BACKGROUND

Nezone Group is India’s one of the most prominent Steel and Engineering Company whose
business operations extend to the production of the full range of steel products . It is a multi-
plant manufacturer also specializing in the production of top quality electrically welded steel
tubes . Its plants are in the states of Assam, Meghalaya ,Tamil Nadu and West Bengal with
the total production capacity of around 6,00,000 M.T annually and turnover reaching the
2000 crores mark per annum .
Founded in 1981 Nezone today is more like a one stop shop for all kinds of welded steel
tubes. All the plants are capable of handling large production lines and specialize in the field
of contract manufacturing . The products are manufactured from HR Coil i.e., purchased
from TATA Sail . The quality of materials manufactured are of excellent quality . From the
rolling of tubes to manufacturing of poles and towers ,Nezone as a group is capable to meet a
wide range of customer demands . Physical and mechanical properties of every steel coil is
accurately and carefully recorded and analysed at the same time . All the units of
manufacturing have been awarded ISO 9001:2008 certification from respective concerned
authorities . For the purpose of this project Nezone Tubes Assam Limited was consulted and
the results obtained are in regard to the information provided .

PRODUCT RANGE
 GI Pipes : Galvanized Iron Pipes are manufactured with the help of mild steel strips
of low carbon steel coils . These are used to withstand corrosion from water as well as
other elements
 MS Black Pipes : These range of pipes are not galvanized and thus is an ideal product
to be welded into tubes, pipes and all sorts of tubing . It can last up to almost 100
years and is also one of the cheapest metals available in the market .
 Hollow section pipes : Manufacturing as well as exporting Square or Rectangular
Pipes and hollow section tubes. The shape of the pipes suites multiple axis loading .

OPERATION FLOW CHART

 Orders Received
 Steel Coils/Strips are ordered which will be eventually rolled into pipes and
tubes
 Steel Coil/Strip received
 Steel Coil/Strip inspected
 Roll Forming
 Straightening of pipes/Tubes
 Cutting in required dimensions
 Testing
 Inspection and Marking
 Packing
 Orders Dispatched
 INTRODUCTION
Pricing the products and services accurately is one of the toughest decisions to make that can
either break or make a business . Large businesses specially in manufacturing sector are
opting for activity-based costing (ABC). The activity-based costing is used to find the total
cost of activities where ABC systems assigns cost to each one of these activities . Companies
who take their overhead costs and allocate them evenly across all their products are usually
inaccurate because some products use more overheads than others. When we use ABC we
take into account both the direct and overhead costs of creating each product . When we
assign both direct and indirect expenses to each one of these products we can set prices more
accurately.
Activity-Based Costing process steps :
 Identify the various activities and activity pools
 Directly trace or assign costs to activities and the cost objects
 Assign the costs to each activity pool
 Calculate the rates of activity cost drivers
 Finally assign costs to cost objects
Benefits of Activity-Based Costing :
This method provides a more accurate method of product or service costing process. It
increases the overall understanding of cost drivers and overhead costs. It helps make the
costly and non-value adding activities more visible to the eye. Activity-Based Costing
enables us to allocate the overhead costs effectively which results in improved products .It
also helps to alter the nature of multiple indirect costs, such as utilities, depreciation or
salaries which are traceable to certain activities. It also expands the number of cost pools
which are used to assemble all the overhead costs . It pools the costs by activity instead of
accumulating all these costs in one company wide pool.
Traditional vs. ABC based Costing :
The major points of difference between traditional costing and ABC based costing are given
below :
 Primary Focus : For Traditional costing the primary focus is towards the
apportionment of overheads to the various activities of production. It sets only a
single metric for every activity involved in the production process . Under the ABC
costing appropriate cost drivers are allocated for every activity and cost is then
allocated depending on these cost drivers .
 Application : Traditional method of costing is easier to implement because a single
cost driver is set for all the activities and all the overhead costs are simply divided
into variable and fixed overheads . ABC is difficult to implement we need to choose a
suitable basis for the absorption and absorbing of these overheads.
 Scope : Traditional costing is limited to the absorption of only manufacturing
overheads whereas ABC can be used effectively to allocate manufacturing as well as
non-manufacturing overhead costs such as administrative, selling etc.
 Management Use : ABC costing is more insightful for managerial purposes because
ABC method of costing is based on subjectivity of the user .
 Effectiveness of Operations : ABC method is more effective in improving the
business processes in the longer run. This is because this method forces the company
to investigate deeply into all activities and other costs.