JAGRAN LAKECITY UNIVERSITY, BHOPAL

Mid Semester Examination 2021

Session: Jul-Dec 2021
Course Name: FUNDAMENTAL OF MANAGEMENT AND COST ACCOUNTING III
Course Code: BBAC18301
Submitted by:

Name: Paarth Chaturvedi

Roll No. : 2020BBA164
JLU ID: JLU05901

Name: Mohammad Ahad Khan

Roll No.: 2020BBA110
Jlu ID: JLU05560

Name: Pranjal Awasthi

Roll No.: 2020BBA113
Jlu ID: JLU05593

Name: Yash Kukreja Submitted to:

Roll No.: 2020BBA107 Faculty Name: Dr. IFTEKHAR KHAN
Jlu ID: JLU05558
 WHAT IS TEXTILE INDUSTRIES ?
The textile industry is primarily concerned with the design, production and distribution of yarn, cloth and clothing.
The raw material may be natural, or synthetic using products of the chemical industry.

WHAT DOES TEXTILE INDUSTRY PRODUCE ?

The textile manufacturing processes in the global textile industry are producing the textile yarn, fiber, fabric, and
finished products including apparels.
 WHAT IS COST ?
Cost is defined as the monetary valuation of effort, material, resources, time consumed, risk and opportunity forgone
in production / delivery of a good or service. It is simply put as the amount that has to be paid or given up for
something to be acquired.

WHAT IS COST MANAGEMENT?

It is defined as the process of planning and controlling the budget of the business. It helps in predicting the expenses
of the business so that one can avoid going over budget, thereby being an integral part of business management.
 What does cost management plan include?
A cost management plan usually involves several decisive procedures ensuring that the project will
be executed within the approved budget and quality standards.
• Levels of precision: Define how close the measured values are to each other.

• Units of measurement: Define the dimensions, quantity, capacity, amount, etc.

• Control thresholds: Are the regulation of the minimum and maximum cost variation standards. Depending
on the size of the project and its approved budget.

• Reporting formats: Establishing reporting protocols, their format and frequency through all stages of a
project is of primary importance.
 Advantages of cost management

I. It helps in controlling the project specific cost, in turn also the overall business cost.

II. One can predict the future expenses and costs and accordingly work towards the expected revenues.

III. Predefined costs can be maintained as records for the business.

IV. It helps in taking those actions that are necessary to assure that the resources and business operations aim at attaining the chalked
objectives and goals.

V. It helps in analyzing the long term trends of the business.

VI. The actual cost incurred can be compared to the budgeted to see if any component of the business is spending more than expected.

VII.It helps in analyzing the business positioning in terms of making an acquisition factoring the cost component involved.
 HOW TO IMPROVE COST MANAGEMENT
I. Perform a Work Breakdown Structure (WBS) with your team. The team can help you break the
project

II. Ask for estimates from the people doing the work.

III. Create a contingency reserves.

IV. Create a management reserve.

V. Perform change control.

VI. Compare your actual expenses against your planned expenses regularly.
 Cost management techniques

1. Capitalize on technology
• This is one of the methods that help in streamlining the business. The latest of technology helps in getting quality of higher
standards, less time consumption with higher productivity and keeps the employee count within the desirable range. All of this
very strongly reflects in the overall cost of the business

2. Time management
• The one who owns the business definitely knows the value of time for his / her business. However, it is important to pass down the
relevance across the hierarchy of business to view the desired results.
• It is very essential to make the employees understand the value of time and how to be efficient to do more work in the same time
span. This is one of the methods that will help increase the productivity without adding to the labor cost.

3. Inventory management
• One of the major cost as well as ways of generating revenues is through inventories.
• First and foremost one needs to chalk out the inventory requirements, the quantity check that needs to be stored, vendor costs etc.
• As all of this helps in knowing the requirements of the business and helps avoid stocking excess inventory and deploy the capital
elsewhere rather than tying up in the inventory stocks
4. Outsourcing
• Outsourcing is one way that helps take employees on third party roles especially when it is for one time projects.
• This saves the employer from taking the cost onto his books.
• This is definitely done keeping in mind that the outsourcing partners are of the standards that do not hamper the quality of services to the
customers of the business.
• Besides the employees, certain projects also can be outsourced, which helps in saving the additional employee costs onboard as well as get
access to outside talent and technology, helping in optimizing the resources.

