould it as per there 3 operation requirement.


2) It updates data on real life basis, i.e. the effect of every transaction entered is reflected
in related accounts automatically with maximum delay of 2-5 seconds.
3) This system facilitates preparation of MIS reports without any delay, in the format
required by the management, hence provides desired information to the right time in
the right format.
4) It is very secure in the sense that for assign even a single transaction proper
authorization is required without which data can neither be accessed nor can altered.
Each individual is provided with unique username and password, using which one can
access data as per the authorization given to him/her.
5) It is an online system; an individual can perform his task anywhere, within an
organization, by logging in using his user id.
6) This system is compatible with most of the software, which are most commonly used
for accounting purposes in an organization. For e.g. MS-Excel, Flat File etc.
7) Manual data updating is also possible through flat files like notebook.

INFORMATION SYSTEM

RESPONSIBILITY

SAP support and SAP maintenance.


1) System Administration.
2) Ensure high availability of systems and network.
3) Development of additional reports in SAP.
4) Hardware & software procurement.
5) Identify and implement new technology initiative which is relevant & beneficial to
CKPL.
6) Ramco HR System support.

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ACTIVITIES
1) SAP System administration using SAP tool viz. BASIS.
2) Database & UNIX system monitoring & tuning.
3) Configuration changes/ enhancement to SAP and Ramco HR System.
4) Identify & implement additional features of SAP that would be useful to all
depatments.
5) Ensure appropriate authorization is given to various SAP users.
6) Maintain & manage company’s IT & communication infrastructure.
7) Coordinate with hardware maintenance party to ensure high up time of machines.
8) Coordinate with service provider for WAN (Wide Area Network).
9) User training.

CURRENT INFRASTRUCTURE
1) SAP works using Oracle RDBMS on UNIX o/s.
2) Local Area Network at HO and the ROs.
3) Wide Area Network (WAN) connecting ROs, R & D and Pondicherry at HO through a
service provider.
4) Desktops PCs are Celeron, Pentium range of machines using Windows 95/98, PIII,
PIV, using windows XP.
5) Office automation – lotus smart suite

APPLICATION

The application modules deployed at HO and at the regional offices are:

1) SAP (FI-Financial accounting; SD-sales & dist.; MM material management)


2) Ramco HR & payroll.
3) Internets
4) Web based system to connect TPU’s – Cavinkonnet.
5) Web based system for field force & RS-Cavinkomm.

E-Mail
Internet based messaging is used with domains and sub domains for HO, R & D, Pondy
office and regional offices. Mail server- Mdaemon; mail client – outlook express.

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FINANCE
SECTION OF THE
COMPANY

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ORGANISATION STRUCTURE

Mr. Sameer Singh Bhadauria


(Factory manager)

Mr. Rohit Mishra


(Assistant manager-A/C)

Miss Richa Sharma Mr. Antim


(Costing officer) (Jr. Costing officer)

Mr. Varun Kumar Mr. Akhilesh Mishra


(Accounts officer) (Treasury officer)

Mr. Rupesh Aggarwal Mr. Pradeep Bhatt


(Commercial tax officer) (Accounts Payable Officer)

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• Variance • Funds • Preparation
ACCOUNTING
COSTING

COMMERCIAL TAXATION
analysis management & submission
• Variance • Budgeting of excise
settlement • Processing of return
• Process order TDS/TCS • Preparation
closing • Accounting of & filling of
• BOM analysis RM & PM sales tax
return
• Costing run
• Filling of ‘c’
forms & form
31/16 (Road
permits)

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RESPONSIBILITY & AUTHORITY: It is the responsibility of the employees
working in accounts function that the procedures put in place are practiced in its entirely &
without any deviations.

Costing section:
Activities undertaken in costing area:

A) Variance analysis for all finished goods (FG) &semi finished goods (SFG).
i) Ensures the detailed analysis of all variance for all FG & SFG production
orders created during JC (Journey Cycle).

B) Variance settlement

C) Process order closing without any error.

D) BOM (Bills Of Material) Analysis

E) Costing run: Updating of conversion costs.

Commercial taxation:
Activities undertaken in Commercial Taxation area:

A) Excise related work


i) Preparation & Submission of monthly excise return
ii) Coordinate with excise authorities for export & dispatch/ planning department.
iii) Filling of other required document to excise authorities as and when required.
iv) Maintenance and filling of excise return.

B) Sales tax work


i) Preparation & filling of annual sales tax returns.

C) Work contract tax


D) Others
i) ‘c’ forms / forms 31/16 (Road permits)

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Accounting
A) Accounts and Finance works
i) Funds management
ii) Payment to vendor
iii) Ensure closing at regular time intervals.
iv) Scrutiny of all GL code (heads) & review the same.
v) Vendor reconciliation of RM (Raw Material) & PM (Packing material).

B) Material & other Sales Accounting


i) Processing & scrutiny of TDS/ TCS/ & WCT accounting.
ii) Accounting of RM/PM & Purchase Returns.
iii) Accounting of DM water & Bulk scrap recovery.

C) Vendor payment
i) Preparation of cheques to make payments.

D) Bank reconciliation

E) Receipts from various scrap customers

F) Cash –
i) Daily cash payments
ii) Cash receipts

G) GR(Goods receipt) / IR(Invoice receipt) of revenue & capital vendor


H) GR for all purchases
I) Purchase order
J) Revenue & capital vendor reconciliation
K) Raising of Debit notes.

