PROJECT REPORT

ON COSTING SYSTEM IN WBD, TATA STEEL, JHARKHAND

Under the Guidance ofMr. Vinod Kumar Mr. Kumar Sunil Mr .D Kunar Mr. M. N. Rao TATA STEEL LTD.

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ACKNOWLEDGMENT
We are truly privileged that we got the opportunity to do our project in a reputed organization like TATA STEEL. We would like to thank Mr. R. K. Shrivastava (Chief HR/IR) &Mr. M.N.RAO (Sr. Manager Training) for giving us an opportunity to work at TATA STEEL WEST BOKARO DIVISION. The association with such a focused & growth oriented company has given us a clear knowledge of what is an organization and what are the major factors that helps an organization to achieve the objectives effectively and efficiently. We wholeheartedly thank Mr. Vinod Kumar, Mr. Kumar Sunil, Mr. Ashish, Mr. Malay Sinha, Mr. D Kunar & Mr. Ashish ghosh for guiding us in our work & providing us with valuable information & suggestions. We are grateful to the executives of different departments who have been a great help and showed their support as & when required. The study reinforced the theoretical and practical knowledge acquired in terms of applications At the end I would like to thank all the respondents, friends and family who were supportive and encouraging throughout the project.

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PREFACE
The project assigned to me was to perform the study of COSTING SYSTEM IN WBD and the study of environment in which it operates, for which I underwent ten weeks summer training, this training is a integral part of PGP/MBA curriculum. The project has been prepared to summarize West Bokaro activities and highlight the crucial system of costing at WBD. This project presents a framework for evaluating inventory, costing, & payroll that have been developed by professional accountants. This project explains the rationale behind the principles and suggests ways and means to improve these systems in practice. I have tried to present it in single way so that it is user friendly and interesting for users. Illustrations, formats, graphs, diagrams have been used whenever required to add glory. I shall thanks to all those who have guided me in completion of the project. I would highly appreciate to receive suggestion from the readers to further improve the project.

INDEX
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SI CONTENTS NO. 1 INTRODUCTION TO TATA STEEL
• • • • • • • • • • • • • • • • • • HISTORY COMPANY PROFILE MISSION & VISION OBJECTIVES & GOALS AWARDS & RECOGNITION

PAGE NO
5-7 7-8 9-10 10-12 12-13

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INTRODUCTION TO WBD

INTRODUCTION STRATEGIC IMPORTANCE MINES&WASHRIES OF WBD ORGANIZATION STRUCTURE

14-18 19 19-21 21

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COSTING SYSTEM

INTRODUCTION TO PRODUCTION SYSTEM INTRODUCTION TO COSTING FLOW OF COST COST CENTRE PRODUCTION AND SUPPORT SERVICE TYPES OF PRODUCT AT WBD APPORTIONMENT OF COST PRODUCTION &SALES REPORT RECOMMENDATION

23-24 24-28 29 29-30 31-34 34-36 37 37-38 39-44

HISTORY OF TATA STEEL
The origins and ascent of Tata Steel, which has culminated into the century long history of an industrial empire, emerge from the illustrious efforts of
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The story of Tata Steel is a century old. the spirit of which could already be felt when he died in 1904. for the first time in the financial history of the country.the masses. the story has flowed through ages to re-define steel in every way. have kept the fire burning. The collieries. It was this vision of constructive change that led Jamshed ji Nusserwanji Tata to embark on a journey of growth that paved the path for industrialization in India. When Tata’s issued shares on 26th August 1907. completed a century of trust in 2007 and carries on. Several mines were spread over the states of Bihar.India's original iron man and the remarkable people who thereafter.Tata was captivated and led by the three guiding stars .building an iron and steel company. The Tata’s soon became the first to own a fully mechanized iron ore mine in India at Noamundi. the mines and the quarries together furnish the bulk of the raw material requirements of the 5 . the Indian people . which started in 1907. generating hydro-electric power and creating an institution that offer the best education in science. in December 1907 that the explorers found their way to Sakchi . The Tata. thus helping in the conservation of the fast dwindling resources of high quality coal. Within his lifetime. On 27th February 1908 when the first stake was driven into the soil of Sakchi the dream had come alive. The Steel Company obtained its first colliery in 1910. The Tata family contributed the remaining 11% shares of the Tata Iron and Steel Company Limited. As India was left slightly dazzled and overwhelmed in the wake of the Industrial Revolution in England the leading Indian intellectuals of the 19th century believed that if India were to keep pace with the world it would have to master the modern scientific methods of the West. Etched with the visions and hardships of a single man.at the confluence of the rivers Subarnarekha and Kharkai. In his lifetime J. And so is the story of steel in India. Orissa and Karnataka. the affluent and the common people -joined hands to put up the first truly Indian enterprise. The Coal Beneficiation Plant at West Bokaro undertook beneficiation of low-grade coal. Jamsetji was to witness the birth of a revolutionary Indian nationalism that would assist in the emergence of independent India. Over the years this one company has discovered different avenues of effective steel utilization and its story defines and re-defines conventional wisdom in more ways than one. Jamsetji Tata had started his quest for steel way back in 1882 but it was twenty-five years later. adding six more in course of time.N.

Post-Independence the Tata’s decided to set on the Herculean task of nation building. a sense of commitment to the family of which they were a part .plant. cost control measures. creed. By the Second World War. optimizing IT support and a strong customer-centric approach were all instrumental in finding the right direction for changing outlooks. The “employee association with management” programme initiated in 1956 gave the workers a stronger voice in the affairs of the Company. An extensive technological overhaul. the port at Kandla. When the entire world was reeling in the Great Depression. raising them to an authoritarian position. steel furnaces. The story of Tata’s achievements is a collective effort of people who sank differences of caste. Tata’s production capacities had expanded enough to make their prices lower than those of steel produced in England. The much-required steel for the newly devised Five-year Plans came from the Tata factories.a momentous day in the history of industrial India. the Tata’s survived and supplied nearly three-fourth of the country’s steel requirements. COMPANY PROFILE 6 . several improvement projects. race and status to strive for a common goal. The first steel was rolled on 16th February 1912 . The Government contributed their bit by connecting railway to Gorumahisani. It did not take long for work to begin thereafter. The Company undertook the Howrah Bridge in Calcutta. mines and quarries were acquired in 1910. Land for the site. At the turn of the millennium. powerhouse and machine shops were laid down. the city of Chandigarh and many more important projects. free medical aid (1915). The last decade of the twentieth century happened to be a very hectic period of self-renewal and growth for Tata Steel. the Bhakra-Nangal Project and the Damodar Valley Corporation. The Tata’s were the first employers to introduce the 8-hour working day (1912).excellence.the Tata’s. In 1908 the plant became functional and the next year. Tata Steel had earned the complete trust of the whole wide world and emerged as a strong entity in the global steel industry. in 1909 the blast furnaces. workers’ provident fund scheme (1920) and many other welfare schemes even before they were introduced in the West. coke ovens. They offered their best as an expression of a sense of belonging.

