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Assignment Assessment Report

Campus: Level: Module Name: Students Name: e-mail id & Mob No Stream Chennai Year/semester ACL II Assignment Type Costing MIS & Budgetary Assessors Name Control B Simanchala Patro Reqd Submission Date Actual Submission Date 9861634747 Business Submitted to : 2010-2012 II Semester Assignment B Prachi mam 15-06-2012 20-06-2012 Prachi mam

Certificate by the Student: Plagiarism is a serious College offence. I certify that this is my own work. I have referenced all relevant materials.

B Simanchala Patro (Students Name/Signatures)

Expected Outcomes

Assessment Criteria

Grade based on D,M,P,R system


General Parameters
Clarity Analytical ThinkingResearch DoneFormatting & PresentationClear understanding of the concept Ability to analyze the problem realistically Research carried out to solve the problem Concise& clear thinking along with presentation

Subject Specific Parameters

1. Understanding the procedures of Costing 2. To be able to calculate the unit cost and prepare costing Profit & Loss statement Grades P M D Clarity of concept Precision in calculation preparation of sheet cost and cost

Grade Descriptors A Pass grade is achieved by meeting all the requirements defined. Identify & apply strategies/techniques to find appropriate solutions Demonstrate convergent, lateral and creative thinking.

Achieved Yes/No (Y / N)

Assignment Grading Summary (To be filled by the Assessor)


Assignment B

Ques 1: Each student will be given one of the under mentioned industry for assignment work. Manufacturing Industry Hospital Industry IT Industry Transport Industry

The students will have to visit a company from the assigned industry, meet the Accounts person and do the following:a. Find out and understand the Cost procedures followed by the company. b. If possible get a sample of cost sheet or Statement of Accounts A presentation on the above and recommendation for areas of improvement has to be made. Ques 2: 1. Discuss the technique of marginal costing as a key for management problems. 2. The following is the trading and profit and loss account of M/s Prem Industries for the year ended 31 st March 2000. To Material consumed To Direct wages To Works overhead To Administration overheads To Selling & distribution overheads To Net profit for the year 708000 371000 213000 95500 113500 69000 1570000 In manufacturing a standard unit, the companys cost records show that: a. Work overhead have been charged to work-in-progress at 20% on prime cost. b. Administration overheads have been recovered as Rs.3 per finished unit. c. Selling and distribution overheads have been recovered as Rs.4 per unit sold. d. The under-absorbed or over-absorbed overheads have not been adjusted into the costing P & L a/c. Prepare: 1. A costing profit & loss account indicating net profits. 2. A Statement reconciling the profit as disclosed by the cost accounts and that Shown in the financial accounts. By Sales 30000 units By Finished Stock (1000 units) By work-in-progress Material Wages Works Overhead 1500000 40000 17000 8000 5000 1570000

Ques 3 : Work out an appropriate cost sheet from the unit cost per passenger km for the year 2006-07 for a fleet of passenger buses run by a Transport Company from the following figures extracted from its books. 5 passenger buses costing Rs.50000, Rs. 120000, Rs. 45000, Rs.55000 and Rs.80000 respectively. Yearly depreciation of vehicles 20% of the cost. Annual repair, maintenance and spare parts 80% of depreciation. Wages of 10 drivers @ Rs.100 each per month, wages of Rs.20 cleaners @ Rs. 50 each per month. Yearly rate of interest @ 4%on capital. Rent of six garages @ Rs.50 each month. Directors fees @ Rs.400 per month, office establishment @ Rs.1000 per month, licenses and taxes @ Rs.1000 every six months, realization by sales of old tyres and tubes @ Rs.3200 every six months, 900 passengers were carried over 1600 kms during the year.


Cost Sheet of Amul Ice Cream

Particulars Cost unit 10.00 3.00 2.50 3.00 3.50 2.00 2.50 1.50 1.00 0.50 1.00 1.50 8.00 Carriage inward Raw Consumed Direct expenses Direct labour Prime cost materials 33.85 2.20 5.30 40.05 3,384,500.00 220,000.00 530,000.00 750,000.00 1.85 per Amount

opening stock Raw materials Dry fruits Milk Flavors Other ingredients Sugar Cup Cutlery Seasonal fruits Waffle Cocoa

1,000,000.00 300,000.00 250,000.00 300,000.00 350,000.00 200,000.00 250,000.00 150,000.00 100,000.00 50,000.00 100,000.00 150,000.00 3,200,000.00 184,500.00