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THEORATICAL
BACKGROUND

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STANDARD COSTING
It is a technique which uses standards for costs and revenues for the purpose of control
through variance analysis. It is an extension of standards set for machine time, labor time and
material usage by the application of standard machine cost per hour, standard wage rates and
standard prices of material, standard cost includes standard overheads.

Definitions:
“Standard Costing may be defined as a technique of cost accounting which compares the
standard cost of each product or services with the actual cost to determine the efficiency of the
operation, so that any remedial action may be taken immediately”

According to CIMA London Standard Costing is, “the preparation & use of standard costs,
their comparison with actual costs & the analysis of variances to their causes & points of
incidences”

Basically there are two groups of standards:

1. Quantity Standard: it should be determined on the basis of engineering and technical


specifications and should not be revised frequently.

2. Price Standard: It should be set on the basis of forecast of market trends and should
essentially require periodic revision.

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Basic Components of Cost

On the basis of Behaviour / Nature / Variability:

Variable Costs: These are costs which tend to vary or change in relation to volume of
production or level of activity. These costs increase as production increases and vice versa.

E.g. cost of raw material, direct wages etc. However, variable costs per unit are generally
constant for every unit of the additional output.

Cost

Output

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Fixed Costs: The cost which remains fixed irrespective of the change in the level of activity
output. These costs are not affected by volume of production.

E.g. Factory Rent, Insurance etc. Fixed Costs per unit vary inversely with volume of
production i.e. if production increase, fixed costs per unit decreases and vice-versa.
Sometimes, these are also known as Capacity Costs or Period Cost.

Cost

Output

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Semi-variable Costs: These are those costs which are party fixed and partly variable.
These are fixed up to a particular volume of production and become variable thereafter for the
next level of production. Hence, they are also called Step Costs.

Some examples are Repairs and Maintenance, Electricity, Telephone etc.

Cost

Output

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On the basis of Elements:
1) Materials – Cost of tangible, physical input used in relation to output/production.

For example, cost of materials, consumable stores, maintenance items etc.

2) Labour – Cost incurred in relation to human resources of the enterprise.

For example, wages to workers, Salary to Office Staff, Training Expenses etc.

3) Expenses – Cost of operating and running the enterprise, other than materials and labour,
it is the residual category of cost. For example, Factory Rent, Office Maintenance,
Salesmen Salary etc.

On the basis of Relationship:

1) Direct Costs: Costs which are directly related to / identified with / attributable to a
Cost Centre or a Cost unit.

Example: Cost of basic raw material used in the finished product, wages paid to site labour in
a contract etc.

2) Indirect Costs: Costs that are not directly identified with a cost centre or a cost unit.
Such costs are apportioned over different cost centers using appropriate basis.

Examples: Factory Rent incurred over various departments; Salary of supervisor engaged in
overseeing various construction contracts etc.

Note: All indirect costs are collectively called as Overheads, since they are generally incurred
over various products (cost units), various departments (cost centers) and over various heads
of expenditure accounts.

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ANALYSIS

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Material Conversion
Cost Cost

BOM Standard
Quantity Cost Over /
Material Under
Variance Recovery

Consumption
Actual Cost
booked by
through bills
Production

Cost of finished goods includes material cost & conversion cost. Standard of material cost can
be set according to the BOM quantity & actual is that which is booked by the production
department as consumption. Difference between these two is known as material variance.

Conversion cost includes five components i.e. labour, utilities, power, depreciation, &
overheads. Standard cost of these components are set on the basis of analysis of past budgets
& actual which is come in the form of bills. Difference between these two is over recovery or
under recovery.

FG codes BOM Qty BOM Val Actual Actual Variance Var.


Consumption Cons. Value
Value
IN0005B11 Total 5199769 3858001 5192920 3842167 6849.774 15834.26

INTERPRETATION:
BOM quantity amount is more than actual consumption’s cost booked by the production it
means it is the favorable variance.

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Variance Analysis

Variance analysis is a control technique. The control process involves comparison of actual

costs (AC) with the standard costs (SC). Variances represent the difference between actual

cost (AC) and standard cost (SC). These are basically related to performance deviations. If

AC is less than SC, it is a sign of efficiency and the difference is termed

‘favorable’/‘positive’. If it is more than SC, it is a sign of inefficiency and the difference is

referred to as ‘unfavorable’/‘negative’.

 Analysis of Standard Vs Actual consumption


 Over/Under variance both should be properly evaluated & analyzed during the
process.

Variances need to be informed to the management at regular intervals.

Cost Variance

The cost variances relate to the costs of a manufacturing enterprise. The three elements of the

costs of such an enterprise are:

 Material Cost Variance (MCV)

 Labour Cost Variance (LCV)

 Overhead Cost Variance (OCV)

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Material Cost Variance

Material cost variance is the difference between the standard cost of materials and the cost of

materials actually incurred.

MCV on per unit basis

MCV = (SQ*SP*AO)-(AQ*AP*AO)

MCV on aggregate basis

MCV = (TSMC-TAMC)

Where; SQ = Standard usage of material per unit

SP = Standard price of material per unit

AO= Actual output in units

TSMC = Total standard cost of actual output

AQ = Actual usage of materials per units

AP = Actual price of materials per units

TAMC = Total actual cost incurred

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Material Price Variance

Material price variance is the difference between the actual price paid for purchase of material

and the standard price.

