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This is to certify that Abid Rizvi, student of M.B.A. 2nd Year, 3rd semester with Roll number 0900122008 has prepared this project on the topic “FINANCE MANAGEMENT, COST REDUCTION & COST CONTROL” under my supervision and guidance. The behavior of the student during the preparation of this project was found to be highly appreciable and satisfactory. I wish him all the best for his future.
(Dr. M. S. Khan) Head OF Department of Business Management Integral University Lucknow: 226026
Abid Rizvi 0900122008
Abid Rizvi 0900122008
Finance as a subject of study, has received wide-spread support from both academic and business segment people. The topic “FINANCE MANAGEMENT, COST REDUCTION & COST CONTROL” in HAL was selected as to understand the financial need and importance with special reference to HAL ACCESSORIES DIVISION LUCKNOW. As the cost control refers to the administration of all the analysis of cost control ratios and sources and application of funds and the company by studying, interpreting various financial statements using various techniques such as comparative statements analysis etc. Even efforts have been made to collect the relevant information about the topic. The present study about “FINANCE MANAGEMENT, COST REDUCTION & COST CONTROL” in HAL Accessories Division, Lucknow it based on my six weeks project study in FINANCE AND ACCOUNT DEPARTMENT in HAL. This training gives me an opportunity to make a study and analysis the system adopted by the organization. It enables me to build the practical knowledge acquired during the class study with practical training received during my project.
Abid Rizvi 0900122008
Rizvi(Cost Manager.M.This is to express my heartiest gratitude towards all those who helped and inspired me to complete my project report. HAL) for his kind and constant support and guidance. I am highly thankful to my H. friends and batch mates for completing my project report. teachers.D Dr. I am also thankful to my supervisor Mr.Finance Management.A.Z. Abid Rizvi MBA 2nd year Integral University EXECUETIVE SUMMARY Topic: . Cost Reduction and Cost Control.S. Abid Rizvi 0900122008 4 .Khan for his support and encouragement that he provided me during the tenure of the project. At the end I would like to mention about the constant motivation and help that I received from my family.O. I feel immense pleasure in submitting my summer training project report.
COST REDUCTION AND CONTROL: To have full coverage of finance control by following various budgets i. purchase budget. maintenance budget. so as to reduce the cost and increase the profitability of the organization. PROFILE OF THE COMPANY Abid Rizvi 0900122008 5 . ways and means etc) and making all efforts to reduce the cost from each element of cost by curtailing the expenditure estimated in the budget to a reasonable cost. ABC analysis etc which are implemented by the organization to control cost under various heads. revenue budget (manpower budget.e. welfare budget. capital budget. 2.Objective:1. FINDING VARIOUS METHODS FOR IMPLEMENTATION: To find out various methods like EOQ (Economic Order Quantity).
India. as well as operating airports. is one of Asia’s largest aerospace companies. helicopters and their components and spares. HAL built the first military aircraft in South Asia and is currently involved in the design. navigation and related communication equipment. Korwa. Under the management of the Indian Ministry of Defence. It has several facilities throughout India including Nasik. jet engines. Abid Rizvi 0900122008 6 . this public sector company is mainly involved in aerospace industry. Kanpur.HINDUSTAN AERONAUTICS LIMITED GENERALPROFILE Hindustan Aeronautics Limited (HAL) based in Bangalore. Koraput. fabrication and assembly of aircraft. which includes manufacturing and assembling aircraft.
Hindustan Aeronautics Limited has it headquarter located at Bangalore. navigation. Later in April 1942.HAL was set up as an amalgamation of Hindustan Aircraft Limited along with Aeronautics India Limited and Aircraft Manufacturing Depot located in Kanpur. especially by the Diwan. BAESystems. India. The decision by United Kingdom was primarily motivated to boost British military hardware supplies in Asia to counter the increasing threat posed by Imperial Japan during Second World War. HISTORY OF THE COMPANY Hindustan Aeronautics has a long history of collaboration with several other international and domestic aerospace agencies such as the Airbus Industries. HAL was established as Hindustan Aircraft in Bangalore in 1940 by Walchand Hirachand to produce military aircraft for the Royal Indian Air Force. Sukhoi Aviation Corporation. the first fighter aircraft made in India. it bought out the stakes of Walchand Hirachand himself and other promoters so that it can act freely. Sir Mirza Ismail. Aeronautical Development Agency and Indian Space Research Organization. and instruments for communication purposes. Hindustan Aeronautics Limited (HAL) came into existence on 1st October 1964. The initiative was actively encouraged by the Kingdom of Mysore. India. and Hyderabad. Rolls-Royce plc. few other Abid Rizvi 0900122008 7 . Boeing. Apart from these. the Mysore Kingdom refused to sell its stake in the company but yielded the management control over to the British Government. Dornier Flugzeugwerke. aerospace. The principal activities of HAL involve manufacturing aircraft. within 2 years of establishment. The British Government bought a one-third stake in the company by April 1941 as it believed this to be a strategic imperative. HAL is one of the largest aerospace companies which are run by the Ministry of Defense. The German engineer Kurt Tank designed the HF-24 Marut fighterbomber. However. RSK MiG. Israel Aircraft Industries. Thus.Lucknow. it was nationalized. Dassault Aviation.
Ltd. HAL has been successful in numerous R & D programs developed for both Defence and Civil Aviation sectors. jet engines. a unique achievement. HAL has made substantial Progress in its current projects: • Dhruv. in the very first year of its production. along with their elements and spares. Navy. and collecting aircraft. The Government of India became a stakeholder of the company in 1941 and seized the management department in 1942.Light Combat Aircraft (LCA) • Intermediate Jet Trainer (IJT) • Various military and civil upgrades. manufacturing. Hindustan Aircraft Limited which located at Bangalore was incorporated by the industrialist the late Seth Walchand Hirachand December 1940. • SAMTEL HAL Display System Limited Abid Rizvi 0900122008 8 . HAL has 19Production Units and 9 Research and Design Centers in 7 locations in India. The Company has an impressive product track record . • PSLV (Polar Satellite Launch Vehicle) • GSLV (Geo-synchronous Satellite Launch Vehicle) • IRS (Indian Remote Satellite) • NSAT (Indian National Satellite) HAL has formed the following Joint Ventures (JVs): • BAeHAL Software Limited • Indo-Russian Aviation Limited (IRAL) • Snecma HAL Aerospace Pvt. HAL has played a significant role for India's space programs by participating in the manufacture of structures for Satellite Launch Vehicles like. helicopters.activities performed by HAL are Designing. which is Advanced Light Helicopter (ALH) • Tejas . 3600 engines and overhauled over 8150 aircraft and 27300 engines.12 types of aircraft manufactured with in-house R & D and 14 types produced under license. Air Force and the Coast Guard in March 2002. Dhruv was delivered to the Indian Army. HAL has manufactured over 3550 aircraft.
• HAL has won several International & National Awards for achievements in R&D. Coast Guards and Border Security Forces. • At the National level. Quality and Fulfillment of Social Responsibilities. Technology and Innovation. Leadership. instituted by the Standing Conference of Public Enterprises (SCOPE).“ARCH OF EUROPE” Award in Gold Category in recognition for its commitment to Quality. Managerial Performance. UK by M/s Global Rating and UK in conjunction with the International Information and Marketing Centre (IIMC). 783. • HAL was awarded the “INTERNATIONAL GOLD MEDAL AWARD” for Corporate Achievement in Quality and Efficiency at the International Summit (Global Rating Leaders 2003). The Company has also achieved foothold in export in more than 30 countries. Hal’s supplies / services are mainly to Indian Defence Services.61 Cores. • HAL-Edgewood Technologies Pvt.• HALBIT Avionics Pvt. London.7. • INFOTECH HAL Ltd Apart from these seven. Exports. • HAL was presented the International . Abid Rizvi 0900122008 9 .The Company scaled new heights in the financial year 2006-07 with a turnover of Rs. having demonstrated its quality and price competitiveness. Transport Aircraft and Helicopters have also been supplied to Airlines as well as State Governments of India. Energy Conservation. Several Co-production and Joint Ventures with international participation are under consideration. other major diversification projects are Industrial Marine Gas Turbine and Airport Services. Ltd. Technology. HAL won the "GOLD TROPHY" for excellence in Public Sector Management. Ltd.
PRODUCTS OF HAL PRODUCTS IN CURRENT MANUFACTURING RANGE Abid Rizvi 0900122008 10 .
SU 30 MKI Twin-seater. accessories and avionics. 2 overawing and 1 under fuselage) capable of carrying a huge load of several of weapons in different combinations to meet the Customers’ needs. MIG-27 M Single-seater Tactical Fighter / Bomber with Variable sweep wings. including the engine.deep penetration strike and battlefield tactical Support Aircraft in 1979 under license from British Aerospace. Long range Fighter / Bomber / Air Superiority Aircraft. Multi-role. AIRCRAFT WESTERN ORIGIN JAGUAR INTERNATIONAL HAL commenced production of Jaguar International . DHRUV (ADVANCED LIGHT HELICOPTER) Abid Rizvi 0900122008 11 . Jaguar aircraft is designed with 7 hard points (4 under wing. MIG-21 VARIANTS Single-seater Front line Tactical Interceptor/ Fighter Aircraft.
• To have a continuous improvement in Knowledge.2001. the Helicopter Division commenced series production of Dhruv (Advanced Light Helicopter) in 2000 . Dhruv is designed to meet the requirement of both military and civil operators. CHETAK The Helicopter Division manufactures the versatile and multi-purpose Chetek Helicopters for Civil and Military applications both for Domestic and International customers . Behavioral and Technical) • To promote a Culture of Achievement and Excellence with emphasis on Integrity.5 ton class. fully designed and developed by HAL. multi-mission helicopter in 5. Abid Rizvi 0900122008 12 . • To enhance Organizational Learning • To play a pivotal role directly and significantly to enhance Productivity. Skill and Competence (Managerial. Credibility and Quality • To maintain a motivated workforce through empowerment of Individual and team building. OBJECTIVES OF HAL • To ensure availability of Total Quality People to meet the Organizational Goals and Objectives. Built to FAR 29specifications.With a proven track record and established technology for manufacture of helicopters and its components. The ALH is a multi-role.
managing the business on commercial lines in a climate of growing professional competence. To become a globally competitive aerospace industry while working as an instrument for achieving self-reliance in design. highly motivated and committed to meet the current and future challenges. This will be driven by core values of the Company fully embedded in the culture of the Organization". manufacture and Abid Rizvi 0900122008 13 . MISSION OF THE COMPANY Enable all those working for HAL to give their best to ensure their all-round growth as well as that of the organization.• Profitability and improve the Quality of Work Life VISION OF THE COMPANY "To make HAL a dynamic. value-based learning organization with human resources exceptionally skilled. vibrant. "To become a globally competitive aerospace industry while working as an instrument for achieving self-reliance in design. manufacture and maintenance of aerospace Defence equipment and diversifying to related areas.
• COST AND TIME CONSCIOUSNESS We believe that our success depends on our ability to continually reduce the cost and shorten the delivery period of our products and services. • RESPECT FOR THE INDIVIDUAL Abid Rizvi 0900122008 14 . We will strive for building empowered teams to work towards achieving organizational goals. reliability. transparency. We will supply products and services that conform to highest standards of design. • COMMITMENT TO TOTAL QUALITY We are committed to continuous improvement of all our activities. manufacture. managing the business on commercial lines in a climate of growing professional competence ". We strive to understand our customers ' needs and to deliver products and services that fulfill and exceed all their requirements. maintainability and fitness for use as desired by our customers. experimentation and learning at all levels within the company with a view to achieving excellence and competitiveness.maintenance of aerospace Defense equipment and diversifying to related areas. and a sense of belonging. VALUES OF THE COMPANY • CUSTOMER SATISFACTION We are dedicated to building a relationship with our customers where we become partners in fulfilling their mission. co-operation. • TRUST AND TEAM SPIRIT We believe in achieving harmony in work life through mutual trust. • INNOVATION AND CREATIVITY We believe in striving for improvement in every activity involved in our business by pursuing and encouraging risk-taking. We will achieve this by eliminating waste in all activities and continuously improving all processes in every area of our work.