Corus comprises three operating Divisions. Corus is Europe’s second largest steel producer. the Company plans to emerge as a major global player in the wire business. Sri Lanka and Thailand. Tata Steel extends support to the economically underprivileged not by Charity but by strengthening and empowering them with expertise and knowledge. Asia (2 MTPA) and Millennium Steel (1. The Company’s wire manufacturing unit in Sri Lanka is known as Lanka Special Steel. While the Company is focused in the pursuit of its operational goals. Tata Steel has recently included in its fold Nat Steel. manifold through organic growth and investments. With main steelmaking operations in the UK and the Netherlands.000 people worldwide. The Company plans to enhance its capacity. Tata steel is among the lowest cost producer of steel in the world. Tata Steel is Asia’s first and India’s largest private sector steel company. 7 . mechanical engineering and other markets worldwide. Long Products and Distribution & Building Systems and has a global network of sales offices and service centre’s. packaging. Determined to be a major global steel player. With wire manufacturing facilities in India. Tata Steel products are targeted at the quality conscious auto sector and the burgeoning construction industry.7 MTPA) creating a manufacturing network in eight markets in South-EastAsia and Pacific countries. Soon the Jamshedpur plan will expand its capacity from 5 MTPA to 7 MTPA by 2008 and 10 MTPA by 2012. Given below is an outline of Tata Steel's operations in Europe and SoutheastAsia.Established in 1907. while the joint venture in Thailand for limestone mining is known as Sila Eastern. employing around 37. it is also committed to being a good corporate citizen. Corus supplies steel and related services to the construction. Strip Products. automotive.

NSH produces about 2 MT of steel products annually across its regional operations. It became a 100% subsidiary of Tata Steel in February 2004. MISSION AND VISION GROUP VISION: We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship We make the difference through: Our PEOPLE.7 mtpa. pride and passion. by becoming the supplier of choice delivering premium products and services and creating value to our customers 8 . enhancing leadership capability and acting with pace. Our OFFER.Headquartered in Bangkok. by fostering team work. nurturing talent. NatSteel Holdings is headquartered in Singapore and is a leading supplier of premium steel products for the construction industry. Tata Steel Thailand is a major steel producer in Thailand and is the largest producer of long steel products with a manufacturing capacity of 1.

the Company seeks to scale the heights of excellence in all that it does in an atmosphere free from fear. respecting the environment. caring for our communities and demonstrating high ethical standards. collective and corporate enterprise for the economic emancipation and prosperity of company guided in its policies and objectives by philosophy and its founder Jamshedji Tata. in keeping with national aspirations. 9 . Tata Steel strives to strengthen India’s industrial base through the effective utilization of staff and materials. The means envisaged to achieve this are high technology and productivity.Our INNOVATIVE APPROACH. Overall. Our CONDUCTS. The company recognizes that while honesty and integrity are the essential ingredients of a strong and stable enterprise. Tata Steel recognizes that while honesty and integrity are the essential ingredients of a strong and stable enterprise. consistent with modern management practices. MISSION Consistent with the vision and values of the founder Jamshedji Tata. It affirms its faith in democratic values and in the importance in the success of the individual. by developing leading edge Solutions in Technology. and thereby reaffirms its faith in democratic values. Effective utilization of material and manpower resources. as well as through systematic growth. OBJECTIVE OF TATA STEEL The Company sets down it’s objectives in 1964. profitability provides the main spark for economic activity. processes and products. • Continued application of modern scientific and managerial methods. by providing a safe working place.The statement spelled out that fundamental objective of the Steel Company is: • To strengthen India’s Industrial base through increased productivity. profitability provides the main sparks for economic activity.

10 . • By creating a sense of belonging and team spirit through their closer association with the management at various levels. SHARE HOLDER • By protecting and safeguarding their investments.The company believes in effective discharge of its duties and obligations toward. job security. good working conditions. • By providing adequate wages. • By earning their continuing confidence in its productive ability and its technical competence to keep improving the quality of its products. EMPLOYEES • By realistic and generous understanding and acceptance of their needs and rights and an enlightened awareness of the social responsibilities of industry. • By promoting feelings of trust and loyalty through a human and purposeful awareness of their needs and aspirations and. CUSTOMER • By providing products of proven quality at a fair price. • By ensuring to them a fair return. effective machinery for speedy redressal of grievances and suitable opportunity for promotion and self-development. • By fulfilling its commitment impartially and Courteous in accordance with sound and straight forward business principles.

It is the first steel com-any in the world to receive this certificate. Tata Steel has been conferred the Prime Minister of India’s Trophy for the Best Integrated Steel Plant five times. • Corporate Sustainability Report of Tata Steel hailed by United Nation’s Environment Programme (UNEP) and standard and poor 11 . • It has been awarded Asia’s most admired knowledge enterprise. • By assuming it proper share of social responsibilities in the communities in which the company operates. • By encouraging talent and promoting a civic sense among members of a community.COMMUNITY • By respecting the dignity of the individual and his activity according to the ideals of the community. • Conferred the prestigious Global Coalition award for Business excellence in the Community in recognition of its pioneering work in the field of HIV/AIDS awareness. • By availing of opportunities to develop democratic quality involved in collective work undertaken in the interest of the community. AWARDS AND RECOGNITION • World Steel Dynamics has ranked Tata Steel as the world’s best steel maker (for two consecutive years) in its annual listing in February 2006. USA. • Tata Steel works has been conferred the prestigious Social Accountability International (SAI).