When actual price exceeds standard price, the variance is unfavorable (U/A): Favorable (F)

results when standard price is greater than actual price. There will be no variance if both the

prices are equal.

Material price variance = (SP-AP)*AQ

For the facts; in example the MPV would be:-

(Rs15 – Rs20)*220kg = Rs220 (Unfavorable)

Responsibility for MPV – MPV is mainly the responsibility of the purchase officers who are

in change of making the entire purchases of the firm.

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MATERIAL USAGE OR QUANTITY VARIANCE (MUV)

Material Usage Variance occurs when actual usage of materials differs from standard usage.

Material usage variance = [(SQ*AO)-(AQ*AO)]*SP

For example, the MUV would be:

= [(2*100) - (2.2*100)]* Rs 14

= Rs 280 (Unfavorable)

Since the actual consumption of materials is more than the standard quantity required for

producing 100 units of output, the MUV is unfavorable.

Responsibility for MUV

The overll responsibility for this variance lies with the production personnel.

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MATERIAL VARIANCE REPORT

For the product IN0005B11


FG codes Input BOM BOM Val Actual Actual Var.
Material Qty Consumption Cons. Variance Value
Value
IN0005B11 501146 5142 101406 5141 105661.6 1 -4255.53
501147 370051 26627.17 368385 27628.88 1666 -1001.71
501149 2220296 657909.2 2220295 656049.9 1 1859.34
501150 370051 466264.3 370049 464769.6 2 1494.7
501163 56.254 5712.52 0 0 56.254 5712.52
501178 140.151 4375.52 0 0 140.151 4375.52
501575 2359.334 512972.9 2359.333 512871.6 0.001 101.31
600325 11377.63 1520279 11237.22 1501517 140.408 18761.31
600327 2220296 562454.7 2215453 573667.9 4842.96 -11213.2
IN0005B11 Total 5199769 3858001 5192920 3842167 6849.774 15834.26

INTERPRETATION:

For the finished good IN0005B11 different type of raw material are used some raw material

variance are favorable whose standard cost is more than its actual consumption cost like

501149, 5001150, 501163 (these are the codes of raw material used in manufacturing a

particular product) & some raw material cost are unfavorable whose standard are lower than

the actual consumption cost like 501146, 501147, 600327. But overall variance of this product

is favorable because total amount of standard cost is more than its actual consumption cost.

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MATERIAL VARIANCE REPORT

For the product IN0005B11N


FG codes Input BOM Qty BOM Val Actual Actual Variance Var.
Material Consumption Cons. Value
Value
IN0005B11N 501146 719 12036.06 719 12036.23 0 -0.17
501147 51738 3621.66 51738 3880.35 0 -258.69
501149 310425 99336 310425 104334 0 -4998.03
501150 51738 65189.88 51738 65282.15 0 -92.27
501163 7.865 798.61 0 0 7.865 798.61
501178 19.595 611.76 0 0 19.595 611.76
501570 5.363 1179.86 1.898 417.56 3.465 762.3
501571 14.801 2220.15 0 0 14.801 2220.15
501575 339.415 73934.77 339.415 73933.73 0 1.04
600325 1590.732 212553.6 1590.732 212553.6 0 0.01
600327 310425 80710.5 310425 80710.5 0 0
IN0005B11N Total 727022.8 552192.9 726977 553148.2 45.726 -955.29

INTERPRETATION:

For the finished good IN0005B11N different type of raw material are used some raw material

variance are favorable whose standard cost is more than its actual consumption cost like

501163, 5001178, 501170 (these are the codes of raw material used in manufacturing a

particular product) & some raw material cost are unfavorable whose standard are lower than

the actual consumption cost like 501146, 501147, 501149 & overall variance of this product is

unfavorable because total amount of standard cost is less than its actual consumption cost.

The difference between actual & standards cost of this finished good is Rs. 955.29

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LABOUR COST VARIANCE (LCV)

Labour cost variance is the difference between the standard labour costs and the actual labour

costs.

LCV on per unit basis:-

LCV = (SH*SR*AO) - (AH*AR*AO)

LCV on aggregate basis:-

LCV = (TSLC - TALC)

Where, SH = Standard labour hours required per unit

SR = Standard wage rate per hour

AO = Actual output achieved during the period

AH = Actual labour hours spent per unit

AR = Actual wages rate per hour

TSLC = Total standard labour cost of actual output

TALC = Total actual labour cost of actual output

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OVERHEAD VARIANCES

A) Variable Overheads

Variable overheads cost variance (VOCV) (unit basis) or

VOCV (aggregate basis)= [(AH * AO * AVOR) – (SH * AO * SVOR)

i) Variable overheads spending variance (VOSV) = TAVOC - TSVOC

ii) Variable overhead efficiency variance (VOEV)

VOEV = [TAVOC – (TAH * SVOR)]

B) Fixed Overheads
Fixed Overheads cost variance (FOCV) {Output Basis}
FOCV = [TAFOC – (SFOR per unit * AO)]
Or FOCV (time basis) = [TAFOC – (SFOR per hour * SH * AO)]

i) Fixed overheads spending variance (FOSV) = TAFOC - BFOC


ii) Volume variance (Output basis) (VV)
VV = [(NO – AO) * SFOR per unit]

Fixed overhead efficiency (FOEV) = [(TAH - ASH) * SFOR per unit]

Calendar variance (CV) = (AD - SD) * SFOD

Capacity Variance (CV) = [(TAH - TNH) * SFOR per hour]

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Budget
Budget is a financial and/or quantitative statement, prepared and approved prior to a defined
period of time of the policy to be pursued during that period for the purpose of attaining a
given objective. It may include income, expenditure and employment of capital.