Contract to manufacture 1.000 TPE331 aircraft engines for Honeywell worth US$200. Multi-role transport aircraft project with Ilyushin of Russi US$600 million.We value our people.7 million contract to supply Advanced Light Helicopter to Ecuadorian Air Force  HAL will also open a maintained base in the country. US$100 million contract to export composite materials to Israel Aircraft Industries. We will treat each other with dignity and respect and strive for individual growth and realization of everyone's full potential. US$50. Abid Rizvi 0900122008 15 . 120 RD-33MK turbofan engines to be manufactured for MiG-29K by HAL for US$250 million. Manufacture of aircraft parts for Airbus Industries worth US$150 million. US$1 billion contract to manufacture aircraft parts for Boeing. US$120 million deal to manufacture Dornier 228 for RUAG of Switzerland. INTERNATIONAL AND DOMESTIC DEALS INTERNATIONAL DEALS • • • • • • • • • • The US$10 billion fifth-generation fighter jet program with the Sukhoi Corporation of Russia. US$65 million joint-research facility with Honeywell and planned production of Garrett TPE331 engines.000 each (estimates put total value of deal at US$200 million).
is worth US$3.2 billion. The total contract. US$57 million upgrade of SEPECAT Jaguar fleet of the Indian Air Force. 64 MiG-29s to be upgraded by HAL and Russia's MiG Corporation in program worth US$960 million.83 billion. Contract of 3 HAL Dhruv helicopters to Turkey in a deal worth US$20 million. • 200 HAL Light Combat Helicopters for Indian Air Force and 500 HAL Dhruv helicopters worth US$5. US$55 million fighter training school in Bangalore in collaboration with Canada's CAE. which also involves Russia's Sukhoi Aerospace. US$20 million contract to supply ambulance version of HAL Dhruv to Peru.• • • • • US$30 million contract to supply avionics for Malaysian Su-30MKM. Licensed production of 82 BAe Hawk132. DOMESTIC DEALS • 180 Sukhoi Su-30MKI being manufactured at HAL's facilities in Nasik and Bangalore. Supply of HAL Dhruv helicopters to Mauritius' National Police in a deal worth US$7 million. Abid Rizvi 0900122008 16 . • • • • US$900 million aerospace hub in Andhra Pradesh. Unmanned helicopter development project with Israel Aircraft Industries.
UK Coast Guard. UK EADS. Nepal Hampson. of Rajasthan Govt. France ELTA. Peru Air India Air Sahara Airports Authority of India Bharat Electronics Border Security Force Coal India Defense Research & Development Organization Govt. UK Honeywell International. Israel Messier Dowty Ltd. UK Mitsubishi Heavy Industries.. of Jammu & Kashmir Govt. UK BAE Systems. of Karnataka Govt. USA Namibian Air Force. Japan MOOG. Namibia Peruvian Air Force . of West Bengal Indian Air force Indian Airlines Indian Army Indian Coast Guard Indian Navy Indian Space Research Organization Jet Airways Kudremukh Iron ore Company ltd. Mauritius Corporate Air. France APPH Bolton.CUSTOMERS OF THE COMPANY International Customers • • • • • • • • • • • • • • • • • • • • • Domestic Customers • • • • • • • • • • • • • • • • • • • • • • • Airbus Industries. Maldives Israel Aircraft Industries. NALCO 17 Abid Rizvi 0900122008 . France Dowty Aerospace Hydraulics. Philippines Cosmic Air. USA Island Aviation Services. UK Chilton. Nepal Dassault Aviation. of Maharashtra Govt. of Andhra Pradesh Govt. Israel Gorkha Airlines. of Uttar Pradesh Govt.
UK Royal Air Force. Ordnance Factories Reliance Industries United Breweries EVOLUTION AND GROWTH OF THE COMPANY The Company's steady organizational growth over the years with consolidation and enlargement of its operational base by creating sophisticated facilities for manufacture of aircraft / helicopters. accessories and avionics is illustrated below. ORGANIZATION STRUCTURE Abid Rizvi 0900122008 18 . Malaysia Royal Nepal Army. Oman Royal Malaysian Air Force. Thailand • • • • Oil & Natural Gas Corporation Ltd. Nepal Royal Thai Air Force. aero engines.• • • • • Rolls Royce Plc.
Abid Rizvi 0900122008 19 .
ACHIEVEMENTS / AWARDS Abid Rizvi 0900122008 20 .
HAL won the "GOLD TROPHY" for excellence in Public Sector Management. instituted by the Standing Conference of Public Enterprises (SCOPE) SERVICES Abid Rizvi 0900122008 21 . Energy Conservation. • At the National level. Exports. • • HAL is the only one PSU which has been included in “NAVRATNA” category.HAL has won several International & National Awards for achievements in R&D.“ARCH OF EUROPE” Award in Gold Category in recognition for its commitment to Quality. Managerial Performance. London. Quality and Fulfillment of Social Responsibilities. Leadership. UK by M/s Global Rating and UK in conjunction with the International Information and Marketing Centre(IIMC) • HAL was presented the International . HAL was awarded the “INTERNATIONAL GOLD MEDAL AWARD” for Corporate Achievement in Quality and Efficiency at the International Summit (Global Rating Leaders 2003). Technology and Innovation. Technology.
2260 crores. The profit of the Company (Profit before Tax) soared to Rs. 000 crore mark for the first time with a sales turnover of Rs.10. The highlights are given below: (Rupees in Crores) Abid Rizvi 0900122008 22 .FINANCIAL HIGHLIGHTS OF HINDUSTAN AERONAUTICS LTD Hindustan Aeronautics Limited (HAL) has cruised past the Rs.10260 crores during the Financial Year 2008-09.
Abid Rizvi 0900122008 23 .00% HAL ACCESSORIES DIVISION LUCKNOW HAL Lucknow Division was established in 1973. A mind boggling range of about 550 different products are being produced and assembled under one roof. But now is holds a peculiar position in the company’s setup practically.96% 26.Particulars 2007-08 2008-09 Growth-over Sales VOP Profit before tax Profit after tax Gross Block 8625 8791 2164 1632 2255 10260 11162 2260 1559 2661 18.47% 18.44% -4. all other divisions are dependant for supply of accessories from Lucknow Division.97% 4. The Division was setup with the objective of supplying six types of systems equipment of Kiran and Marut aircrafts. using totally diverse technologies.
of India Company was handed over United States Air Force.A (Hindustan Aeronautics Employees Association) is the majority union and has been recognized by the management along with these is one officer’s Association H. 24 association .A. Company. Was set up by Late. HAL Lucknow Division is having 293 acres land area. Sri Walchand Hirachand in with then Govt. There are 7 registered Trade Unions presently functioning in the Lucknow Division in which H. HAL AT A GLANCE 1940 Hindustan Aircraft Ltd. as a Private Ltd.O.A (Hindustan Aeronautics Employees Association) to represent the officers of HAL.A. hydraulic and other items which are manufactures for use in aircraft as well as for fighting vehicles. In 48 acres factory premises is constructed and rest 2445 acres are used of township. 1942-45 Abid Rizvi 0900122008 HAL repaired over 1000 different varieties of aircraft and 3800 piston engines. 1941-42 First product Harlow Trainer and curliest hawk Aircraft handed over to Govt.The Division has also built up design and development capability and indigenously developed electrical. of Mysore. The division being a public sector organization has extended a lot of statutory and non-statutory welfare facilities. Service matters of workmen are regulated through certified Standing Orders while in the case of officers are taking care of by the Conduct Appeal and Discipline Rules. The human relations and discipline matters are regulated in the division through well-defined system.E. At present division has 3207 employees out of which 2625 are workmen (1356 direct and 1269 indirect) and 582 officers.
1969 1970 1973 1979 1982 1983 1990 An agreement with USSR was reached for the license production of MIG-21 aircraft. Design and development of Light Combat Aircraft (LCA). 1953-54 1956 1960 1662 HAL came under the public sector. Lucknow Division established to manufacture. The first Hindustan Trainer (HT-II) had its maiden flight. First Percival prentice aircraft assembled. Agreement with USSR for license production of MIG-27M aircraft. Korwa Division of HAL formed. instruments and accessories.1945 Govt. of India took over the management of HAL again after the world war. Koraput and Hyderabad established. 1964 HAL was dissolved and its assets were merged with Aeronautics India Ltd and the company by the name of Hindustan Aeronautics Limited was formed. 1948-49 1951 The control of HAL was shifted from ministry of industries to Ministry of Defence. Aircraft manufacturing depot was established at Kanpur. Aeronautics India Ltd was formed to manufacture MIG-21 Aircraft Three factories at Nasik. 25 Abid Rizvi 0900122008 . Agreement with British Aerospace for manufacturing Jaguar Aircraft. Helicopter Division was established to manufacture helicopters.
Certification of ISO-9001. Certification of ISO-14001. IMGT.State investment 2. Land management system Gyro-Instruments 1.1991 1993 1998 2000 2003 Development of Advance Light Helicopter (ALH). AC system control and protection unit 4. License permitted by Russia for manufacturing of SU-30 Aircraft. Rate Gyros Abid Rizvi 0900122008 26 . PRODUCTS OF LUCKNOW DIVISION Electronics 1. a new division established at Bangalore. Fuel management system 5.DC system control and Production unit 3. Gyro Horizons 3. Direction Gyros 2.
Ground Power Units 2. Jet pipe temperature indicators 4. Gear Pumps 4. 2. Servo Jacks 3. Activators 5. Temptation Sensor + Switches Conventional 1. Engine RPM indicators Electrical 1. Motors 6. Generators 2. Hydraulic Trolleys 3. Altimeters 2. Alternators 3. Value Ground Support Equipment 1. Integrated Drive Generator Fuel System 1. Vertical Speed Indicators 3. Main Pumps 2. D.4. Heat Pumps Abid Rizvi 0900122008 27 . Transformers Rectifier Units 4. Main Wheels 2. C. Carbon composite brake pads Sensors and Switches 1. Customs Built fuel/Hydraulic test rigs Wheels & Brakes 1. Accumulators 2. Synctors Hydraulics 1.Capacitancetypefuel content qualifying Probes. Nose Wheels 3.
PTA (Pilotless Target Aircraft) named “Lakshay” etc.“HAWK” in September 2008 to the “Air Force of India”. Valves Precision Manufacturing Capabilities 1. Fuel Control Units 4.3. Precision Conventional machine FUTURE PROSPECTS • Company is planning to provide “AJT” (Advance Jet Trainer) named. Sukhoi-30 named “OJAS”. All ranges NC Machines up to 5 Axis 2. Water Extractors 4. Cold Air Units 2. Ventures 3. • The projects which are in line for future includes HJT (Hindustan Jet Trainer) named“KIRAN”. Booster Pump Environment Control System 1. Abid Rizvi 0900122008 28 .
HALU Hindustan Aeronautics Limited Employees Union 3. HADEA Hindustan Aeronautics Diploma Engineers Association 29 Abid Rizvi 0900122008 . • The company has also planned to start the projects like CAT (Combat Aircraft Trainer). HAEA Hindustan Aeronautics Employees Association (Recognized) 2. LCH (Light Combat Helicopter) and MLH (Medium Light Helicopter).• The company has got permission to provide LCA (Light Combat Aircraft) named“TEJAS” to “Indian Air Force” up to 2010 with all facilities. HARSS Hindustan Aeronautics Rastriya Sharam Sansthan 4. TRADE UNIONS IN HAL LUCKNOW DIVISION 1.
5. HAPKS Hindustan Aeronautics Prashikshit Karamachari Sangh DEPARTMENTAL ANALYSIS VARIOUS SECTIONS OF FINANCE AND ACCOUNTS DEPARTMENT IN HAL Abid Rizvi 0900122008 30 .
The job information of any of this section starts type from after receipts of commercial work or Purchase or Purchase Department It maintains the proper accounts in relation to the performed by this section. which perform their function independently. This section has three segregations. It also deals with the payment of miscellaneous advances. Abid Rizvi 0900122008 31 .O. bills related to the Indian suppliers are paid off. It is responsible for payment of suppliers and service providers as per terms and conditions of the P. It also ensures timely payment to different parties so that the suppliers and services to the division are ensured uninterruptedly in furthering the organization's objectives. These sub-sections are as under: Bills Payable (Indigenous) Bills Payable (Foreign) Bills Payable (Service and Civil works) BILLS PAYABLE (INDIGENOUS) Here in this section . It is not concerned with any kind of foreign remittance. are made from the bills of service providers and deposited timely with the appropriate authority. This section also ensures that the statutory deductions like TDS etc. It also ensures proper accounting as per the requirements from the corporate office.BILLS PAYABLE SECTION Objectives: Meeting organizations liability is the task of this section.
royalty etc as per the license agreement with the foreign collaborator. assessable value . Functions: 1) Payment and accounting of: Advance to suppliers as per the terms and conditions of purchase order. description and specification of goods . packing and forwarding charges ( P&F) . product code . duty paid . Customer number . License fees. date and time of invoice.Procedure: P. There after order is placed.O is sent to bills section which shows the details of the material required. tax rate . freight. Invoices consist of the name of consignee . Then P.” Material Procurement Committee '' (MPC) approves it. Invoice is sent in case of payment through bank and these invoices are matched with the P. sales rate etc. Abid Rizvi 0900122008 32 . unit.O is sent by the Purchase Department after the approval. type . manufacturing code number .O and then payment is made to the concerned party.rate of duty. insurance. Challan number . Inland vendors for suppliers / services are paid by one of the following procedures: a) b) c) d) Document through bank Cheque against delivery Advance payment Open account BILLS PAYABLE (FOREIGN) Bills payable foreign deals with the payment of foreign suppliers as stipulated in the purchase order. Then the concerned authorities select the best quotation. mode of transport . date and time of removal of goods . rate . This sub-section performs its function separately from the other sub-sections of this department. The vendor sends their quotation for supply of the material. Vendor is consulted for the purchase the details of the material required. Vendor is consulted for the purchase of the material. total quantity of goods .