5. Updated market sense

• It is very important to be updated with the trends in the markets as it is game of survival of the fittest. One has to be constantly in touch with
the vendors and see that renewal of the contracts keep happening with the trend in prices.
• This will help in negotiating for the best prices available rather than dragging on the set prices of long term contracts.

6. Control of headcount
• The second most important cost to a business is the employee cost.
• Although we take employees as assets or the backbone of the business, one needs to keep in mind that they also have cost associated with
them. Besides the regular pays and salaries, workplace, licenses, software's are the additional costs added per employee.
• That is why, it is essential that the manager knows how to reduce the employee costs, either by taking less number of people onboard, or by
taking more of low cost employees rather than few high costs ones.
 How to Minimize Production Cost in Garment Manufacturing?
Nowadays many individuals are starting small scale garment manufacturing business. While setting up a factory is
comparatively easier, it is quite difficult running the factory with a budgeted cost. Secondly for a small set up
controlling the production cost is very important to manage the cash flow.

I. You must find ways to keep your production cost (product cost) as low as possible. This way you can earn more profit and see the
expected growth in the business.

II. Improve fabric utilization

III. Buy most economical fabric width

IV. Go for a piece-rate production system

V. Go for a piece-rate production system

VI. Produce Right first time quality

 The following costing techniques are adapted in the apparel manufacturing companies
1. Total or absorption costing: In this method, the entire cost is absorbed into individual units where both the fixed and variable costs are charged to
production.

2. Marginal costing: In this method, only variable costs are taken into account and fixed costs are written against profits in the period in which they arise.

3. Standard costing: This is a technique of cost control where costs are predetermined on the basis of management’s standard of efficient operation.

4. Budgetary control: This is an important managerial tool for planning and control. A budget is an overall financial plan for future activities.

5. Activity based costing: Nowadays companies try to adapt their offers and terms to different buyers.

6. Target costing: Costs change with production scale and experience. They can also change as a result of a concentrated effort by the company’s
designers, engineers and purchasing department to reduce them.
 PRODUCT COST MANAGEMENT PRACTICES USED IN TEXTILE INDUSTRIES
Textile companies predominantly use traditional costing systems, leaving room for improvement in their cost
management practices. This may involve correcting their use of standard costing and variance reporting or variable
costing.
1. Job costing: The costing technique evaluates the cost of every job work done for a particular order and debits
the cost of jobs for ascertaining the manufacturing cost of a garment.
2. Batch costing: This method is akin to job costing, the only difference is the cost of batch of garment being
produced is considered.
3. Terminal costing: This method is usually used for large contracts, wherein contract sheets are maintained for
specific and individual contracts.
4. Process costing: Useful for determining the garment cost in which many processes are involved.
5. Departmental costing: For large scale manufacturers the department wise producing cost of garments is an
appropriate method of calculating.
 THE FOUR STEPS OF COST MANAGEMENT
1.Resource Planning

Resource planning is the process of identifying the resources required to execute a project and take it to completion. Examples of resources are people (such
as employees and contractors) and equipment (such as infrastructure, large construction vehicles and other specialized equipment in limited supply).

2. Cost Estimation:

Cost estimation is the process of quantifying the costs associated with all the resources required to execute the project. To perform cost calculations, we need
the following information:
 Resource requirements (output from the previous step)

 Price of each resource (e.g., staffing cost per hour, vendor hiring costs, server procurement costs, material rates per unit, etc.)

 Duration that each resource is required

 Potential risks

3.Cost Budgeting :

Cost budgeting can be viewed as part of estimation or as its own separate process. Budgeting is the process of allocating costs to a certain chunk of the
project, such as individual tasks or modules, for a specific time period. Budgets include contingency reserves allocated to manage unexpected costs.

4. Cost Control:

Cost control is the process of measuring cost variances from the baseline and taking appropriate action, such as increasing the budget allocated or reducing
the scope of work, to correct that gap. Cost control is a continuous process done throughout the project lifecycle. The emphasis here is as much on timely
and clear reporting as measuring.