Preparation of Budget estimates

• Preparation of budget on the basis of expenditure incurred in previous years.

• Analysis and Review of all direct cost written last year actual projected estimates and

production trend.

• Analysis and review of indirect cost and all the other elements of cost.

Conversion Cost: The sum of direct wages, direct expenses and overhead cost of
converting raw materials to the finished stage or converting a material from one stage of
production to the other.

LABOUR

POWER

OVERHEAD

DEPRECIATION

UTILITY

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Components of budget are fixed cost, depreciation, labour, cost, utilities,
power, and fuel.
1) Fixed cost- fixed cost are associated with inputs that do not fluctuate in response to
changes in the total activity or output of the firm within relevant range of volume but
fluctuate beyond that range.
Cavinkare pvt ltd includes following charges as fixed cost-
 Bank charges
 Pantry & Canteen expenses
 Professional charges expenses
 Factory maintenance
 Insurance stock at godowns
 Insurance assets a/c
 Lab expenses & glass wares a/c
 Salaries
 Printing, stationary & consumables a/c
 Consumable a/c (computers)
 Bonus a/c
 Conveyance reimbursement a/c
 Company contribution to PF a/c
 Leave travel allowance a/c
 Fax charges
 Guest house expenses
 Freight expenses
 Courier expenses
 Xerox expenses
 Rate & taxes
 Birthday gift

After totaling all the fixed charges the total is divided by the breakeven volume, this is done to
get fixed cost per ton, then it is divided by 1000 to get fixed cost per kg and this rate would
remain same for the rest of the year.

There are chances that the entire item will not be sold in the year, so in that case Cavinkare
take contingencies margin of 5% to recover the fixed cost.

2) Depreciation- The rate of the depreciation is taken from the previous year’s budget.
If a machine produced more than one product than rate is divided among all of them
and it is called common depreciation rate.
After calculating total depreciation it is divided by the volume of the product and then
it is converted into rate per kg.

Page | 44
3) Labour cost- Labour cost is variable component under budget.
Labour cost is calculated as follows:
Standard labour required for breakeven volume x rate per casual labour/ sales volume.

4) Utilities- Utilities include maintenance related part. It includes boiler, pasteurizing,


compressed air, DM water, soft water. Costing of all the above is done separately, then
all are added to get the total cost of utilities. Then total utility is divided by the sales
volume to get the cost per ton and then converted into rate per kg.

5) Power- Power includes two variables


a) Power from electricity department
b) Indigenous power made by own

Page | 45
CONVERSION COST REPORT
Brand CHIK Meera & karthika Nyle
SKU 4 7.5 4 7.5 7.5 30
FIXED COST per kg 2.89 2.89 2.89 2.89 2.89 2.89
DEPERECIATION per kg 1.37 1.37 1.37 1.37 1.37 1.37
LABOUR COST
Bulk processing per kg 0.02 0.02 0.02 0.02 0.02 0.02
Packing per kg 0.46 0.40 0.46 0.40 0.40 3.49
Material handling per kg 0.31 0.31 0.31 0.31 0.31 0.31
UTILITIES
Cleaning in place(CIP) per kg 0.01 0.01 0.01 0.01 0.01 0.01
Air Handling(AHU) per kg 0.07 0.07 0.07 0.07 0.07 0.07
Efluent Treatment(ETP) per kg 0.00 0.00 0.00 0.00 0.00 0.00
Utilities consumed in Bulk per kg 0.04 0.04 0.04 0.04 0.04 0.04
Packing utilities per kg 0.00 0.00 0.00 0.00 0.00 0.00
POWER
for bulk preparation per kg 0.02 0.02 0.02 0.02 0.02 0.02
for packing per kg 0.79 0.50 0.79 0.50 0.50 0.08
Total cost per kg 5.99 5.63 5.99 5.63 5.63 8.31
No. of pieces per case 3600 1440 3600 1440 720 192
Spefific Gravity 1 1.025 1 1.025 1.025 1.025
Weight per case 14.4 11.07 14.4 11.07 5.535 5.904
Bulk Level (per Kg)
Labour 0.18 0.18 0.18 0.18 0.18 0.18
Power 0.02 0.02 0.02 0.02 0.02 0.02
Overheads 1.44 1.44 1.44 1.44 1.44 1.44
Utilities 0.12 0.12 0.12 0.12 0.12 0.12
Depreciation 0.69 0.69 0.69 0.69 0.69 0.69
Total per kg at Bulk level 2.45 2.45 2.45 2.45 2.45 2.45

Packing level per case


Labour 8.88 6.09 8.88 6.09 3.05 21.51
Power 11.34 5.51 11.34 5.51 2.78 0.48
Overheads 20.79 15.99 20.79 15.99 7.99 8.53
Utilities 0.00 0.00 0.00 0.00 0.00 0.00
Depreciation 9.87 7.59 9.87 7.59 3.80 4.05
Total per Case at packing Level 50.89 35.18 50.89 35.18 17.62 34.57

JC Production in Tons 1306.38 0.00 122.66 160.12 12.18 0.01


Budget 1011
Labour 11.47 8.08 11.47 8.08 4.04 22.57
Power 11.70 5.79 11.70 5.79 2.92 0.63
Overheads 41.59 31.97 41.59 31.97 15.99 17.05
Utilities 1.70 1.30 1.70 1.30 0.65 0.70
Depreciation 19.75 15.18 19.75 15.18 7.59 8.10
86.20 62.32 86.20 62.32 31.19 49.04

Page | 46
INTERPRETATION:
After calculating all the components of the conversion cost separately budget of the company
will be ready or prepared. Now if actual consumption is booked different by the production
department from this budget than it is recorded as under recovery and over recovery and this
is called overhead variance.

