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A PROJECT REPORT ON Master Data Analysis to correct Overhead Absorption on Product Cost At Tata Motors Submitted in partial fulfillment

of the curriculum requirement of Post Graduate Diploma in Management at ISB&M, Bangalore

Submitted By AVIK ROY


Finance & Accounts Division


No task is singles mans effort, various factors, situations, person integrated to provide the background for accomplishment of a task. So, thanking just a few people for this project would be justified the kind of help, assistance and valuable advice I got from person whom I approached, I will remain indebted to them . It was a great learning experience for me to work on my project from 4th June to 31st July, 2012 in such a congenial environment in the Finance division of TATA Motors Ltd. at Jamshedpur. I have gathered lots of experience in this limited span of work. I take this opportunity to express my profound gratitude and deep regards to my Guide Mr. Vivek Sonthalya & Mr. Himanshu Dhar for their exemplary guidance, monitoring and constant encouragement throughout the course of this Thesis work. The blessing help and guidance given by them time to time shall carry me a long way in my journey of life on which I am about to embark.

Last but not the least I would express my heartfelt gratitude to, Mr. Uttam Biswas for allowing me to do this project at TATA Motors Ltd.

My several well-wishers helped me directly or indirectly; I virtually fall short of words to express my gratefulness to them.

Therefore, I am leaving this acknowledgement incomplete in their reminiscence.

DECLARATION I hereby declare that this project report titled Master Data Analysis to correct Overhead Absorption on Product Cost AT TATA MOTORS is my original work carried out under the guidance of Mr.Vivek Santhaliya (FINANCE),Tata Motors Limited, Jamshedpur. This is the property of the institution and use of this report without prior permission of the institution will be considered illegal & actionable.

Industry Guide:Student Details:

Mr. PGDM 2011-2013, Tata Motors Limited, Jamshedpur. ,

CERTIFICATE This is to certify that the project work entitled A Project Report on Master Data Analysis to correct Overhead Absorption on Product Cost at Tata Motors Ltd. carried out by of my supervision and direct guidance. I am absolutely satisfied with dissertation on the project; the original work was carried during at 10/04/2012 to 05/06/2012 in Finance Department of TATA MOTORS LTD., Jamshedpur (TML). This work is in partial fulfillment of the requirement towards the certificate of project training. The approval does not necessarily endorse every statement made, opinion expressed and conclusion draw as recorded in this report. It only signifies the acceptance of the report for the purpose for which it is submitted.


ACKNOWLEDGEMENT .......................................................................................................................... 2 CHAPTER-1 .................................................................................................................................................. 6 INDUSTRY OVERVIEW ................................................................................................................................. 6 CHAPTER 2 ................................................................................................................................................ 28 SWOT ANALYSIS: ....................................................................................................................................... 28 CHAPTER 3 ................................................................................................................................................ 31 VEHICLE FACTORY: .................................................................................................................................... 31 THE WORKING MECHANISM..................................................................................................................... 31 CHAPTER 4: ............................................................................................................................................... 37 SCOPE & OBJECTIVE .................................................................................................................................. 37 CHAPTER 5 ................................................................................................................................................ 40 RESEARCH METHODOLOGY ...................................................................................................................... 40 CHAPTER 6 ................................................................................................................................................ 41 CLASSIFICATION OF COSTS(Manufacturing) ............................................................................................. 41 CHAPTER 7 ................................................................................................................................................ 46 PROCESS OF COSTING AT TATA MOTORS Ltd. .......................................................................................... 46 CHAPTER-8 ................................................................................................................................................ 51 DATA ANALYSIS & INTERPRETATION ........................................................................................................ 51 CHAPTER- 9 ............................................................................................................................................... 56 FINDINGS .................................................................................................................................................. 56 CHAPTER 10 .............................................................................................................................................. 57 SUGGESTIONS: .......................................................................................................................................... 57


The automotive industry in India is one of the largest in the world and one of the fastest growing globally. India's passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3.7 million units in 2010. According to recent reports, India is set to overtake Brazil to become the sixth largest passenger vehicle producer in the world, growing 16-18 per cent to sell around three million units in the course of 2011-12. In 2009, India emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand. In 2010, India reached as Asia's third largest exporter of passenger cars, behind Japan and South Korea beating Thailand. As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second fastest growing automobile market in the world. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 5 million by 2015 and more than 9 million by 2020. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads. The Indian automobile industry took a u-turn when Indian market opened up with 100% FDI in the industry. Since then Indian automobile industry is growing rapidly. . Global player have set up their factories in India taking the level of production from 2 million vehicles produced in 1991, it has increased to 10 million vehicles in recent years.

Potential of Indian Automobile Industry

There is a very stiff competition in the automobile industry segment in India. This has helped many to realize their dreams of driving the most luxurious cars. During the recent past, a number of overseas companies have started grabbing a big chunk of the market share in both domestic and export sales. Every new day dawns in India with some new launches by active players in the Indian automobile arena. By introducing some low cost cars, the industry had made it possible for common men to buy cars for their personal use. With some innovative strategies and by adopting some alternative remedial measures, the Indian automobile industry has successfully come unaffected out of the global financial crisis. While the automobile industry in India is the ninth largest in the world, the country emerged as the fourth largest automobiles exporter on the globe following Japan, South Korea and Thailand, in the year 2009. Over and above, a number of automobile manufacturers based in India have expanded their operations around the globe also giving way for a number of reputed MNCs to enthusiastically invest in the Indian automobile sector. Nissan Motors has revealed its prospective plans to export 250,000 vehicles produced in its India plant by the year 2011. General Motors has also come up with similar plans. During the current fiscal year, the Indian automobile industry rode high on the resurgence of consumer demand in the country as a result of the Governments fiscal stimulus and attractively low interest rates. As a result the total turnover of the domestic automobile industry increased by about 27 per cent. A reply produced in the LokSabha recently has quoted data from the Society of Indian Automobile Manufacturers and has revealed that the total turnover of the Indian automobile Industry in April-February 2009-10 was 1,62,708.77 crore. This is a remarkable achievement compared with the total revenue of Rs 1,28,384.53crore reported during the same period of last fiscal year. Specifically, the segment of commercial vehicles witnessed the biggest jump in revenues by 31 per cent by reporting Rs 38,845.09 crore. During the same period, the passenger vehicle segment in the country witnessed a growth of 27 per cent over the last fiscal year by reporting total revenue of Rs 76,545.96 crores. These figures imply a highly prospective road lying immediately ahead of the Indian automobile industry. Predictions made by Ernst and Young have estimated that the Indian passenger car market will have a growth rate of about 12 percent per annum over the next five years to reach the production of 3.75 million units by the year 2014. The analysts have further stated that the industrys turnover will touch $155 billion by 2016. This achievement will succeed in

consolidating Indias position as the seventh largest automobiles manufacturer on the globe, eventually surging forth to become the third largest by the year 2030 behind China and the US. The Automotive Mission Plan launched by the Indian government has envisaged that the country will emerge as the seventh largest car maker on the globe thereby contributing more than 10 percent to the nations $1.2-trillion economy. Further, industry experts believe that the nation will soon establish its stand as an automobile hub exporting about 2.75 million units and selling about a million units to be operated on the domestic roads.
Types of Commercial vehicles in India

Commercial vehicles are of two types Goods vehicles and Passenger vehicles. Good vehicles used for transport are the trucks, tempos, containers, trailers and tankers. In this segment, the medium and heavy commercial vehicles goods occupy a maximum market share of 48%. The light commercial vehicles enjoy a market share of 38%. The industrial revolution that started post-Independence and contributed to urban migration led to a huge demand for these goods vehicles. In the recent years, with the retail boom all over the country, it has been noticed that the market share of Light Commercial Vehicles (LCVs) is increasing. This is indicative of the hub and spoke model that most retailers and producers are following. The boom in the economy has also contributed to increase in passenger, business and leisure travel. These segments have also contributed to the passenger vehicles sales increase. With the expansion of the cities, the travel of the urban dwellers has also increased manifold. This is also one of the prime factors in increasing the passenger travel.

