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COSTING SYSTEM OF TOYOTA

ACKNOWLEDGMENT
First of all we are thankful to Almighty Allah who in spite of all our weaknesses enabled us to prepare this research report well in time. We thankful to Mr. Ali Raza (Finance Manger TOYOTA) We are also highly indebted to our teacher "Prof.

Syed Zia-ul-Hassan Shamsi whose timely help


and guidance paved a way for us to complete a report on such a critical and vast topic. We are also thankful

to all those personalities who help a lot in order to complete this task.

BUSINESS PROFILE
THE COMPANY HISTORY

Replica of the Toyota Model AA, the first production model of Toyota in 1936. In 1933, Toyoda Automatic Loom Works created a new division devoted to the production of automobiles under the direction of the founder's son, Kiichiro Toyoda. Kiichiro Toyoda had traveled to Europe and the United States in 1929 to investigate

automobile production and had begun researching gasolinepowered engines in 1930. Toyota began to expand in the 1960s with a new research and development facility, a presence in Thailand was established, the 10 millionth model was produced, a Deming Prize and partnerships with Hino Motors and Daihatsu were also established. The first Toyota built outside Japan was in April 1963, at Port Melbourne in Australia. By the end of the decade, Toyota had established a worldwide presence, as the company had exported its one-millionth unit. With high gas prices and a weak US economy in the summer of 2008, Toyota reported a double-digit decline in sales for the month of June, similar to figures reported by the Detroit Big Three.

Mission & Vision


"IMCs Vision is to be the most respected and successful enterprise, delighting customers with a wide range of products and solutions in the automobile industry with the best people and the best technology".
o o o o o o

The most respected. The most successful. Delighting customers. Wide range of products. The best people. The best technology.

Mission of Toyota is to provide safe & sound journey. Toyota is developing various new technologies from the perspective of energy saving and diversifying energy sources. Environment has been first and most important issue in priorities of Toyota and working toward creating a prosperous society and clean world.

INTRODUCTION

For my project I have chosen a Toyota Motor Corporation (TMC) an international automobile manufacturer. In addition, Toyota provides retail and wholesale financing, retail leasing and certain other financial services primarily to its dealers and their customers related to vehicles manufactured by Toyota. The major portions of Toyota's operations on a worldwide basis are derived from the Automotive and Financial Services business segments. The Company also has an All Other segment, which includes its non-automotive business activities. The most significant of Toyota's other operations are its information technology (IT)-related businesses and pre-fabricated housing. The company was established in 1937. The Toyota group manufactures automobiles in 25 countries and regions throughout the world and its vehicles are sold in more than 160 countries and regions under the Toyota, Lexus, Daihatsu, and Hino brand. Recently the company created a new brand Scion

Toyota Today
200,000 associates working in 140 nations Build vehicles in two dozen countries 4th largest auto manufacturer in U.S.

Toyota Motor Manufacturing North America builds two-thirds of the vehicles we sell.

Year 2007 2007 2007

Model Toyota Prius Toyota Camry Toyota Highlander

Prices $22,175-$23,070 $23,580 to $26200

City (mpg) 60

Hwy (mpg) 51 38 Not found

CR 9.7 9.3 9.3

40 Not $32,490 to $36,550 found

2007 2007

Lexus RX 400h Lexus GS 450h

Not $41,180 to $42,580 found $54,900 25

Not found 28

9.3 9.1

Costing System
An accounting system established to monitor a company's costs, providing management with information on operations and performance

Process costing system:


In process costing, costs are accumulated by department, rather than by job order or batch. The cost per unit is found by averaging the total

costs incurred over the units pr

Components

Assembly

Overhead

Standard

Custom

Labor

Equipment and Tooling

Support

Indirect Allocation

Raw Material

Processing

Tooling

Elements of the Manufacturing Cost of a Product

Actual and Normal Costing:


Toyota is using normal costing. In this type of costing direct material, direct labor are applied to the work in process inventory and their actual amount but manufacturing overhead is applied to work in process inventory using predetermined overhead rate.