For example:
Standard according to the budget of CHIK 4 gm was 86.20 & actual booked by the
production is 87 than it is over recovery. And if actual is booked by them 85 than it is the
case of under recovery.

Page | 47
Function of Costing Section
Product Costing

Costing of product by absorption of cost by direct allocation or apportionment of all cost


incurred.

Classification of expenses

Classification of expenses (As recorded in financial accounts) on different product through

direct allocation / apportionment / absorption.

Cost Estimates

Preparation and periodical review of recovery rate of the whole Conversion Cost includes:

• Labour Cost
• Power
• Utility
• Depreciation
• Overhead.

Comparison of actual cost with estimates to assist management in cost control / revision of
norms.

MIS

Preparation of various MIS like Production Report, Material / fuel consumption report,
machine and labour utilization report etc.

Inventory Valuation

Valuation of WIP and Finished Goods at periodic intervals, including physical verification, in
accordance with the company’s policy.

Scrap Note

This document is raised by the concerned department while delivering scrap to the concerned

holding cell of stores Department. With the prior approval as decided.

Page | 48
Elements of Manufacturing Overheads

Indirect labour, indirect material, depreciation, power and fuel , repair & maintenance, and

other indirect expenses etc., which cannot be directly allocated, but can be apportioned or

absorbed which constitute the manufacturing overhead.

Review of factory expenses/ overheads.

At periodical intervals, actual expenditure and manufacturing overheads applied shall be

reviewed and where the difference is significant, the same shall be absorbed in proportion to

the manufacturing overheads applied among different areas. This will have the effect of

absorbing all the overhead expenditure.

Page | 49
ACTIVITIES PERFORMED UNDER COSTING PROCESS
2) Cost updation in the system.
3) Analyzing the cost booked and its variances in process orders.
4) Variance settlement and closure of process orders.
5) Product cost and presentation to management.
6) Updating the system for sale price (MRP) & assessable value for excise duty declaration.

Costing ensure that master data pertaining to costing are maintained properly in the
system, so that accurate cost estimate can set for the product to follow-up on cost incurred
in manufacturing a product.

MASTER DATA VERIFICATION

 New material induced into the


production system
 Change in conversion cost
 Change in BOM quantity structure
 Change in material price

COSTING

Page | 50
BOM Analysis

Before updating cost in sap first Wastages in BOM should be analyzed

Recipe Creation

Recipe including conversion cost is to be created.

Cost Run through SAP

Cost Release Through SAP

MRP & Zasb Updation

Page | 51
RECIPE CREATION
 Recipe is the master which contains the data that integrates the various masters
pertaining to a product like conversion cost.
 Ensure recipe is released for enabling costing run.
 First recipe is to be created for any new product.

EXERCISE BEFORE COSTING


 Costing needs to be run at the beginning of every JC or in middle (if required)
planning shall give a request for costing.
 Ensure all process orders should be properly closed at the time of costing.
 Ensure recipe creation before costing.

STEPS TO BE FOLLOWED WHILE COSTING


 Costing run
 Costing release

Page | 52
FINISHED GOODS

BOM of Finished goods:

 Bulk Semi finished goods(SFG)


 Sleeved/ labeled containers (SFG)
 Packing material (PM)

COSTING FOR FINISHED GOODS


There is list materials present in the BOM of a particular Finished Goods.

Before the costing for FG material we should ensure that costing for all semi-finished goods
present in that FG have been first updated in system.

UPDATING MRP & ASSESSABLE VALUE IN SYSTEM


 After completion of costing process MRP & Zasb (Assessable value) needs to be
updated in system.
 Both are updated on the basis of one case for a particular finished goods.

Zsab should be calculated as below:


 In case of less than 10ml: Zasb (accessable value) = Standard cost
 In case of more than 10ml:Zasb = MRP*(1-Abatement)

Page | 53
PROCESS FLOW DIAGRAM

PLANNING DEPARTMENT

Material
STORE
Requisition
PRODUCTION DEPARTMENT

MANUFACTURING

ACTIVITIES

FINISHED GOODS

STOCK TRANSFER

Page | 54
PROCESS ORDER
Procedure to be followed while closing of process order:

 Proper checking on the status of process orders.


 Variance calculation of each & every process order.
 Settlement of every process order.
 Variance should be analyzed for the above.
 Closing of process orders.

STATUS OF PROCESS ORDERS


 At every JC end all process orders should be properly closed.
 Analysis of variance in consumption of all the materials as compare to the standards
set in BOM.

Page | 55
Material requisition to
Planning Deptt Issue
Receiving PO by store by dispensing
process order
Production deptt. team
(through SAP)
(both RM & PM)

Book into SAP as per


Receive material by Issue material by
standard consumption
production team store
by production team

Closing of all Process Calculate variances


Orders (SAP Vs Physical)

Page | 56
RESEARCH
METHODOLOGY

Page | 57
RESEARCH METHODOLOGY

Secondary Data:
In this study secondary source used is websites, books and annual publication of the
company.