R are sent to materials accounts section/ E.M. 2) Opening of Letters of Credit on the advice of I. revalidation and utilization .C the Bank Adjustment voucher is prepared on the basis of bank advice and sent to the cash section for adjustment. amount of duty paid to ensure that the duty Abid Rizvi 0900122008 33 (Purchase order) rates and . Final bills. All the L. 5) Priced R. Flow of work: All P.D. loading of custom duty . freight bills.M Department and liaison with Banks for Foreign Exchange release and payment on maturity date. Custom duty.O. All the Contractual payments in respect of Royalty . On maturity of the L. 4) Pricing of R. 3) Maintenance of commitment registers for budgetary purpose. freight and insurance charges. Bills of Entry received from the IMM Department are entered in the register to record value of the goods assessed .R(Receiving cum discrepancy report) with P. Particular of payments are noted in relevant P.D.P for punching in batch mode for the processing of materials ledger.D.O / Contracts received are entered in the registers before opening of separate file for each P.O. Where the Purchase terms provide for " Documents through Bank" the Bills Payable section after checking the documents with the P.C opened in favor of Foreign suppliers as per the terms of P.O passes the invoices and issues Letter of Authority to the Bank for arranging payment.O are entered in Registers to record the particulars about their extension. License fee and Technical Assistance fees are made as per the License / Collaboration agreement.O.
Invoice value 4. the payments made to foreign vendors. Total amount of duty paid 3. loaded to the inventory After receipt of goods the stores department send the R. Advance Payment Direct Payment.R to the foreign bills for pricing and making necessary accounting. Pending the pricing of the R. through letter of credit / sight draft are put temporarily in goods in transit account. Follow-up with IMM department is done for timely release of RDR so as to clear the G. Total number of packages 2.O./License agreement/contracts a) b) c) d) Letter of Credit Sight Draft.D.D.O raised by H. In respect of material dispatched by the vendor against P.T .R . Freight Abid Rizvi 0900122008 34 .I. Bills of entry are received by the agents before receiving of goods.L the liability is provided in the company's books of accounts if payments have not been made for such supplies.levied is correct and the amount of duty paid is accounts correctly. It includes: 1. stipulated in the Bills of entry It is a document filled by custom officers for giving custom clearance to the goods received from foreign countries.A. Foreign suppliers are paid by any of the following methods as P.
d. This sub-section is mainly responsible fora. If payment is done on the same day then the RDR is priced at value at which payment is done. Advance payment. c. Service contracts. b. Payment regarding construction of building etc. Exchange rate 7. running bills to contractors and final bills. Abid Rizvi 0900122008 35 . If the payment is done in advance and goods received later. then the RDR is priced at the value of exchange rate of the last day of the previous month. Insurance 6. Medical payment. Job contracts. Pricing of RDR is done by two methods: 1.5. BILLS PAYABLE (SERVICES & CIVIL WORKS) Bills payable section deal with the preparation of bills of services and civil works in the company. 2. Accounting and adjustment of earnest money and security deposits. e. Accounting related to all these are also done by the section. Accessible value RECEIVING CUM DISCREPANCY REPORT: RDR (Receiving cum discrepancy report) is prepared at the time of receiving of goods within organization. Adjustment and recovery of advances. Functions: Payment and accounting of advances.
The amount settled against running bills . Payment of miscellaneous advances.S etc is deducted from the gross amount payable. impress approved by competent authority. T. transportation. advances if any . submitted by Contractors duly certified by Engineers-In-Charge. with the contract / acceptance letter .g. electricity. water.g. Final bills submitted by the contractor is checked with the measurement book and the gross amount payable is determined. water etc received from plant maintenance department / concerned user duly verified by them and approved by Abid Rizvi 0900122008 36 .g electricity.work order etc and arranges payment after deducting Income tax. Architects. Payment to all casual employees recruited on "job-contract" basis. Advocates. Advances to contractors are given as per the acceptance letter given to the contractor which are recovered with interest by way of deduction from on account payment bills in suitable percentage in relation to the progress of work so as to recover all sums advanced by the time 80% of the contracts are completed. Payments of bills for services e. Part time doctors etc. Payment to all consultants e. balance security deposit and other advances if any and retaining the prescribed percentage of the bill towards retention money no deduction is to be made on this account. Telephone. canteen.D. Capitalization of buildings. sanitation etc. Material advances to the extent of 75% of the value of materials brought by contractors and lying at the site are given on certification of the Engineer-incharge and are recovered from running / final bills. Flow of work: In case of running bills the works accounts section links the bill. recovery towards consumption of material . penalty for delay in completion of work . Payment of all services bills e.
stage payment. Abid Rizvi 0900122008 37 . Sales tax authority and others . It has also to act as liaison with custom department . Proper accounting is done as per the instructions provided by the Corporate Office. This section ensures that dues from customers in respect of goods supplied and services rendered are recovered timely as per the fixed price quotation / price catalogue proved by the Ministry of Defense.g sales tax. Objectives: 1) To ensure that the dues from the customers in respect of the goods supplied and service rendered are recovered timely as per the fixed price quotation / price catalogue approved by the ministry in acceptance with the government issued by the Ministry of Defense dated 24th August 1995. final delivery are raised timely in order to have smooth cash flow position. Three categories are made and rate of these categories differ from each other. Army.the competent authority are made. 4) To ensure that all statutory payments e. 2) To ensure that the invoices relating to the advances . Payments in respect of other services received by the company is made after it is duly approved by the competent authority. which accounts for round 85% share in total sales of the organization and rest are mainly Navy. In case of job contracts payments are made to casual employees of the company. ADA and others. 3) To ensure that proper accounting is done as per the statute and accounting instructions laid down by the Corporate Office. excise duty . HAL regular customer is IAF . BILLS RECEIVABLE This section is responsible mainly for the preparation and submission of invoices etc. custom duty is recovered from the customers and is deposited timely with appropriate authority.
b) Subsequent stages / final payments are claimed on the basis of dispatch advice. • • • Development sales for customer financed projects. Functional test. Repair and overhaul. a) b) c) d) Manufacturing activity Repairs and overhaul Supply of spares against RMSO Deferred revenue expenditure The invoices following documents shall be produced in support of the a) Initial advances are recovered on the basis of customers order.Indian Air Force customers of the following activities. Suppliers against Repair Maintenance Supply Orders (RMSO). Suppliers and services rendered to civil customers. Defect investigation and Zero hours servicing.Functions: 1) Preparation and rendering of invoices to Indian Air Force (IAF) in respect of the following activities with the guidelines laid down in the government letter dated 30th Sept. • • • Firms / forecast task given by the Air Force.g. Chief Resident Inspector ( CRI) coordinated Inter Divisional Task Orders ( IDTO) for divisional tasks. in respect Abid Rizvi 0900122008 38 . Acknowledgement received Air Force in Form Q423. In respect of the repairs and overhaul work the payment is strictly regulated based upon the nature of the work carried out e. 1997. Inspection Note certified by the Chief Resident Inspector about the progress of the work done. Repairs Maintenance Supply Order. 1) To prepare and render invoices to Non.
revised estimates.2) To raise debit on other divisions on Stock in Trade (SIT) in respect of parts / accessories supplied for fitments in Engines / Aircraft / Helicopters manufactured by them for supply to customers. d) Miscellaneous Abid Rizvi 0900122008 39 . c) Manufacture and supply of spares for overhaul against RMS orders. 4) To submit invoices for reimbursement of royalty from Air Force and set up sales for these claims and created claims receivable. ACCOUNTING PROCEDURE Accounting for the sale of aircraft / engine / equipment etc. manufactured / repaired and overhauled and for services rendered. IDTO for budget estimates. firm / forecast task . 5) To follow up with AODAD and other customers for collecting the payments against the invoices raised. 6) To provide details to budget section for compilation of sales budget on the basis of sales order. Sales Journal: Separate journals are maintained for the following activities: a) Manufacture of aircraft / engine / equipment b) Overhaul of aircraft / engine / equipment and overhaul of ratable. is done through the following accounting journals: 1. 8) To compile Sales Tax from returns and submit the same to Integrated Material Management ( IMM) department for onwards submission to sales tax authorities for assessment. 7) To collect Sales Tax from the customers and deposit the same. 3) To claim payment from Account Officer Defense Accounts Department (AODAD) on the basis of fitment details received from those divisions.
Claims / Accounts receivable journal: All invoices raised in respect of various services rendered / facilities provided are entered into this journal and journal entries passed at the end of each month by debiting to claims / accounts receivable account and crediting to the respective income account. To scrutinize and give financial concurrence as per delegation of power for each proposal involving: a. Manpower requirements Abid Rizvi 0900122008 40 . To submit MIS reports to corporate office monthly. the Memorandum and Articles of Association of the company and the relevant rules and regulations of the company and the guidelines issued by the company. 3. Capital expenditure b. To ensure that financial proposals are routed to the competent authority as per delegation / sub-delegation of powers so as to ensure compliance of the provisions of the Companies Act. To ensure that the financial discipline is maintained in the division.These journals are posted from the final invoices / Performa invoice raised on dispatch or delivery. Purchase of materials / stores / tools and other services d. To ensure that all expenditure is incurred with due regard to principles of financial propriety. 4. To ensure that the funds are available in the approved capital and performance budget so as to cover the relevant proposals. Functions: 1. 5. Revenue expenditure c. these sales journals are totaled and sales are set up by debiting to respective sundry debtors / advances account. At the end of each month. FINANCE SECTION Objectives: 1. 2. 2.
e. Waiver of dues / write off of losses f. Cases involving relaxation of rules etc. as per delegation of powers g. Sale, lease, alienation or disposal of company’s assets h. Contracts entered into with suppliers / collaborators / sub contractors. i. Award of contract in respect of civil / electrical works / other works / plant orders j. Project reports 2. Certification for availability of funds with reference to capital and performance budgets and appropriation of funds. 3. Fixation of rent and rates of recovery in respect of services / supplies / disposals by the company. PROCEDURE (FINANCIAL VETTING) Finance section plays a major role in accounts department. It can be termed as centre point of activities, because this section clears all the files for proceedings by the concerned authorities as per delegation of power. First of all material purchase requisition is sent by the purchase department, it is request for procurement of material which is sent to store and the store sends this file to finance section for further proceedings. These requisitions are broadly classified as under: a. Non- Recurring items b. Recurring items. Concerned authorities in the section approve the file. Committee members as per the amount mentioned in the files, do approval of the files. Different Committees have been formed for different approvals like different committee approves the proposals which amounts up to Rs 5 lakhs, different committee is authorized for the amount above then Rs 5 lakhs & so on. Approval is done by CM (IMM) , Manager(Maintenance) , Senior Manager (Maintenance) as the case may be . After the CM’S approval, it is sent back to IMM & the IMM sends it back to the Finance section, including specifications which shows that it is suitable or not. Finance Department approves P.O FILES. Then further proceedings go on which includes rising of inquiry for tenders. Sealed tenders are opened in front of concerned authority. There are fixed days for opening sealed tenders-Friday and Tuesday. Amongst the Abid Rizvi 0900122008 41
sealed tenders L1 is selected , which represents the lower amount amongst all tenders. In spite of considering lowest amount other factors are also taken into due consideration subject to the companies policies. Thereafter further proceedings take place:
As the name shows, this section is concerned with salary, wages, incentives & correspondence with Time Office. It also takes into consideration subsidies granted and providing motivational benefits.
To formulate salaries and wages of all employees as per terms of employment. To regulate payment of welfare facilities extended by the management e.g. L.T.C, medical, interest subsidiary, school fees etc Payment and recovery of various natures of advances such as Travel advances, LTC advances, conveyance advance and timely adjustment thereof. To ensure timely remittance of amounts recovered from employees to various agencies like LIC, UPICA, and HDFC etc. To ensure proper accounting is done as per the requirement of the statute and corporate office guidelines. To adhere to the provisions laid down in the personnel Manual relevant to the above functions. Abid Rizvi 0900122008 42
To ensure that all –statutory deductions e.g. TDS, PF etc are made from the salaries of the employees and deposited timely with the appropriate authority.
