Objectives of the study

Every work must have an objective. The main objective of our study is
to gather practical knowledge about cost structure and inventory contract
system of
(a private company) RSRM. The objectives of the study are summarized
below:
1. To determine the cost of product per ton
2. To examine inventory planning policy of the company.
3. To examine the effectiveness of the techniques followed by
RSRM
4. To assess inventory control of the firm
5. To analysis the cost structure of the company
6. To gather information regarding the organizational set up of the
store department
7. To find out the major problems in inventory control system in the
selected company.
8. To determine the ratios of Financial Statement of the company.
9. To ascertain the overhead of cost sheet.
10. To examine the overall Financial Performance of the company.
 Methodology of the study

In the research study both secondary and primary data and

information have used. Secondary data have been collected by
examining various documents such as company ordinance, year
books, journals, official records, annual reports & Budget statements,
circular, employee job regulation etc. On the other hand the primary
data have been furnished with the help of questionnaire, open
discussions and direct interview with the heads and officers of
accounting division. Some direct information are collected by
visiting the factory and discussing with the store in-charge of the
company.
These primary and secondary data have been analysed and
interpreted to draw some conclusions.
 Scope of the study

RSRM is only fully automatic steel re-rolling mill in the country. As a

fully domestic company RSRM is contributing significantly to the
development of Bangladesh. RSRM sells its products in the native
country as well as in foreign markets.
In today’s highly technological world, there cannot be any compromise
of quality. At RSRM this realization has lead to ensuring that every
product measures up to the highest international standards. This is the
main reason why most of the quality conscious buyers and particularly
most foreign construction firms working in Bangladesh buy steel from
RSRM . Strict adherences to buyers specifications in terms of steel
grades profile and close tolerances on unit mass enabled RSRM to
supply steel to a number of national projects. The rationality of study in
this company is to know about the cost involved in producing export
quality goods and production procedure of the products.
 Limitation of the study

Our selected enterprise is a Private Limited Company. According

to Companies Act -1994 Private Limited Companies have no obligation
to prepare annual report for its share holders. They need not call Annual
General Meeting (AGM). So, they have some limitation in providing
information to the users.
Limitation of our study are as follows:
1. RSRM does not have adequate publication , specially in the form
of research studies.
2. Data and information , specially financial statements were not
available in the published / written form.
3. The duration of the internship program was not at all sufficient
enough to get more practical knowledge.
4. Some of the key people of RSRM were reluctant to provide us
required information. As a result the facts were not fully found
out.

In spite of the above limitation , I have tried with my all efforts to

know and find out the response pattern of the subject and consultation of
relevant record and documents , may have reached a fairly acceptable
degree of accuracy.
 Executive Summary

A. General:
1. Legal form of the Enterprise:
The company was incorporated on 28th December, 1960 A.D. as a
Private Limited Company under the Companies Act, 1913.
2. Capital of the company:
The capital of the company is Tk. 2,00,00,000 .
B. Balance Sheet:
1. Fixed Assets : Written Down Value of assets at 31st December, 2008
is
Tk. 52195389.57
2. Inventories : Tk. 104024466.78
This made up as follows:
 Raw materials Tk. 591796.78
 Stores & spares Tk. 17240570.00
 Finished goods Tk. 80862100.00
Total Tk. 104024466.78
3. Investments: (Tk. 38400300.00)
This made up as follows :
 Share of Modern Steeel Ltd. Tk.2640000.00
 South Asia Capital Limited Tk.1200000.00
 Shares of Islamic Steam Ship Co. Ltd Tk. 300.00
Total Tk.3840300.00

1. Cash at Bank Tk.12408822.02

2. Advance deposit and payments Tk. 177790469.40
3. Loan to associate company Tk. 16760980.93
4. 14% Mortgage loan from Agrani Bank Tk. 7896526.85
5. In the year 2008 the company paid VAT Tk. 184590125.00
C. RELEVANT INFORMATION:

1. On the closing date of the year the company has 150 staff , officials
and workers on its payroll.
2. Only 25 of staffs and officers get salary above Tk. 36000 per month.
3. During the years a sum of Tk. 780000.00 was paid to directors as their
remuneration.
 Introduction

6. BACKGROUND
Ratanpur steel re-rolling Mills Ltd. having 40 years experience
exclusively in steel making, is the only fully automatic steel re-rolling
mill in the country. The company was incorporated on 28th December,
1960 as a private limited company under the Company Act, 1913.
The founder of the company was Mr. Maksudur Rahaman and is now
managed by his sons and nephews. The head office of the company is
situated at Muradpur Road, (Nahar Mansion) in chittagong.
What makes RSRM different and distinctive from others is that the mill
can only use M.S. Billets of regular shape and proper size which means
it is a hundred percent billet based mill. No scrap or ingot can be rolled
and hence there is no possibility of using any sub-standard raw material
which in itself is a guarantee of the mills production quality.

