Upload
rahul-ranganathan
View
321
Download
17
Tags:
Embed Size (px)
DESCRIPTION
Cost of Making Bread
Citation preview
Assignment Assessment Report
Campus: Goa Year/semester 2011-2012 – II Semester
Level: ACL II Assignment Type Assignment B
Module Name:Costing MIS & Budgetary Control
Assessor’s Name
Student’s Name: Sonia Naik Reqd Submission Date
e-mail id & Mob No [email protected] Actual Submission Date
Stream Business Submitted to :
Certificate by the Student:
Plagiarism is a serious College offence.
I certify that this is my own work. I have referenced all relevant materials.
(Student’s Name/Signatures)
Expected Outcomes
Assessment Criteria
Grade based on D,M,P,R system
Feedback
General Parameters
Clarity Clear understanding of the concept
Analytical Thinking-
Ability to analyze the problem realistically
Research Done- Research carried out to solve the problem
Formatting & Presentation-
Concise& clear thinking along
with presentation
Subject Specific Parameters
1. Understanding the procedures of Costing
Clarity of concept
2. To be able to calculate the unit cost and prepare costing Profit & Loss statement
Precision in cost calculation and preparation of cost sheet
Grades Grade DescriptorsAchieved Yes/No (Y / N)
P A Pass grade is achieved by meeting all the requirements defined.
M Identify & apply strategies/techniques to find appropriate solutions
D Demonstrate convergent, lateral and creative thinking.
Assignment Grading Summary (To be filled by the Assessor)
OVERALL ASSESSMENT GRADE:
TUTOR’S COMMENTS ON
ASSIGNMENT:
SUGGESTED MAKE UP PLAN
(applicable in case the student is asked
to re-do the assignment)
REVISED ASSESSMENT GRADE
TUTOR’S COMMENT ON REVISED
WORK (IF ANY)
Date: Assessor’s Name / Signatures:
Assignment B
Question 1
a. Find out and understand the Cost procedures followed by the company.b. If possible get a sample of cost sheet or Statement of Accounts
AN INTRODUCTION TO FOOD & BEVERAGES SECTORThe multi-billion food and beverage industry comprises several markets including bakery products such as bread, biscuits etc., milk and dairy products, beverages such as tea, coffee, juices, bottled water etc., snack food, chocolates, etc. beverage, confectionery, processed foods and others. India's Food and Beverage industry is valued at Rs. 3584 billion. India produces above 600 million tons of food products every year and is one of the major producers of food in the world. The food and beverage industry registered a growth rate of 8.5% in 2005-06. With increase in disposable income of consumers, growing awareness among consumers about health products, rapid urbanization, and increasing popularity of convenience foods, food and beverage sector is expected to grow at a high rate. This sector holds a huge potential to grow because of the increase in advertisement spending, awareness campaign about products in urban as well as rural areas, and large scale transformation. The food and beverage industry is primarily driven by consumer health trends. Presently, the food and beverage industry is in a dynamic phase, marked by a high degree of competition. As product development within the food and beverage market moves towards a focus on health and nutrition, the growth and development of food manufacturers in the market depends on having prudent strategies in place, which can be applied globally. In effect, this has created a highly competitive market place, which fosters growth of participants with a clear vision of "growing with their customers."The major players in the "Food and Beverage" Industry is: Heinz, Mars, Marico,Conagra, Pepsi, HLL, Pillsbury, Nestlé, Amul, ITC, Dabur, Britannia, Cadbury, SmithKline Beecham, The Surya Food and Agro Private Ltd
BAKERY INDUSTRYBakery industry in India is probably the largest among the processed food industries, production of which has been increasing steadily in the country. Bakery products once considered as sick man’s diet have now become essential food items of the vast majority of population. The two
major bakery industries, viz., bread and biscuit account for about 82% of the total bakery products. The annual production of bakery products which includes bread, biscuits, pastries, cakes, buns, rusk, etc., most of which are in the unorganized sector, is estimated to be in excess of 3 million tones. The production of bread and biscuits in the country both in the organized and unorganized sectors is estimated to be around 1.5 million tones and 1.1 million tons respectively. Of the total production of bread and biscuits, about35% is produced in the organized sector and the remaining is manufactured in the unorganized sector. Indian Bakery sector is indicating significant growth both in terms of volumes and customer base. The sector, which is estimated at Rs 3,500 crore, is currently registering a 40% growth according to industry sources. The production of Bakery products has increased from5.19 lakh tones in 1975 to 18.95 lakh tones in 1990 recording four-fold increase in 15 years.