Commercial vehicle manufacturers in India

There are about nine manufacturers of commercial vehicles in India. Some of them are Eicher Motors Ltd, Tata Motor Limited, Ashok Leyland, Mahindra and Mahindra Limited and Volvo Motors. The commercial vehicles segment is dominated by leading domestic players like Tata Motors with a total market share of 62%, Ashok Leyland Ltd. with a total market share of 15%, M & M Ltd. with a total market share of 11%, Eicher Motors Ltd. with a total share of 6%, and others.


Tata Motors Limited is India's largest automobile company, with consolidated revenues of INR 1, 23,133crores (USD 27 billion) in 2010-11. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. It is the world's fourth largest truck and bus manufacturer.


Tata Motors Limited is India's largest automobile company, with consolidated revenues of INR 1, 23,133crores (USD 27 billion) in 2010-11. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. It is the world's fourth largest truck and bus manufacturer. The company's over 25,000 employees are guided by the vision to be ''best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics.'' Established in 1945, Tata Motors' has its presence in the length and breadth of the country. Over 6.5 million Tata vehicle runs on Indian roads, since first it was rolled out in 1954. The company has set up its factories spread across the country- Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand (Gujarat) and Dharwad (Karnataka). Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company's dealership, sales, services and spare parts network comprises over 3,500 touch points; Tata Motors also distributes and markets Fiat branded cars in India.

Going International: Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand, Spain and South Africa. Among them is Jaguar Land Rover, a business

comprising the two iconic British brands that was acquired in 2008. JLR supports two state of the art engineering and design facilities and three manufacturing plants (Solihull, Castle Bromwich &Halewood) in the UK. In 2004, Tata Motors acquired the Daewoo Commercial Vehicles Company, South Korea's second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009. Hispano's presence is being expanded in other markets. In 2006, Tata Motors formed a joint venture with the Brazil-based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully-built buses and coaches for India and select international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company's pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the Xenon having been launched in Thailand in 2008. Tata Motors (SA) (Proprietary) Ltd., Tata Motors' joint venture with Tata Africa Holding (Pty) Ltd., has its assembly plant in South Africa at Rosslyn, north of Pretoria, in the Gauteng province of South Africa. The plant can assemble, from semi knocked down (SKD) kits, light, medium and heavy commercial vehicles ranging from 4 - 50 tonnes. Tata Motors is also expanding its international footprint, established through exports since 1961. The company's commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia, CIS, Russia and South America. It has franchisee/joint venture assembly operations in Bangladesh, Ukraine, and Senegal. The foundation of the company's growth over the last 65 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D. With over 4,500 engineers and scientists, the company's Engineering Research Centre, established in 1966, has enabled pioneering technologies and products. The company today has R&D centers in Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. Within two years of launch, Tata Indica became India's largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India's first indigenously developed mini-truck. In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which India and the world have been looking forward to. The Tata Nano has been subsequently launched, as planned, in India in March 2009. A development, which signifies a first for the global automobile industry, the Nano brings the comfort and safety of a car within the reach of thousands of families. Designed with a family in mind, it has a roomy passenger compartment with generous leg space and head room. It can comfortably seat four persons. Its mono-volume design will set a new benchmark among small cars. Its safety performance exceeds regulatory requirements in India. Its tailpipe emission performance too exceeds regulatory requirements. In terms of overall pollutants, it has a lower pollution level than two-wheelers being manufactured in India today. The lean design strategy has helped minimize weight, which helps maximize performance per unit of energy consumed and delivers high fuel efficiency. The high fuel efficiency also ensures that the car has low carbon dioxide emissions, thereby providing the twin benefits of an affordable transportation solution with a low carbon footprint.

In May 2009, Tata Motors ushered in a new era in the Indian automobile industry, in keeping with its pioneering tradition, by unveiling its new range of world standard trucks called Prima. In their power, speed, carrying capacity, operating economy and trims, they will introduce new benchmarks in India and match the best in the world in performance at a lower life-cycle cost. In October 2010, Tata Motors launched the Tata Aria, the first Indian four-wheel drive crossover. The Tata Aria redefines several benchmarks with its design and technologies, offering class leading features that take comfort and safety to a new height. Tata Motors is equally focused on environment-friendly technologies in emissions and alternative fuels. It has developed electric and hybrid vehicles both for personal and public transportation. It has also been implementing several environment-friendly technologies in manufacturing processes, significantly enhancing resource conservation. Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations. Tata Motors is committed to improving the quality of life of communities by working on four thrust areas employability, education, health and environment. The activities touch the lives of more than a million citizens. The company's support on education and employability is focused on youth and women. They range from schools to technical education institutes to actual facilitation of income generation. In health, our intervention is in both preventive and curative health care. The goal of environment protection is achieved through tree plantation, conserving water and creating new water bodies and, last but not the least, by introducing appropriate technologies in our vehicles and operations for constantly enhancing environment care. With the foundation of its rich heritage, Tata Motors today is etching a refulgent future


VISION To develop TATA into a world class Indian car brand for innovative and superior value vehicles. MISSION To, Be the most admired multi-national Indian car company producing vehicles that people love to buy. Create an organization that people enjoy working for, doing business with and investing in. COMMERCIAL VEHICLES BUSINESS UNIT (CVBU):-

VISION To be a world class corporate constantly furthering the interest of all its stakeholders.


SHAREHOLDERS To consistently create shareholder value by generating returns in excess of Weighted Average Cost of Capital (WACC) during the upturn and at least equal to Weighted Average Cost of Capital (WACC) during the downturn of the business cycle. CUSTOMERSTo strengthen the Tata brand and create lasting relationships with the customers by working closely with business partners to provide superior value for money over the life cycle. EMPLOYEES To create a seamless organization that incubates and promotes innovation, excellence and the Tata Core Values. VENDORS AND CHANNEL PARTERNS To foster a long term relationship so as to introduce a brand range of innovative products and services that would benefit our customer and other stakeholders. COMMUNITY Toproactively participate in reshaping the countrys economic growth. Take a holistic approach toward environmental protection.





To create economic assets for road transportation for bulk moment of goods and people and participate in managing these over the life of assets in order to create economic value.


Commercial Vehicles India:

Industry-wide sales of commercial vehicles in India during the year were 7,42,091 a growth of 27.3% over the previous year.

During the year, Tata Motors commercial vehicles sales achieved an all-time high of 4,58,828 registering a growth of 22.7% over the previous year and a market share of 61%. Intermediate and heavy truck sales increased by 30% and several new models were introduced during the year. Sales of the Ace, the sub-one ton pick-up, grew 25% over the previous year and achieved the highest ever annual sales. The Companys other commercial vehicles also achieved record sales during the year. Passenger bus sales during the year also grew substantially, both diesel and CNG powered,and the Companys new low-floor city buses have been exceedingly popular in the cities where they have been marketed.