1. Material variance report


2. Conversion Cost variance report
3. Process orders status
Technological tools used:
- MS-Excel
- MS-Word

METHODOLOGY AND PRESENTATION OF DATA:


The data so collected is then coded in the tables to make the things presentable in more
effective.

Page | 58
FINDINGS

Page | 59
OBSERVATIONS/FINDINGS:
1. While setting standard, standard cost setting team should consist of accountants, engineers,
personnel administrators, purchase department, and production managers and their combine
efforts to set standards based on experience, expectations and engineering study

2. While determining the standard cost of raw materials, it has been found out that wastage is
considered in bulk instead of every raw material.

3. Standard cost of raw material should be determined by analysis of market trend and past
data along with supplier conversion cost but it should also include incidental cost of materials.
Incidental cost is considered but in different head so it will not reflect true picture of standard
cost of raw material.

4. Direct labor variance is included in fixed overhead but need to evaluate separately for
analysis of the same and take measures accordingly.

OTHER OBSERVATIONS:

1. Huge inventories kept for write off in the plant. Those inventories associated with high
inventory carrying cost which include insurance, building cost, manpower cost and cost of
capital.

2. Packaging materials are purchased on the basis of lead time and cost involved at supplier
end. It should also consider scientific model of lot sizing while purchasing materials.

3. Salary pay date of casual is 7th of every month and company pay it to supervisor on 4th of
every month which could bear burden on company as cost of capital.

Page | 60
SUGGESTIONS

Page | 61
SUGGESTIONS/RECOMMENDATIONS:
1. Objective of variance analysis is not only to observe deviation from standard cost but also
measure performance of the company and this is carried out from followings:
Performance measurements:
(a) Production volume ratio = standard hours of actual output x 100
Budgeted hours of output

(b) Efficiency ratio = standard hours of actual output x 100


Actual hours worked

(c) Capacity usage ratio = actual hours worked x 100


Budgeted hours of input

2. In variance analysis, direct labour variance should be calculated to increase efficiency of


the same and reduce direct labour cost. By clubbing with fixed overhead, it is very difficult to
analyze the same.

3. After analysis, it has been found out that present variance procedure is cumbersome, so
standard operating procedure has been suggested to standardize the process and every
department should be aware of the same.

4. Standard reporting format has been suggested for final variance presentation at end of every
JC which would provide summary of relevant variance.

5. In Material variance analysis, company should have to focus both on material price
variance and material usage variance. Since fluctuation in price is as important as material
wastage and through this company could better monitor over the price.

6. Wastage of each raw material should be incorporated in the BOM instead of bulk materials
only. This should be based on material balance technique, engineering and technical
specification verified by test run and also considering other similar industries trend.

Page | 62
CONCLUSIONS

Page | 63
SUMMARY/CONCLUSIONS:

1. Company has been set standard cost of material, labour and overhead but need to in
corporate things which have been suggested above.

2. Material Usage variance is discussed at the end of every JC and action plan is framed to
eliminate deviation.

3. Financial Report has been also prepared at end of every JC which includes labour,
overheads.

4. Continuous training imparted to each and every employee to make aware about standard
and variance.

JC refers to the Journey Cycle which is of 28 days. 13 JC covered under one financial year. 1st
JC is started on 1st April & ended at 28th April.

Page | 64
CONVERSION COST REPORT
Brand CHIK Meera & Karthika Nyle
SKU 4 7.5 4 7.5 7.5 30
Fixed cost per kg 2.89 2.89 2.89 2.89 2.89 2.89
Depreciation per kg 1.37 1.37 1.37 1.37 1.37 1.37
LABOUR COST
Bulk processing per kg 0.02 0.02 0.02 0.02 0.02 0.02
Packing per kg 0.46 0.40 0.46 0.40 0.40 3.49
Material handling per kg 0.31 0.31 0.31 0.31 0.31 0.31
UTILITIES
Cleaning in place(CIP) per kg 0.01 0.01 0.01 0.01 0.01 0.01
Air Handling(AHU) per kg 0.07 0.07 0.07 0.07 0.07 0.07
Efluent Treatment(ETP) per kg 0.00 0.00 0.00 0.00 0.00 0.00
Utilities consumed in Bulk per kg 0.04 0.04 0.04 0.04 0.04 0.04
Packing utilities per kg 0.00 0.00 0.00 0.00 0.00 0.00
POWER
for bulk preparation per kg 0.02 0.02 0.02 0.02 0.02 0.02
for packing per kg 0.79 0.50 0.79 0.50 0.50 0.08
Total cost per kg 5.99 5.63 5.99 5.63 5.63 8.31
No. of pieces per case 3600 1440 3600 1440 720 192
Spefific Gravity 1 1.025 1 1.025 1.025 1.025
Weight per case 14.4 11.07 14.4 11.07 5.535 5.904
Bulk Level (per Kg)
Labour 0.18 0.18 0.18 0.18 0.18 0.18
Power 0.02 0.02 0.02 0.02 0.02 0.02
Overheads 1.44 1.44 1.44 1.44 1.44 1.44
Utilities 0.12 0.12 0.12 0.12 0.12 0.12
Depreciation 0.69 0.69 0.69 0.69 0.69 0.69
Total per kg at Bulk level 2.45 2.45 2.45 2.45 2.45 2.45