Golden peacock award for CSR on 4th mar. 2009. Population Services International (PSI) and the centre for Strategic and International Studies (CSIS) in 2007.as strongest . • Deming application Prize 2008 for excellence in TQM. 2008. • Tata Steel conferred Mother Teresa Award for Corporate Citizen • Tata Steel won “Award for Corporate Social Responsibility in Public Health by US Indian Business Council (USIBC). • • ET award for “company of the year” in Jan. TATA STEEL conferred fortunes most admired company on 12th may 2010. 12 . submitted by any corporate house from emerging economics. . • Best Governed Company Award 2006 for setting high standards in governance practices.

He leased 13 . The land belonged to Kamakhaya Narayan Singh Bahadur.M north of Jamshedpur. the West Bokaro Collieries division of TAT A STEEL has been making a major contribution towards the Steel Plant’s total requirements of metallurgical coal. Maharaja of Ramgarh.WEST BOKARO DIVISION (A RAW MATERIAL DIVISION) HISTORY: Located 180 K.

A wholly subsidiary of Tata Steel. the requirement of coal increased and West Bokaro was required to feed 1. The entire production of medium cooking coal of West Bokaro was commited to Tata Steel right from the beginning of the mining operation at West Bokaro. Ltd. The West Bokaro collieries raised its first 100 tonnes of the coal in 1978 with taotal manpower of 15 employees from the underground and the place is still known as " South Mine Incline. MODERNISATION PHASE-III With the launching of modernization phase-Ill at Jamshedpur.00 crores two new mechanized Queries were opened viz a viz Quarry "A" and "B" each with a capacity of 3000 tonnes per day. All the washed products namely clean coal meddling from West Bokaro is being transported to Chainpur railways siding from where the same is loaded into wagon and dispatched to Jamshedpur.-l in the country was set up by Tata Steel at West Bokaro with a rated through put capacity of 0. 265 crore. Modernization phase-Ill was launched in the year 1991-92 and completed by 1994-95.come this deficiency at least partly. They invited Tata Steel to buy all coal that it would raise at West Bokaro this offer came like an answer to a prayer. A new Wahery (W-ll) was commissioned in 1982. With the completion of MP14 . This marked the beginning of yet another new phase modernization phase-III (MP) at West Bokaro. thus the colliery passed into the direct supervision of Tata Steel West Bokaro Pvt. From 1952 the managing agent system was abolished by an amendment to the Company's Act.1300 bighas to Bokaro and Ramgarh Ltd. The firm later subs leased property to its managing agents. total capital outlay was Rs.6 MPTA. totaling 1. For one the prime cooking coal that the Steel company received from five captive collieries in the Jharia coal field could not meet immediate Blast furnace needs the offer meant that West Bokaro could help over. 50. For hiring activities.4 MTPA (Million tons per annum) of clean coal having an ash content of 17% as against the present the 1. In 1946 Anderson Wright &Company.e. a mining firm conducted the geological survey of the area and confirm deposit of metallurgical coal in abundance. Washery no. In 1972 West Bokaro was made a separate of the company with some specific entity. In 1952 with the advent of land reforms act abolishing zamindari system in Bihar M/S Anderson Wright & Company which had so far paid royalty to the Maharaja became lease of the state Govt.1 MTPA.” In 1972 open cost main was introduced with small scale mechanization under the phase -1 expansion phase-11 to achieve self sufficiency in Metallurgical coal requirement of the Steel plant having a capital outlays of Rs.8 million tons per anuum . In 1951 the first ever coal Washery i.

34 million cubic meters.1 ( 1st in India) 90 TPH monocable ropeway 15 .III the raw coal production was increased from 2. augumentation of product transportation capacity and one more moving loader facilitities at chainpur for higher dispatches by Rail.30 million tons per annum 2. The expansion program included the opening of a new open-cast mine with necessary infrastructure at Pundi.5 MTPA to 3. 2 3 1952 1972 Management taken over by M/S West Bokaro Pvt.1 MW Power House 1.6 million cubic meters per annum to 8. There was increase of overburden production from 3.1 MTPA. West Bokaro becomes a division of Tata Steel GROWTH Year 1948 1951 Major facilities Underground mine opened Capacity 0. installation of a third washery (W-III) having a capacity of 2. Ltd. Management of mine given to M/S Anderson Wright. A wholly owned subsidiary of Tata Steel.5 MTPA. A brief history and growth series of West Bokaro Division is given below:1 1947 Mines comes into existence as M/S Bokaro&Ramgarh Ltd.50 tones per hour Clean coal @ 18% Ash washery No. In order to meet the increased requirement of 10 MW fluided power plant was commissioned.

1972 1982 Modernisation Phase.1 500 TPD Enter in Quarry 0.1 MTPA Through Washery Clean coal@ 17% ash No.-2 Q-AB/EF Rope way/PCP-1 1994 Modernisation Phase-3 1. Desholer In Built) Q-E/PCP-2/OLC 220 TPH Monocable Ropeway 10X2 MW Power House Sustance of Production) Deshaling plant Production (Replacement of 1.7 MTPA Clean coal@ 16% Ash 1997 1999 2000 2003-04 Sustenance Phase-1 Additional equipment Replacement of Equipment Replacement of old equipment GPS(Global Positioning System)based TDS (Trunk dispatch system) (1st in India Sustenance Phase-2 Opening of new South Eastern Block (1st coal mine in India which have world level equipments and facilities 16 .80 MTPA through washery coal@ 17% Ash No.10 MTPA Clean TPH BC rope way 1 .567 MTPA Clean coal fd) 17% Ash 1.-3 (Modular concept.40 MTPA Clean coal@ 18% Ash Modernisation Phase-2 6.40 MTPA 2.40 MTPA Clean coal@ 17% Ash 1.46 MTPA Clean coal (a) 17% Ash 1.2MW Power House 500 1.

