1.

2 Background of the Report

The importance of cost accounting and cost accounting information is being increased day by
day. It is not only help to reduce cost but also in all kind of decision making. Without analysis of
cost accounting information no manager can make effective decision. The cost accounting
collects the data, analyze those data and help the managers to make better decision. In
accordance with development of new tools and techniques of cost accounting the use of cost
accounting information is changing. Managers need to use the cost accounting information in
different way from traditional method to evaluate the performance.
Developing and accepting the JIT (Just-In-Time), TQM(Total Quality Management) and other
contemporary costing techniques force to manager to change the performance evaluation
techniques and requires different cost accounting information unlike traditional labor based
information now a days which become obsolete.
Primarily this report is concerned with cost accounting information by an organization in
decision making as well as corporate reporting, the tools and techniques used by organizations
and the implications of these in the organization.
We select Beximco Pharma to examine the use of cost accounting information and cost
accounting tools and techniques used by the company. We emphasize on the implication of
using information and technique and examine whether Beximco Pharma use or not that
particular techniques and the reason of following or not following based on our queries to
respective authority of the company.

2.1 Cost Accounting Information:

In a broad aspect, cost accounting refers to the measurement, analysis, and reporting financial
and nonfinancial information relating to the cost of acquiring or using resources in an
organization. So cost accounting can be defined as the information obtained from cost
accounting activities. For example, calculating the cost of product is a cost accounting function
that answers managers decision making needs (such as choosing products to offer). Modern
cost accounting takes the perspective that collecting cost information is a function of the
management decision being made. Cost accounting information helps the manager in short-run
and long-run planning and control decisions that increase value for the customers and lower
the costs of products and services. For example, managers make decisions regarding the
amounts and kinds of material being used, changes in plant processes, and changes in product
designs.

3.1 An overview of Beximco Pharma

Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company and is a member of
the BEXIMCO Group, the largest private sector industrial conglomerate in Bangladesh. The
strategic strengths of Beximco Pharma are its strong brand recognition, highly skilled work
force and diversified business mix. Beximco Pharma brands - Neoceptin R (Ranitidine), Napa
(Paracetamol), Amdocal (Amlodipine), Neofloxin (Ciprofloxacin), Bexitrol F (Salmeterol Plus
Fluticasone), Bextrum Gold (Multivitamin and Multi Mineral) and Atova (Atorvastatin) are
among the most recognized brands in the Bangladesh Pharmaceutical industry.

Beximco Pharma started its operation in 1980, manufacturing products under the licenses of
Bayer AG of Germany and Upjohn Inc. of USA and now has grown to become nation's one of
the leading pharmaceutical companies, supplying 15% of country's total medicine need. Today
Beximco Pharma manufactures and markets its own `branded generics' for almost all diseases
from AIDS to cancer, from infection to asthma, from hypertension to diabetes, both nationally
and internationally.
Beximco Pharma manufactures a range of dosage forms including tablets, capsules, dry syrup,
powder, cream, ointment, suppositories, large volume intravenous fluids, metered dose
inhalers etc. in several world-class manufacturing plants, ensuring high quality standards
complying with the World Health Organization (WHO) approved current Good Manufacturing
Practices (cGMP).
The recipient of three times `gold' national export trophy, Beximco Pharma is the largest
exporter of pharmaceuticals from Bangladesh, spreading its presence in many developing and
developed countries across the globe. Beximco Pharma is the only company in Bangladesh to
receive this highest national accolade for export, for record three times.
Beximco Pharma markets its brands through professional sales and marketing teams in African,
Asian and European markets. It also supplies its products to renowned hospitals and institutions
in many countries, including Raffles Hospital and K K Women & Children Hospital in Singapore,
MEDS and Kenyatta National Hospital (KNH) in Kenya, Jinnah Hospital, Agha Khan Hospital and
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Shaukat Khanum Memorial Hospital in Pakistan. Beximco Pharma is also an enlisted supplier of
WHO and UNICEF.
Another important business activity of Beximco Pharma is the contract manufacturing for major
international brands of leading multinational companies. Beximco Pharma is acclaimed
domestically and internationally for its outstanding product quality, world class manufacturing
facilities, product development capabilities and outstanding service.
Beximco Pharma has a strong market focus and is anticipating continued future growth by
leveraging business capabilities and developing superior product brands and markets. In
particular the company is very interested in developing a strong export market in USA and
Europe. To meet the future demand Beximco Pharma has invested US$ 50 million to build a
new state-of-the-art manufacturing plant, confirming to USFDA and UK MHRA standards. This
new plant will also offer contract-manufacturing facility to leading pharmaceutical companies,
especially from Europe and US.