7. NATURE OF THE ORGANIZATION:

The company is engaged to production and sales of M.S. rod and other
products. The company is doing its business both in domestic market
and foreign markets. Their products specially “TOR STEEL” is very
demandable in the country and they sell 88% in domestic market and
rest 12% in abroad.

8. LIST OF PERSONNEL:
Mr. Maksudur Rahman– (C.E.O) EXISTING
MRAbul kashem. – (G.M)
MRMINAL KANTI – (CHIEF
ACCOUNTANT)
4. Organogram of RSRM

M.D. / CHAIRMAN

DIRECTOR DIRECTOR DIRECTOR DIRECTOR

G. M G. M
(HEAD (DHAKA
OFFICE) OFFICE)

FACTOR
Y A.G.M.

CHIEF
ACCOUNTANT ENGINEE
R

ACCOUNT ACCOUNT ACCOUNT

ANT ANT ANT

ACCOUNT ACCOUNT ACCOUNT

ANT ANT ANT

SR. SR. SR. SR.

COMMERCI ADMINISTRAT PURCHASE MARKETIN
AL IVE OFFICER OFFICER G OFFICER

COMMERCI DOMESTIC FOREIGN MARKE

AL PURCHASE PURCHASE TING
MANAGER
5. PRODUCT PATTERN AND THEIR DESCRIPTION:-

Name of the products:-

1. M.S. rod
2. Round
3. Flats
4. Squares
5. Wire rods
6. M.S. Angles
7. Tees
8. Channels and other section
9. Bolts and nuts
10.Wires etc.
Products details are included in appendix.
FINANCIAL STATEMENT RATANPUR
STEEL RE-ROLLING MILLS
 RATANPUR STEEL RE-ROLLING MILLS LTD.
CHITTAGONG
BALANCE SHEET
For the year ended 31st December, 2008
SOURCES OF FUND 31.12.2008 31.11.2007
1. FUND Capital
b) Reserves & Surplus 12900000 2900000
11271970 11271970
24171970 14171970
2. Loan Fund
a) Bank (Ind. Credit from Agrani Bank) 7896526 13348342
b) Other -- --------
7896526 13348342
Total 32068497 27520313

APPLICATION OF FUND
1. Fixes Assets
a) Gross Block 202674588 194339482
Less Depreciation 150479199 138948781
b) Net Block 52195389 55390700
BMRE(work – in – progress) 7430827 6618521
59626216 62009222
2. INVESTMENT 3840300 3840300
3. CURRENT ASSETS, LOAN &
ADVANCES
Inventories 102066466 109280698
Sundry Debtors 120296145 93553631
Cash at bank 12408822 11943339
Cash in hand 1138423 2230749
Advance, Deposit & Pre-payment 177790469 100022057
Loan to associate company 18741824 16513694
432442151 333544171
Less Current Liabilities and Provisions 531183499 442371576
(98741348) (108827404)
4. Profit & Loss Account 67343329 70498196
Grand Total (1+2+3+4) 32068497 27520313
 RATANPUR STEEL RE-ROLLING MILLS LTD.
CHITTAGONG
MANUFACTURING, TRADING, PROFIT & LOSS ACCOUNT
For the year ended 31st December, 2008
Particular 31.12.2008 31.12.2007
(Taka) (Taka)
Sales(Local) 1106451628 753566178
Sales (Export) 151026893 225101878
1257478500 978668056
Less: Cost of goods sold 1170389652 904944098
87088869 73723957
Less: Depreciation 10136227 10968514
Gross profit 76952642 62755443
Less: Administrative expenses 8450167 7521083
Selling and distribution expenses 20954777 16789086
Financial expenses 43164490 38865365
72569435 63175535
4383207 (420092)
Add: Profit on imported D-Bar 976382 -----
5359589 (420092)
Add: Other Income
Misc. Sales 654827 540424
Profit or losses of sales of car 118672 87045
Rent received 1665849 1379452
2439348 2007011
Net Profit 7798937 1586919
Less: Provision for taxation 3016000 635000
4782937 951919
Add : Loss brought forward from previous year (70498196) (71450115)
(65715258) (70498196)
Add: Short Provision for Taxation in previous (1628071) --
year
Balance Transfer to Balance Sheet (67343329) (70498196)
 RATANPUR STEEL RE-ROLLING MILLS LTD.
CHITTAGONG
COST SHEET
For the year ended 31st December, 2008
Particular 31.12.2008 31.12.2007
(Taka) (Taka)
Opening stock of raw materials 36945540 68512014
Add: Material purchased 1077294165 766533152
1114239705 835045166
Less : Closing stock of raw materials 5921796 36945540
Material consumed 1108317908 798099625
Add: Direct expenses 9413972 7610944
13846155 12076833
Factory overhead
22830346 14484697
Power consumed 15187717 16886385
Gas consumed 1362058 266467
1109692 1613819
Welding gas/ lq. Oxygen consumed 3147219 3343351
Fuel & lubricant 19365979 20664674