• Leasehold-4300 acres. • West Bokaro is a division of Tata Steel providing 43% cooking coal & thermal coal requirement of the company. North of RamgarhCantt. • Reserves-200 MT. North of Jamshedpur -38Kms. which provides the various types of coal on demand of the Tata Steel Jamshedpur & other customers.which has been certified under Environment Management System ISO 14001. WEST BOKARO IS TODAY…………. The products are:• ROM (Raw coal) • Clean coal • Middling coal • Rejection coal • Slurry STRATEGIC IMPORTANCE OF WEST BOKARO 17 . South of Hazaribagh 26 Kms. Tata Power. • West Bokaro Division is the first coal mine in India. • Location-180 Kms. WORK ACTIVITIES West Bokaro is one of the coal mines divisions of Tata Steel. • It also provides 34% thermal coal of the requirement of Jojobera plant.ASPIRATION OF WEST BOKARO DIVISION “To be the most admired unit in coal industry”.

950 per ton over Rs. OVERBURDEN: means the layer between two coal seams. 2. 18 . a second washery with automatic controls for online monitoring and control process parameters was set up. which is made of rock and soil having no fuel quality.from plants remains which accumulated together with other sediments the sea floor in shallow gradually subsiding basins of sedimentation .now these mines are not in use because of safety reason. The West Bokaro Collieries have a distinction of commissioning the county's first coal washery in 1951. MINES AND WASHERIES OF WEST BOKARO DIVISION MINES: A mine is the surface land which is rich in coal. coal reserve is about 192 million tones. OPEN CAST MINES: In open cast mine the upper layer is removed to perform mining operation. WASHERIES: It is a plant which cleans the impurities of raw coal and produces coal with desired characteristics. product quality and adherence to deadlines give the division a distinct edge over other collieries. The colliery has reserves of over 196 million tonnes of coal.The division is built on the philosophy of excellent services.4 million ton per annum clean coal is produced here. The colliery showcases sophisticated mining technology and delivers coal at competitive cost. Cost competitiveness (Rs.there are two types of mine: • Underground mines • Open cast UNDER GROUND MINES: In underground mines mining operations are performed without removing upper layer of earth . Raw coal is extracted from mine and sends towasheries . 3000 per ton imported from Australia). COAL: Coal is a non-renewable fossil fuel that was formed by a series of natural geochemical process . accounting for about 50% of Tata Steel's coking coal requirement for its Blast Furnaces and Coke Ovens. consistency. Later.

this raw coal is then send to hopper for crushing plant. Adminis(Engg.In this process the holes done by drilling machine are filled by explosive such as gun powder after that celling is done then after blasting took place • Removal of over burden. middling & reject.Gr. this machines drills holes in the surface • Blasting.) (Account) (Quarry E) (Coal (West Bokaro) (Quarry (Planning) (P-SEB) (HR) (HR/IR) (ITS) tration AB)Raw Material Prod. After washing the coal we get is clean coal. • Coal beneficiation-In washery coal beneficiation took place.Managing Director Manager manager Head Head Chief Head Chief Managing Director Chief Vice Head General (R&TS) (Sec.) 19 . • Extraction of coal-In this process drilling and blasting operations are repeated and then what we get is raw coal.MINING OPERATIONS • Preparation of surface-First the surface of land is prepared for mining operations. trees are cut down. • Crushing of coal-In hopper huge rocks of raw coal are crushed into small size acceptable to washries.After blasting heavy rocks breaks down in to small pieces . surface is labeled • Drilling-Drilling is done through drilling machines. coal beneficiation include washing of coal.Serv) officer (P&S)Ben) (Aspire) (Tech. • Dispatch to railway siding and storage –Clean coal is then dispatched to Jamshedpur plant through railways Chief President Head Medical Dpt.then with the help of Dosers and shovel machine these OB are loaded on dumper the loaded dumper dump the OB to the distance place from the mining areas.

ORGANISATION STRUCTURE 20 .

21 .

• Preparation of surface(clearing ground surface) 22 .INTRODUCTION OF PRODUCTION SYSTEM West Bokaro is an opencast mine of coal. ACTIVITIES IN QUARRY Ground Preparation & Removal of Overburden. In order to extract the raw coal Mining operation has to go through several processes gradually.

Crusher is driven by a 180 KW slipring motor. • Filled by the gun powder. where the medium of washing constitutes of water and finely ground magnetite powder. Outbound Logistics: Ropeway is used to transfer the Clean Coal from washeries to Chainpur Railway siding in order to dispatch the clean Coal to Jamshedpur. The principle of separation by specific gravity is employed in the DM Cyclone process. The raw coal is crushed to a size of –125 mm. at the Washeries. middling.. Extraction of raw coal (grade wise) from various quarries.. COSTING 23 . tailings and rejects. to produce clean coal. Inbound Logistics (Transfer to Washery): With the help of Ropeway and Conveyor belts Crushed Coal transfer from Crushing plant to Washery for Coal beneficiation. Coal Beneficiation: Raw coal is beneficiated. • Heavy Earth Moving Machineries (HEMM) takes out coal from the mine and sends to crushing plant to further reduce the coal size. Crushed coal is fed to 2 conveyor circuits (600 TPH) known as C1A and C1B.• Firstly the rocks are drilled • filled by the gun powder and blasting is done • SHOVELL MACHINE and DUMPHER dumped over burdens on dumping yard. ACTIVITIES IN CRUSHING PLANT Crushing Plant: Raw coal is dumped into hoppers by 50 T capacity Bottom Dump Coal Haulers. • Blasting is done to fragment the coal. • Seams of coal are drilled.

Costing works are performed in the different cost centers at west bokaro division and works are done very effectively and efficiently. Production Data (Material Wise) Payroll Related Data Sales Related Data Parameters Such as Equivalent Ratio ERP Provision for Expenses Reports/Data 24 . The process of cost run is fully automated and manual intervention is minimized. Based on above data/reports.The techniques and processes of ascertaining costs. costing system draws input from these module automatically. including Account Receivable and Payable are also in SAP.As accounting system. The entire costing related activities are performed in SAP (ERP). Cost of sales. Amount absorbed in cost and statement of under/over absorption. • • • • • Total expenditure under different expense heads. Department/activity wise cost. variation analysis with ABP is done for managerial decision. Post costing Run: following reports/statements are generated. Material wise cost.