Based on the appointment /transfer notification from personnel department, individual files are opened in the payroll section to record the particulars of the employees such as grade/group date of appointment/transfer, department code, P.B.No., scale of pay etc. The payroll records is updated from time to time entering therein increment drawn, promotion, transfers. The master data in respect to all officers/employees is sent to computer department in respect of basic pay, DA, HRA, CCA etc and this data is updated every month depending upon the cheque. The deduction to be made is fed to the computer department by means of deduction statement. Computer department in turn prints out the deduction statement. In the form of check lists by 25th of every month. Payroll section corrects the same with reference to the various documents and recovery registers and sends it back to compute department for final adoption by 26th827th of the month. The computer department prints the payroll in duplicate in which one copy is maintained in the payroll section for record purpose and the original copy is distributed to the employee concerned. DISBURSEMENT OF SALARY 7 WAGES Payment of salary to officers is made through Bank based on the payroll received from the computer department. In cases of non supervisory personnel the payment is made by cash by various groups except few cases where the payment is made through P.N.B Bank HAL branch. Cash is drawn two
Abid Rizvi 0900122008
last day of month and filled in the envelopes are kept in safe custody in cash office for disbursement on 1st of next month.days in advance i. Also reimbursement of expenses limes medical. To monitor the controllable expenditure e. school fee.g. PAYMENT OF ADVANCES AND ADJUSTMENT thereof and reimbursement in of expenses various type of advance such as car/scooter advance.supervisory personnel and sent to book keeping section for adoption. conveyance etc. Income Tax etc are remitted to the various agencies within the stipulated date by means of cheque. proper accounting is done to ensure that necessary advice is raise to the concerned division. medical expense . contingency advance. To make payments made to persons from the division. TA/DA etc are paid and adjusted / recovered as per the rule of the company. ACCOUNTING PROCEDURES Monthly payroll journal entry is made both for supervisory and non. REMITTANCE OF RECOVERIEES various recoveries made from employees in respect of LIC premium. on monthly basis an to ensure it does not exceed the budget provided for it. HDFC Loan. etc. conveyance expenses. Is made as per the rules of the company.e. Abid Rizvi 0900122008 44 .
Allow Basic ARR DA. Allow Incentive Amt MAGA Allow WASH. / EMP No. Bank A/c No. Bank Name Branch Address Abid Rizvi 0900122008 45 . Designation Grade DA – 30 % Basic Basic Pay EARNING Code Basic Pay DA HRA Conv.PAY ROLL FORMAT HAL SERIAL NO. DATE PAY SLIP FOR THE MONTH OF ________________ Name Deptt. ARR HRA Arrears Earning Description Current -Previous Total Net Pay FPF No.
______-___ In Words.______________________________ Attendence Salary Day HRA Day Leave CL VL Opening Leave Details Current Earned Previous Availed Balance Current Previous - Abid Rizvi 0900122008 46 .DEDUCTIONS Code Description PF Income Tax GSLI HAOA VPF Sports Club PF Arrear HAOC DRF Total Deduction Net Pay – Rs.
debtors. value of production. Abid Rizvi 0900122008 47 . These entries are serially numbered and punched into the computer and thereby posted to the General ledger. Functions: Journal entries originated by the various sections of Finance and Accounts department are sent to book keeping section. profit. statutory & Government auditors as prescribed by law. To assess the performance of the company in financial terms such as sales. a bunch of journal vouchers are forwarded to Book-keeping section for consolidation.BOOK KEEPING SECITON After the completion of a task or in its due course there is need to maintain an accounting record which is duly fulfilled by passing on a journal entry in almost every finance & accounting section with some exception. To get the accounts of the company audited by the Internal. So theirs sections responsible for proper maintenance of accounts of the company as per requirements of the status. Objectives: To complete the accounts of the company are prepared as per the requirement of the statute/corporate office guidelines. After its proper jormalization. To furnish data/information in respect of income Tax Assessment done at Corporate Office. value-added etc.
30th sept. P. P&L Account and Balance Sheet Fixed assets registers Abid Rizvi 0900122008 48 . Accounts are computerized are drawn for every quarter as on 30th June.No. capitalized are also furnished by civil works section to the book keeping section. Physical verification of fixed assets is done as per the guidelines of cooperate office. The documents are FAD Trial Balance. The maintenance of assets ledger is computerizing din which the details like data of purchase. Registers And Documents: Since the maintenance of accounts is computerize although it maintains vouchers which are handwritten. location of asset etc are recorded. 2) Depreciation on capital assets is calculated as per the policy of the company and is reckoned accordingly as per operating expense of the division. nature of item. profit and loss A/c and Balance sheet. It ha sits own program for consolidation purpose. Maintenance of Fixed Assets Register and depreciation schedule. To provide support to other sections of accounts in their reconciliation and control functions. RDR are furnished by the bills payable section like wise details of assets like building etc. 1) For all capital items purchases. Inter Divisional Transaction are accounted through control account adjustment advices which are reconciled twice in a year at the clearing house.O. Preparation of Trial Balance. 31st Dec and Final Accounts as on31st March of each Financial year.
Revised Estimates 2) Budget Year. Deposit register Control advice account register General register Division control accounts BUDGET SECTION For its effective operation. a budget serves as the guiding path for the prosperity of an organisation.e.” In this way. The movements must be accordingly done so that optimum result can be obtained with less effort. quantitative terms and for that necessary guidelines with target period for achievement are to be set. The budget is prepared in three 1) Current Year. In this manner a Budget can be defined as“It is a financial statement of plans laid done prior to the period of its implementation during which it has to be followed based on management’s policy and prepared for specified objectives achievement.Forecast Estimates Abid Rizvi 0900122008 49 . This formal structure is called Budget. whether operation are going in accordance with the plan set & such other things which are to be considered.Budgeted Estimates 3) Forecast Year. what it wants to achieve. The following are the guidelines of budget section-: part: The period of budget is April to March. management must know what are its resources. So for this purpose it is also required that plans must be said down into verifiable terms i.
vehicles.Welfare Budget 10.Sales Budget 4. Sales Budget and cash flow after approval of the board are broken into monthly budgets. Replacement 5. Computers 1. etc.P&M.It is the most important budget that involves huge funds & is prepared for long term investment.Improvemetn & Rationalization 4. It is a base for all activities. roads.Design & Development 7. In this way it is a long term budget.Manpower Budget 7. New Projects 2.e. items which are to be used for long period for the betterment of the organization for many tasks accomplishment. This budget is related to the capital item i. It involves large Abid Rizvi 0900122008 50 .Profit and loss Budget 9. The proposal under each subhead is classified under three categories.Existing Project 3.Ways & means Budget 12.Training Budget 8. To ensure that capital facility must be made available in time to suit the production requirement.” CAPITAL BUDGET.Projected Balance Sheet “A capital expenditure is that which helps to increase the production and revenue expenditure is that which helps of consumption in production process. There are many types of budget prepared but it has bifurcated under two major heads as under CAPITAL BUDGET PERFORMANCE BUDGET CAPITAL BUDGET PERFORMANCE BUDGE 1. Such as investments in plant and machinery.Welfare Budget 6.Purchase Budget 5.Foreing Exchange 6. Civil works and others. It affects decisions over a period of year.Production Budget 3. It involves huge capital outlays projects and long term commitments.Overheads Budget 11.Order Status 2. building.
e.g.risks and uncertainties. utilization in effective manner. Thus. Here in capital budget is laid down under following heads• • • • • • • New projects Existing project Improvements and rationalization Replacement Welfare Design & Development Information & Technology The requirement and allocation of capital expenditure is raised for above stated purpose. Generally top executives of the coorporate and operational level take initiation for proposals of capital expenditure as per requirement. Helps a systematic procedure for appraising profitability performance of the company. PERFORMANCE BUDGET –This budget is also termed as Revenue budget but due to misconception which might be taken by other it is named as performance budget. sales budget. Helps to formulate other organizational budget. It serves following purposes-: • • • • • Helps to evaluate capital expenditure proposal. Helps to control capital expenditure i. Its benefits are realized generally at short period of time but some exceptional cases are there e. manpower budget etc. Helps to consider the best proposals according to which priority can be fixed. This budget can be recognized as the type of budget related to different fields which directly and indirectly affect profitability. It is generally concerned department and project in charge who feel its need. DRE. This type of budget contains different types of budgets which are explained below- Abid Rizvi 0900122008 51 . its preparation is handed over to senior and experienced executives. It has been further explained In “Capital Budgeting Head”.
It is a basis for preparation of material. it is totally based on sales budget and desired inventory levels. So in this way. o PRODUCTION BUDGET-As we cans understand what this budget stands for. 20000/ and revenue item upto Rs. So in this way expected sale is prepared. Budgeted sales + desired closing inventory of finished goods – Opening inventory of finished goods. o SALES BUDGET. For its preparation mainly production department on the basis of work order received. 50.o ORDER STATUS. These types of budgets are prepared after the information/ data submitted by bills payable. Abid Rizvi 0900122008 52 .This budget is prepared to calculate expected purchases to be made and also payments due.This budget is related to the purchase order pending to be ordered. and furnish the data to budget section. labour and factory overhead budget. o PURCHASE BUDGET. purchase order is raised. It also takes into consideration the cost of carrying out production plans and programs. Generally there is also relaxation where in financial approval need not to be taken which is fro capital item upto Rs.000. purchase department and finance department. Actual these both budgets i. So these orders status is recognized under this budget. Generally it is calculated on the basis of sales order. When a particular item is due to be purchased and for that purchase requisition is raised by the concerned department and for that after selecting bid. It takes into consideration the production to be done in the budget period. By keeping balance between sales budget and production budget.This budget is prepared after the information supplied by customer service department and bills receivable section which is ultimately responsible for dispatching for receipt of sales order and raising work order and communicating bill receivable for raising invoices respectively. Production budget s generally calculated as. purchase and sales are interred related as one affects automatically other’s need. It is also concerned with keeping sufficient inventory requirement.e. idle capacity can be avoided. Here in scientific management has also to play a significant role. It also shows unit wise cost.
So in this way. In this way. France. their forecasted grade/ scales. For this. Abid Rizvi 0900122008 53 . Thus. There are some facilities that are availed by only employees so accordingly classification is done. education.e. This formation according to need is collected from different department and consolidated in well. It takes into consideration the new appointments. • TRAINNING BUDGET. Mainly two types of imports are mentioned i. transport. personnel are also sent to abroad for better learning. • FOREIGN EXCHANE BUDGET-Basically it is a part of purchase budget but it specifically takes in to consideration the foreign purchases i.As we all can understand that such as organization always need to be get aware with new technologies. retirement. Russian and western (UK. different types of seminars. As its rate is not fixed so in this way. group discussions.framed manner and submitted to budget section.e. b) Revenue item which is dealt in this budget. tests are held. to carry out budget plan. Human Resource Department with the help of other department judges its position. • WELFARE BUDGET. it has to calculate according to the foreign currency payment. maintenance of clubs & grounds. accident and sudden resihnation so every time there is exceed in expenditure from the budgeted figure.• MANPOWER BUDGET -This budget is prepared out of the requirement for direct and indirect work force. its implementation and operation so that its position can be maintained. It also calculates recruitment and selection expenditure.There are various facilities which are provided to employees of HAL as well as to their families such as medical. every time there is plus-minus. canteen. import. So in this case adjustments are made time to time. a) Capital item which is dealt in capital budget. Etc). there are two items under it. etc. As contingency exists too much under this budget due to deaths.
In this way. As this section is related to almost whole organization s its responsibility increases as for performing policies. Controlling mainly by through discussions. emphasizes management to derive useful information and use accordingly. Abid Rizvi 0900122008 54 . BUDETARY CONTROL As their is wide difference between budgeting and budgetary control. budget section serves its purpose by fulfilling these objectives- Helping in forming plans. The same concept applies to this organisation as its main concentration on budget and its approach. It can be termed as a type o budget follow up. Motivating employee to actively participate in decision making process and achieving goals by fulfillment of duties. coordination and control. objectives and targets of the organisation and to measure performance against the stated targets. It is a system which uses budgets for planning and controlling different activities of business. reviewing budgets.Significance For Organization: It is a tool in the hands of management t establishes goals. But in this phenomenon there is need to check the activities time to time by way of” variance analysis” by accepting it as standard figure. But budgetary control has this phenomenon as it implies the use of a comprehensive system of budgeting to as management in carrying out its function like planning. which is performed to watch that whether funds has been used properly an accordingly improvement is done. Helping in communication plan to concerned personnel. In this way by this type o system it provides base for future budgets lying. But it is often used unchangeably as a system o managerial control. taking into consideration different types of contingencies etc Helps to define the results to be expected. Co-ordination all activities of the organisations as to facilitate its working and success. passing on reports. It sets out a path to walk over to achieve goals accordingly by taking care against probable hurdles.
Their review.This function is serving in HAL and organization is giving emphasis by active participation of corporate executives. discussions and repot collection fulfilling the purpose well. Abid Rizvi 0900122008 55 .