Passenger Cars India

In the passenger car segment, the industry registered sales of 24,66,814 passenger vehicles a growth of 29.8% over the previous year. Sales levels at Tata Motors grew at only 23% resulting in a market share decline of 0.7%.Initiatives are underway to revitalize the dealer network and improve market share. The totalCompany sales, since it entered the passenger car segment in 1999, crossed 2 million cars.The highest ever annual sales were achieved during the year. Nano sales crossed 1,00,000 and the all-new crossover, Aria was launched in the second quarter.Total export sales of Tata Motors amounted to about 58,000 vehicles an increase of 70% over the previous year

Jaguar Land Rover

Sales of Jaguar cars and Land Rover/Range Rover vehicles have been extremely encouraging. During the year, Jaguar introduced the new XJ sedan and a new R-series high performance shashi versions of the XK sports and the XF sedan. Sales of Jaguar and Land Rover vehicles span 140 countries, and their market appeal has been growing. Total wholesale sales of Jaguar cars during the year were about 53,000, registering a growth of 11.8% over the previous year. Land Rover/Range Rover achieved wholesale sales of 1, 90,628, registering a growth of 30.1% over the previous year. The new Evoque is proposed to be launched in the current year and has attracted a very positive reaction from the market. Assembly operations in India have commenced for the Land Rover Freelander. Assembly of other Land Rover products are also under consideration. To optimize the synergetic strengths between JLR and Tata Motors in India, an examination is also underway on a joint engine development program which would have manufacturing facilities both in the U.K. and India. The Company is also considering various options for assembly and localization of selected products in China, which has become an important market for the Company.

Both Tata Motors in India and Jaguar Land Rover in the U.K. have extensive product development plans for cars, off-road vehicles and commercial vehicles, powered by regular and alternative fuels, as also electric and hybrid vehicles, to meet future fuel efficiency and low emission requirements.

The borrowings of the Company as on March 31, 2011 stood at `15,899 crores (previous year `16,595 crores). Cash and Bank balances and Current investments in Liquid / Liquid Plus schemes of Mutual funds stood at `2,514 crores (previous year `2,273 crores).Tata Motors Groups borrowings as on March 31, 2011 stood at `32,791 crores (previous year`35,108 crores). Cash and Bank balances and current investments in Liquid / Liquid Plus schemes of Mutual funds stood at `12,071 crores (previous year `9,808 crores). The keyhighlights were:- The Company issued rated, listed, secured/unsecured non-convertible debentures of `900 crores with maturities of 10 15 years as a step to raise long term resources and optimize the loan maturity profile. In October 2010, the Company raised funds aggregating `3,351 crores (US$ 750 million) by an issue of 3,21,65,000 A Ordinary Shares at a price of `764/- per share and 83,20,300 Ordinary Shares at a price of `1,074/- per share to Qualified Institutional Buyers ('QIBs'), under a qualified institutional placement. The said issue was well received by the investors and the Company availed of the opportunity to price it at the mid-upper band. This milestone in the financing strategy enabled it to come closer to its objective off balance sheet de-leveraging. Consequent upon the holders of Foreign Currency Convertible Notes (FCCNs) of US$327.07 million and JP 30 million exercising their option to convert their FCCNs to Ordinary Shares, the Company allotted 2,35,70,426 Ordinary Shares.


The Companys CVBU Pune won the GOLD rating of Green Factory Building Award from Indian Green Building Council (IGBC), which is first of its kind in India and for the Tata Group. All the existing buildings are rated as GOLD rating factory buildings in Pimpri. The Company is the first to receive this award for the existing factory buildings. CVBU Pune was declared winner of 'Vasundhara Awards 2010' organised by the Maharashtra Pollution Control Board (MPCB), winner of first prize in Technical Paper Contest at INSSAN Regional Convention 2010 of INSSAN (Indian National Suggestion Schemes'Association) - Eastern India Chapter. It also received the Excellent Energy Efficient Unit award in the CII 11th National Awards for Excellence in Energy Management - 2010. The Company won the Srishti G-Cube Awards for Good Green Governance in Manufacturing - Engineering category, CVBU Pune was the winner, Jamshedpur Plant was declared ''runner up'', and Pantnagar Plant received a ''certificate of commendation''. CVBU Lucknow was adjudged the Excellent Energy Efficient Unit for the second time in a row at the 11th National Awards for Excellence in Energy Management 2010, conducted by CII - Godrej Green Business Centre at Chennai. It also received the Silver Award in the automobile sector at the 11th Global Green Tech Excellence Awards 2010 and awarded the first prize in the National Energy Conservation Award (NECA) 2010, in the Automobile Sector, at New Delhi. Pantnagar Plant received the first prize in the Uttarakhand State Energy Conservation Award 2010, under the Large and Medium scale industry category. It was also awarded the second prize at the National Energy Conservation Awards (NECA) 2010, under the Automobile Manufacturing Sector. This is the consecutive second year that the Plant has received this National Award.

Subsidiaries, JVs and Associates

Tata Daewoo Commercial Vehicle Company Ltd (TDCV) Tata Marcopolo Motors Ltd (TMML) Tata Hispano Motors Carrocera S. A. Tata Motors (Thailand) Limited (TMTL) Tata Motors(SA) Proprietary Ltd (TMSA) TML Drivelines Limited Telco Construction Equipment Co. Ltd. (Telcon) TAL Manufacturing Solutions Ltd. (TAL) Tata Motors European Technical Centre plc. (TMETC) Tata Technologies Ltd. (TTL) and its subsidiaries TML Distribution Company Limited (TDCL) Concorde Motors (India) Ltd. (Concorde) Tata Motors Finance Limited Tata Motors Insurance Broking & Advisory Services Ltd (TMIBASL) TML Holdings Pte. Ltd. (TML) Sheba Properties Ltd. (Sheba)

Business Overview
Tata Motors Business: The Indian economy recorded a robust growth rate estimated at 8.6% over 2009-10, driven by growth in the agricultural sector (5.4%), industrial sector (8.1%) and services sector (9.6%). The growth in the first half of the fiscal year was higher, Which moderated in the second half. The year also witnessed inflationary trends beyond RBI targets and followed successive increases in CRR and other monetary policy changes by RBI to curb inflation, which progressively affected the business sentiment through the year. As a result, the second half of the fiscal year saw a drop in the Index for Industrial Production (IIP) as industrial activity was affected. On the back of overall economic growth, the automotive industry recorded an increase of 26% in current fiscal. Facilitated by economic growth, increase in personal disposable incomes, availability of finance and development of infrastructure, the commercial vehicle industry growth moderated to 27% as compared to 40% in 2009-10 and the passenger vehicle industry grew by 30% as compared to 25% in 2009-10, driven by increased level of disposable income.