• It helps in forecasting • To allocate proper cost to respective cost center • To record cost • Good costing system provide base for future planning Costing System consider the expenses of every activities in production process 25 . • It helps the management in its effort to maximize the output and profit.NEED FOR COSTING • Exercise the control over cost. • Cost help in management in fixation of the selling price of the product produced. • Cost is to help formulating policies.

special costs or direct costs. Cost or production cost refers to all sorts of monetary expenditures incurred in the production of the commodity. Total Variable Cost (TVC) It is the payment of variable factors of production is called as total variable cost. Fixed costs are also known as supplementary costs or overhead costs.:.Showing Types of Production Cost Total Fixed Cost (TFC) It is the payment for fixed factors of production in the short run is known as total fixed cost. Some examples of Total Variable Costs are:• Wages of temporary labourers • Cost of raw materials • Cost of fuel • Cost of electricity etc. Fixed costs are cost which do not change with the change in quantity of output. Fig.COST It is the amount of expenditure incurred on or attributable to a given thing. 26 . Total variable costs are also known as prime costs. Variable cost is one which varies as the level of the output varies. Some examples of Total Fixed Costs are:• Insurance premium • Salaries of the permanent employees • Standard depreciation of the plant and machinery • Maintenance of building and license fee etc. It is the result of effective combination of factors of production.

administration. There are some significant advantages to classifying simple. Material (Material is a very important part of business) A. Overhead A. 1. Direct material B. selling. Administration overheads 3. labor. Indirect material B. or investment centres. variable. Production or works overheads 2. The important ways of classification of costs are: • By nature or element: materials. Indirect labor 3. Typical examples include research and development. marketing and customer service. 27 .Total Cost (TC) Total cost includes both total fixed cost and total variable cost. TC = TFC + TVC Elements of Cost 1. It may be also called as total cost of production. profit centres. the grouping of costs according to their common characteristics. R&D. Distribution overheads Classification of costs Classification of cost means. Selling overheads 4. expenses • By functions: production. uncontrollable • By normality: normal. Companies may choose to classify business units as cost centres. a cost centre is a division that adds to the cost of an organization. development. semi-variable • By controllability: controllable. • As direct and indirect • By variability: fixed. Indirect material 2. abnormal Cost centre In business. Indirect labor They are grouped further based on their functions as. Direct labor B. distribution. but only indirectly adds to its profit. Labor A.

Cost Elements are also used in Costing System. a captive source of coal. since cost is easy to measure. Rs 50 paid for maintenance. These cost centres and their cost elements are taken together for better understanding of the cost incurred on each cost elements with respect to their cost centres. Rs 100 for transport and Rs 100 other misc. However. TATA Steel derives a significant cost advantage from its low-cost captive sources of iron-ore and coal.straightforward divisions as cost centres. 100 Tota l 500 Costing System at West Bokaro In TATA Steel Costing is done on the basis of Accrual basis which expenses incurred is recorded on the same date whether paid in cash or not. an important element of production cost. which is not suitable for metallurgical operations. Cost Centre and Cost Element both are related to each other taking them individually for decision making or analyzing does not work. Rs 75 for repairs. different expenses which constitute the total expense for the financial year of a cost centre. cost centres create incentives for managers to underfund their units in order to benefit themselves. Rs 800. despite using a 50:50 blend of captive coal and imported coke. we cannot take decision on these data until and unless we have the proper information of expenses which are included in this amount i.e. works as one of the various Cost Centres of TATA Steel Ltd. TATA Steel's cost structure also benefits from the modernization programmes and process improvements that it has continuously undertaken. and this underfunding may result in adverse consequences for the company as a whole. In simple words. From the above data we cannot infer anything. Blended coal is used to reduce the high ash level of Indian coal. Rs 900 and Rs 1100 respectively. The company's cost of coking coal. there are 4 Cost Centres A. Cost Elements represents nature of expenditure. C and D and their cost during a financial year are Rs 500. is almost less in comparison to other companies. B. When we combine both the elements then it makes easy to understand the data or its origin and it also makes easy to take decision. West Bokaro Division. Cost savings have 28 . out of Cost of Rs 500 of cost centre A Rs 100 is paid for wages. Say. Rs 75 for stores. This can be understand with the help of an example: Suppose in a company XYZ Co. having its own cost centres along with various cost elements of these cost centres. Cost Centr e A Wag e 100 Repair s 75 Cost Elements Maintenanc Stor e e 50 75 Transpor t 100 Misc . expenses. Cost Centre is the lowest cost object in the organization structure. Ltd.

12. and processes and reduction in specific raw material consumption. 2. 11.) System Application & Products (SAP – ERP) 29 . 4. 9. Power etc. 10. TATA Steel plans to achieve additional cost savings in the areas of strategic sourcing. 8. 6. manpower and administrative costs. Cost Centres 1. 3. The company has also satisfactorily dealt with its high labour costs through continuous manpower rationalisation. TATA Steel has divided the production process at West Bokaro Division in the following cost centers for his convenience and better working: List of cost centers in use at West Bokaro Division: S. Overheads (Medical.primarily accrued from improvements in throughput in different equipment. 7. No. The company recognizes the need to further reduce costs and improve efficiencies. HR. Water Supply. 5. Drilling Shovelling Mining Gnrl – Coal Loading Hauling Pumping Dozzing Crushing Plant Deshlling Plant Outbound Logistics Rake loading system at Chainpur Support Services (Work Shop. 13. inbound and outbound logistics. Accounts etc.