The EDP after processing of all MR / issue vouchers prints the material issue analysis statement monthly indicating: a) The cost of material drawn against various job orders. b) The cost of material issued to contractors and others. 2. 4. 3. To ensure that all non-moving / slow moving materials are identified as “surplus” by IMM and a suitable redundancy provision is made against them and are disposed off. Based on the above statements accounting for issue of material is done by debit to WIP / expense / contractors account and credit to relevant inventory accounts. On the basis of list of material / transfers reclassification indicating the material code number / quantity and value. To generate exception list for missing RDR and getting it resolved with bills payable section. 3. 2. 2. To ensure that all the receipts and issues of materials from stores are recorded and accounted properly. To ensure that bin card balances are reconciled with the material ledger balances in coordination with IMM and the balances of material ledgers tallies with the general ledger. All the materials drawn excess when returned are credited to stores through stores return voucher. To send the priced RDR received from bills payable section to EDP for punching in the batch mode and thus all the receipts are recorded and control is exercised over all the purchases value-wise. Functions: 1. necessary journal entries are passed by debit / credit to relevant inventory accounts. Abid Rizvi 0900122008 56 . c) The cost of tools issued to various tool cribs from main tool stores. expense accounts etc.MATERIAL ACCOUNTS SECTION Objectives: 1.
Stock verification statement 4. shortages / overages. necessary journal entries are passed after obtaining clarifications from stores department by debit / credit to stock adjustment account credit / debit to relevant inventory accounts after taking approval of CFA wherever required for adjustments / write off of stores. Stock transfer / stock re-classification statement 3. material code number. On the basis of stock verification sheets indicating stock verification note number. Accounting Procedure Accounting of the receipts of material by various classes and issues thereof to various work order and expense accounts is done based on the following ‘output’ statements received from computer / data processing section: 1. b) The cost of material issued to contractors and others. Materials not required for production or for other purposes are identified and suitable action is taken by IMM for finding their usage in other divisions or is auctioned.5% is made on the balance inventory. 4. c) The cost of material transferred to other divisions. 5.3. Redundancy provision is made in the books of accounts at the rate of 100% for non moving inventory and for closed projects as special provision on the basis of list given by EDP. A list of material not moved for over 5 years is given by EDP which is reviewed by stores / concerned programming department. Surplus / condemned stores statement Material issues analysis statement: The computer / data processing section analysis statements monthly indicating: a) The cost of materials (including material overhead expenditure) drawn against various work orders and expense accounts. Abid Rizvi 0900122008 57 after processing all the material requisition/issue vouchers pertaining to the month prints out the material issue . Further a normal provision at 1. Material issue analysis statement 2.
indicating stock verification note number. Surplus / condemned stores statement: Non moving / slow moving material are reviewed by stores / production engineering department from the lists of non moving / slow moving items furnished by the computer / data processing section.. accounting for issue of material is done by debit accounts.and more than Rs 500/.d) The cost of tools issued to various tool cribs from main tool stores. otherwise charged off to profit and loss account by credit to respective inventory accounts. material code number. Stock verification statement: The computer / data processing section makes available the print out lists of stock verification notes. The surplus materials when so declared are transferred to the salvage stores for disposal. duly approved by the competent authority. Based on the above statements. the value of the material transferred to salvage is debited to the redundancy provision account where available. Based on the disposal orders received in the material accounts section. Likewise materials held in stores and condemned due to expiry shelf-life deterioration etc. by debit / credit to stock adjustment / inventory adjustment account and credit / debit to relevant inventory accounts. to WIP/Expenses/Division/Contractors accounts concerned and credit to the relevant inventory Abid Rizvi 0900122008 58 . Material not required for production or as “surplus” and referred to the ‘surplus committee’ for review and declaring the same as surplus. overages or shortages of less than Rs 500/. are also transferred to salvage stores for disposal.based on which necessary journal entries are issued after obtaining clarifications from stores department.
To determine the rate of absorption / recovery of labor and other overheads for recovering labor cost on the different jobs undertaken i. To accumulate the labor and overheads content of each activity project-wise based on evaluated LTB generated by EDP from work orders / time dockets. sub-assembly WIP. 9. To accept the debit raised by other divisions for items received by the division in respect of requirements raised by us through IDTO. Functions: 1. To get the WIP statement as on 31st March from EDP for all manufacturing components. 7. To keep track of different jobs completed and jobs lying incomplete in different stages over a reasonable period of time and to coordinate with concerned production controllers for justification for jobs lying unfinished beyond a reasonable period of time and to ensure their early disposition. 2. 2. assembly WIP for physical verification by the concerned production shops. 3.COST ACCOUNTS SECTION Objectives: 1. 6.e. To keep record of all IDTO received and issued. 8. 4. Abid Rizvi 0900122008 59 . To ensure that the valuation of WIP has been done correctly keeping in view the percentage of completion of the job. MHR computation. To establish a costing system in line with the activities and the product range of the division. To send debit advices to other divisions for items dispatched against IDTO received from them. 10. 5. To determine the price realizable from the customer for the products manufactured / repaired / overhauled / serviced / supplied by the division. To keep track of SIT transactions with different divisions. To review work orders on which no material / labor cost has been recorded and finding out the reasons for the same.
Labor and material costs are booked on the batch work order/mass fabrication order only. ground radars. engines etc. a fully fledged cost accounting system is essential for effective cost monitoring and cost control. THE SYSTEM The system of cost accounting followed in HAL is "Batch Costing" which is a variation of job costing and is mainly designed to suit the work carried out in HAL. Design and Development Activities of aircrafts. accessories and instruments. ground radars. engines. all the components. army etc. aero-engines. Accounting records rules formed by the GOI. accessories and instruments. Though HAL manufacturing don't come in the range of products under cost audit and cost. avionics.COSTING SYSTEM In Hal Division the work carried out in following categories Manufacturing and Assembling Operations • • • • • Of aircrafts. and DRDL for supply to IAF against RMS order. etc. minor assemblies. Though job cards/job tickets are issued for manufacturing of individual components. a. avionics. Some divisions of HAL have also work order schemes suitable for component costing. engines. Of other equipment like foreign and costing. Batch Costing 1. aero-engines. Of spares required for overhaul of aircrafts. • • Customer Finance. avionics. accessories and instruments. required for a batch of aircraft /engines/equipments are manufactured on batch order/mass fabrication orders. Repairs and Overhaul Activities Aircraft. navy. ground radars. Company Finance. cost is not recorded separately. In the batch costing system. Abid Rizvi 0900122008 60 . Other equipments.
To this is added. sub assemblies. etc. In this system individual work is issued for overhaul of each aircraft/engine/equipment and for manufacture of spare items .The items are held in quantitative inventory. the cost being held in WIP. erection and testing. Individual work order are issued for assembly. The batch quantities of aircrafts/ engines etc. b. Component Costing In the component costing system. engines. sub assemblies. The components after manufacture are credited at cost to production stores and drawn for assembly when required.Labor and material cost is collected on the individual work orders and the total cost of each item is ascertained. The cost of minor assemblies. 3. equipments etc. Abid Rizvi 0900122008 61 . Thus the items are held in priced inventory. relating to an aircraft/engines/equipments in the complete batch is determined by dividing the total cost recorded on the batch work order/mass fabrication work order by the number of units produced in the batch. The components after manufactured are carried out to production store and drawn for assembling on the next assembly line immediately . the cost recorded on assembly line. minor assemblies. overhaul and spares programs as a whole is determined and work orders/ job cards/ job tickets are issued for manufacture of each of component in the economical batch quantities. erection and testing work order(s) and sundry direct charges to arrive at the total cost of the aircraft/engines/equipments. and for manufacture of spares against RMSO spare for HAL held IAF store and miscellaneous jobs. are not relevant but the batch quantity of each component is important. major assemblies can be built from the cost of components issued to such assembly jobs. c. Job Costing This system of costing is followed in the case of repairs and overhaul of aircraft. The cost of bought out items drawn at the stages of assembly and erection is booked to these orders.2. an individual work order/job ticket is issued for each component against which labor and overheads expended and cost of material drawn are recorded and the total cost is ascertained. In this system the cost of all components. In this system the requirement of component for manufacturing of component.
These labor hours will be valued by applying yearly Man Hour Rate (MHR) applicable to the division f.d. avionics. sub assemblies. Material Standards The material requirements as per the bill of material shall be the basis of determination of the standard for marginal cost. wheel assembly and high value rotable. Labor costs as per the standard and as per actual. assembly allotted in time docket in the division is taken as parameter for fixing standard labor hours. The costing of material shall be done on the basis of weighted average rate of respective material prevailing at the time of issue of work order. the price standards shall be adopted based on technical estimates. Standard Costing Standard costing is a technique to control cost. 3. g. where work schedule are available. 2. It can be extended for periodical overhaul of major products like airframe. Marginal Costing With a view to increase the utilization of the available facilities and manpower and to obtain some contribution towards the company's fixed overhead expenses. Labor Standards The present standard time for each component. major assemblies and final assemblies. engines. Here costs should be first extended to manufacturing projects including fabrication of detailed components. For the purpose of comparison and analysis of cost. Standard Man Hours (allowed man hours where SMH are not available) v/s actual hours booked against each work order. marginal costing techniques are adopted in the pricing the supply and services. e. Standards for labor and material should be fixed for deriving variance under each category for control. Material cost as per standard and as per actual. equipment. monthly statements should be prepared in regard to1. However in respect of USSR material where itemized prices are not available. Abid Rizvi 0900122008 62 .
The FPQs for overhaul/repair and price catalogue for spares are approved by GOI.Jobs may be undertaken at prices lower than the cost of sales at full man hour rate.e. At present the FPQ is applicable for repair & overhaul and supply of spares only and for payment of manufacturing programmed e. Dornier. The FPQ’s approved for base year (1995-96) are escalated as per agreed parameters up to 8 years (2003-04) and thereafter fresh base year cost verification is done by Air HQ by considering the actual usage of material for overhaul/repair items in the last 3 years and accordingly material cost firmed up in 2004-05. Under FCQ system HAL has no incentive to bring efficiency in material usage or labor utilization since the entire cost incurred was getting paid by IAF. Air HQ at base year. Hawk etc are fixed as per contract price agreed between HAL and air force and prices offered by HAL are negotiated by the customer. Abid Rizvi 0900122008 63 . cost of tooling. In 1995. Su-30. g. Similarly labor efficiency and yield factor of division are fixed at 79% and 76% respectively. payment to HAL was regulated as per FCQ (Fixed Cost Quotation) of cost plus system. 1995. The base year prices are escalated at agreed escalation percentage and exchange rates given every year by Air HQ for material and inflation indices for Man Hour Rate. labor cost (including wages to direct workers). It is used as a basis for calculation of labor cost. provided the price is not less than the prime cost of jobs. government implemented FPQ (Fixed Price Quotation) system. The prime cost shall comprise of all expenditures directly incurred on the execution of jobs and production process like direct material cost. IJT. MAN HOUR RATE: Man hour rate is defined as the rate of total expenses that the factory bears on direct labor during production process of 1 hour. PRICING POLICY FOLLOWED IN HAL Prior to implementation of revised pricing policy i. LCA. Due to FPQ system HAL has find scope in bringing cost reduction in the form of lesser usage of material or completing the work by putting lesser Man Hours as standard man hours so that labor cost per unit should be decreased which helps in improving the profitability of the division. in which the prices of products and services are fixed by Directorate of Financial Planning.
5 hrs per day X 25 days X 12 months) X (agreed yield percentage + OT hours).e. power.g. and other expenses incurred by the division] Divided by [the number of net available hours of direct worker including over time hours]. fuel. LTB hours Percentage Total input hours Abid Rizvi 0900122008 64 . Yield = Actual output in terms of SMH (Standard Man Hours) i. Net available hours= (No of direct worker X 7.Man hour rate is calculated as follows[Divisional expenses on salaries and other payments made including cost of facilities provided to staff plus all the overheads e.
PROJECT PROFILE Financial Management Financial Management can be defined as:The management of the finances of a business/organization in order to achieve financial objectives Taking a business as the most common structure. the key objectives of financial management would be to: • Create wealth for the business Abid Rizvi 0900122008 65 .
• Generate cash. pay employees and fund sales made on credit. For example it is possible to raise funds from selling new shares. In the short term. borrowing from banks or taking credit from suppliers. and • Provide a return on investment keeping in mind the risks that the business is taking and the resources invested There are three primary elements to the process of financial management: FINANCIAL PLANNING Management need to ensure that sufficient funding is available to meet the needs of the business. funding may be needed to invest in equipment and stocks. Financial control addresses questions such as: • Are assets being used efficiently? • Are the businesses assets secure? •Does management act in the best interest of the shareholders and in business rules? FINANCIAL DECISION MAKING The primary aspects of financial decision making relate to investment. • A key financing decision is whether profits earned by the business should be retained rather than distributed to shareholders via dividends. funding may be needed for significant additions to the productive capacity of the business or to facilitate acquisitions. accordance with Abid Rizvi 0900122008 66 . however there are always financing alternatives that can be considered. financing and dividends: • Investments must be financed in some way. In the medium and long term. If dividends are too high. the business may be starved of funding to reinvest in growing revenues and profits. FINANCIAL CONTROL Financial control is a critically important activity to help the business ensure that said business is meeting its goals.