3.2 Cost Accounting System of the company:

The company primarily uses batch costing method in their costing system. As a pharmaceuticals
manufacturing company they need to produce huge amount of product so here batch costing is
appropriate for the company. Here it is cost effective and easy to calculation. Batch costing has
the several advantages over other methods in regard of the providing following information:
-the analysis and the cost control at each cost generator;
-the operative management of each place generator of costs, the specification of the
production and of the predicted costs and their control and realization;
-the correct assessment of the produced stocks;
-determination of the efficiency obtained by the taken decisions.
The company uses weighted average method in time of inventory valuation. They believe that it
gives more accurate and clear picture of inventory. In this method it is very hard to manipulate
and easy to calculate though it has a limitation that it sometimes cant represent inflation.
4. Contemporary cost accounting methods and techniques used by Beximco Pharma:
Beximco Pharmaceuticals Ltd is a leading company in our country. To compete with the other
companies in the industry, Beximco Pharma uses several contemporary methods and
techniques. Mass production of a mature product with known characteristics and a stable
technology was the basis of traditional cost accounting models. Anyway, Beximco Pharma, with
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automation, lessened the labor content in manufacturing process while the other costs in the
company are increased.
Flexible manufacturing system:
Flexible manufacturing systems use computer controlled production processes, including
CAD/CAM programmable machine tools. Because flexible manufacturing reduces setup or
changeover times, companies can efficiently manufacture a wide variety of products in small
batches. Though Beximco Pharma can adopt flexible manufacturing system, it merely reduces
the size of the batch.
Total quality management:
Total Quality Management refers (TQM) to the process of continuous improvement to achieve
the full customer satisfaction. Rather than waiting to inspect items at the end of the production
line or striving to stay within acceptable tolerance limit, TQMs goal is eliminating all waste. In
Beximco Pharma, quality is maintained with great care. As it is a pharmaceutical company, it is
mandatory to keep up with the quality level with the other companies. As a result, they have
received GMP Clearance from Therapeutic Goods Administration (TGA) of Australia and from
Gulf Central Committee for Drug Registration, Executive Board of the Health Ministers' Council
for Gulf Cooperation Council (GCC) states (representing Saudi Arabia, Kuwait, Bahrain, United
Arab Emirates, Qatar and Oman). The company is also in the process of obtaining approvals
from several other regulatory authorities including National Health Surveillance Agency
(ANVISA) of Brazil, Medicine and Healthcare Regulatory Agency of United Kingdom (UK MHRA),
US FDA etc.
Just in Time Concept:
The Just in Time (JIT) minimizes throughput time by emphasizing continuous improvements. JIT
reduces inventories by achieving a continuous production process. In JIT system, employees
keep on hand only the inventory needed to production until the next order arrives. Having
fewer goods in hand not only requires less warehouse spaces and storage equipment but also
reduces inventory holding cost, while realizing productivity. For implementing JIT, company
must need a strong supply chain system. In Beximco Pharma, they cant follow JIT because most
of the inventory or raw materials are come from abroad so it is impossible to implement JIT in
Beximco Pharma. If they want to implement JIT their cost will be higher rather than being lower
because here ordering cost is very high as raw materials are imported. Beximco use EOQ model
to determine their ordering size and they have large storage facilities.
Pull Rather than push system:
Pull system refers to decision will come from downstream of management. The factory
production line operates on a demand pull basis. A pull system can only work while
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manufacturing process can react to a pull system. However Beximco Pharma doesnt follow the
pull system they use push system. The authority of Beximco Pharma believes that push system
is more effective than pull in the context of Bangladesh. Because of JIT is not possible in the
firm, pull system is difficult to implement because in pull system it is believed that it is better
not to produce unnecessary products and do not keep inventory in hand.
Activity-Based Management:
The activity-based management system links resources consumption to the activities a
company performs and cost the activities to product or customers. Activity-based management
uses activity based costing systems to measure and control this relationship. In Beximco
Pharma there is no such use activity cost driver to measure the cost of a product. The
traditional system is used to determine the cost of the product.
Life Cycle Costing:
Life cycle costing tracks and determines the cost attributed to each product and service from its
initial research and development to development to final marketing to customer. In Beximco
Pharma, this type activity is done in mainly in the Central Product Management (CPM)
Department. The activities of CPM are:
Market research
Selection of new product
Design and testing of product (DTP)
Sample store (logistics) management
Making strategy
The department deals with the controllable marketing variables, the 4p's. This department
takes decisions in the following areas:
Product - Size, color, shape, packaging etc.
Price - Raw materials cost, customer ability, regulatory body's approval etc.
Promotion - Promotional aids include brochure, pads, folder, and plant visit by