• Material wise cost. Post costing run following reports and statements are generated: • Total expenditure under different expenses head. The process of cost run is fully automated and thus manual intervention is minimized. ratio System Application & Products (ERP) Payroll related data Sales related data Provision for expenses 30 . variation analysis with Annual Business Plan is done for managerial decision. each and every cost element of Cost Centres is defined and is uniquely identified by 7 digits numeric codes. including accounts receivables and payables. Following is the list of Cost Centre groups and their SAP group name. costing system draws input from these modules automatically. • Cost of sales • Department activity wise cost. Based on the above data and reports. • Amount absorbed in cost and statement of under/over absorbtion. Inventory and Stores related Data Production data Parameters like Eq. In SAP. these are meant for the convenience of user: Group SAP Group Name Quarry AB QAB Quarry E QE Quarry SE QSE Coal Beneficiation CBGRP Power PWR Central Organisation CORG Support Service WBMISC Total West Bokaro RWBK01 Cost Centre group WBK Department wise Cost RWBK01 Centre Maintenance Cost Centre WBMNTPM Cost Element Group WBALL As accounting system.The entire Costing related activities are performed in System Application & Products (SAP – ERP).

The raw coal is crushed to a size of –125 mm. In order to extract the raw coal. Post beneficiations following products are generated: Product Range of Ash % End Use Mode of Dispatch Clean Coal Middlings Tailings Rejects 11 to 13. tailings and rejects. The principle of separation by specific gravity is employed in the DM Cyclone process.5 35 to 40 50 to 65 65 + Steel making Rail Thermal Power Plants Rail Bricks Kilns etc. After blasting over burden like rocks. In crushing plant. dust etc is removed from the surface with the help of shovel machine and earth moving equipments.With the help of Ropeway and Conveyor belts Crushed Coal transfer from Crushing plant to Washery for Coal beneficiation. Process begins with clearing ground surface with the help of drilling machine and gunpowder (used to blast the surface). to produce clean coal. Reports and Statements Figure showing the structure of SAP (ERP) Production Process West Bokaro is an opencast mine of coal. Power Plants etc. middlings. mining operation has to go through several processes gradually. raw coal is dumped into hoppers by 50 T capacity Bottom Dump Coal Haulers. Crushed coal is fed to 2 conveyor circuits (600 TPH) known as C1A and C1. Rail/Road Rail/ Road 31 . After beneficiation raw coal is ready to dispatch for consumption. Once the surface is cleared raw coal is extracted from the mine with the help of dumpers and sends to the crushing plant. Coal Beneficiation is a process in raw coal is beneficiated. Crusher is driven by a 180 KW slipring motor.Data. for this purpose ropeway is used to transfer the Clean Coal from Washery to Chainpur Railway siding in order to dispatch the clean Coal to Jamshedpur. where the medium of washing constitutes of water and finely ground magnetite powder. at the Washeries.

a cost centre is a division that adds to the cost of an organization. which may differ from cost centre to cost center. Costing works are performed in the different cost centers at West Bokaro division and works are done very effectively and efficiently.:. As discussed earlier. but only indirectly adds to its profit as well as it has its own cost elements. Fig.Showing Types of Production Cost Purchase of Raw materials Purchase of Services & Labour Purchase of Plant & Equipment Overheads Processing & Maintenance Depreciation Work in Progress Finished Goods 32 . Cost or production cost refers to all sorts of monetary expenditures incurred in the production of the commodity.Costing System consider the expenses of every activities in production process. In SAP each cost centre is defined and is given a specific code or identification number which is known as Cost Centre Number.

Maint Hauling Pumping Pump-Maint Suppt. labour.Cost of Goods transfer / Sold From the above diagram it is clear that for Production or manufacturing we need some other things except raw materials i. transport service. Suppt.e. Equip Maint Haul Road Maint Project Exp(SEB) Future Use Total Cost ITEMS SPH-OPRN OB ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** AB Coal *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** Quarries E OB Coal ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** WBC SE OB Coal ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** ** *** WBC ******* **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** SUPPORT SERVICES 33 . Some of these Production Service and Support Services of West Bokaro Division are listed following. maintenance etc. Production Services Items Drilling Blasting Dozing RD-Maint Minning GNR Drill-Maint Shovelling Shovel-Maint Dumping RD-Maint Dozer-Maint Elec-Maint Loading Pl & Buil. these are called Support Services. Equip.

Maint Telecom Dept Sanitation Town Maintenance Inspection Cell Medical Administration Security Guest house Officer’s Hostel Sports Cell PUR & STORES Project Cell ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* 34 . Gen. Comm ASPIRE Gen. Canteen Services Training & Quality Rural Development Secondary Production Planning & Development Land Cell Environment Cell ITS Accounts GM-Office Corp.SPH-MAINT DG SET-OPRN DG SET-MAINT DVC PD-OPRN PD-MAINT Personnel Dept. Service Central Garage Domestic Water AC & Rfgeration Elec.

Jamshedpur. inflation rate etc.Cen. Org. that planned and actual figures are displayed simultaneously and easy to monitor. Production requirement etc and external factors can be Government Policy. These estimated values are calculated on the basis of last month data and then entered into the system. production. logical Workshop Instrumentation Industrial Water CSEP EOS Quality Monitoring EEI (CB) MGMT Cost Exploration Casual Employees Middling Credit Block KB & P QCD Total Cost of Support Service Cost ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* ******* Cost of Production Dept + Cost of Support Services Dept. dispatch & sales and closing stock of different material are given in the report) is received from Chief (Planning). = Total Cost Run. Survey report (details of opening balance. Reconciliation of data as per SAP 35 . Jamshedpur is received by West Bokaro Division an Annual Business Plan (ABP) is prepared. need of Jamshedpur plant. The ABP figures are also fed in the system so. Internal factor can be Policy of management. The ABP is drafted after deep analysis impact of external factors. This requirement is dependent on various internal and external factors. consumption. Once the requirement of clean coal by TATA Steel. Process & Control The cost process begins with knowing the requirement of clean coal by the TATA Steel. ABP is a statement showing the estimate value of production and cost incurred during the production process by the various cost centers. Price of Coal in International Market etc. The ABP drafted is a very useful tool for monitoring expenses and production target. Government policies.

e.with that of Survey Report is done. Joint. There are specific activities for each production and maintenance departments in SAP which enables system to compute standard cost. clean coal. For cost control – Data as per SAP should be matching with Survey report figures. Manager (Q-AB) from departments for correction. 36 .product Joint product is the main product. At west Bokaro Division two types of products are produced: 1) Joint product • Clean coal • Middling 2) By-products • Tailing • Washery Rejects 1. In case of difference. In the end of the month ABP figures are compared with Actual figure and Cost Sheet (Annexure V) is prepared for the month and then on the basis of this cost sheet a Comparative Statement (Annexure VI) is prepared and sent to Chief Finance Officer (Jamshedpur) and General Manager (West Bokaro Division). contact the authorized production personnel and sr. It means that all the mining operations are done for getting the main product i. Cost run should not start before data as per SAP is exactly matching with survey report.