According to Committee of cost concepts-"Cost is foregoing. incurred or potentially to be incurred to achieve a specific objective. which refers to sacrifice.COST MANAGEMENT (CONTROL AND REDUCTION) COST CONCEPT The term "cost" is synonymously used for the term "expense"." Controlling Cost via Responsibility AccountingTo control cost these fundamentals should be observed- Abid Rizvi 0900122008 67 . measured in monetary terms.
Abid Rizvi 0900122008 68 .• • • Fixing responsibility to control. Limiting the individuals control efforts to his controllable costs Reporting the performance of individual.
CLASSIFICATION OF COSTS Abid Rizvi 0900122008 69 .
Materials. cost of direct labour. ii. Abid Rizvi 0900122008 70 .It is the cost of the entire process of production. For e. Production cost.e. wages paid to indirect labour. iii. Variable cost . cost of materials. cost of direct materials. Semi-variable cost . cost of labour.g. viz. For e. Fixed cost . telephone bill. ii. Classification by Element: The cost is classified into (a) Direct Cost. and (b) Indirect Cost according to elements.Fixed cost is that cost which remains constant at all levels of production.Direct cost is that cost which can be identified with a cost centre or a cost unit.g. electricity bill. Administrative cost. For e.This cost is partly fixed and partly variable in relation to the output.g. Classification By Behavior: i. rent.g. insurance. directing the organization and controlling the operations of an undertaking. Indirect cost . For e.. ii. In other words it is nothing but the cost of manufacture which is incurred up to the stage of primary packing of the product. Direct cost . Labour and Expenses Classification by Function: i. This cost is not related to any other functions like selling and distribution. research and development etc. it increases on increase in production volume and viceversa.g.The cost which varies with the level of production is called variable cost i.Classification by Nature: i.It is the indirect cost pertaining to the administrative function which involves formulation of policies.Cost which cannot be identified with a particular cost centre or cost unit is called indirect costs. For e.
For e. viii. which can be influenced by the action of a specified person in an organization. vi. Development cost is the cost of the process which begins with the implementation of the decision to produce the new product or apply the new method and ends with the commencement of formal production of that product or by that method. v.The cost.Selling cost represents the indirect cost which is incurred for (a) seeking to create and stimulate demand (b) securing orders. Distribution cost .The cost which cannot be influenced by the action of the person heading the responsibility centre is called uncontrollable cost. Conversion cost . Costs that they are able to control are called controllable costs and include material. ii. methods and applications. before the commencement of formal production. Controllable cost .iii. The term ‘direct’ indicates that the elements of cost are traceable to a particular unit of output. It comprises of direct labour cost. all the allocated costs and the fixed costs. In a business organization.It is that part of the development cost which is incurred for the purpose of a trial run. Uncontrollable cost . heads of each responsibility centre are responsible to control costs.It is the cost incurred for converting the raw material into finished product. labour and direct expenses. Classification By Controllability: i. for re-use.g.Prime cost is the aggregate of direct material cost. direct labour cost and direct expenses. Pre-production cost . vii. Prime cost . if any available. Selling cost . Research cost is the cost of researching for new products. direct expenses and factory overheads. iv. R&D cost . is known as controllable cost. Abid Rizvi 0900122008 71 .It is the cost of the sequence of operations which begins with making the packed product available for dispatch and ends with making the reconditioned returned empty package."Research Cost" and "Development cost" are two different types of costs.
under the conditions in which that level of output is normally attained. Classification by Time when Computed: • Sunk cost -Historical cost which is incurred in the past is known as sunk cost. Normal cost is charged to the respective product / process. In the case of a decision relating to the replacement of a machine. Abid Rizvi 0900122008 72 . It is based on past data adjusted to anticipated future changes. the written down value of the existing machine is a sunk cost and hence irrelevant to decision making. This cost is not relevant in decision making in the current period. ii. For e.It is the cost which is normally incurred at a given level of output.Classification by Normality: i. Abnormal cost – It is the cost which is not normally incurred at a given level of output in the conditions in which that level of output is normally attained. • Estimated cost -It is an approximate assessment of what the cost will be.g. Normal cost .
ELEMENTS OF COST The following diagram depicts the various elements of cost: Abid Rizvi 0900122008 73 .
g. Coconuts in case of coconut oil or wood in a wooden cupboard. Labour Cost: Direct Labour . Hiring charges for a machine specifically hired for a particular process. Indirect Materials . Expenses: Direct Expenses .g. Abid Rizvi 0900122008 74 . For e.Materials which are present in the finished product or can be identified in the finished product are called direct materials. Stores. For e. process or job is called direct labour. It is the labour utilized in converting raw materials into finished products. royalty. oil. cotton wool etc. Indirect Labour . For e. They are also called "chargeable expenses". process or job is known as direct expenses. process or job is called indirect labour.Indirect materials are those materials which do not normally form part of the finished products or which cannot be directly traced to the finished product. Labour employed in the crushing department of an oil mill. excise duty. Indirect labour cost is apportioned to cost units or cost centres.Labour which cannot be identified with a particular product.g.g.Labour which can be attributed wholly to a particular product.g. Maintenance workers. grease. For e. For e.Material Cost: Direct Materials .Expenses incurred (except direct materials and direct labour) specifically for a product.
Expenses incurred other than direct expenses are called indirect expenses. general repairs. Factory rent & insurance. indirect labour and indirect expenses. Cost control is keeping expenditures within prescribed limit. Timely cost control reports (responsibility reporting) describing variance between budgets and standards and actual performance. i.. Abid Rizvi 0900122008 75 .g. Formulation of corrective measures to eliminate and reduce unfavorable variances. A systematic and fair plan of motivation to encourage workers to accomplish budgetary goals. power. incurrence. For e. iii. Follow-up to ensure that corrective measures are being effectively applied.Indirect Expenses . ii. Overheads: Overheads is the sum total of indirect materials. Production / Works overheads Administrative overheads Selling overheads COST CONTROL Cost control can be defined as comparative analysis of actual costs with appropriate standards or budgets to facilitate performance evaluation and formulation of corrective measures. It aims at accomplishing conformity between actual result and standards or budgets. Cost control has following features: Creation of responsibility centre with defined authority and responsibility for cost Formulation of standards and budgets that incorporate objectives and goals to be achieved. Functionally overheads can be classified as.
costs are optimized before they are incurred. 4. 3. For cost control we should: 1. It should be higher than the standard cost. sales. e) Taking corrective action. raw material and supplies. Thus its main objective is the performance of same job at a lower cost or better performance for the same cost. sometimes it may be lower. administration and research and development. Identify major type of include – staff cost. Establish realistic budgeted cost based on the actual experience. Record actual cost and compare them with the standard and budgeted cost.Cost control does not necessarily mean reducing the cost but its aim is to have the maximum utility of the cost incurred. capital expenditure etc. 2. Periodically review. d) Investigating the variances. b) Ascertaining actual performance. Choose the cost to focus on first : Costs that may offer easy savings. Start from the business objective. Cost control process involves: a) Setting targets and standards. 2. financing. Large costs that you may be able to change in short term. In cost control. Identify major cost centre – production. Systematic Cost Control: 1. 3. 2. c) Comparing actual performance with targets. Costs that are higher than the budgeted cost indicate opportunities to reduce cost in short term. utility bills for energy and water. Abid Rizvi 0900122008 76 . Establish standard costs for achieving your objectives.
Form strategic buying alliance in businesses in your area or trade to buy large volume. Crack down excessive costs. Find ways to make production more efficient : Trim back product range and increase production runs. Checking supplier invoices may reveal overcharging (e. double billing. Agree long-term contracts or guarantee minimum annual purchase volumes in return for lower prices. Make more use of technology. Built personal relationship with supplier to encourage preferential treatment. 2. Use part-time employees instead of full time. Reduce your payroll cost : Outsource non-core activities. Simplify purchasing procedure to reduce your cost and those of your suppliers. Eliminate unnecessary costs : Get rid of overcapacity. 3. Improve your purchasing : Switch to cheaper supplier or negotiate for price reductions or higher discount for early payments. Root out inefficiency.g. Abid Rizvi 0900122008 77 . Scrap useless processes. Use standard components to lower design. missing discounts). Opportunities: 1. Cut out blatant waste. 2. 2. purchasing and manufacturing cost. 3. Redesign processes to cut out activities that waste time.Easy Savings: 1.
CRI and quality control members must come to the shop to check and encourage employees. Methods of Cost Control: Cost control involves control of material as well as labor overheads. c. to reduce excess time wasted in taken tools from the stores. Effective Cost Control: 1. Procedure for material procurement and use.g. instead of overdrafts. Effective environment. Full utilization of efficiency. 2. medical. Cost of material in inventory at the end of a period. 7. ATM. 3. 4. Improve quality control to cut rejection rates and reworking costs. 4. Extra facilities must be provided (e. 6. 5. Low rejection – trained person. Stores situated in nearby area. Material control Methods: Material management includesa. tooling and healthy environment. spoiled goods and defective work. Material costing methods. d. canteen etc. Costing procedure for scrap. Maintenance workers as well as supervisors should be available nearby. Cut back on working capital through JIT (Just in Time) purchasing and better credit control to suppliers. Abid Rizvi 0900122008 78 .). Review the Finances : Finance fixed requirements using loans. b. Change processes to minimize wastage of raw material and energy.
FLOWCHART FOR PROCUREMENT OF MATERIAL Abid Rizvi 0900122008 79 .
Inventory planning and control method should have one goal that might be expressed in two waysAbid Rizvi 0900122008 80 .
The cost of inadequate carrying. overtime and Extra setup time. 2. d. b. Warehousing and storage. Taxes and insurance. b. 2. Determination of how much and when to buy involves two conflicting type of costsa. Handling.1. Deterioration and shrinkage of stocks. To maximize profit within specified time and resource allocations. Material planning deals with two fundamental factors1. handling and transportation costs. c. Forecast demand for next month. e. Determine acquisition lead time. High price (small order quantity). Frequent stock outs causing disruption of production schedule. f. Material Requirement Planning: To plan manufacturing requirements. To minimize total cost. Abid Rizvi 0900122008 81 . Establish quantity on hand. Obsolescence of stocks. The quantity to purchase. or year. Lost sales and loss of customer. Place units on order. Cost of holding or carrying Interest or investigation of working capital. every stock item or class of items should be analyzed periodically toa. quarter. Plan usage during the lead time. Determine reserve or safety stock requirements. The time to purchase-or simply how much and when to buy. Cost of inadequate carrying Extra purchasing. The cost of holding or carrying.
Therefore we must balance between two factors1.ECONOMIC ORDER QUANTITY Economic order quantity is the amount of inventory to be ordered in one time for the purpose of minimizing annual inventory costs. and cost per order. 2. but this saving may be more than offset by the cost of carrying material in stock for longer period of time. Time needed for delivery. Determining order point would be relatively simple if lead time. hence companies use order-point calculations to calculate economic order quantities.the interval between placing an order and having the material on the factory floor ready for production – and the Abid Rizvi 0900122008 82 . inventory carrying cost. The cost of acquiring (ordering) material. 2. The problem of when to order is controlled by three factors1. unit price. If purchases are made in small quantities. 3. How to compute Economic Order Quantity: However there are tabular and graphic methods for determining economic order quantity but they are very lengthy. Safety stock. frequent orders with correspondingly high ordering cost will result. Buying in larger quantities may decrease the unit cost of acquisition. Rate of inventory usage. If the company buys in large quantity. However. the time to order is also important. The cost of possessing (carrying) material. the cost of holding or carrying the inventory is high because of high investment. differential calculus makes it possible to compute economic order quantity using the formulaEconomic order quantity = √ (2 × Annual required units × Cost per order) ⁄ (Cost per unit of material × carrying cost percentage) DETERMINING TIME TO ORDER: The economic order formula answers quite satisfactory the quantity problem of inventory control. With information such as quantity required.
MHLT = Maximum historical lead time. The Safety Stock Level (SSL) can be calculated using following formula- Maximum SSL = MHDU x (MHLT . 2. The theory behind this safety stock calculation is that you will have just enough inventories in stock if two "catastrophic" events happen simultaneously: 1. SSL=Safety Stock Level. and On those days that your supplier is late.ALT) Whereas. ALT = Average lead time. For most stock items there is a variation in either or both of these factors.usage pattern for a given item were definitely predictable. Abid Rizvi 0900122008 83 . MHDU = Maximum historical daily usage. your company uses the most inventories it has ever used. Your supplier's lead time slips to the longest it's ever been with that supplier.