Factory overheads Fixed Depreciation Rent Power Insurance Supervisor's salary Variable: Electricity Running exp of machine work cost Office over head Employee cost Other expenditure computer Telephone Taxes Carriage outward cost of production 2.50 1.00 1.75 1.50 0.60 0.70 1.00 9.05 250,000.00 100,000.00 175,000.00 150,000.00 60,000.00 70,000.00 100,000.00 905,000.00





1.20 0.10 0.40 0.20 62.30

120,000.00 10,000.00 40,000.00 20,000.00 6,229,500.00

Opening stock


200,000.00 6,429,500.00

Closing stock 64.30 Cost of goods sold Selling and distribution expenses 4.00 Advertisement Delivery Vehicles Petrol Packaging Cost of sales Profit Sales 3.50 1.75 0.51 74.05

400,000.00 350,000.00 175,000.00 50,500.00 7,405,000.00

18.50 92.56

1,851,250.00 9,256,250.00

Marginal Cost Sheet

Particulars Sales Variable Cost Purchases Raw material consumed Contribution Fixed cost Factory cost Employee cost Deprecation Other expenditure Profit Amount 9,256,250.00 3,200,000.00 3,384,500.00 2,671,750.00 905,000.00 1,000,000.00 100,000.00 190,000.00 476,750.00

Ice Cream Industry in India

Industry Snapshot; Market Size-1200 corers Ice Cream market is growing at 26% Major players; Amul- Market leader with share of 36% HLL- Kwality walls- 2nd biggest players Mother Diary Arun- Chennai based hatsun agro product

Cost Sheet Analysis

The Company is producing 100000 units of ice cream at Rs. 74.05 Which the total cost incurred is Rs.7405000 and the total cost sales profit being made is Rs. 1851250. The Company is producing a single cup of ice cream at Rs .92.5625 which includes the cost of a cup ice cream at Rs. 74.05 Which again Implies that the Profit of Rs. 18.5125 is earned on a single unit of Amul Ice Cream. Since the company is earning some percentage of Profit above the cost, it means a slight increase in the cost will not have too much of an effect on the profit since there is a large margin of safety. Since the company is earning some amount of profit, the business is capable to expand and diversify over a period of time. PVR=C/S= 2671750/9256250=28.86% BEP (in Rs.) = FC/ PVR=2195000/28.86=Rs.7650568.26 BEP (In units)= FC/C=2195000/2.67175=821558.9=821559 MOS= Profit/ PVR= 476750/28.86=16519.404

Determination of selling price

Amul Ice cream has marked the selling price of their product roughly 20% above the cost price. This implies that they are making a profit on each unit of output that is sold. These profits can be ploughed into the business again to create more output.

Facts The portfolio consisted of impulse product like sticks, cones, cups as well as take home packs and catering packs. In 1997, Amul ice creams entered Mumbai followed by Chennai in 1998 and Kolkata and Delhi in 2002. Nationally it was rolled out across the country in 1999. Has combated competition like Walls, Mother Dairy and achieved the No 1 position in the country. Today the market share of Amul ice cream is 38%. Amuls entry into ice cream is regarded as successful due to the large market share it was able to capture within a short period of time.

Answer-2 .1
Discuss the technique of marginal costing as a key for management problems

Marginal costing is an accounting technique. Marginal costing is not a system of costing such as process or job costing. As marginal costing is a technique, it may be used in conjunction with any costing method. Marginal costing as a technique helps the management to measure the profitability of an undertaking by considering the underlying cost behavior. Marginal costing is an impotent technique, which guides the management theory. Marginal costing is also known as direct costing or variable costing or differential costing or incremental costing or comparative costing. Marginal costing is a very useful tool for management because of its following applications and merits

Cost control: Marginal costing divides the total cost into fixed and variable cost can be controlled by the top management and that to limited extent. Variable costs can be controlled by the lower level of management. Marginal cost by concentrating all Efforts on the variable costs can control and thus provides a tool to the management for control of total cost. In marginal costing fixed costs are not eliminated at all. These are shown separately as a deduction from the contribution instead of merging with cost of sales and inventories. This helps the management to have a control on fixed costs. Profit planning Marginal costing helps the profit planning, that is planning for future operations in such a way s to maximize the profits to maintain a specified level of profit. Profits are increased or decreased as a consequence of fluctuations in selling prices, variable costs, and sales quantities in case there is fixed capacity to produce and sell. Evaluation of performance Evaluation of performance is the different products, departments markets and sales divisions have different profit earning potentialities. Marginal cost analysis is very useful for evaluating the performance of each sector of a concern. Performance evaluation is better done if distinction is made between fixed and variable expenses. Decision making: The information provided by the total cost method is not sufficient in solving the management problems. Material costing techniques is used in providing assistance to the

management in vital decision making, especially in declaring with the problems requiring short-term.