Commonly used methods for allocating joint process costs are: 1) Physical quantities method. MAIN FEATURES ARE: 1) Joint product by their very nature of production process cannot be produced separately and have equal economic importance. usually requiring further processing. It contains the 35%ash it is obtained during the process of main product. By analyzing.Clean coal Clean coal is obtained from the raw coal after washing the coal at the washeries of the WBD and raw coal is obtained from the mining operations. Middling At WBD joint product is the middling.We calculate the net cost of middling. 2) The joint products can be sold either at the stage of production (split off point) or itself or they can be processed further. We calculate the net cost of cc. It is sold by the Del credre agent . it is clear that two or more products are inevitably produced in a process from one basic raw material and each has more or less the same value economic importance or earns approximately the same profit in relation to the other. 3) Costs incurred before the split off point are called joint costs and the costs incurred Beyond that point are known as separable cost. 4) The crucial factor in accounting for joint product is allocation of joint cost among the joint product from the joint process. each product being in such proportion that no single product can be designed as a major product. Middling are sold to the thermal power stations or some middlings are sent to the Jamshedpur for further process. Joint products are defined as the two or more products separated in course of some processing operations. Clean coal is a low ash% coal which is used in blast furnace for melting iron. West Bokaro Division is a captive mine of Tata steel ltd. The primary objective is to supply of clean coal to Jamshedpur plant as per the annual budget plan decided by the company at low cost. 37 .

2) If subsequently process enhances their value but the resulting profit will be less than that of the main product otherwise the by product would become the main product. At WBD NET REALISABLE VALUE METHOD is used. Rejects contains 65% of ash% and it is used in FBC power houses. We calculate the net cost of Tailing.Equivalent Ratio (ER) method Use value of coal is equal to the carbon content in it. Tailing contains 50% of ash % and it is used in brick kilns. Midd. 1. MAIN FEATURES ARE: 1) By products are of lesser value as compared to that of main product. By analyzing the definition it is clear that by products are associated products which arise or emerge from one basic raw material in the course of producing the main product and such product having the market value.2) Relative sales value method. Carbon content in clean coal is higher than middling. Net realizable value method. Miscellaneous income method. 4) Weighted average cost method. The two most commonly used methods of accounting for by products are:1. 3) The accounting treatment depends upon whether the by product is sold at the split off point or is further processed. Cc =clean coal. there is no calculation work is done. BY PRODUCTS Tailing and rejects are the byproducts at WBD. =Middling’s 38 . 2. 5) Any reasonable method. . By product is defined as the any saleable or usable value incidentally produced in addition to main product. The ratio for distribution of cost is based on the ration of carbon in clean coal and middling as per their quantity. 3) Net realizable value less normal profit method.

Expenditure is allocated to both products based on carbon produced (equivalent ratio method). On actual sale of Middling. On sale of tailings. In formula: Inventory Sales Value . Equivalent Ratio Method is used to allocate cost of Joint Product and Net Realizable Method is used for allocating the cost of By-Product. credit is given to CC and Middling cost at the rate of administered price of tailings. NRV is part of the Generally Accepted Accounting Principles and International Financial Reporting Standards (IFRS) that apply to valuing inventory.Apportionment of Cost At West Bokaro Division. Stock of Middling is valued at moving weighted average price.000 Middlings 350 tonnes 39 . in the field of accounting. Stock of Tailings is maintained at administered price.Estimated Cost of Completion and Disposal = Net Realizable Value Clean Coal and Middling are considered as joint product. Net realizable value is generally equal to the selling price of the inventory goods less the selling costs (completion and disposal). ratio of division of cost is calculated on the basis of Carbon content in the product. Net Realizable Value is a method of evaluating an asset's worth when held in inventory. difference between sale price and administered price is credited to CC cost and Middling cost in the ratio of carbon production . so as to not overstate or understate the value of inventory goods.Credit for sale of Rejects is given at the time of actual sale to Clean Coal and Middling at ratio of carbon production. difference between sale price and moving weighted average price is credited to CC cost. Amount of credit is distributed to Clean Coal and Middling based on carbon production. On production of Tailings. 30. In Equivalent Ratio Method. Example: Apportion of Cost* Dispatching Cost Production Clean Coal 200 tones Rs.

5 = 59057.000 Production of Tailings 10 tonnes Rejects 50 tonnes Selling price of Rejects Rs. notified price of Tailings Rs. 1.96 = 168.5/200) = (59057.5) = (6187.5 (+) Dispatching Cost = 12000 = 18000 -----------------------------Net Cost after Dispatching = 33592. 1.5) -----------------------------= 33592.73 Rs. 225 per ton (* figures are hypothetical) Calculation of Cost per ton of Clean Coal and Middling: Particulars Clean Coal Middling Production 200 t 350 t Ash % 14% 40% Carbon Content 86% 60% Equivalent Ratio 200*86% 350*60% = 172 = 210 =172/(172+210) =210/(172+210) = 0. 107. 760 per ton Selling price of Tailings Rs.5 (-) Sale of Middling (800*15) = (12000) -----------------------------Net Cost before dispatching = 21592.5/350) = 167. 117.5 = 41057.55 or 55% Cost to be absorbed in ratio = 45% = 55% Gross Cost = 100000*45% = 100000*55% = 45000 = 55000 (-) Sale of Tailing (1410*10) = (6345) = (7755) -----------------------------= 38655 = 47245 (-) Sale of Washery Rejects (225*50) = (5062.5 -----------------------------Cost per ton before dispatching = (21592.73/t 40 .5/350) = 107.96/t Rs.30 Rs.96/t Rs.45 or 45% = 0. 168.96 = 117.3/t Cost per ton after dispatching = (33592.5/200) = (41057.410 per ton Total Cost of Raw Coal Rs. 167.Sale of Middling 15 tonnes @ Rs 800 per ton Govt. 00.5 = 41057.