Flow of Cost in Making a car:


Manufacturing costs consist of direct material, direct labor and manufacturing overhead. The product costing system uses by Auto mobile companies several manufacturing account. As production takes place all manufacturing costs are added to the work in process inventory account. Work in process is partially completed inventory. After that such inventory is transferred to finished goods inventory as they completed. Its journal entries passed by as follows:

Journal Entries

Raw material purchase Accounts Payable Work in process inventory Raw material inventory Work in process inventory Wages Payable Work in Process inventory Manufacturing overhead Finished goods inventory Work in process inventory

Cost of goods sold Finished goods inventory

After completion of good these units are sold and its journal entry is given below: Cost of goods sold Finished goods inventory They sell their products on account its entry is given below: Accounts receivable Sales

Toyota Production Report Assembly Department


Physical units

% to completion with respect to conversion


10%

Equivalent Units Direct conversion material

work in process January 1 10000 unit started during year 80000 total units to account for 90000

units completed and transferred out 70000 100% work in process December 31 20000 10000 total units accounted for 90000 total equivalent units 80000 Direct material Work in process January1 $ 230000 Cost incurred during year 400000 Total Cost to account for $ 630000 Equivalent Units 90000 Cost per equivalent unit $7 Cost of good completed and transferred out (70000)(17.03) Cost on December31,2007 Direct Material : (20000)(7.00) 140000 Conversion (10000)(10.03) 100300 Total cost on March 31 240300 Verification $ 1192100

70000 50% 20000 90000

70000

Conversion Total $ 45000 $ 275000 757400 1157400 $ 802400 $ 1432400 80000 $ 10.03 $ 17.03 of cutting department: $119210 $

240300 $ 1432400

Toyota Motor Corporation (ADR) SCHEDULE OF COST OF GOODS MANUFACTURED For the year ended on 31-03-2007

Toyota Motor Corporation (ADR) SCHEDULE OF COST OF GOOD SOLD For the year ended on 31-03-2007

In Millions of JPY (except for per share items) (except for per In Millions of JPY share Material Directitems)
Opening Rawfinished goods Opening material Inventory Raw material purchased inventory Subtotal Cost of material Ending raw goods inventory Direct material used manufactured Direct labor Subtotal Manufacturing overhead Ending finished goods Indirect labor Indirect material inventory Utilities Cost of goods sold Depreciation on equipment Insurance Total actual manufacturing overhead Under applied overhead Overhead applied to work in process Total manufacturing cost Work in process opening inventory Subtotal Work in process closing inventory Cost of goods manufactured $ 3,054,580 10,00,000 $ 4054580 175000

$ 21,036,909 11,260,415 $ 32,297,324 16,944,944 $ 15,352,380


$ 3,879,580 2,10,000

$ 140,000 60,000 491,000 7,589 69,510 $ 768099 250

767,849 $ 4,857,429 6,892,506 $ 11,749,935 489,520 $ 11,260,415

Toyota Motor Corporation (ADR) INCOME STATEMENT For the year ended on 31-03-2007

Toyota Motor Corporation (ADR) Cash Flow Statement For the year ended on 31-03-2007

In Millions of JPY 12 months Ending 2007-03-31 12 months (except for per Ending 2006-03share items) 31 In Millions of JPY (except for 1,644,032.00 1,372,180.00 Net Income/Starting per share items) Line
Depreciation/Depletio Revenue n Other Revenue, Total Amortization Total Revenue Deferred Taxes Cost of Revenue, Total Non-Cash Items Gross Profit Working Changes in Selling/General/Admin. Capital Expenses, Cash from Operating Development Research & Activities Capital Expenditures Depreciation/Amortization Other Investing Cash Interest Expense (Income) Flow Items, Total Net Operating Cash from Unusual Expense (Income) Investing Activities Other Operating Expenses, Financing Cash Flow Total Items Total Operating Expense Total Cash Dividends Operating Income Paid Interest Income (Expense), Net Issuance (Retirement) Non-Operating of Stock, Net Issuance (Retirement) Gain (Loss) on Sale of Assets of Debt, Net Other, Net Cash Before Tax Incomefrom Financing Activities Income After Tax Foreign Exchange Minority Interest Effects Equity In Affiliates Net Income Before Extra. Items Change in Cash Net Accounting Change Cash Interest Paid, Discontinued Operations Supplemental Cash Taxes Paid, Extraordinary Item Supplemental Net Income
1,382,594.00 1,211,178.00