Repairs & maintenance of furnace

Store consumed
Cost of production 1194581051 872046799
Add: opening stock of finished goods 56670700 89568000
1251251752 961614799
Less: closing stock of finished goods 80862100 56670700
Cost of sale 1170389652 904944098
 RATANPUR STEEL RE-ROLLING MILLS LTD.
CHITTAGONG
CASH FLOW STATEMENT
For the year ended 31st December, 2008
Particular 31.12.2008 31.12.2007
(Taka) (Taka)
OPERATING ACTIVITIES
Net profit of the year 4760094.44 951919.08
Adjustment for depreciation 11769089.58 12536586.04
Prior year adjustments (1628071.00) (87045.00)
14782441.02 13401460.12
Increased / decreased in:
Inventories 5256231.32 66799315.60
(26742513.72) 17831610.69
Sundry debtors (77768411.89) (28527598.87)
Advances, deposits and payments 88811923.60 (65729041.03)
Current liabilities and provisions (10442770.39) (9615713.61)
A: Net cash flow from Operating Activities. 4339670.63 3785746.51
INVESTING ACTIVITIES:
Addition of fixed assets (8690106.38) (3365285.00)
Sales of fixed assets 235000.00 295500.00
BMRE : Work –in – progress (812305.93) (541587.00)
B: Net cash flow from Investing Activities. (9267412.31) (3611372.00)
FINANCING ACTIVITIES
Share capital 10000000.00 ------
Bank loan (5451816.00) (5099481.00)
Loan to associate company (247286.72) 10046314.20
C: Net cash flow from Financing Activities. 4300897.28 4946833.20
GRAND TOTAL (A+B+C) (626844.00) 5121207.71
OPENING CASH & BANK BALANCE 14174089.45 9052881.74
CLOSING CASH & BANK BALANCE 13547245.05 14174089.45
 NOTES TO ACCOUNTS:

1. SALES
Taka Taka
Sales of Tor Steel 290615597 285048154
Sales of Angles 97411059 68513016
Sales of Deformed Bar 741021712 513224020
Sales of Rod 9912367 12623857
Sales of Coil 5332623 16707255
Sales of Channel 37161269 33374196
Sales of Square Bar 44156111 36376757
Sales of Spring Steel 5424117 1599933
Melting Scrap 5633438 4239909
Sales of Mis Rolls 20810224 6960953
1257478522 978668056
Sales (Local) 1106451628 753566178
Sales(Export) 151026893 225101878
1257478522 978668056
2.
QUANTITY ANALYSIS OF RAW MATERIALS PURCHASE
Consumption , production of finished goods & closing stocks are given
below:
31.12.2008 31.12.2007
M. Tons M. Tons
Bonded stock: Opening Stock ----------- ----------
Receipts : Raw Material 9983.665 5124.650
9983.665 5124.650
Closing Stock ----------- -----------
Transfer to Raw Materials 9983.665 5124.650
Raw Materials:Opening Stock 2517.896 4283.056
Receipts : Imported 9983.665 5124.650
Local 57607.050 47488.580
70108.611 56896.286
Less: Wastage 4184.101 3263.209
65924.510 53633.077
Closing Stock 373.620 2517.896
Manufacturered Goods 65550.890 51115.181

Finished Goods (M.S PRODUCTS)

Opening stock of finished goods 3290.180 4714.123
Manufactured 65550.890 5115.181
68841.070 55829.304
Wastage ------------- -----------
68841.070 55829.304
Closing stock 4324.176 3290.180
Sales 65416.894 52539.124
Accounting concepts that are practiced by
RSRM:

a) Money Measurement Concept:

In accounting, a record is made only of those facts can be
expressed in monetary terms. The advantage of expressing facts in
monetary terms is that money provides a common denominator by
means of which heterogeneous facts about a business can be expressed
in terms of numbers that can be added and subtracted.

b) Business Entity Concepts:

In case of any type of business organization, for accounting
purpose the business is treated as a distinctive individualistic and
independent entity.
RSRM is a private limited company, formed under Company Act 1913.
Every company has a separate business entity.
The accounting equation --- Assets = Liabilities + Capital

c) Going Concern Concept:

The accounting unit is considered to have a life expectancy greater
than that of any assets which it now owns. The assumption always goes
in favour of considering the business to operate for an indefinitely long
period of time.

d) Cost Concept:
A fundamental concept of accounting closely related to the going
concern concept is that an assets is ordinarily entered on the accounting
records at price paid to acquire it that is at its cost and that this cost is the
basis for all subsequent accounting for the assets.
RSRM follows the Historical cost concept,
e) Dual aspect concept:
Accounting systems are set up in such a way that a records is
made of two aspects of each event that affect these records and essence
this aspects are changes in assets and changes in equations. Hence every
transaction brings it corresponding effect on the accounting equation.

f) Accounting Period :
It relatively easy to measure income for the whole life of a
business. Accountant choose some convenient segment of time and they
measure the income for that period of time. The time interval chosen is
called the accounting period.
Accounting period of RSRM is January to December.
 Accounts section of RSRM.

This section of the company is responsible for maintaining all kinds of

accounts. There is a chief accountant, who is the head of the section.
There are seven accounts officer guided by him. RSRM follows a
computerized accounting system. The procedure followed for daily
transactions processing are:

Daily Transactions

Cash
Voucher
Bank

Computer Entry

Computer Processing

Report

Organogram of the Accounting Department.

Chief Accountant

Accoun Accoun Accoun Accoun Accoun Accoun

Books of accounts & register maintained :

The following books of accounts are maintained by RSRM:

1. Journal
2. Ledger
3. Cash book
4. Trial balance
5. Manufacturing A/C
6. Trading A/C and Profit & Loss A/C
7. Balance Sheet
8. Cash Flow Statement

RSRM uses a fully automated accounting system. They follows the

following accounting software to maintain accounts:
1. Accounts Receivable software
2. Accounts Payable software
3. Payroll software
4. General Ledger Accounting software
5. Integrated accounting software
 Analysis of cost sheet: (For the year 2008)

Costs per ton at different levels are calculated below:

1. Cost of Production Per Ton
Total cost of Production
Manufactured goods

Tk .1194581051 .36
= 65550.890

= Tk. 18223.72

2. Raw Material Consumed Per Ton

Total cost of sales

Manufactured units

Tk .1108317908 .98
= 65550.890

= Tk. 16907.75

3. Direct Expenses per Ton

Direct Expenses
Manufactured goods

Tk .9413972.42
= 65550.890

= Tk. 143.61

4. Factory overhead per Ton

Factory Overhead
Manufactured goods

Tk .13846155.01
= 65550.890

= Tk. 2113.62
5. Power Consumed Per Ton
 Power consumed
Manufactured goods

Tk .22830346.01
= 65550.890

= Tk. 348.28

6. Gas Consumed Per Ton

Gas Consumed
Manufactured goods

Tk .15187717.85
= 65550.890

= Tk. 231.69

7. Welding Gas (Liquid Oxygen) Consumed Per Ton

Welding Gas Expenses

Manufactured goods

Tk .1362058.41
= 65550.890

= Tk. 20.77

8. Fuel And Lubricant Per Ton

Fuel and Lubricant expenses

Manufactured goods

Tk .1109692.95
= 65550.890

= Tk. 16.93

9. Stores Consumed Per Ton

 Store Consumed
Manufactured goods

Tk .19365979.89
= 65550.890

= Tk. 295.43

10. Cost of Sales Per Ton

Total cost of sales

Sales in Ton

Tk .1170389652 .10
= 64516.894

= Tk. 18140.83

After studying the cost structure of the company the following

overhead ratio are found:
1. Percentage of factory overhead to total cost:

Factory Overhead
 100
Total Cost of Production
13846155.01
=  100
1194581051.36
= 1.16%

2. Percentage of administrative expenses to total cost

Administrative Expenses
 100
Total Cost of Production
8450167.92
=  100
1194581051.36

= 7.07%
3. Selling and distribution expenses
Selling and Distribution Expenses
 100
Cost of Sales
20954777.75
=  100
1170389652.10
= 1.80%

4. Financial Expenses on total cost

Financial Expenses
 100
Total Cost
43164490.06
=  100
1194581051.36

= 0.36%

The comparative analysis of overhead to total cost shows that the

administrative expenses is the greatest figure among the other overhead.
But this expenses is not too much. So it can be said that the financial
performance is well and the company is expert in controlling
management expenses.
 Analysis of Inventory Control