Some of the well-known and most frequented bakeries in the country are Sweet Chariot, Modern Bakery, Daily Bread in Bangalore, Monginis, Birdie's, Croissants in the west, and in the north and eastern parts of the country, there are quite a few big players too.
BREADBread is the cheapest and basic instant food available for consumption. Though bread is not a staple food in the country, its consumption has increased over the years. In India it is still a secondary staple food when compared to chapatti, puri or rice. The different types of bread available are White bread, Whole meal or whole wheat bread, mixed grain bread, Kibbled wheat and cracked wheat bread, Fiber-increased white breads, Rye bread
INTRODUCTION TO BRITANNIA INDUSTRIES The story of one of India's favorite brands reads almost like a fairy tale. Once upon a time, in 1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now Kolkata) with an initial investment of Rs. 295. The company we all know as Britannia today is one of India’s best known brands and also one of the most admired Food Brand in the country. Having succeeded in garnering the trust of almost one-third of India's one billion population and a strong management at the helm means Britannia will continue to dream big on its path of innovation and quality. And millions of consumers will savor the results, happily ever after. The company has four productions Facilities, 4367 employees, and sells its products in over 600,000outlets across India The Britannia Brand is all about eating healthy for leading a better life. It is the largest company in the food processing industry whose product range also includes breads and cakes. Britannia has a basketful of goodies with biscuits like Nice Time, Tiger, Marie Gold, 50 50 Maska Chaska, Milk Bikis, Pure Magic, Time Pass Nimkee, Treat, Good Day, Little Hearts, Nutri Choice, Nutrichoice Digestive, Daily Fresh Bread and Britannia Cakes.
BRITANNIA DAILY FRESH BREADTill 1958, there were no breads in the organized sector and bread consumption was a habit typified by the British. Then, a mechanized bread unit was set up in Delhi with the name "Delbis" which produced sliced bread and packed it under the Britannia name. Thus, Britannia was not only the pioneer, but also inculcated in the people of Delhi the habit of eating white sliced bread.
The Mumbai unit came up in 1963, and there again Britannia was the first branded bread in the city. From a company offering 2 packs - the 400gm and the 800gm plain white sliced bread - Britannia has evolved into a company offering 22 packs, catering to a variety of taste and price segments in the bread consuming market. The last couple of years also saw the introduction of Whole Wheat Bread as a part of "Eat Healthy, Think Better" credo. Britannia Daily Fresh Bread, which finds its way to over 6 lakh households daily, is the mainstay of the company’s non-biscuit business at present. Britannia hopes to drive this emerging business through the exploding modern trade and has already gained access to Reliance Retail, Trinethra and Fabmall for its breads. Britannia is widely recognized as an innovative marketCOST SHEET OF BRITANNIA BREAD PROFORMA OF COST SHEET
Cost sheet for every 1lac units produced and sold.