-132,308.00 91,627.00 -12,388.00 3,238,173.00 -2,690,195.00 -1,124,183.00

21,036,909 21,036,909 33,262.00 15,352,380 89,175.00 5,684,529 -190,315.00 221,362 -

2,515,480.00

-2,771,240.00 -604,260.00 -3,375,500.00 -

-3,814,378.00

--339,107.00 -295,699.00 1,516,574.00 881,768.00 25,429.00 330,992.00

19,158,567 -244,568.00 3,470,909


-129,629.00

83,158

1,251,108.00

125,860 876,911.00 3679927 1,292,207 68,743.00 -84,393 164,366 85,634.00 1,372,180 730,469.00 815,180
332,337.00

550,398.00 741,798.00

Toyota Motor Corporation (ADR) Balance Sheet As on 31-03-2007

In Millions of JPY (except for per share items)


Cash & Equivalents Short Term Investments Cash and Short Term Investments Accounts Receivable - Trade, Net Receivables - Other Total Receivables, Net Total Inventory Prepaid Expenses Other Current Assets, Total Total Current Assets Property/Plant/Equipment, Total Gross Goodwill, Net Intangibles, Net Long Term Investments Other Long Term Assets, Total Total Assets Accounts Payable Accrued Expenses Notes Payable/Short Term Debt Current Port. of LT Debt/Capital Leases Other Current liabilities, Total Total Current Liabilities Long Term Debt Capital Lease Obligations Total Long Term Debt Total Debt Deferred Income Tax Minority Interest Other Liabilities, Total Total Liabilities Redeemable Preferred Stock, Total Preferred Stock - Non Redeemable, Net Common Stock, Total Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Treasury Stock - Common Other Equity, Total Total Equity Total Liabilities & Shareholders' Equity Shares Outs - Common Stock Primary Issue Total Common Shares Outstanding

As of 2007-03-31

As of 2006-03-31

1,900,379.00 462,172.00 2,362,551.00 2,023,818.00 6,618,127.00 1,803,956.00 544,274.00 551,503.00 11,880,411.00 17,102,486.00 5,888,029.00 1,050,633.00 32,574,779.00 2,211,586.00 1,668,337.00 3,497,391.00 2,368,116.00 2,021,740.00 11,767,170.00 6,263,585.00 6,263,585.00 12,129,092.00 1,312,400.00 628,244.00 767,288.00 20,738,687.00 397,050.00 497,593.00 11,764,713.00 -1,524,654.00 701,390.00 11,836,092.00 32,574,779.00 3,197.94

1,569,387.00 685,228.00 2,254,615.00 1,980,680.00 5,894,335.00 1,620,975.00 444,803.00 520,494.00 10,735,222.00 15,857,844.00 5,230,892.00 793,543.00 28,731,595.00 2,086,587.00 1,464,263.00 3,033,019.00 1,723,888.00 1,720,978.00 10,028,735.00 5,640,490.00 5,640,490.00 10,397,397.00 1,092,995.00 589,580.00 819,346.00 18,171,146.00 397,050.00 495,250.00 10,459,788.00 -1,228,955.00 437,316.00 10,560,449.00 28,731,595.00 3,241.76

Cost Minimization Techniques:


Toyota is using following techniques to minimize its manufacturing Cost:
Improve technology Reduce labor cost Improve relationship with suppliers Efficient Logistic System Focus on product Design Reduce in Budgeting Costing Cross Functional Teams Reducing Non Value added cost

Future Outlook
The company has envisaged a difficult time ahead but the management is taking appropriate counters measures to overcome the situation. The company will continue to focus on cost effectiveness, quality standards and best after sales services to their valued customers. The company has aimed to strive hard to overcome unpredictable challenges due to rising competition in international market.