From October 1, 2010, emission norms in India migrated to the Bharat Stage III for the nonmetro cities / towns, considering an imminent increase in prices, there was a spurt in buying of vehicles (mainly commercial vehicles) in the first half of the year. The fuel prices, especially the petrol prices increased throughout the year, thereby affecting the consumer sentiment to an extent. The year also witnessed a significant pressure on commodity prices, leading to increase in costs and pressure on margins. The Companys total domestic sales increased by 22.8% to 7,78,540 vehicles in 2010-11.The commercial vehicle sales at 4,58,828 vehicles grew by 22.7% and the Company maintained its leadership position in the domestic market despite new players entering the field. The passenger vehicles volumes at 3,19,712 vehicles grew by 23.0% in the domestic market on the back of increased volumes of the Nano, launch of Aria and the launches of new variants of Indigo, Manza and Safari. The Companys exports increased by 70.3% to 58,089 vehicles during the year with significant economic improvement in its major international markets such as the Indian sub-continent,South Africa and the Middle East.

The industry performance in the the domestic market during 2010-11 and the Companys share is given below

Source: Society of Indian Automobile Manufacturers report and Company Analysis* including Magic and Winger sales; #including Fiat & Jaguar Land Rover branded car


The largest passenger automobile and commercial vehicle manufacturing company of India Tata Motors Limited, was formerly called TELCO (TATA Engineering and Locomotive Company), has its headquarters in Bombay, now Mumbai, India. Established in 1945, listed on the New York Stock Exchange in 2004 has created Rs. 320 billion wealth and was one of the top 10 wealth creators in India. It has its manufacturing plants in towns of Jamshedpur, Lucknow, and Pune. This company was founded by Jamshetji Tata and is run by Ratan Tata under the flagship company known as Tata and sons group. He commands 22000 employees working in three plants as well as other regional and zonal offices across the length and breadth of India. Tata motors passenger cars still need to reach acceptable international requirements. The company commands an imposing 65% share of the domestic commercial vehicle market and is trying to modernize this segment. The financial business of Tata motors was separated into a subsidiary company in Sep. 2006, where it recorded a strong financial performance during the last 5 year period. From year 2003-2007, the profits of the company went up at a CAGR of 36.4%, to attain Rs. 331, 525 million in 2007 from Rs. 95, 731 Million in 2003. By floating two rights issues at the end of Sep 2008 Tata Motors Ltd expected to raise Rs 4, 150 crores. They are offering one ordinary share valued at Rs. 340 every six shares expecting to net Rs. 2.90 Crores, the so called A share would have different voting and dividend rights, for every such 6 shares held at a face value of 305 would raise Rs. 1.960 Crores, these proceed would be utilized for an early repayment of the short term funding of 2.3 Billion $ (Rs. 10,189 Crores) Borrowed for Acquisition of jaguar and Land Rover from their principle The Ford Motor Companys. It is also in talks with private equity funds to offload 25% of stake in each of the following 6 unlisted group units, they are Tata Daewoo commercial vehicle company, HV transmissions,

Tata motors finance, Tata technologies and TELCO construction equipment, the sales of the stakes would possible conclude by June 2009, helping it to raise further funds for this acquisition, earlier in July it sold 24% stake in an Auto component unit to a group firm and booked a profit of Rs. 110 crores, it also sold 10 million shares or 1.36% of Tata steel for RS. 486 crores to Tata Sons, the holding company of whole Tata group firms. Tata Motors owes its leading position in the Indian automobile industry to its strong focus on indigenization. This focus has driven the Company to set up world-class manufacturing units with state-of-the-art technology. Every stage of product evolution-design, development, manufacturing, assembly and quality control, is carried out meticulously. Our manufacturing plants are situated at Jamshedpur in the East, Pune and Sanand in the West and Lucknow and Pantnagar in the North.

Engine Factory



Truck Factory,



Truck Divisionboasts of two assembly lines. The main assembly line, measuring

180 m in length has 20 work stations with a vehicle rolling out every 8 minutes. The other line is dedicated to special purpose vehicles and for meeting the requirements of the Indian Army. The uniqueness of the Factory lies in its possession of:

Advanced facilities for manufacturing long members comprising of a set-up of 5000 Tones Hydraulic press line, cut-to-length line for strip preparation purchased from M/s Kohler of Germany and a Camber Correction line.

Facility for hot forming of axle halves with a 3000 tone press and heating furnace. Flexibility in manufacturing frames with an off line Proto-typing facility.


Cab & CowlFactory is

equipped with state-of-art facilities like Centralized Paint

Shop and Automated painting set up, Robot painting, BIW Fabrication of day & sleeper cabs for trucks, Articulates (Tractor/ Trailer), BIW Fabrication of Cowls for buses, and other miscellaneous applications.

The fully equipped

Foundary, that the unit is supported by, supplies high-grade SG Iron

castings for automobile components and excavators, and is rated as one of the cleaner, better and highly automated foundries in the world. It has an annual capacity of 42,000 MT of Good castings and makes, both, Gey and SG cast Iron casting. It manufactures all critical automobile castings e.g. Cylinder Block, Cylinder Head etc. It has a sophisticated Kunkel Wagner High Pressure Moulding line of a rated production capacity of 90 moulds/ hour. This is supported by a sand cooler and sand mixer from Kunkel Wagner. Its melting shop has Medium Frequency Induction Furnaces for melting and Channel Furnaces for holding. The pouring is done by a Channel Press Pour coupled with a Steam Inoculation Dispenser. The core shop has a state-ofthe-art Cold Box Machine, making four cores per minute. It has elaborate sand and metallurgical laboratories. In 1993 the foundry was ISO 9002 certified by the Bureau Veritas Quality International, which was later followed by the more stringent QS 9000 certification from the BVQI in the year 2000. Currently it is certified as TS: 16949 by BVC.


Engine Factoryis

responsible for the in-house manufacture of Tata 697/497

Naturally Aspirated and Turbo Charged engines, and the 6B series engines manufactured at Tata Cummins. As one of the most modern forging set-ups in the Country, the Forge Division is equipped with a semi-automated forging line with 40,000 mkgBeche Hammer and state-of-the-art presses from Kurimoto of Japan. It produces critical forgings like crankshafts, front axle beams and steering parts for the automobile plant. The new forging line, installed in April 1984, has the capacity to forge front axle beams at 90 sec per piece and crankshafts at 120 sec per piece. Mechanical presses help produce a variety of heavy forgings. The sophisticated FIDIA digit 165 CC Graphite Milling Machine links shop floor machines to the design workstation. The Forge has been certified as ISO 9002 and QS 9000 by the BVQI.


Automobile industry is booming in this century. India is one of the key players in the international automobile market. One of the fastest growing sectors in India is the automobile industry. High demand for cars,two wheelers and other vehicles has driven the growth of the automobile sector .Introduction of easy repayment and finance schemes has given a boost to the automobile companies in India. The list below gives the name of the best automobile companies in India.

Bajaj Auto Ltd :

It is market leader among the automobile companies in India. The Bajaj Group's flagship company is Bajaj Auto. It is the fourth largest two-wheeler and four-wheeler manufacturer in the world. The Bajaj Brand is renowned in countries like US,Europe,Latin America etc .It is also among the top ten Indian companies in market capitalizaion. The company has products in the segments like scooters, mopeds, motorcycles, three wheelers.

Ford Motor Company:

This company entered the Indian automobile industry by a tie up with Mahindra Motors to manufacture the awesome Ford Escort. The company's models made for India are manufactured keeping in mind the Indian conditions. The company has sold about more than 260,000,000 vehicles across the globe. The eminent brands of the company are Jaguar, Mercury, Ford, Lincoln. The company also ranks among the best five industrial corporations in the globe and is found in about 200 countries.