The concept of inventory control :

Inventory refers to the physical stock of goods which through
remain idle in a store but is essential for smooth sailing of the company
and hence has economic value. Inventory control denotes regulating the
availability of materials of right quality and quantity, thereby ensuring
maintenance of adequate but not excessive materials at all time to
maintain an economic and under flow of production and sales to ensure
minimum blocking of capital. It is very essential for effective production
and financial control. The aim of inventory control is to facilitate
production and commercial type at a minimum cost.
Inventory control involves three major means:- (1) planning the
inventory operations, (2) fixing responsibility for performance and (3)
measuring the results. Proper inventory control will reduce costs arising
from the faults in planning and execution or inventory functions.
Inventory planning and control use of special important to each of the
functional areas in the organization’s sales production, marketing and
finance. Inventory includes not only the control of the physical goods
owned by an organization but also the control of the amount of funds
which is invested in inventories of each type.

1. Importance of controlling inventory:

The major aims and objective of inventory control should be as follows:
1. To provide a supply of required material for uninterrupted
operations.
2. To assure an adequate inventory for prompt delivery to customers.
3. To avoid excessive consumption of supplies and to control
wastage.
 4. To keep in active surplus and absolute items to a minimum by
systematic reporting of product changes.
5. To maintain the amount of capital invested in inventories at a
level consistent with operating requirements and the management
pleas.
6. To store materials for the shortest possible span of time with a
minimum of costs and protect them from loss, theft, damaged and
the like.

2. Inventory Principles:
These basic assumption regarding objectives / importance of
inventory control leads to the following inventory principles for
manufacturing concerns:
1. the highest degree of utilization of material is achieved by
providing the required quantity, quality and conditions of those
materials at the required time and place.
2. authority and responsibility for inventory management should be
entrusted to the enterprise.
3. increasing material turnover reduces the expenses of material
control.
4. inventory policies and procedures should be formulated and
initiated prior to the exercise of the control functions.

3. Methods of inventory control:

There are three methods of controlling inventory, such as –
A. Physical control
B. Stock verification , and
C. Budgetary control
These are discussed below:

A. Physical control:
 Physical control inventory is one of the most important function in
the inventory management. For physical control of stores it is
essential that material of correct quantity is available as and when
required with due attention to economy in storage. The work involves
the following process:
a) assessing the items to be held in stock
b) determining the extent of stock holding.
c) Regulating the impact of stock holding.
d) Controlling the issue of stock from the store houses.
The following conditions are essential for effective physical control
a) area of responsibility should be specified and identified.
b) Storage facilities should be adequate.
c) Accounting records should be efficient.
d) Proper identification and coding system should be installed.
There are two process in this method :
a) control through coding
there are several methods of codification in use. But the following are
commonly used-
Alphabetical system:
Under this system , the first alphabet of the name of the material is the
starting point of codification.
Numerical system:
This System Is Based on number rather than alphabet. The numbers are
allotted as codes and the numbering may be simple number , block
number or stock number.
Combination of numerical and alphabetical system:
This system is a mixture of both the system alphabetic and numeric. The
system has the merits of the two systems.
 Level of Control:
One of the basic methods of controlling stock by quantity is level
control. Stock levels are marked on the stock records and subsequently
used as a means of indicating when action is necessary. As a planning
function the management decides well in advance what quantities of raw
materials should be maintained decisions with regard to the quantity of
materials to be stocked are reached after considering the lead time,
investment in inventories, storing capacity, consumption, nature of
material, market condition, cost of storage, economic order quantity, and
risk of loss due to bailing price, depreciation, obsolescence etc. There
are various kinds of stock levels but fundamental among them are
minimum, ordering and maximum level.

Maximum level.
This is the level beyond which stock should not be maintained. The main
object is to avoid overstocking and thereby using working capital in a
proper way.
The formula to ascertain maximum level of store is:
Reorder level + reorder quantity – (Minimum consumption
during the period × minimum time required for delivery)

Maximum stock level of RSRM are 2000 tons

Minimum level:
This is the level below which the stock of an item should not fall. This is
also known as safety stock or buffer stock.
The formula for calculating reorder level is :
Reorder Level – (Normal Consumption ×Average Lead
Time)
Minimum stock level of RSRM are 1400 tons
Reorder level:
It is the point fixed between maximum and minimum stock level at
which it is necessary to initiate purchase requisitions for fresh supplies.
The formula to find out this level is :
Maximum consumption per day/week / month × maximum
period required for delivery.
Reorder stock level of RSRM are 1600 tons

Danger level:
It is generally fixed below the minimum level.
There are no danger stock level in RSRM.