physicians, health-related people, students, and people of different student.

Other than this department, in January, 2000, the Business Research & Development
department was established. The functions that are done by this department are:

Outsourcing negotiated

New product study

New technology study

Project feasibility study

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Commercial negotiation

Observing the world pharmaceuticals market

With these departments, Beximco Pharma determines the Life Cycle of the products.

Target Costing:
Target costing is an approach which determines what a product or service should cost based on
its sales price less a target profit. Unlike traditional costing for making up cost, it is a market
driven way of examining the relationship of price and cost. In Beximco Pharma, the use of
Target Costing is very common to make the target for the cost of the product.
Change In performance Evaluation:
The adoption of JIT, life cycle costing and other innovative techniques requires new
performance evaluation techniques rather than traditional productivity measures because it is
irrelevant in this context. The use of single short term profit measure may not be sufficient
because it is not reliable indicator of managers ability. Profit may be increased by doing some
activities which are not conform to companies overall organizational goal.
Goal Congruence: this performance measures should encourage manager to achieve overall
organizational goal. The Beximco Pharma does not explain the measurement of the
performance of the employees. In general, some marketing employees get benefited if the
sales volume is high. But the total performance evaluation system depends in the decision of
the management.

Concluding Remarks:
Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company and is a member of the
BEXIMCO Group, the largest private sector industrial conglomerate in Bangladesh. Beximco
Pharma is also the largest exporter of pharmaceuticals from Bangladesh, spreading its presence
in many developing and developed countries across the globe. Recently, BPL has successfully
made its footmark in the global market when it made its debut on the London Stock Exchange as
the first Bangladeshi company to be listed in the world's most prestigious bourse. This milestone
event has widened the responsibility, accountability and transparency of the company beyond
geographical border. The listing adds new challenges to the staffs of Accounts & Finance
department who are directly responsible for financial reporting to a diverse group of stakeholders
both in national and international arena.
In this report, we have tried my level best to identify cost accounting techniques and procedures
used by Beximco Pharma. What and how Beximco Pharma use cost accounting information for
decision making and external financial reporting along with describing the procedure and
systems of using cost accounting information. In this report, we imply our acquired knowledge
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from cost accounting course and try to comply with the techniques procedure and systems
followed by the company.
Beximco believes that quality and control should be ensured and these can be ensured by using
proper cost accounting information. Relevant and reliable cost information can be ensured by
implementing by using effective cost accounting methods. And they do the best one fit in the
context of Bangladesh.

References:
1. Horngren, Charles T., Datar Srikant M., Foster, G.; Cost Accounting: A Managerial
Approach, Prentice Hall, Inc.; 12th Edition, 2007.
2. Rayburn, Latricia G.; Cost Accounting: Using A Cost Management Approach; Irwin
Book Team; 6th Edition, 1996.
3. Hansen, Don R., Mowen Maryanne M.; Cost Management: Accounting and
Control; South-Western College Pub; 5th edition, 2005.
4. International Financial Reporting Standard; International Accounting Standard
Board; as approved at 1 January, 2008.
5. http://www.beximco-pharma.com
6. http://britannica.com
7. http://en.wikipedia.org
8. http://www.bizmanualz.com
9. http://www.iasplus.com