Mahindra & Mahindra Limited:

This Indian automobile company is a subsidiary of Mahindra Group. The company specializes in vehicles for the general purpose utility. It ranks tenth among the largest private sector companies in India. The company has four divisions-tractors, automotive,inter trade and MSL. It has about 33 sales offices and the network support is about 500 dealers across India.

Maruti Suzuki India Ltd:

It is the company which has ushered revolution in the industry of Indian cars. The Company is the result of the alliance of Japan's Suzuki and Maruti. Maruti Suzuki car is for the average Indian. It is the first Indian company which manufactured about one million vehicles. The motto of the largest Automobile Company of India was to offer low cost and fuel efficient vehicles. The company produces Zen ,Maruti 800, Maruti Esteem,Maruti Omni etc.

Hyundai Motor India Ltd :

The company is a sub division of the Hyundai Motors Company ,a South Korean multinational. The South Korean top manufacturer of automobile has captured the Indian market through this sub division. The company has more than 70 dealer workshops. Hyundai Santro is giving competition to others. This car is designed in India near Chennai.

Hindustan Motors:
The leading manufacturer of Electric Motors in India is Hindustan Motors. The first Car Company of India to start the manufacturing process of cars in India in the year 1942 is Hindustan Motors. The company has a strong network of 115 dealers and 60 Parts Dealers and 4 regional offices. The new model ,Ambassador Nova was launched by this company.

Ashok Leyland:
It is the second largest key player among the commercial vehicles in India. The company manufactures Vestibule buses, Haulage vehicles,18-82 seater single and double decker buses etc. The six manufacturing units of the company can produce 77,000 vehicles at a time. It is an interesting thing to note that there is a 50:50 partnership between General Motors and SAIC. According to sources, General Motors India Private Limited is the fifth largest automobile company in India after Maruti Suzuki, Hyundai, Tata Motors and Mahindra. This company has launched vehicle manufacturing plants in Halol, Gujarat and TalegaonDabhade, Maharashtra. The company has its headquarter in Gurgaon and Halol.

Toyota Kirloskar Motor Private Limited:

The main aim of the company is INNOVATION. The continuous effort of the company has made it very popular in the automobile sector. The company is working with the aim of becoming 'the most admired company in the country.


Strengths Strong Domestic player (Indian market) Tata has a strong presence in india and is a key manufacturer of commercial vehicles. Tata motors is india slargest automobile co with revenues of 123133.30 cr in 2010-11.
It is a demand driven, and customer-oriented, taking care of customers preferences and taste. 3. Long list of portfolios: Its products include passenger cars, trucks, vans and coaches. It is worlds 4th biggest truck producer, it is also worlds second biggest bus producer. Global Presence Tata Motors has been in the process of acquiring foreign brands to increase its global presence. Through acquisition, Tata has operations in the UK, South Korea, Thailand and Spain. Among these acquisitions is Jaguar Land Rover, a business comprising two struggling iconic British brands that was acquired from the Ford Motor Company in 2008. In 2004, Tata acquired the Daewoo Commercial Vehicles Company, South Koreas second largest truck maker. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. Tata Motors has expanded its production and assembly operations to several other countries including South Korea, Thailand, South Africa and Argentina and is planning to set up plants in Turkey, Indonesia and Eastern Europe. Tata also has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and Senegal. Tata has dealerships in 26 countries across 4 continents. Dealership, Sales and Service Access: The Companys dealership, sales, services and spare parts network comprises over 3500 touch points. Research and Development Activities: Tata motors is known as an innovative global leader. The company has a very strong R&D having over 3000 engineers and scientists. The Engineering Research Centre (ERC) in Pune was setup in 1966 and is among the finest in the country. It has been honoured with two prestigious awards - 'The DSIR National Award for R&D Effort in Industry - 1999' and 'National Award for Successful Commercialisation of Indigenous Technology by an Industrial

The internationalisation strategy so far has been to keep local managers in new acquisitions, and to only transplant a couple of senior managers from India into the new market. The benefit is that Tata has been able to exchange expertise. For example after the Daewoo acquisition the Indian company leaned work discipline and how to get the final product 'right first time.' The company has a strategy in place for the next stage of its expansion. Not only is it focusing upon new products and acquisitions, but it also has a programme of intensive management development in place in order to establish its leaders for tomorrow. The company has had a successful alliance with Italian mass producer Fiat since 2006. This has enhanced the product portfolio for Tata and Fiat in terms of production and knowledge exchange. For example, the Fiat Palio Style was launched by Tata in 2007, and the companies have an agreement to build a pick-up targeted at Central and South America.

Return on Investment on TATA motors shares in low. Tata motors products are not considered as luxurious. The products are generally targeted for economy class rather than for luxury. Hence, the company lacks a strong footprint in the sector of luxury products. Safety standards are not maintained/ often ignored. This has led to diminish of public image of the TATA automobiles (eg Tata Nano). Limited consumer base Though Tata is present in many countries it has only managed to create a large consumer base in the Indian Subcontinent, namely India, Bangladesh, Bhutan, Sri Lanka and Nepal. Tata has a growing consumer base in Italy, Spain and South Africa. Relatively smaller proportion of market share in Passenger vehicles in India.

The company's passenger car products are based upon 3rd and 4th generation platforms, which put Tata Motors Limited at a disadvantage with competing car manufacturers. Despite buying the Jaguar and Land Rover brands (see opportunities below); Tata has not got a foothold in the luxury car segment in its domestic, Indian market. Is the brand associated with commercial vehicles and low-cost passenger cars to the extent that it has isolated itself from lucrative segments in a more aspiring India? One weakness which is often not recognised is that in English the word 'tat' means rubbish. Would the brand sensitive British consumer ever buy into such a brand? Maybe not, but they would buy into Fiat, Jaguar and Land Rover (see opportunities and strengths). Opportunities In the summer of 2008 Tata Motor's announced that it had successfully purchased the Land Rover and Jaguar brands from Ford Motors for UK 2.3 million. Two of the World's luxury car brand have been added to its portfolio of brands, and will undoubtedly off the company the chance to market vehicles in the luxury segments.

Tata Motors Limited acquired Daewoo Motor's Commercial vehicle business in 2004 for around USD $16 million. Nano is the cheapest car in the World - retailing at little more than a motorbike. Whilst the World is getting ready for greener alternatives to gas-guzzlers, is the Nano the answer in terms of concept or brand? Incidentally, the new Land Rover and Jaguar models will cost up to 85 times more than a standard Nano! The new global track platform is about to be launched from its Korean (previously Daewoo) plant. Again, at a time when the World is looking for environmentally friendly transport alternatives, is now the right time to move into this segment? The answer to this question (and the one above) is that new and emerging industrial nations such as India, South Korea and China will have a thirst for low-cost passenger and commercial vehicles. These are the opportunities. However the company has put in place a very proactive Corporate Social Responsibility (CSR) committee to address potential strategies that will make is operations more sustainable. The range of Super Milo fuel efficient buses are powered by super-efficient, ecofriendly engines. The bus has optional organic clutch with booster assist and better air intakes that will reduce fuel consumption by up to 10%. Threats Other competing car manufacturers have been in the passenger car business for 40, 50 or more years. Therefore Tata Motors Limited has to catch up in terms of quality and lean production.