Packing level per case


Labour 8.88 6.09 8.88 6.09 3.05 21.51
Power 11.34 5.51 11.34 5.51 2.78 0.48
Overheads 20.79 15.99 20.79 15.99 7.99 8.53
Utilities 0.00 0.00 0.00 0.00 0.00 0.00
Depreciation 9.87 7.59 9.87 7.59 3.80 4.05
Total per Case at packing Level 50.89 35.18 50.89 35.18 17.62 34.57

JC Production in Tons 1306.38 0.00 122.66 160.12 12.18 0.01


Budget 1011
Labour 11.47 8.08 11.47 8.08 4.04 22.57
Power 11.70 5.79 11.70 5.79 2.92 0.63
Overheads 41.59 31.97 41.59 31.97 15.99 17.05
Utilities 1.70 1.30 1.70 1.30 0.65 0.70
Depreciation 19.75 15.18 19.75 15.18 7.59 8.10
86.20 62.32 86.20 62.32 31.19 49.04

Page | 65
MATERIAL VARIANCE REPORT
Actual
Input BOM Actual Cons. Var.
FG codes Material Qty BOM Val Consumption Value Variance Value
IN0005B11 501146 5142 101406 5141 105661.6 1 -4255.53
501147 370051 26627.17 368385 27628.88 1666 -1001.71
501149 2220296 657909.2 2220295 656049.9 1 1859.34
501150 370051 466264.3 370049 464769.6 2 1494.7
501163 56.254 5712.52 0 0 56.254 5712.52
501178 140.151 4375.52 0 0 140.151 4375.52
501575 2359.334 512972.9 2359.333 512871.6 0.001 101.31
600325 11377.63 1520279 11237.22 1501517 140.408 18761.31
600327 2220296 562454.7 2215453 573667.9 4842.96 -11213.2
IN0005B11 Total 5199769 3858001 5192920 3842167 6849.774 15834.26
IN0005B11N 501146 719 12036.06 719 12036.23 0 -0.17
501147 51738 3621.66 51738 3880.35 0 -258.69
501149 310425 99336 310425 104334 0 -4998.03
501150 51738 65189.88 51738 65282.15 0 -92.27
501163 7.865 798.61 0 0 7.865 798.61
501178 19.595 611.76 0 0 19.595 611.76
501570 5.363 1179.86 1.898 417.56 3.465 762.3
501571 14.801 2220.15 0 0 14.801 2220.15
501575 339.415 73934.77 339.415 73933.73 0 1.04
600325 1590.732 212553.6 1590.732 212553.6 0 0.01
600327 310425 80710.5 310425 80710.5 0 0
IN0005B11N Total 727022.8 552192.9 726977 553148.2 45.726 -955.29
IN0005NB03 501163 143.946 14616.93 0 0 143.946 14616.93
501178 265.646 8293.47 0 0 265.646 8293.47
501534 3787612 1174634 3787613 1168264 -1 6370.63
501538 631269 1333625 631270 1332699 -1 925.05
501539 13154 186566.2 13097 185465.9 57 1100.3
501549 631269 44188.83 631270 47344.38 -1 -3155.55
501760 4033.762 873269.1 4033.762 873272.9 0 -3.76
600670 19409.16 4570080 18692.3 4401289 716.856 168790.9
600675 3787612 833274.6 3809320 838050.4 -21708 -4775.76
IN0005NB03 Total 8874769 9038548 8895296 8846386 -20527.6 192162.2
IN0005NB03N 501163 2.2 223.39 0 0 2.2 223.39
501178 4.06 126.75 0 0 4.06 126.75
501534 57888 17366.4 57888 17123.2 0 243.2
501538 9648 20260.8 9648 20243.74 0 17.06
501539 201 2856.21 201 2838.86 0 17.35
501549 9648 675.36 9648 723.58 0 -48.22
501570 1.5 330 0 0 1.5 330
501571 4.14 621 0 0 4.14 621
501760 61.65 13346.61 61.65 13346.66 0 -0.05
600670 296.64 69846.85 296.64 69846.86 0 -0.01
600675 57888 12735.36 57888 12735.36 0 0
IN0005NB03N Total 135643.2 138388.7 135631.3 136858.3 11.9 1530.47

Page | 66
PROCESS ORDER STATUS
Order System Material
Order Material Type MRP Plant quantity Unit Basic star Status description
1106431 600065 ZP01 PSF MF01 200 KG 27.08.2010 Closed APG Extract new
1108836 600065 ZP01 PSF MF01 69 KG 09.09.2010 Closed APG Extract new
1108214 600116 ZP01 PSF MF01 10,000 KG 06.09.2010 Closed Karthika shampoo
1108215 600116 ZP01 PSF MF01 10,000 KG 06.09.2010 Closed Karthika shampoo
1108601 600116 ZP01 PSF MF01 10,000 KG 08.09.2010 Closed Karthika shampoo
1108792 600116 ZP01 PSF MF01 10,000 KG 09.09.2010 Closed Karthika shampoo
1109018 600116 ZP01 PSF MF01 10,000 KG 10.09.2010 Closed Karthika shampoo
tech
1109222 600116 ZP01 PSF MF01 10,000 KG 11.09.2010 closed Karthika shampoo
tech
1109482 600116 ZP01 PSF MF01 10,000 KG 13.09.2010 closed Karthika shampoo
1106748 600186 ZP01 PSF MF01 4,000 KG 29.08.2010 Closed Chik santin shampoo
tech
1106750 600186 ZP01 PSF MF01 4,000 KG 29.08.2010 closed Chik santin shampoo
1107327 600186 ZP01 PSF MF01 4,000 KG 01.09.2010 Closed Chik santin shampoo
tech
1107950 600186 ZP01 PSF MF01 4,000 KG 05.09.2010 closed Chik santin shampoo
1108367 600186 ZP01 PSF MF01 4,000 KG 07.09.2010 Closed Chik santin shampoo
tech
1108411 600186 ZP01 PSF MF01 4,000 KG 07.09.2010 closed Chik santin shampoo
1109188 600457 ZP01 PSF MF02 500 KG 11.09.2010 Open Meera HWP
1109189 600457 ZP01 PSF MF02 500 KG 11.09.2010 Open Meera HWP
1109190 600457 ZP01 PSF MF02 500 KG 11.09.2010 Open Meera HWP
1109191 600457 ZP01 PSF MF02 500 KG 11.09.2010 Open Meera HWP
1109502 600457 ZP01 PSF MF02 500 KG 13.09.2010 Open Meera HWP