B. Stock Verification:

Stock verification is a process of physical counting or weighing the

entire range of items in the stores and recording the results in a
systematic manner. The physical inventory may be taken periodically or
continuously.
There are three processes in this method:

1. ABC Analysis: ABC analysis means in any series of elements would

always account for a large fractions in terms of effect. In such
classifications, inventories are classified into A, B and C according to
value. ‘A’ contains the higher value item, ‘B’ medium and ‘C’ low
value items. This techniques of stock control is also known as stock
control according to value method or always better control method or
proportional parts value analysis method.

2. Annual Physical Inventory:

Under this method inventory is taken at the end of a particular period or
when reorder point is reached. Under this method it is necessary to make
a special end of the year count of slow moving items. The physical
inventory on such items serves as a means of analyzing inventory for
obsolete materials.

3. Perpetual Inventory System:

This system maintains a detailed daily inventory record throughout the
period for each items stocked. Under this system, inventory record
includes opening inventory , purchase, issues and a continuous balance
of inventory.

C. Budgetary control:
Budgetary control involves setting of standard, comparison between the
actual and standard and taking of corrective action. Where complete
budgetary control is in operation the inventory control will be integrated
these with and will be a part of the total system. It is a system of
planning and controlling cost.

1. Inventory Turnover Ratio:

The inventory turnover ratio is based on the relationship between sales
and closing inventory. The ration of net annual sales to average
inventory reflects the turnover. The higher the inventory turnover rate
the greater is the volume of business. The lower the turnover the higher
is the risk of loss through price decline and changes is demand.

2. Raw Material Inventory Turnover ratio:

The purpose of calculating this ratio is to determining whether capital is
necessary tied up in raw material inventory. Taw materials turnover ratio
has been calculated as:
Cost of raw materials consumed
Average raw materials inventory
3. Work–in-progress Turnover Ratio:
It is calculated for the purpose of monitoring effectiveness of inventory
management.

4. Finished goods inventory turnover ratio:

It measures the number of times inventories turnover in a particular
period for making the sales . Finished goods turnover ratio has been
calculated as:

Cost of goods sold

Average finished goods at cost.

5. Inventory Financing
Inventory management denotes not only the ownership of the physical
goods but also the amount of funds which raw invested in inventory.
Financial management is vitally connected with the aspects of funds
invested in inventory, since it is responsible for the efficient use of the
firms capital. As such, it is essential too manage inventories efficiently
so as to avoid unnecessary investment in them.

RSRM uses MS Bellet as raw material purchased from Meghna

Engineering Ltd. This raw material is processed by fully automated
machine and final products are produced as different types of Rods.
Storehouse maintains the maintenance parts of machinery.

The controlling of inventories assured that, the result of inventory

planning correspond to the inventory objectives. It is, therefore,
necessary that each step in inventory process is checked against the
established standards, and that in case of any deviations immediate
actions are taken to correct the situation.
Organization for the inventory control functions:
Organization means assembling of resources both human and non-
human to achieve organizational objects. For examining inventory
control system in RSRM we have visited the factory and its warehouse.
Functions of the factory are described as follows:

Planning departments:

Planning process

Annual sales estimates

Budgeting

Rolling sales plan

Procurement plan

Lead time Minimum Order Safety Stock

Quantity
Material issued for production:-
1. LIFO : The company follow the LIFO (last in first out)
method in issuing raw material from store house.
2. Daily issue : The company issued raw materials in daily
basis.
3. Issue note : There are 2 copies of issue note are prepared.
One for store department and other for respective dept.
4. Posting in Bin card / stock card : material issued are
recorded for first in the Bin Card.
5. Weekly summary : a weekly summary is prepared for
determining the weekly consumption of material.
 Limitation of RSRM

Since RSRM is a private limited company, it has some shortage in

recording inventory. In fact the company does not maintain any
systematic manner in recording inventory. So the data and information
that are found in respect to inventory management are not sufficient. So
a lot of problems are faced in collecting data and preparing the report.
The company faces the following limitations:
1. In respect of cost structure:
 They have no separate costing department. This department
is controlled by accounting department.
 Cost sheet is not prepared in systematic manner
 Overhead are not allocated in proper basis
 Headwise cost are not shown in cost sheet

2. In respect of inventory control:

 Warehouse are scattered
 Lack of basic model for proper inventory control
 Lack of maintaining level
 Absence of ABC analysis
 The company does not follow EOQ method, as a result the
company have to bear a lot of money for inventory
management.
 Recommendation