Sustainability and environmentalism could mean extra costs for this low-cost producer. This could impact its underpinning competitive advantage. Obviously, as Tata globalises and buys into other brands this problem could be alleviated. Since the company has focused upon the commercial and small vehicle segments, it has left itself open to competition from overseas companies for the emerging Indian luxury segments. For example ICICI bank and DaimlerChrysler have invested in a new Punebased plant which will build 5000 new Mercedes-Benz per annum. Other players developing luxury cars targeted at the Indian market include Ford, Honda and Toyota. In fact the entire Indian market has become a target for other global competitors including Maruti Udyog, General Motors, Ford and others. Rising prices in the global economy could pose a threat to Tata Motors Limited on a couple of fronts. The price of steel and aluminium is increasing putting pressure on the costs of production. Many of Tata's products run on Diesel fuel which is becoming expensive globally and within its traditional home market.


The Vehicle Factory boasts of two assembly lines. The main assembly line, measuring 180 m in length has 20 work stations with a vehicle rolling out every 8 minutes. The other line is dedicated to special purpose vehicles and for meeting the requirements of the Indian Army. The uniqueness of the Factory lies in its possession of

Advanced facilities for manufacturing long members comprising of a set-up of 5000 Tones Hydraulic press line, cut-to-length line for strip preparation purchased from M/s Kohler of Germany and a Camber Correction line. Facility for hot forming of axle halves with a 3000 tone press and heating furnace. Flexibility in manufacturing frames with an off line Proto-typing facility.

The Main Activities in Vehicle Factory:

Engine Drop
Engine is brought with hoist & dropped on chassis. Holes are aligned of mounting bracket with bolts of mounting pads. Prefit washer & nut on the bolts. Holes are aligned with front mounting pad holes, insert bolt & prefit. After all nut bolts are fitted tackle is removed

Radiator Drop
Drop the radiator with hoist on chassis. Align the bottom holes & prefit bolts with washer. Align the dumbbell assembly holes with radiator mtg bkt holes & prefit bolts. Tighten all nuts. Apply paint after tightening.

Cowl Drop
Bring the cowl with monorail hoist. Align it with the chassis & drop slowly Align holes on cowl mtg bracket rear LH/RH & insert bolts to prefit. Align holes on cowl mtg bracket front LH/RH & insert bolts. After inserting the bolts remove tackle.

Battery Drop
Lift battery along with battery cover,

Bring to mtg tray & drop Apply petrol jelly to battery poles Prefit nuts & tighten with nut runner to fit battery on tray

Fuel Tank Mounting

Paste the rubber strap on the mtg bracket with Lift the fuel tank & place on the mtg brackets Wrap the strap & prefit into the bracket at bottom with double nuts Tighten the straps by tightening the nuts

Tyre Fitment
Collect front tyre, lift slightly with the help of wooden bat Align the bolts on axle with holes on tyre rim, Insert tyre on axle & prefit nuts. Assemble front LH & RH tyre Similarly assemble rear inner & outer tyres on axle & prefit nuts Repeat the same for dummy axle tyre fitment

Coolant Filling:
Remove the cap of auxiliary water tank & insert gun. Start the flow of collant into tank Fill the collant till MAX mark on tank. Stop the flow of coolant

Diesel Filling
Open the cover of fuel tank, Insert gun into it. Dispense 25 lit of diesel in to tank. Fit the tank cover.

Clutch Bleeding
Remove the top cover of clutch oil filling bottle. Remove the clutch pipe from booster. Connect flexible pipe & start filling oil with gun. Bleed the clutch oil from other end till all the air in the circuit is removed. Stop filling & plug the other end. Check clutch working

Smoke Meter:
Insert the probe of smoke meter into silencer pipe. Start the vehicle in neutral gear & race for few min. Take readings at different intervals. Stop the vehicle & remove the probe. Take the printout of the report from m/c & paste on inspection card

Chassis Booking:
After checking all the remarks in the inspection card & correction of defects listed in it, Ok sticker is pasted on the cowl & chassis is booked. Ok chassis in now ready for road testing


Absorption costing methods is followed in Tata Motors Jamshedpur plant, for allocation of overheads to the product cost. Overheads are classified into four major heads as given below: Salary expenses. Indirect expenses. Consumption of Stores and spares. Depreciation charge. Each expenses heads are allocated on different basis to the product costs. My objective for the project was to correct the allocation of depreciation cost to be absorbed on the product costs, by:

Physically identifying the assets (fixed) and then allocating them to their respective cost centers for correct depreciation booking.

Correcting the asset master data in the system like gross block, net block, depreciation etc, and these parameters are used as a base for costing of products.

The another significant aspect of the project was that, those assets which were not in use or which were lying as a scrap- whether to make in use of those assets by modifications or to dispose them off.


Correction of overhead absorption rate results in correct costing of products.

Correct costing will lead to correct pricing of the product in the market. Correct costing will lead to correct profit margin on the product.

Scope of the Project was to correct Overhead absorption on the Frame cost. Total Overheads are divided into four heads and are calculated under given percentage basis: Salary expenses (67% of Total Overheads) Indirect expenses (8% of Total Overheads) Consumption of Stores and spares (15% of Total Overheads) Depreciation charge (10% of Total Overheads) In this project our scope was to correct only Depreciation Overheads by correction of Asset master data for correct calculation and absorption of Depreciation overheads on the product cost of the frame, which constitutes 10% of the total overheads.

Scope of project was limited to the Vehicle Factory of Tata motors Jamshedpur.

Time duration for the project was 2 months.

Only fixed assets of the Vehicle Factory was to be audited for the study, not the current assets.

To physically identify the assets in their respective cost center and to match them with the asset master for correct depreciation booking.

To suggest the action point to the Tata motors based on my findings for correct allocation of depreciation and overhead absorption rate for correct costing of product.


Research Design The project study is based on descriptive and applied research. This project based on physically finding the assets in vehicle factory and matching them with the asset master. Later on it focuses on the product costing method followed by Tata motors.

Determining Sample Design

Research Process included some specific items related to the research viz. Asset Number, Cost centre, Asset Category, Gross block etc. and excluded those items which were not required in the research process. Also assets included in the project were taken from cost centre 1216210, and excluded other cost centres in the asset master. Collecting the data
Data Collection was both primary and secondary. The first half of the project which includes the company profile, industry profile, swot analysis etc. falls under secondary data. The second half which includes the working mechanism of vehicle factory, the product cost followed by TML etc comes under the primary data.


We first classify costs according to the three elements of cost: a) Materials b) Labour c) Expenses

Product and Period Costs: We also classify costs as either 1 2 Product costs: the costs of manufacturing our products; or Period costs: these are the costs other than product costs that are charged to, debited to, or written off to the income statement each period.

The classification of Product Costs:

Direct costs: Direct costs are generally seen to be variable costs and they are called direct costs because they are directly associated with manufacturing. In turn, the direct costs can include:

Direct materials: plywood, wooden battens, fabric for the seat and the back, nails, screws, glue. Direct labour: sawyers, drillers, assemblers, painters, polishers, upholsterers Direct expense: this is a strange cost that many texts don't include; but (International Accounting Standard) IAS 2, for example, includes it. Direct expenses can include the costs of special designs for one batch, or run, of a particular set of tables and/or chairs, the cost of buying or hiring special machinery to make a limited edition of a set of chairs.