Following factors are important in deciding location of stores- Material should be stored according to1. b.STORES ORGANISATION Efficient storing after efficient purchasing is another important step in material control system. 1. The production area where item is used. Factors involved in establishing stores organization area. Payroll Department. 3. Time keeping Department. stock ledger cards. Size of unit. The frequency of their usage. bin cards etc. Distance from user department. Stores should maintain all documents like material requisition form. LABOUR CONTROL Effective control over labor is very important as it is very important part of total cost. Nature. material procurement form. Storage Layout: Storage layout should be carefully designed for saving of costs. 2. Account number specifically given to different type of material. 2. Location of stores: Location of store should be carefully planned so as to give Nature of material. Unit of material used. 3. 4. size and shape of item. maximum efficiency. 5. Spacing. 6. 4. Security requirements. The following departments should contribute for labor control Personnel Department. Cost Accounting Department. Abid Rizvi 0900122008 84 .
bonus plan. job card etc. job docket. It can control labor cost by maintaining sufficient wage system. For this employees record card is maintained which is known as punch card with every employee’s PB (Permanent batch) number. job ticket. Payroll department is an intermediate function between time keeping and cost analysis department. efficiency plan.The main function of personnel department is to provide efficient labor force. Time keeping department prepare record for time spent by each employee for labor costing and control process. Various documents used by department include clock card for attendance record. Cost accounting department helps in implementing incentive wage plans. Personnel manager is responsible to maintain sufficient manpower so that there will be no surplus as well as deficit of efficient manpower. Abid Rizvi 0900122008 85 . budgeted expenditure plans to control cost at all overheads.
3. For this reason changes in costs are expected. Standards are taken to be the desired state of efficiency. Is generally effective only when some form of standards can be set. In other words. Unit cost reduction by expenditure reduction in respect of a given volume of output . Existing costs. are challenged in an effort to reduce them. including standards. Can be effective for all types of conditions. Concerned with adhering as closely as possible to the set standards. 3. or rate of output for a given expenditure). Unit cost reduction by the increase in productivity (i. 4. IMPORTANCE OF COST REDUCTION Abid Rizvi 0900122008 86 . and / or 2. They are viewed with suspicion. It is not limited to where standard costing can apply. 2. cost reduction is the process whereby permanent savings are made without any reduction in the quality and / or usefulness of the products. Standards are regarded as yardsticks which can be improved upon. Difference between cost reduction and cost control: Cost Control 1.COST REDUCTION Cost reduction embraces: 1. Cost Reduction 1. Recognizes that the operations of a company are dynamic in nature. Concerned with genuine cost savings. an increase in output. yield. 2.e. 4. Attempts to be guided by what is the lowest cost for the conditions which prevail.
kilowatt hours of electric energy. Once costs are saved they should be controlled at the new level until some method of reducing them still further is found. Not only are materials wasted. 3. 2. Cost reduction of a permanent nature. training and inclination. In fact it is exceptional to find an industrial plant where a reduction of utilities consumed per unit of production cannot be made. Without cost reduction a business is unlikely to survive. inefficient management and dispute between labor and management. In effect. The first basic cost reduction should be the elimination of waste all along the line from source to ultimate consumption or use. without any reduction in quality or usefulness.1. 4. AREAS OF COST REDUCTION 1. Finally. failure to plan and execute the job properly the first time and bureaucracy and pressure groups. cost reduction is profit earning: by reducing the cost side of the cost / revenue equation it is possible to increase the profit. there is the satisfaction of the consumer. products will not sell. Competition from within the economy affects the price that can be charged. A business has to deal with two aspects – cost incurred and revenue received. In addition. but countless man-hours are lost for a variety of reasons. etc. 3. In addition to raw material and man-hour losses. per unit of production of goods and services. weights of raw material. is the only solution which is unlikely to have adverse effects. 4. there is the question of dealing with pay claims which increase costs and reduce profits unless prices are increased. 2.. The real success of a business depends primarily on the efficient use of those basic cost elements: by basic costs are meant the man-hours of labor. The difference between the two is profit out of which the following must be satisfied : • • Shareholder Expansion of the business 2. Among these are poor personnel relations and failure to make the most of the individual employee’s talents. excessive use of utilities frequently occurs. accidents and illness. If too high. Abid Rizvi 0900122008 87 .
labor cost with mechanization can be almost brought down to 5% to 10%. Hence there is maximum scope for cost reduction in this area. Even though material cost reduction was presented as the most potential area for cost reduction due to being a major part of the cost in manufacturing industries. While material cost could be reduced from 60% to 50% or even 40%. The above example show that the direct material cost is to a great extent enhanced by: i. Abid Rizvi 0900122008 88 . In a rubber works. There are many ways in which industrial engineering know-how and procedures can be applied to basic cost reduction. Wrong selection of raw material in terms of type or of quality.5. iii. Defective design of the product and its components. ii. For example: 1. MATERIAL COST REDUCTION In a manufacturing industry. Poor manufacturing methods leading to excessive scrap and rejection. manufacturing caps for penicillin vials. Hence the direct material cost of this product for this factory is 60% higher than what it ought to be. A manufacturer of electronic equipment in Bombay found by investigation that he could obtain an 18. material takes a major share (50 to 70%) of the cost. labor cost control has received more attention due to its easiness to handle. the rejection for various reasons was found to be as much as 38%. Another reason for its receiving favorable consideration from management and consultants is the extent to which reduction is possible.8% saving in the component cost of unitized Gamma Ray Spectrometer by eliminating a few of the components and substituting cheaper ones for others without affecting the quality of the instrument. 2. LABOR COST REDUCTION 1.
finished goods. iii. The solution to a reduction of labor cost lies in the elimination of the factors enumerated before as leading to poor utilization of manpower. tools and spare parts. poor inventory policy leading to excessive stocks of raw material. Direct labor cost normally shown on the cost sheet includes true labor cost (payment for the time booked) which cannot be reduced and a major portion of costs added due to various factors. such as i. This may be attributed to factors like poor planning. It is regrettably true that management’s concern for efficiency in manufacture often appears to be continued to the more obvious factors like production methods. lack of standardization and poor organization. ii. 2. To summarize. It is of far greater significance from the point of view of cost reduction by virtue of the fact that stocks can give rise to the following sources of cost: i. iii. The importance of stock control arises from the demand which investment in stocks places upon the available liquid capital. iv. Overhead cost in almost every industry is excessive. Poor planning adds up unnecessary overhead expenses also in addition to direct material and labor costs. 3. labor productivity can be enhanced and labor cost consequently reduced by: i. ii. factory layout and operator efficiency. Abid Rizvi 0900122008 Storage cost 89 . Poor planning Poor manning Poor working methods Lack of motivation 3.2. iv. while other potential sources of considerable savings go untapped. Reducing the work content of jobs Providing adequate work Recognizing extra effort Worker working OVERHEADS 1.
iii. lest the benefits achieved by improved performance may easily be dissipated. Waste of manpower 5. Waste of space 7. iv. and a programmed once commenced should be coordinated and controlled. Establish company objectives and targets 2. Waste of material 2. The effects upon costs and the general manufacturing efficiency of a wide diversity of products. equipment and methods are sufficiently important to warrant special consideration of this factor. Waste can be made in following forms: 1. 4. v. components. Finally. vii. The wheels of industry turn to the orders of many persons having various degrees of authority and the contribution that a properly defined chain of responsibility and channels of communication can make towards a reduction of costs is difficult to measure. vi. Waste of ideas Planning overhead cost control: There are six basic steps through which overhead cost can be controlled: 1. 3. Handling cost Stock-taking and other clerical expenses Deterioration and its prevention Pilferage Insurance and stock room security Obsolescence 2.ii. cost reduction and control is a continuous process. Waste of supplies 3. Develop detailed programmers Abid Rizvi 0900122008 90 . Waste of money 6. Waste of customers 8. Waste of machinery 4.
they must have patience because ideas create more ideas. and to think of new methods.3. 4. Establish department standards of performance to match programmers 5. At the same time. 5. A cost reduction programmed must encompass all employees. There is no single way to fulfill the needs of obtaining cost reduction. It has to be a combination of many ways. There must be constant effort to improve. and seize every opportunity to bring the subject to the attention of all employees. but must be worked on constantly. Top management must have interest. 6. the more opportunity there is to get worthwhile results. Tools and Techniques of Cost Reduction Abid Rizvi 0900122008 91 . b) Get the facts by breaking down the operation into detailed steps. It has to be a continuous operation. 3. It cannot be started and stopped at will. 2. Report on performance In some organization a systematic approach is followed so that methods can be improved in the department. e) Install the new met Below mentioned are the points essential in the organization of cost reduction: 1. One person has to be responsible. Develop a system of budgets 6. consideration and a firm belief that cost reduction is worthwhile and necessary. cooperation. and to increase and create greater interest on the part of the employees. and every idea does not produce the desired result. Organize resources to meet the objectives 4. That person must think constantly in terms of cost reduction. c) Analyze the facts by questioning every step.each person that is a part of the organization. But the more ideas there are. d) Develop a new and improved method. It is a simple five step plan to: a) Select the operation for improvement. 7. All possible means must be used to make all employees cost conscious and cognizant of the need for cost awareness. Cost reduction ideas must always be “glamorized” in order to make them appear new and different.
the main function is production of accessories of aircrafts. Operations study: In HAL process layout is prepared to study various operations included in completion of a job. In HAL various methods are implemented for value analysis. After that they sign MAS (Mutually agreed schedule) for all IDTO’s (Inter divisional transaction orders). All divisions mutually agree to set their targets and to fulfill them. For this planning department meet with all divisions and ask for their production targets. Various methods for production of job are studied minutely and the method which is least time consuming and having cost conciseness is accepted. job docket and job ticket in which standard time for completion of each and every operation is fixed and Abid Rizvi 0900122008 92 . It helps in improving quality of product. They are : VOP (Value of production) = Total sales ± Changes in WIP / SIT Value added = VOP – Raw material consumed Capital employed = Working capital + Net block of fixed assets + Special tools Working capital = Current assets – Current liabilities SIT = Opening balance + Dispatch – Fitment 2. 3. For planning the production process production budget is prepared in advance. After this planning department send this to budget department for production budget. Production planning: In HAL Lucknow.1. Work study: Work study includes calculation of standard costs and batch costs and then prepares FPQ (Fixed price quotation) for fixing prices of every product. Value analysis: Value analysis is a technique applied to analyze all aspects of an existing product to determine the minimum cost necessary for specific functional requirement. This is done by planning department. For this every employee got a job card. 4. 5. Organization and method study: In HAL method study is implemented during production process.
b) Don’t have required resources for the work. The objectives of TQM are : i. Quality control: Quality is the strength of HAL. For zero defects all these factors are removed. iv.it is inspected periodically. Abid Rizvi 0900122008 93 . The company aim at best quality product. The organization quality policy is producing “1st Time Correct “. ii. and to make their products and services of international level. iii. Every employee is aware of all possible improvements in his work area. so he should give suggestions to the management for this improvement. stationary etc. Zero defect Continuous improvement(Kaizen) Wastage removal(Lean management) Customer satisfaction Zero defect: Organization found that there are three main factors which cause defect in the production: a) Don’t have full knowledge of job. Continuous Improvement: Every employee of the organization should aim at maintaining the continuous improvement in their work. 6. They should aim to complete their production and services with low time and cost and that too with good quality. Wastage Removal: Employee should aim to remove all those wastages that cause cost increment like water. c) Don’t concentrate on the work. For this TQM is applied in whole organization. so that standard time should be maintained at relevant cost so that cost and time should be controlled. electricity. so as to make the organization more economic.
Self Discipline. 2. Abid Rizvi 0900122008 94 . Lean Tools: Waste elimination. 5. Create flow. The organization should find their customer's requirements and to fulfill them without any defect.PROFIT= PRICE – COST. "Lean is a term to describe a system that produces1. Customer Satisfaction: The basis of every organization is their customers. 3. Simplification: In HAL for this purpose lean management is applied for all production processes.PRICE=COST + PROFIT But in present scenario it changed to. Continuous Improvement. Do the 5S. 2. Reduction in set up time. Standardization: In HAL standards are fixed for time consumption as well as for cost incurred. Put in visual control. For time standards the standard time is fixed for every process of job and for cost standards standard cost and FPQ are defined in advance to control time and cost. at low cost and to deliver them within time limit. Job standardization. What customer wants? When they want it? with minimum wastages. The historic approach of the organization was. 4. What Is 5S? 1. 3. Simplify. whether internal or external. 2. Shine Standardize. Sort.
Abid Rizvi 0900122008 95 . Untapped Resources. Transportation. Defects. Misused Resources.KAIZEN: Achieving continuous improvement in performance by identification and elimination of all wastage relentlessly. Waiting. There are 8 wastes which the organization should keep in mind Over Production and Over Processing. Continuous Improvement. Motion. Value work is that customer is willing to pay for. Present capacity includes value work as well as wastes. Inventory. and waste is adding cost but not the value.