Cost Per Unit
Quantity Manufactured 1 100000
Quantity sold 1 100000
CPU(Rs)
DIRECT COST
Raw materials consumed
Opening stock of raw materials 0
Purchases of Raw Materials 5.805
(-)Closing stock of Raw Materials 0
Materials Consumed 5.805
Direct labor/wages 0.124
Direct cost/expenses 0.2415
PRIME COST 6.1705
INDIRECT COST
Factory/Works Overheads
Indirect labor 0.122
Depreciation on Machinery 0.675
Works Overheads 0.05204
Cost of Maintenance 0.0589
Other Factory Expenses 0.0282
Supervisors Salary 0.0385
Power & Fuel 0.5678
Total Overheads 1.54244
FACTORY COST/WORKS COST 7.71294
Office and Administrative Overheads
Depreciation on office furniture@7% 0.0281
Office Rent 0.0585
Salary to Staff 0.089
Office and General Expenses 0.0257
Telephone expenses 0.0219
Electricity and Lightings 0.03123
Printing and stationary 0.00294
Total Office and Administrative Overheads 0.25737
COST OF GOODS SOLD 7.97031
Selling and Administrative Overheads
Sales Commission 0.705
Salary of Salesman 0.1
Carriage Outward 0.12798
Sales Expenses 0.057
Total Selling and Administrative Overheads 0.98998
COST OF SALES 8.96029
PROFITS 1.03971
SALES 10
Raw Materials Cost
Flour 3.756
Water 0.892
Yeast 0.6789
Salt 0.4781
Raw Materials per unit 5.805
COST SHEET ANALYSIS Direct Cost:Direct materialsTo manufacture one unit of bread the following RAW MATERIALS are required.•Flour •Water •Yeast•SaltDirect labor/wages:Direct labor/Wages amounts to Rs. 0.124 per unit which is approximately 2.009% of the PRIME COST. This percentage is low because a good amount of work is automated as a result of which Human resources are diverted to more productive areas such as SALES and MARKETING.Direct cost/expenses:
Direct cost includes costs incurred in bringing the raw materials into the factory which is Carriage inward. It also includes the amount paid loading unloading charges and other petty expenses
Indirect Costs:Factory Overheads:The Factory Overheads includes the indirect labor, Depreciation on Machinery, Works Overheads, Cost of Maintenance, Other Factory Expenses, supervisors Salary and Power & Fuel.•Indirect labor:The amount of indirect labor is Rs. 0.122 per unit. This value includes sweeper charges, support staff etc.
•Depreciation on machinery:The depreciation is calculated on the basis of WDV calculated @ 10% p.a. This value amounts to around 43.7% of the FACTORYOVERHEADS. The percentage is high because of the level automation and technology used for production.•Power:Per unit power and fuel consumption is Rs. 0.5678.•Other factory expenses:Other factory expenses include maintenance of factory and other miscellaneous expenses.Office and A administration O overheads:-Office and administration overheads include Depreciation on office furniture@7%, office rent, salary to staff, office and general expenses, Postage and Telegrams, telephone expenses, electricity and lightings•Salary to staff:The salary paid to staff comes up to around Rs. 0.089 per unit cost.•Office and general expenses:This comprises of refreshments (tea and snacks),Postage and Telegrams and other petty expenses.•Printing and stationary:This consists of photocopy charges, printouts and other stationary items.•Telephone Expenses:Calls made by the staff members.•Electricity and lightings:It consists of office lighting and air conditioning expensesSales and distribution overheads:-Selling and distribution cost includes Sales Commission, Discount allowed, Salary of salesmen, Carriage outward and Sales expenses•Sales Commission:As a part of encouragement for sales people, they are given commission of 5 % of the total sales done by them.•Discount allowed:To attract whole sellers to buy the product they are offered a discount of 5% on the selling price.•Salary of salesmen:The average salary paid to the sales people is around Rs. 0.1 of the total per unit cost of the product.•Carriage outward:To carry the finished goods to the whole sellers, the transportations charge per unit/product is set as RS 0.12798.•Sales expenses:This includes expenses incurred on advertisements and promotional expenses such as newspaper advertisements, hoardings, TV commercials etc.The Profit arise out of selling per unit of the product is 11.603% of the total per unit cost price
Question 2:
1. Discuss the technique of marginal costing as a key for management problems.2. The following is the trading and profit and loss account of M/s Prem Industries for the year ended 31st March 2000.