Introduction of a new product or line: A business concern producing only one type of article or multi product concern may add another product either to make use of the available felicities which are otherwise idle or to capture new market.

These are also use of the marginal costing: 1. Fixation of selling price 2. Key or limiting factors. 3. Make or by decisions4. 4. Selection of a suitable product mix. 5. Effect of change in price. 6. Maintaining a desired level of profit. 7. Alternative methods of products. 8. Diversification of products. 9. Closing down or suspending activities. 10. Alternative course of action

Cost sheet Particulars material Consumed Direct wages Prime Cost Amount 708000.00 371000.00

1,079,000.00 Production Over head (20% On Prime Cost) (1079000/100*20%) Less -Closing working in Progress material Wages Work over head 215,800.00 17000.00 8000.00 5000.00 (30,000.00) 1,264,800.00

Work Cost Add Administration Over head @3 Pre finished unit (30000+100)*3 Cost of goods produced Less -Closing of finished goods (1000 Units) 1357800/31000*100 Cost of goods sold Add Selles And distribution overheads (30000*4) Cost of Sales Add Profit for year Sales

93,000.00 1,357,800.00

(43,800.00) 1,314,000.00

120,000.00 1,434,000.00 66,000.00 1,500,000.00

Trading and Profit and loss account of M/S Prem industries for 31st mar 2000 Particular Profit and loss a/c as per cost a/c Add Production over head (over absorbed) (215800-213000) Salary and distribution over head (over absorbed) (120000-113500) Less Administration over head (under absorbed) (95000-93500) Over head of closing stock (43800-40000) Profit as per financial account Details Amount(Rs) 66,000.00

2,800.00 6,500.00 9,300.00 2,500.00 3,800.00 6,300.00 69000


Cost Sheet
Particulars (A) Standing charges Depreciation (WN-2) Interest on capital @4% (WN-3) Office establishment @ Rs.1000 per month (WN 4) licenses and taxes @ Rs.1000 every six months(WN-5) Rent of six garages @ Rs.50 each month (WN -6) Directors fees @ Rs.400 per month (WN -7) (A)Total Repair Chargers Repair And maintenance Realization by sales of old tyres and tubes (WN -8) (B)Total 56,000.00 (6,400.00) 49,600.00 70,000.00 14,000.00 12,000.00 2,000.00 3,600.00 4,800.00 106,400.00 Amount (Rs)

Total Am (Rs)


Running charges
Wages of 10 drivers @ Rs.100 each per month (WN -9) wages of Rs.20 cleaners @ Rs. 50 each per month(WN-10) Total Total (A+B+C) passengers kms during Passengers Kms Total (WN -11) Cost Per Passenger (WN -12) 12,000.00 12,000.00 24,000.00 180,000.00 900 1600 1440000 0.125

Working Note

1. 5 passenger buses costing -50000.00+120000+45000+55000+80000=350000 2. Yearly depreciation of vehicles 20% of the cost - 350000/100*20=70000 3. Yearly rate of interest @ 4%on capital -350000/100*4=14000 4. Office establishment @ Rs.1000 per month -1000*12=12000 5. Licenses and taxes @ Rs.1000 every six months -1000*2=2000 6. Rent of six garages @ Rs.50 each month -6*50=300*12=3600 7. Directors fees @ Rs.400 per month 400*12 =4800 8. Wages of 10 drivers @ Rs.100 each per month -10*100=1000*12=12000 9. wages of Rs.20 cleaners @ Rs. 50 each per month 20*50=1000*12=1200 10. realization by sales of old tyres and tubes @ Rs.3200 every six month 3200*2=6400 11. Total passenger km = Total Passenger *Total kms

= Total Passengers Kms

=900*1600=1440000 12. Cost Per Passenger = Total Expanses /Total passengers kms

= 180000/1440000 =0.125