We have worked with them and visited the factory. We have studied
their books, their inventory system , production procedure, costing and
accounting system.
I think my best that RSRM can follow the following recommendation
for their better performance in all levels:
1. Introduce a separate MIS division to get the available information
needed.
2. Set up a separate costing division for determining the cost of
product.
3. They should use EOQ method in estimating the required raw
material.
4. Factory space should expanded for containing rapid production
process.
5. Maintain proper financial report for future planning.
 Analysis of financial statements

1. Gross Profit Ratio:

Gross Profit
 100
Net Sales
76952642.92
=  100
1257478522.06
= 6.12%

2. Net Profit Ratio

Net Profit
 100
Net Sales
7798937.00
=  100
1257478522.06

= 0.62%

3. Operating Ratio
Cost of Goods Sold  Operating Exp.
 100
Net Sales
11778839820
=  100
1257478522.06

= 93.74%

4. Stock Turnover Ratio

Cost of Goods Sold

Average Stock

1170389652 .10
= 68766400.00

= 17 Times

5. Fixed Assets Turnover Ratio

Net Sales
Net Fixed Assets
 1257478522106
= 52195389.57

= 24.09 Times

6. Assets Turnover Ratio

Gross Sales
Total Assets
1257478522.06
= 495908667.80

= 2.54

7. Current Ratio
Current Assets
Current Liabilities
432442151106
= 531183499.73

= 0.81
8. Proprietor Ratio
Proprietors fund
Total Assets
24171970.96
= 32068497.81

= 0.075

9. Debt-Equity Ratio
Outside Liabilities
Proprietors Fund

7896526.85
= 24171970.96

= 0.33

10. Capital Gearing Ratio

Equity Share Capital  Undistributed Profit
Fixed interest Bearing Securities

24171971
= 7896526.85

= 3.06
11. Fixed Asset Ratio
Fixed Assets
Proprietor' s Fund

52195389.57
= 24171970.96

= 2.16

12. Proprietor's Fund to Total Liabilities

Proprietor' s Fund
Total Liabilities
24171970.96
= 32068497.81

= 0.75

13. Return on Investment(ROI)

Net Profit After Tax  Interest

 100
Owned Capital  Loan Capital

4782937.77
=  100
20796526.85

= 23%
 Significance of the Ratios
The analysis of the financial statements of the RSRM shows the
following significance:
1. The Gross Profit Ratio is 6.12% which shows that the gross profit is
not satisfactory. The standard ratio is 20% to 30% for such industry.
So the G. P. Ratio of the company is below standard.
2. The net profit ratio is very small i.e. 0.62%. Hence
the overall profitability is not satisfactory.
3. The Operating Ratio is 93.74%. The operating is in
satisfactory level and the operating expenses are under control.
4. Stock Turnover ratio is well. It means the company
has good selling efforts.
5. Fixed Assets Turnover ratio is satisfactory , i.e.
24.09 times.
6. Assets Turnover Ratio is not quite satisfactory.
7. The Current Ratio is 0.81, this means, the company
has little ability to pay current liabilities from current assets.
8. Proprietary Ratio is not satisfactory.
9. Debt-Equity Ratio is not satisfactory.
10. Capital Gearing Ratio is satisfactory according to
standard rate.
11. Fixed Asset ratio is well.
12. Proprietor's Fund Ratio is not satisfactory.
13. The company earns a satisfactory ROI. i.e. 23%. It
is a good return on investment.
Conclusion

RSRM is a well reputed company in Bangladesh. it manufactured

goods are highly demandable.
Export quality goods are manufactured in the organization. Its product
have highly demand not only in Bangladesh but also in abroad, specially
TOR STEEL Rod is only product that is produced in RSRM. Recently
the company is going to install a BMRE Project that will be more
powerful than existing one. If the project can be successfully competed,
the production capacity will be expanded.
Though there was some deficiencies in collecting information from the
company, we were able to know about the practical aspect which help to
build our career in business arena. We came to know about practical
records maintained by the company with the help of cordial guidance of
chief accountant. We believe that the experience that we gather from the
company will be helpful in our practical life.
 Bibliography

1. C.R. KOTHARY: Quantitative Techniques, Vikas Publishing

house Pvt. Ltd. New Delhi 1978 p.202
2. Annual Report , year book, documents, journals of RSRM
3. Mukherjee S.K. "Focus and highlight on inventory management
and a Break through in inventory control in Railways" The
management Accountant, volume 13.no.3, p.225
4. Beauty, H. Russel, Principles of Industrial Management, The
Ronald Press, New York, 1951
5. Spriegel, William R. and Lanshburgh, Richard H. Industrial
Management, the practical hand book of current Business Theory
and practice, New York, John Wiley and sons, INC, 1970.
pp.33.1-33.2
6. Martz . A. and Usry, M.F. Cost Accounting. Planning and
Control: India, D.B. Taraporaeval sons(pvt.)Ltd. 1982, Pp. 382
7. Albord, L.Pand Beatty. H. Russel, OP.Cit., Pp.319.
8. Jain , S.P. and Narang, K.L. Cost Accounting. New Delhi.
9. M.M. Khan, Advanced Accounting
10.Monilal Das, Management Accounting
 Table of contents

Title Page No.