To Material consumed 708000 By Sales 30000 units 1500000
To Direct wages 371000 By Finished Stock (1000 units) 40000
To Works overhead 213000 By work-in-progress
To Administration overheads 95500 Material 17000
To Selling & distribution overheads 113500 Wages 8000
To Net profit for the year 69000 Works Overhead 5000
1570000 1570000
In manufacturing a standard unit, the company’s cost records show that:
a. Work overhead has been charged to work-in-progress at 20% on prime cost.b. Administration overheads have been recovered as Rs.3 per finished unit.c. Selling and distribution overheads have been recovered as Rs.4 per unit sold.d. The under-absorbed or over-absorbed overheads have not been adjusted into the costing P & L a/c.
Prepare:
1. A costing profit & loss account indicating net profits.2. A Statement reconciling the profit as disclosed by the cost accounts and thatshown in the financial accounts.
Answer: Marginal cost is change in total cost due to increase or decrease one unit or output. It is technique to show the effect on net profit if we classified total cost in variable cost and fixed cost. The ascertainment of marginal costs and of the effect on profit of changes in volume or type of output by differentiating between fixed costs and variable costs. In marginal costing, marginal cost is always equal to variable cost or cost of goods sold. The following formulae a) Contribution (Per unit) = Sale per unit - Variable Cost per unit b) Total profit or loss = Total Contribution - Total Fixed Costs
or Contribution = Fixed Cost + Profit
or Profit = Contribution - Fixed Cost
c) Profit Volume Ratio = Contribution/ Sale X 100 ( It means if we sell Rs. 100 product, what will be our contribution margin, more contribution margin means more profit) d ) Break Even Point is a point where Total sale = Total Cost
e) Break Even Point ( In unit ) = Total Fixed expenses / Contribution f) Break Even Point ( In Sales Value ) = Breakeven point (in units) X Selling price per unit g) Break Even Point at earning of specific net profit margin
= Total Contribution / Contribution per unit
or = fixed cost + profit / selling price - variable cost per unit
Application of Marginal Costing in Managerial Decisions
1st Application : Managerial Decision Relating to Determination of Optimum Selling Price
To determine the optimum selling price of any product or service is big challenge for a manager of any company because company wants to profit of each unit of any product or service. In marginal costing technique, fixed cost will not be changed at any level of production. Only variable cost is changed for getting optimum selling price where company can achieve expected
profit.2nd Application: To Check the Effect of Reducing of Current Price on profit
we all know, this is the time of competition, customer has become king. He wants product at minimum price. One example, we can see free video on YouTube. Instead of buying costly CDs and DVD, customers of entertainment industry see free films and movies on YouTube. But on the other side, company wants to maintain his current profit. At that time, manager will be in tension because it is not possible to maintain profit even after reducing price. But if manager learns marginal costing techniques and uses it effective way, they can check the effect of reducing of current price on net profit, after this, he can decide to reduce production or increase production. It is the law of economics, variable cost will reduce by reducing units of production in same proportion but when we increase production, fixed cost will rapidly decreases due to constant nature.
3rd Application: Choose of Good Product Mix
it may be possible that company is producing more than one product, at that time company has to calculate each product's contribution margin or gross profit margin. After this, manager sees which product is giving high contribution margin. Company manager will give preference to that product whose contribution will high. One more decision can be taken by manger. He can check contribution by producing different quantity of different products. If he sees any quantity of products is producing maximum contribution, it will be equilibrium point. Production of units at that quantity will be benefited to company.
4th Application: Calculation of Margin of Safety
Marginal costing can be utilized for calculating margin of safety. Margin of safety is difference between actual sale and sale at breakeven point. According to marginal costing rules, production will follow sales. Suppose current sale is Rs. 4, 00,000 and BEP is Rs. 3, 00,000, margin of safety is Rs.100000. We can calculate it with following formula
= Profit/ P/V ratio
If company's sale is less than margin of safety, then manager can take step to reduce both fixed and variable cost or increase prices.