Total direct costs are collectively known as Prime Costs and we can see that Product Costs are the sum of Prime costs and Overheads.

Indirect Costs: Indirect costs are those costs that are incurred in the factory but that cannot be directly associate with manufacture. Again these costs are classified according to the three elements of cost, materials labour and overheads.

Indirect materials: Some costs that we have included as direct materials would be included here. Indirect labour: Labour costs of people who are only indirectly associated with manufacture: management of a department or area, supervisors, cleaners, maintenance and repair technicians Indirect expenses: The list in this section could be infinitely long if we were to try to include every possible indirect cost. Essentially, if a cost is a factory cost and it has not been included in any of the other sections, it has to be an indirect expense. Here are some examples include: Depreciation of equipment, machinery, vehicles, buildings Electricity, water, telephone, rent, Council Tax, insurance Total indirect costs are collectively known as Overheads.

Finally, within Product Costs, we have Conversion Costs: these are the costs incurred in the factory that are incurred in the conversion of materials into finished goods.

The classification of Period Costs: The scheme shows five sub classifications for Period Costs. When we look at different organisations, we find that they have period costs that might have sub classifications with entirely different names. Unfortunately, this is the nature of the classification of period costs; it can vary so much according to the organisation, the industry and so on. Nevertheless, such a scheme is useful in that it gives us the basic ideas to work on.

Administration Costs: Literally the costs of running the administrative aspects of an organisation. Administration costs will include salaries, rent, Council Tax, electricity, water, telephone, depreciation, a potentially infinitely long list. Notice that there are costs here such as rent, Council Tax, that appear in several sub classifications; in such cases, it should be clear that we are paying rent on buildings, for example, that we use for manufacturing and storage and administration and each area of the business must pay for its share of the total cost under review. Without wishing to overly extend this listing now, we can conclude this discussion by

saying that the costs of Selling, the costs of Distribution and the costs of Research are all accumulated in a similar way to the way in which Administration Costs are accumulated. Consequently, our task is to look at the selling process and classify the costs of running that process accordingly: advertising, market research, salaries, bonuses, electricity, and so on. The same applies to all other classifications of period costs that we might use.

Finance Costs: Finance costs are those costs associated with providing the permanent, long term and short term finance. That is, within the section headed finance costs we will find dividends, interest on long term loans and interest on short term loans. Finally, we should say that we can add any number of subclassifications to our scheme if we need to do that to clarify the ways in which our organisation operates. We will also add further subclassifications if we need to refine and further refine out cost analysis.


Particulars Opening Stock of Raw Material Add: Purchase of Raw materials Add: Purchase Expenses Less: Closing stock of Raw Materials Raw Materials Consumed Direct Wages (Labour) Direct Charges

Amount Amount *** *** *** *** *** *** ***

Prime cost (1) Add :- Factory Over Heads: Factory Rent Factory Power Indirect Material Indirect Wages Supervisor Salary Drawing Office Salary Factory Insurance Factory Asset Depreciation Works cost Incurred Add: Opening Stock of WIP Less: Closing Stock of WIP Works cost (2) Add:- Administration Over Heads:Office Rent Asset Depreciation General Charges Audit Fees Bank Charges Counting house Salary Other Office Expenses Cost of Production (3) Add: Opening stock of Finished Goods Less: Closing stock of Finished Goods *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** ***





Cost of Goods Sold Add:- Selling and Distribution OH:Sales man Commission Sales man salary Traveling Expenses Advertisement Delivery man expenses Sales Tax Bad Debts Cost of Sales (5) Profit (balancing figure) Sales *** *** *** *** *** *** ***


*** *** ***

Notes:1) Factory Over Heads are recovered as a percentage of direct wages 2) Administration Over Heads, Selling and Distribution Overheads are recovered as a percentage of works cost.








C. S

Assembly Line

Vehicle Factory Engine Division

Finance Security

Personnel Cab & Cowl Shop Administration Auto Planning

Example showing the procedure for product costing in Tata Motors (JSR), through division chart.

*C. E. M- Capital Equipment Manufacturing. *C. S- Common Service.

*R & D- Research and Development.


As shown in the chart in the previous page, there are many divisions in the Tata motors Jamshedpur plant like Auto, forge, foundry, C.E.M, C.S, R & D divisions. As also discussed previously that there are two types of costs direct cost and indirect costs. The indirect costs such as services which the other supporting divisions provide to manufacturing divisions, example common service division which consists of finance, H.R, personnel, security and administration departments gives there supporting services to like Auto division, forging, foundry, C.E.M, research & development divisions. The indirect cost incurred by these divisions for their common services are also considered in the total cost of product. Another example for indirect cost from the chart: In Auto divisions there are many manufacturing divisions such as Assembly line, Frame shop, Engine division, Cab & cowl shop, these divisions are also supported by Auto planning division, the indirect cost incurred by this division in supporting other manufacturing divisions also contributes in the total product cost. The costing procedure can be made clearer by following parameters: A) If considering only Auto division then costing procedure are1) Common service expenses are allocated to Auto based on various parameters. 2) Auto expenses = Expenses booked in cost center* of (Assembly line + frame shop + Cab & cowl + Auto planning) + Common service. (*Cost center means the area in which manufacturing activity is done). B) If considering only frame shop in the Auto division then costing procedure is1) Expenses of frame shop = Expenses in (productive cost center + Non- productive cost center) + common service + share of Auto planning division.

2) Cost per unit of frame (calculated quarterly) = Total expenses of frame shop / Total production.


1. BC rate or Cost center working rate is done on Quarterly basis 2. Cost center wise expense is downloaded from SAP. 3. Cost center wise summary of expense is made in to the following category a. Sal b. Inert c. STS Salary expenses Indirect expenses Consumption of Stores and spares Depreciation charge

d. Depreciation -

4. Reconciliation between trial balance and cost center wise dump is made. List of account that is not considered for overhead absorption are identified and form part of the record. 5. Following Non-Financial parameters are also included at the cost center wise summary. a. NOM b. AGB c. Cu Dep No of permanent employees Average Gross Block Accumulated depreciation

Summary is prepared in the following format: Cost Center NOM Salary Inert STSP Dep. Total Exp AGB Cu Dep

6. Cost centers are then grouped in to the following based on the nature of cost centers: a. Tool Room b. Productive cost centers c. Non Productive cost centers d. Maintenance cost centers

e. Stores f. Spares Domestic g. Spares Export h. Sales & Service 7. Power expense is booked in the divisional cost centers of the respective factory. Power expense booked in the auto division profit center is taken from SAP and re-distributed to the cost centers based on SMH (standard man hour) of the productive cost centers.