A. Introduction:
1. Objectives of the study 1
2. Methodology of the study 2
3. Scope of the study 3
4. Limitation of the study 4
5. Executive Summary 5
6. Relevant information 6

B. Findings and their analysis

1. Introduction of RSRM 7
2. Organogram of RSRM 8
3. Product pattern and their description 9
4. Financial statements of RSRM 10-16
5. Accounting Concept – practiced by RSRM 17-18
6. Accounts section of RSRM 19
7. Books of Accounts and Register maintained 20
8. Analysis of cost sheet 21-24
9. Analysis of inventory control 25-27
10. Level of control 28-31
11. Organization for the inventory control functions 32
12. Material issued for production 33
13. Limitation of RSRM 34
14. Recommendation 35
15. Analysis of financial statement 36-38
16. Significance of the ratio 39
17. Conclusion 40
17. Bibliography 41
INTERNSHIP REPORT
ON

COST STRUCTURE AND INVENTORY

CONTROL
OF
RATANPUR STEEL RE-ROLLING MILLS LTD.

SUPERVISED BY
MR. BAZLUR RAHMAN
ASSISTANT PROFESSOR
DEPARTMENT OF MARKETING STUDIES
AND INTERNATIONAL MARKETING
UNIVERSITY OF CHITTAGONG

PREPARED BY

MD.ALAUDDINKAIUM
EXAM. ROLL NO. 2007/70
CLASS ROLL NO. 15096
SESSION : 2006-2007
DEPARTMENT OF MARKETING STUDIES
AND INTERNATIONAL MARKETING
UNIVERSITY OF CHITTAGONG.

DATE OF SUBMISSION: JULY 25, 2009.

 Letter of Submission

Date : July 25, 2009

To
Assistant professor Md. Bazlur Rahman
Department of Marketing Studies & International Marketing
University of Chittagong
Chittagong

Subject: Submission of the Internship Report.

Dear Sir;
I am pleased to inform you that I have completed the internship report in
compliance with your skillful guidance.

I intend to submit the internship report for your kind perusal with hearty
consideration.

Your sincerely

_____________________________
Md. Alauddin Kaium
Class roll: 15096
REG-10826
Exam roll: 2007/70
Session : 2006-2007
Department of Marketing Studies &
International Marketing
University of Chittagong
 Preface
Modern business is very challenging. As an MBA student every
one must have to gather practical knowledge about this challenging
business. After completion of MBA program one must have to
introduce with the practical field in order to be a successful career
builder. Without practical knowledge one cannot take a challenging
profession. Internship program is one of the most important thing that
can help a student to compare his theoretical knowledge with the
practical aspects. A perfect co-ordination between theory and practice is
of paramount importance in the context of modern business world. In the
global and international market one have to face a lot of challenges and
complexities. In order to get a clear idea about these challenges and
complexities one must have to gather practical knowledge in the global
business arena. There are far differences between theoretical and
practical knowledge. In order to resolve the dichotomy between these
two areas, the department of accounting of chittagong university
arranges internship program as a part of final examination in MBA
course. This program brings students to the business practical and
thereby help them to substantiate their knowledge to build up a
successful career. Under the internship program every student is attached
to an organization with a view to achieve practical knowledge. Each
student is required to prepare a report on the selected organization under
the guidance of his / her co-coordinator and the report should be
approved by the examination committee before awarding MBA degree.
 Acknowledgement

As a part of MBA program this study has been completed under

the direct supervision of honourable reverent teacher assistant Professor
Md.Bazlur Rahman, Department of Marketing studies, University of
Chittagong . At first, I would like to express my deep hearted gratitude
to him for his valuable advice and suggestions to prepare the report
successfully. I strongly acknowledge the efforts of our internship
program’s co-ordinator and respectful teacher Assistant
ProfessorMd.Bazlur Rahman
I specially thanks Manager (HRM) of RSRM for giving me valuable
time and deliberate co-operation. Its my pleasure to thanks Senior
Officer and other executives of RSRM, for their deliberate and cordial
co-operation to complete this studies successfully.