5th Application: Decision regarding to sell goods at Different Prices to Different Customers
sometime, company has to give special discount to special customers. These customers may be govt, foreign companies or wholesaler. At that time manager has to take decision at what limit, we can give discount to special customers. Marginal costing may help in this decision.
Answer:COSTING PROFIT AND LOSS ACCOUNTParticulars Amount(Rs.) Particulars Amount(Rs.)To Material Consumed
7,08,000 By Sales 15,00,000
To Wages 3,71,000 By Closing Stock To Work Overhead 2,15,800 Finished Good 40,000To Administrative Overhead
93,000 WIP 30,000
To Selling &Distribution
1,20,000
To Net Profit 62,20015,70,000 15,70,000
RECONCILIATION STATEMENTAmount(Rs.) Amount(Rs.)
Profit as per Cost Account 62,200Add: Over absorbed Overhead Excess Factory Overhead
2,800
Selling & Distribution 6,500 9,30071,500
Less: Under absorbed OverheadAdministrative Expenses 2,500
Profit as per Financial Accounts
69,000
Working Notes:COST SHEET Rs.
Material Consumed 7,08,000Wages 3,71,000Prime Cost 10,79,000Work Overhead (20% of Prime Cost) 2,15,800Less: Cost of Work-in-progress 30,000
Work Cost 12,64,800Add: Administrative Overhead 93,000Cost of Production 13,57,800Less: Closing Stock Of Finished Goods
40,000
Cost of Goods Sold 13,17,800Selling & Distribution Overheads( 4x30,000)
1,20,000
Cost of sales 14,37,800
Profit 62,200
Sales 15,00,000
Total Finished good units during the year
= Unit sold-Opening stock + Closing stock
= 30000 - 0 + 1000= 31000
Admin i s t r a t i on ove rheads have been r ecove red a s Rs .3 pe r finished unit= 31000*3
= 93000
Ques 3 :
Work out an appropriate cost sheet from the unit cost per passenger km for the year 2006-07 for a fleet of passenger buses run by a Transport Company from the following figures extracted from its books.
5 passenger buses costing Rs.50000, Rs. 120000, Rs. 45000, Rs.55000 and Rs.80000 respectively. Yearly depreciation of vehicles 20% of the cost. Annual repair, maintenance and spare parts – 80% of depreciation. Wages of 10 drivers @ Rs.100 each per month, wages of Rs.20 cleaners @ Rs. 50 each per month. Yearly rate of interest @ 4%on capital. Rent of six garages @ Rs.50 each month. Director’s fees @ Rs.400 per month, office establishment @ Rs.1000 per month, licenses and taxes @ Rs.1000 every six months, realization by sales of old tyres and tubes @ Rs.3200 every six months, 900 passengers were carried over 1600 kms during the year.
Sol.Cost of buses= Rs. 50,000 + 1, 20,000 + 45,000 + 55,000 + 80,000 = Rs. 3, 50,000 Yearly Depreciation (20% of cost) = Rs. 70,000Yearly Repairs (80% of Depreciation) = Rs. 56,000
Operating Cost- SheetFor the year 2006-07Particulars Amount (Rs.) Amount (Rs.)(A)Standing ChargesWages of drivers(10x100x12) 12,000
Wages of cleaners(20x50x12) 12,000 24,000
Interest(4% on capital) 14,000
Directors fees(Rs.400x12) 4,800
License & Taxes(Rs.1000x2 2,000Office establishment (Rs.1000x12)
12,000
Garage rent(6x50x12) 3,60060,400
B) Maintenance Charges
Repairs, Spare parts etc. 56,000
(-) Sale proceeds from old tyres & tubes
6,400
49,600(C) Operating Charges
Depreciation 70,000
Total(A+ B + C) 1,80,000
(E)Passenger Km.Carried(900x1600)
14,40,000
(F) Cost per passenger Km. Rs.(1,80,000/14,40,000)
0.125