Research Methodology:Types of Research: - Descriptive research design for the final survey. •
Source of Data: • Primary Data:-
The primary data has been collected through questionnaire, personal interview and departmental analysis. • • • • • • Secondary Data:Website of HAL. Company monthly journals. Training manual on cost reduction provided by HAL. Accounting manual and Budget manual provided by HAL. Pricing policy of HAL.
Sample Design: - Probability sampling design. Sample Size: - 10 people.
Recommendation: There should be facility of intranet so fax and such other things must be done through it that can reduce time and money. For attendance finger print system should be adopted so that actual person’s attendance can be mentioned. The time delay between rising of purchase order and preparation of RDR should be reduced. Wages to direct workers should be given through piece rate system.
Abid Rizvi 0900122008
Efficiency of indirect workers should be measured so that slackness can be sorted out.
TOOLS AND TECHNIQUES OF DATA ANALYSIS DATA ANALYSIS
The introduction of an online website for any company of today’s world is a boon. Cause growth and expansion will be a promising factor as the internet makes the world a smaller place to do business. This was introduced in the year in the year 2000 by HAL.
Table showing the improvement of the division on introduction of a website: Feedback Yes No Percentage 97% 3%
Management level Labor level
Bar graph showing the improvement of the division on introduction of the website:
ANALYSIS: 97% of the workers / employees are aware that the website has helped the division to improve in its company’s dealings and has helped the company to progress in the new economy of today’s world.
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INFERENCES: The remaining 3% are those workers who are at the lowest cadre of work who do not have sufficient knowledge about the website of the organization.
The knowledge about the website should be fair among the people who work in the organization to conclude that the workers are aware as to where the company is heading to in the 21st century. HAL being a premier defense industry in the field of aviation has to always keep up with the other nations and therefore adopt new technology.
Table showing the awareness level of the web by the workers in the organization: Response / Levels Aware / Yes Not aware / No Management level 98% 2% Labor level 87% 13%
ANALYSIS: Most of the workers in the organization are aware about the website at both levels and know how it has improved the division, as the customers get to know more about the division’s products and services worldwide which improves the profitability and also helps the division to understand its customer’s background to enhance the business. INFERENCES: Only around 2% at management level and 13% at labor level are not aware of the website as they have poor knowledge and belong to the lowest cadre. Abid Rizvi 0900122008 98
clients and vendors to have a continuous touch with the company. Coast Guard and Boarder Security who often contact with the company over the net. Website of the company helps the customers to keep in touch with the company through the e-mail provided by the websites for various divisions. This helps the customers.3. Indian Army. INFERENCES: A very small percentage of the remaining customers such as the corporate customers and civil customers including international customers contact with the company through net. Abid Rizvi 0900122008 99 . Table representing the customers who respond to the website: Customers Defense customers Foreign customers Corporate customers Civil customers Percentage 85% 45% 6% 5% ANALYSIS: The major customers of HAL are the defense customers such as the Indian Air force. Indian Navy.
Abid Rizvi 0900122008 100 . doubt or clarification but since HAL is defense oriented. As most of the customers contact the company through other means. It is the same for HAL accessories division too. Table representing the number of customers who respond voluntarily to the website: Options Most of them All Few Very few Response in percentage 30% 40% 90% 70% ANALYSIS: From the above graph we can see that only few of the customers respond to the website voluntarily.4. INFERENCES: We see that almost all customers somehow come into contact with the company for some enquiry. so mostly the customers are from defense. so that the customers can have a continuous touch with the company. The main intension of putting up a website by any company is to get prospective customers and induce them to make contract with the company.
and Indian Army etc. The table below shows the number of customers who placed order with the company: Table showing customers who placed order through net: Customers who contact Defense customers State government Corporate customers Civil customers Percentage 70% 20% 7% 3% ANALYSIS: From the above data we can conclude that most of the customers who placed order with the company through net are the defense customers in comparison to others. The main objective of any company is to get enough customers to place an order or contract with the company. Indian Navy.5. therefore the company focus more on the defense customers such as Indian Air Force. And the best way to achieve this is by obtaining many Abid Rizvi 0900122008 101 . In today’s economy we see that not only multinational companies are trying to globalize but public sectors are also trying to globalize. although few of the customers come into contact with the company through the net not all might be willing to place an order or make contract with the company. INFERENCES: The customers belonging to the other group such as the civil and corporate customers are very limited. 6.
The table below shows the number of international customers the division is able to get through the net: Table representing international customers over the web: Customers Many Few Very few In percentage 10% 20% 5% ANALYSIS: Few international customers are interested in making contact with the company. From this we can conclude that HAL has opportunities of expansion in international market. Today’s business have made the “Customer the King” and have decided to give the customers what they want through customization and customerization. The table below shows the number of customers who seek such benefits: Table representing importance of customization to customers: Abid Rizvi 0900122008 102 . 6. the company gets help in improving the technology for production.international customers. INFERENCES: When international customers and corporate come into contact.
7. As the world is getting more advanced thus customization becomes more important but it is not much in the case of civil or corporate customers. HAL is one of the leading manufacturers of engines and its accessories. Sales are a very important aspect for any company and to achieve maximum sales is a goal of all companies. The table below shows how HAL is able to get a sufficient amount of sales after the internet came into existence: Abid Rizvi 0900122008 103 .Feedback Very important Important To some extent Not important Response 90% 80% 50% 5% ANALYSIS: Since engines are one of the most advanced machines that help in the flying of air vehicles and customers always seek sophistication in their engines. INFERENCES: Mostly the defense customers have an in-depth knowledge and thus seek sophistication in the aircrafts. Therefore most of them seek customization.
15 ANALYSIS: From the above graph we can see that the sales of the company have been increasing moderately in the past two years which is mainly because of the use of web. Therefore we can expect sales to increase in the future. The table below shows the profit of HAL in past years: Table showing the profits of the division for last 4 years: Years Abid Rizvi 0900122008 Profit (in crores) 104 . 8.14 328.5 415. expansion and development in all directions.Table showing the sales of the division for the past 4 years: Years 2001-2002 2002-2003 2003-2004 2004-2005 Sales (in crores) 338.14 424. Therefore it is an important factor for public sector also such as HAL which is a nonprofit organization. INFERENCES: Since the web was introduced in the division only in the year 2000 and the division have taken time to make complete use of it in the recent years. Profit of any company determines its growth.
As technology has grown to such an extent that the world is no longer a huge place to trade. will in INFERENCES: As mentioned earlier most of its customers are defense customers and international customers who contact through net and a very few of them are civil and corporate customers.5 65. Table showing new prospective customers over net: Customers Civil customers Corporate customers State government Defense customers Percentage 10% 15% 20% 100% Abid Rizvi 0900122008 105 . In order to grow it is necessary for every company that it must be able to find new customers through new means and mode. 9. so that profits in fluctuating.9 62. cannot interpret internet company profits or not.66 Bar graph showing the profits of the division nonprofit we can see each year are Therefore we whether help the making more Profits(in crores ) ANALYSIS: 80 60 40 20 0 Y ears Profit As HAL is a organization.55 51. With the use of internet it is possible for all companies to find new prospective customers.2001-2002 2002-2003 2003-2004 2004-2005 46.
As it is basically a defense oriented company. 10. The table below shows the drawbacks in CRM over the web: Table showing reasons for drawbacks in CRM over web: Reasons for drawbacks Delay in reply Negligence Failure of system Percentage of effect 20% 30% 40% Abid Rizvi 0900122008 106 . Customer relation is very important today. INFERENCES: Although the company has limited range of new customers but it has scope to get customers at international level also. It is more effective only through the World Wide Web and although it has so many plus points but there are certain drawbacks in it.ANALYSIS: From the above diagram we can conclude that the new customers made by the company in each segment are very less. so almost all the defense customers have dealings with the company.
Other means 10% ANALYSIS: Most of the reasons for the drawback of CRM are due to system failure and it can be taken care of by providing for backup systems and better management in replying to customers. INFERENCES: CRM is gaining its importance in the current scenario and if more importance is given it will prove more successful for the organization. FINDINGS. SUGGESTIONS AND CONCLUSION FINDINGS In HAL cost reduction and cost control is done in following ways: Abid Rizvi 0900122008 107 .
Abid Rizvi 0900122008 108 . so that there would be no wastage and cost can be reduced. due to which we can identify that the job belongs to which batch.e. • Method study is implemented during production process and the method which is less time consuming and having less cost is accepted. outsourcing is done so that cost can be reduced and controlled. For this TQM is applied in whole organization so that cost would be controlled. • Quality is the strength of HAL. component costing is used for calculating the cost of each component. standard cost and fixed price quotation (FPQ) are defined in advance to control time and cost. the standard time is fixed for every process of job and for cost standards. The company aims at best quality product at lowest price. • In HAL standards are fixed for time consumption and also for cost incurred. so that cost and time can be reduced and controlled. • In costing section. By applying this method the total cost can be reduced and controlled. Under this technique. Due to which standard time for completion of operation is fixed and inspected periodically. • Efficiency of employees is approximately 100% due to which there is no wastage and cost is reduced. L1 i. all the jobs are classified into different categories and are codified. • It also implements the technique of classification and codification for cost reduction and control. For time standards.e. lowest price is considered so that total cost of production would be reduced and controlled.• In finance section. • As the rate of machine hour rate (MHR) is very high in HAL so the work is done on contract basis i. • Minimum inventory is kept in stores. • Process layout is used for the study of various operations included in completion of job.
SUGGESTIONS • There should be facility of intranet so fax and such other things must be done through it that can reduce time and money. Abid Rizvi 0900122008 109 . • It also aim at producing all accessories as first time correct and with Zero error so that the cost incurred in rejection and rework processes can be controlled. It has also implemented lean management and various tools like KAIZEN for wastage removal so as to reduce the extra cost incurred.• • It is also implementing methods of 5S to control and maintain cost effectiveness. • For attendance finger print system should be adopted so that actual person’s attendance can be mentioned.
• The company should give some stipend to Industry guide for summer training due to which they will take more interest in providing guidance. development and manufacture of aircrafts.• The time delay between rising of purchase order and preparation of RDR should be reduced. • • • Wages to direct workers should be given through piece rate system. • Workers who have talent and compatible with office grade but restricted to work only at non-supervisory position. • Officers should be promoted only on the basis of performance and not on the basis of number of years worked. • Profit calculation by project cell for project evaluation is different from costing section. the policy should be such so that grade promotion could be possible. Efficiency of indirect workers should be measured so that slackness can be sorted out. In this way project evaluation is not proper. HAL with its wide spectrum of expertise in design. So it must frame its cost-benefit evaluation and focus on only licensing fee and other DRE and framing of analysis should be done as per actual recoverable profit percentage. Employees should be included in brainstorming and also should be given liberty and non-monetary incentives as appreciation. CONCLUSION HAL is one of the largest PSU under the department of defense production. Abid Rizvi 0900122008 110 . GOI and is a “NAVRATNA” company ranked 34th in the list of world’s top 100 defense companies.
As herein. In the organization.helicopters. ANNEXURE Questionnaire: Name: Designation: Section / Department: Abid Rizvi 0900122008 111 . cost of inventory as well as labor is controlled very well by implementing ABC analysis but there is also some scope for cost reduction by reducing number of casuals to reduce labor cost and by implementing EOQ (Economic Order Quantity) technique to control material cost. the projects and items need huge investments than any other organization and confidential factor is also there too much extent but as much information is extracted shows that cost control is being performed quite good that’s why it is in so much profit. accessories and avionics has emerged as major aeronautical complex in Asia. Although for the organization’s betterment its executives are working hard and trying to serve in the best possible manner with their colleagues and they all are very qualified and experienced so organization must extract optimum from them. engines.
Describe the major activities being carried out at the accessories division? 2. Is there a component costing system in existence? 4. Describe the procedure of processing the cost ledger? 7.Cost accunting Jawaharlal – Cost accounting Abid Rizvi 0900122008 112 . How are the work order issued? BIBLIOGRAPHY During the preparation of project I took the help of various sources which are as follows: Books: • • M. Describe the work order structure? 11. Describe the current practice followed in calculating the cost for various departments? 8. On what basis is the production work undertaken? 5. What is your comment on the present budgeting system? 6. Batch costing and job costing is carried out for which of these activities? 3.1. Agarwal.L. Is the current computer system capable of tracing the work flow? 10. Describe the steps taken to improve the international relationship with foreign companies like Turbomeca and Rolls-Royce? 9.
org Abid Rizvi 0900122008 113 .hal-india.Journals: Accounting manual Budget manual Training manual on cost reduction Company monthly journals Internet: www.wikipedia.com www.
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