8. Total Common service charge allocated to Auto division is grouped based on their nature of allocation in the common service working file. These groups are further regrouped into the basis on which they will be redistributed to group of cost centers of auto division. A summary of the said grouping and redistribution is given below:

Nature of Common service expense allocated to Auto Average Gross Block Power Material Overhead Spares No. of Men Telephone Guest House Low Cost Automation Compressor House Oxygen Plant NPI Floor area Turnover Water Import

Basis of allocation of Common service share of Auto to Cost centers group within Auto Average Gross Block

Allocated to Cost center Group

ALL Average Gross Block Material Overhead STORES Material Overhead No. of Men No. of Men ALL No. of Men No. of Men Standard Man Hour Standard Man Hour Standard Man Hour Standard Man Hour Standard Man Hour Standard Man Hour Standard Man Hour ALL


Standard Man Hour ERC ERC

9. Following common service expenses allocated to Auto are not considered for BC rate working:
Cost center 1219987 1219919 1219911 1219811 1219989 1219979 1219912

KOREA International Projects Internal Audit Divisional Office (Marco Polo) Divisional Office (Prog. Mgt) Projects WT Projects

10. Common service expense of auto is allocated to group of cost centers within auto based on the above basis.

11. All the overheads of cost center group, except Productive cost center group, and Common service expense allocated above is absorbed to the individual productive cost centers, a matrix is prepared for the same. The overheads are absorbed to the productive cost centers based on the nature of expenses and allocation basis sated above. Total expenses of productive cost center will be the summation of the followings expenses: a. Direct expenses booked in Productive cost centers b. Allocated expense, both direct expenses and allocated common service expense, of other cost center on productive cost centers c. Common service allocation of productive cost centers

12. Total expense of a productive cost center arrived above is divided by the total SMH booked in the respective cost center to arrive at the overhead rate per SMH also known as the BC rate or overhead absorption rate.

13. BC rate arrived above is updated in the System using Tcode KP26


Analysis 1 Asset category: Electrical Installations

Cost Centre Number of assets as per asset master Assets Physically found in cost centre 1216210 9 Assets Physically not found in cost centre 1216210 1 Disposed off Assets found in a different cost centre 0 1



Interpretation In asset category electrical installations nine assets present in the asset master were physically found in line 1 of the vehicle factory. There was one asset which was physically found but in a different cost centre. It was found in Assembly Line 2 of the cost centre 1216211.

Analysis 2 Asset Category: Factory Buildings

Cost Centre Number of Assets Physically assets as per found in cost asset master centre 1216210 Assets Physically not found in cost centre 1216210 Disposed Off Assets found in a different cost centre 1216210 20 16 4 1 3

Interpretation In asset category factory and buildings, there are 20assets in the asset master of which 19 assets were found and 1 asset was disposed off. But there were three assets which were found in a different cost centre i.e. in cost centre 1216211.

Analysis 3 Asset Category: Factory Equipment & Fixture

Cost Centre Number of assets as per asset master Assets Physically found(a) in cost centre 1216210 1216210 88* 76 Assets Physically not found in cost centre 1216210 12 4 8 Disposed Off Assets Lying in a different cost centre

Interpretation Out of the eighty eight assets present in the asset master, seventy six assets were found in line 1 of the cost centre 1216210. Out of the 12 assets which were not found, four assets were disposed off. Four assets lie in the cost centre 1216233 of the frame shop. The other four assets being used in chassis line2 of the cost centre 1216211.

Analysis 4 Asset Category: Furniture

Cost Centre Number of assets as per asset master Assets Physically found(a) in cost centre 1216210 1216210 5 5 0 0 0 Assets Physically not found in cost centre 1216210 Disposed Off Assets Lying in a different cost centre

Interpretation Out of 5 assets in furniture category in asset master, all the 5 assets were physically found in line 1 of the cost centre 1216210.

Analysis 5 Asset Category: Other IT related equipments

Cost Centre Number of assets as per asset master Assets Physically found(a) in cost centre 1216210 1216210 3 3 0 0 0 Assets Physically not found in cost centre 1216210 Disposed Off Assets Lying in a different cost centre

Interpretation All the three assets included in the asset master generated by the system were physically present in cost centre 1216210. There were no assets found in a different cost centre or disposed off.

Analysis 6 Asset Category: Plant &machinery

Cost Centre Number of Assets Assets Disposed Off Assets Lying

assets as per asset master

Physically found(a) in cost centre 1216210

Physically not found in cost centre 1216210

in a different cost centre




Interpretation: According to the asset master in plant and machinery category of the cost centre 1216210 there are 29 assets altogether and out of them 28 assets could be physically identified. There was a single asset that was present in cost centre 1216211.

Analysis 7 Asset Category: Roads and other Buildings

Cost Centre Number of assets as per asset master Assets Physically found(a) in cost centre 1216210 1216210 5 5 Assets Physically not found in cost centre 1216210 0 0 0 Disposed Off Assets Lying in a different cost centre

Interpretation According to the asset master, the category roads and other building have 5 assets. Four assets were physically found in the chassis line1 and one asset was found in Tyre assembly line 1.

Analysis 8 Asset Category: Furniture minor, Minor Equipments, Motor Cars, and Jeep.
Cost Centre Number of assets as per asset master Assets Physically found(a) in cost centre 1216210 1216210 2 1 Assets Physically not found in cost centre 1216210 1 1 0 Disposed Off Assets Lying in a different cost centre

Interpretation: *Note: Since trolleys were old, and relatively lower in costs, they were not considered. (26 Trolleys were not considered, out which 25 of them fell under Factory Equipment & fixture and 1 under minor equipment.


Cost centre 1216210 in vehicle factory covers 188 assets in cross conveyor and assembly line 1. Each and every asset has a particular and a unique asset number booked in the asset master

Each and every asset is considered under various categories viz. factory and buildings, electrical installations, plant and machinery, furniture, minor equipments etc. The numbers of assets which are physically found in the cost centre 1216210 of vehicle factory are, out of 188 assets are 143. There were forty five assets which were physically not found in the cost centre 1216210. There are twenty six trolleys in the asset master. Trolleys are old and the price is low, so their significance was minimal. So they were considered either disposed off or not in use anymore. There are nine assets which is present in the cost centre 1216210 of the asset master. But they were found to be used in a different cost centre i.e. 1216211. There are four assets which is present in the cost centre1216210 of the asset master. But they were physically found in the cost centre 1216233 of the frame shop.

According to the asset master digital tyre inflators are six in number in the cost centre 1216210 of the vehicle factory. But there were fourteen of them identified in the cost centre 1216210. Finally there are nine assets that are disposed off.


Nine assets which lie in the cost centre 1216211, but their depreciation cost is shown in the cost centre 1216210 of the asset master should be removed from the cost centre 1216210 of the asset master to the cost centre 1216211 of the asset master. Benefits: The overhead cost would reduce in the cost centre 1216210. Rivet guns and hydraulic pack for rivet guns is booked in the cost centre 1216210 of the asset master but physically found in the cost centre 1216233 of the frame shop. Booking of these assets in the cost centre 1216211 of the asset master should be done. Benefits: They should be removed from the cost centre 1216210 of the asset master and booked in the cost centre 1216233 as that would lead to correct costing of the product. BLIND RIVET GUN lies in the cost centre 1216210 of the asset master and also physically found in the same lying unused. It should be moved to the cost centre 1216233 (of the frame shop) for its proper use. Benefits: It is increasing the overhead cost of the cost centre 1216210. So moving it would lead to reduction in the cost and also it being used for the production.

According to the asset master digital tyre inflators are six in number in the cost centre 1216210 of the vehicle factory. But there were fourteen of them identified in the cost

centre 1216210. So the correct number of tyre inflators should be booked in the asset master. Benefits: Correct booking will lead to correct finding of the overhead cost and hence lead to correct pricing of the product.


BOOK REFERENCES: Tata Motors Internal Document Tata Motors Memorandum Of settlement 2011 Tata Motors Policies