• Quantitative detail raw material is also given. • Clean coal dispatch to Jamshedpur plant. The ABP drafted is a very useful tool for monitoring expenses and production target. that planned and actual figures are displayed simultaneously and easy to monitor. SALES REPORT SALES REPORT is a key document. inflation rate. • Middlings and Tailings are sold to the Institutional buyers. etc. It contains following information: 41 . government policies. Production Report Production report is a key document. need of Jamshedpur plant. The data like raw coal production etc. . The ABP is drafted after deep analysis impact of external factors. The report is made on daily basis. helps in calculation of royalty and stowing excise. • Raw coal fed to washeries. It contain following information:• Extraction of Overburden.ABP ABP stands for “ANNUAL BUSINESS PLAN” it is like an annual preplanned budget for one financial year. The ABP figures are also fed in the system so. However at the month end a final summary of the entire month is captured and verified by surveyor. • Extraction of raw coal (grade wise) from various quarries • Opening stock and Closing stock is also given.

However at the month end a final summary of the entire month is captured and verified by surveyor. • Quantity of the item sold. RECOMMENDATION The mining industry is under constant pressure to stay competitive whilst complying with often conflicting environment and safety objectives. • Name of the item sold. On the sales VAT and CST are calculated. Here we recommend some ways to reduce cost and increase productivity: 42 . The report is made on daily basis. • Rate of the item sold.• Name & Address of the party whom the company has sold its product.

eliminates the need for trucks to drive up and down the pit and offers economic. This shortens the travelling distance for ore trucks as well as the cycle times betweenthe excavation and crusher operations. • Significant reduction in greenhouse gas emissions by elimination of up-ramp travel under maximum power. safety and sustainability benefits. it can earn CORBON CREDIT. which has been aptly named ‘truck uplift in pit system’ or TULIP. which can be sold to industries situated in other developed countries . requiring fewer trucks without reducing the beneficiation rate. It allows greater savings in terms of fuel. instead of trucks. • Lengthening of the economic life and depth of a mine due to reduced pit cut backs. fleet sizes. • Reduced manpower due to fewer trucks. carbon dioxide emissions and time. The same applies when conveyors.” 2) The company can also go for an automatic mine hoisting system developed by GHD. The concept. • Increased safety of operations due to reduction of haulage operation. The system achieves significant cost savings leading to capital investment recovered within approximately two to three years after implementation due to: • Reduced truck fuel consumption. 43 . are used to remove overburden from under-ground operations. because when company reduce greenhouse gas emission . • Decrease emission of greenhouse gases : The company can reduce its cost by reducing greenhouse gas emission.1) The company can reduce it’s production cost by using the central positioning of a primary crusherin the pit of an opencast mine. maintenance and tire costs. accompanied by conveyors that transport the crushed over burden out of the pit. it carry two standard mine trucks directly up and down the slope of a mine.

The detector will shut off lights when people are not in the room. • Invite in Sunlight .08 cents a page to print in color versus . Using these settings to shut off the monitor or put the computer into sleep mode can really help lighten the electricity load. • Replace Old Monitors with LCD Screens . • Use electronic chock instead of common chocks • Don’t use zero watt bulb it actually consumes 10 watt • Do not overcharge phone. clean. if we assume a person prints 10 pages a day*260 workdays…printing in color will cost $208 per year 44 . helping to reduce office energy consumption • Use Compact Fluorescent Light Bulbs . and they are about four to five times more efficient than a traditional light bulb. So. • Install an Occupancy Detector -For a relatively small amount of money an occupancy detector can be installed in a room and linked to the lighting.Natural light is free.FEW WAYS TO REDUCE OFFICE ENERGY CONSUMPTION • Optimize Energy Settings on Your Computer.Besides wasting power. To reduce office energy consumption open up all those blinds and invite the natural light inside. • Change Default Printing to Black & White It’s estimated that it costs . • Unplug Devices that are Not in Use. it will damage the phone. and also helps brighten the mood of workers.Every computer has energy settings that will put the machine into sleep mode if not used for a certain period of time.Compact fluorescent light bulbs are a relatively new addition to the market.007 cents page to print in black and white. • Shut Down Your Computer When You Leave.LCD monitor saves 50 % more electricity than a CRT monitor so use LCD monitor in office. Try to arrange desks around natural light sources if possible as well. too.

Translate these down to department and individual work standards • Staffing models .80.while printing in black and white will cost $18.Take that across a company of 5. • Brainstorming • Benchmarking: Set up internal benchmarks to reduce your cost per order. • Negotiate with your suppliers. Because a small confusion can harm the operation. carrying cost & proper forecasting. Full time. may be costly.By reducing dead stock. Change the mix of full time. 45 . cost per call.Make sure your office telephones are used for official work not for personal calls.000 employees and we’re talking some serious costs savings folks ($949.000). so confusion can be avoided between managers and subordinates. Take a good look at your current staffing ratio.20 per year for a difference of $189. if not kept productive. part time and flex time staff. • Print on Both Side of Paper • Text Messaging Plans • Proper inventory management. cost per contact and cost per transaction. • Keep your employee up to date by proper training Employees must know from the starting point what is being expected from them. • Minimize machine breakdown.full time/part time/flex: Labour is your single biggest expense in the cost center. • Telecomm audit.

Visits to the accounts department were a learning experience for me. 46 .**************************************** CONCLUSION I enjoyed a lot during my training. But. The process may not be applicable to all parallel industries. indeed it was a learning and pleasant experience. I also learned many things about the organization from which I was unaware which were important for my personal enrichment. Payroll system at West Bokaro Division is an outcome of practical thinking and designed as per specific need of West Bokaro Division.

OFFICE. PANDEY STAFFS (ADM.M. PURCHASE DEPT) 47 .ACCOUNTS DEPT..REFERENCE • • • • INTERNET JRD TRAINING CENTRE. LIBRARY FINANCIAL MANAGEMENT-I. STORE DEPT.

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