Page | 67
PRODUCT WISE COSTING

Brand > CHIK


SKU 4 7.5 12 25 30 40 50 100
Fixed cost per kg 2.888 2.888 2.888 2.888 2.888 2.888 2.888 2.888
Depreciation per kg 1.371 1.371 1.371 1.371 1.371 1.371 1.371 1.371
LABOUR COST
Bulk processing per
kg 0.025 0.025 0.025 0.025 0.025 0.025 0.025 0.025
Packing per kg 0.462 0.395 0.000 5.582 4.652 3.489 3.349 2.512
Material handling
per kg 0.310 0.310 0.310 0.310 0.310 0.310 0.310 0.310
UTILITIES
Cleaning in
place(CIP) per kg 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005
Air Handling(AHU)
per kg 0.067 0.067 0.067 0.067 0.067 0.067 0.067 0.067
Efluent
Treatment(ETP) per
kg 0.004 0.004 0.004 0.004 0.004 0.004 0.004 0.004
Utilities consumed
in Bulk per kg 0.042 0.042 0.042 0.042 0.042 0.042 0.042 0.042
Packing utilities per
kg 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
POWER
for bulk preparation
per kg 0.025 0.025 0.025 0.025 0.025 0.025 0.025 0.025
for packing per kg 0.788 0.498 0.335 0.131 0.109 0.082 0.078 0.039
Total cost per kg 5.99 5.63 5.07 10.45 9.50 8.31 8.16 7.29
No. of pieces per
case 3600 1440 600 192 192 146 144 120
Spefific Gravity 1.00 1.025 1.025 1.025 1.025 1.025 1.025 1.025
Weight per case 14.40 11.07 7.38 4.92 5.90 5.99 7.38 12.30
CC per case 86.20 62.32 37.43 51.41 56.07 49.73 60.25 89.64
CC per case
without
depreciation 66.45 47.14 27.31 44.66 47.97 41.52 50.13 72.77

Page | 68
RESOURCE COST SUMMARY FOR UPLOADING IN SAP AT
THE PLANNED ANNUAL AVERAGE UTILISATION OF S:
1900Ts+C: 70Ts+T:150Ts
SKU 4 7.5 12 25 30 40 50 100
Bulk Level (per Kg)
Labour 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18
Power 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02
Overheads 1.44 1.44 1.44 1.44 1.44 1.44 1.44 1.44
Utilities 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12
Depreciation 0.69 0.69 0.69 0.69 0.69 0.69 0.69 0.69
Total per kg at Bulk
level 2.45 2.45 2.45 2.45 2.45 2.45 2.45 2.45
Packing level per
case

Labour 8.88 6.09 1.14 28.23 28.38 21.81 25.86 32.80

Power 11.34 5.51 2.47 0.64 0.64 0.49 0.58 0.48

Overheads 20.79 15.99 10.66 7.10 8.53 8.64 10.66 17.76

Utilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Depreciation 9.87 7.59 5.06 3.37 4.05 4.10 5.06 8.43


Total per Case at
packing Level 50.89 35.18 19.34 39.35 41.60 35.05 42.16 59.48
JC Production in
cases 90,721 - 2,870 1,746 543 3,362
JC Production in
Tons 1306.38 0.00 0.00 14.12 0.00 10.45 4.00 41.35
Budget 1011

Labour 11.47 8.08 2.47 29.11 29.44 22.89 27.19 35.01

Power 11.70 5.79 2.66 0.76 0.79 0.64 0.76 0.78

Overheads 41.59 31.97 21.31 14.21 17.05 17.29 21.31 35.52

Utilities 1.70 1.30 0.87 0.58 0.70 0.71 0.87 1.45

Depreciation 19.75 15.18 10.12 6.75 8.10 8.21 10.12 16.87

86.20 62.32 37.43 51.41 56.07 49.73 60.25 89.64

Page | 69
BIBLOGRAPHY
1. Saxena & Vashishtha “Cost & Management
Accounting”
2. P.V. Ratnam
3. www.cavinkare.com

Page | 70
Annexure: Standard reporting format for variance
analysis
Cost Variance: Value (Rs)

A. Material cost variance:


Material A: Price
Usage

B. Labour variance
Skilled Labour:
Idle time
Efficiency
Rate
Unskilled Labour:
Efficiency
Rate

C. Variable overhead variance:


Expenditure
Efficiency

D. Fixed overhead variance:


Expenditure
Efficiency
Capacity

Page | 71