CHAPTER - I

INTRODUCTION

Introduction

In management accounting, cost accounting is that part of management

accounting which establishes budget and actual cost of operations, processes,

departments or product and the analysis of variances, profitability or social use

of funds. Managers use cost accounting to support decision making to reduce a

company's costs and improve its profitability. As a form of management

accounting, cost accounting need not follow standards such as GAAP, because

its primary use is for internal managers, rather than external users, and what to

compute is instead decided pragmatically.

Costs are measured in units of nominal currency by convention. Cost

accounting can be viewed as translating the Supply Chain (the series of events in

the production process that, in concert, result in a product) into financial values.

There are at least four approaches:

 Standardized Cost Accounting

 Activity-based Costing

 Throughput Accounting

 Marginal Costing / Cost-Volume-Profit Analysis

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Classical Cost Elements are:

1. Raw Materials

2. Labor

3. Indirect Expenses / Overhead

Origins

Cost accounting has long been used to help managers understand the costs

of running a business. Modern cost accounting originated during the industrial

revolution, when the complexities of running a large scale business led to the

development of systems for recording and tracking costs to help business owners

and managers make decisions.

In the early industrial age, most of the costs incurred by a business were

what modern accountants call "variable costs" because they varied directly with

the amount of production. Money was spent on labor, raw materials, power to

run a factory, etc. in direct proportion to production. Managers could simply

total the variable costs for a product and use this as a rough guide for decision-

making processes.

Some costs tend to remain the same even during busy periods, unlike

variable costs which rise and fall with volume of work. Over time, the

importance of these "fixed costs" has become more important to managers.

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Examples of fixed costs include the depreciation of plant and equipment, and the

cost of departments such as maintenance, tooling, production control,

purchasing, quality control, storage and handling, plant supervision and

engineering. In the early twentieth century, these costs were of little importance

to most businesses. However, in the twenty-first century, these costs are often

more important than the variable cost of a product, and allocating them to a

broad range of products can lead to bad decision making. Managers must

understand fixed costs in order to make decisions about products and pricing.

For example: A company produced railway coaches and had only one product.

To make each coach, the company needed to purchase Rs.60 of raw materials

and components, and pay 6 laborers Rs.40 each. Therefore, total variable cost for

each coach was Rs.300. Knowing that making a coach required spending Rs.300,

managers knew they couldn't sell below that price without losing money on each

coach. Any price above Rs.300 became a contribution to the fixed costs of the

company. If the fixed costs were, say, Rs.1000 per month for rent, insurance and

owner's salary, the company could therefore sell 5 coaches per month for a total

of Rs.3000 (priced at Rs.600 each), or 10 coaches for a total of Rs.4500 (priced

at Rs.450 each), and make a profit of Rs.500 in both cases.

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Standard Cost Accounting

In modern cost accounting, the concept of recording historical costs was

taken further, by allocating the company's fixed costs over a given period of time

to the items produced during that period, and recording the result as the total cost

of production. This allowed the full cost of products that were not sold in the

period they were produced to be recorded in inventory using a variety of

complex accounting methods, which was consistent with the principles of

GAAP. It also essentially enabled managers to ignore the fixed costs, and look at

the results of each period in relation to the "standard cost" for any given product.

This method tended to slightly distort the resulting unit cost, but in mass-

production industries that made one product line, and where the fixed costs were

relatively low, the distortion was very minor.

An important part of standard cost accounting is a variance analysis which

breaks down the variation between actual cost and standard costs into various

components (volume variation, material cost variation, labor cost variation, etc.)

so managers can understand why costs were different from what was planned and

take appropriate action to correct the situation.

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Weaknesses of Standard Cost Accounting for Management Decision

Making

As time went on, standard cost accounting lost its usefulness for

management decision making due to a variety of reasons:

 The practice of paying workers on a 'set-piece' basis changed in favour

of paying on an hourly rate.

 Modern companies tend to have relatively low truly variable costs

(primarily raw material, commissions or casual workers) and very high

fixed costs (worker salaries, engineering costs, quality control, etc.).

 Equipment has become more complex and specialized and may be a

very significant proportion of total costs.

 Changes in the level of full cost inventory create swings in profitability

that are difficult to explain or understand. An increase in inventory can

"absorb" costs of production and increase profits, while a decrease in

inventory level will decrease profits.

 Organizations with a wide range of products or services have

processes which are common to several finished items, making cost

allocation irrelevant or misleading.

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 As a result of the above, using standard cost accounting to analyze

management decisions can distort the unit cost figures in ways that can lead

managers to make decisions that do not reduce costs or maximize profits. For

this reason, managers often use the terms "direct costs" and "indirect costs" to

replace the standard costing, to better reflect the way allocation of overhead is

actually calculated. Indirect costs (often large) are usually allocated in proportion

to labor cost, other direct costs, or some physical resource utilization.

For example: If the railway coach company now paid its workforce a

fixed monthly rate of Rs.8,000 (total) and its other fixed costs had risen to

Rs.2,600/month, the total fixed costs would then be Rs.10,600/month. The unit

cost to make 40 coaches per month would still be Rs.325 per coach (Rs.60

material + (Rs.10,600/40)), but producing 100 coaches would result in a unit cost

of Rs.166 per coach (Rs.60 + (Rs.10, 600/100)), provided the company had the

capacity to increase production to that level.

Managers using the standard cost for 40 coaches per month would likely

reject an order for 100 coaches (to be produced in one month) if the selling price

was only Rs.300 per unit, seeing that it would result in a loss of Rs.25 per unit. If

they analyzed the fixed vs. variable cost distinction, they would see clearly that

filling this order would result in a contribution to fixed costs of Rs.240 per coach

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(Rs.300 selling price less Rs.60 materials) and would result in a net profit for the

month of Rs.13,400 ((Rs.240 x 100) - 10,600).

The Development of Throughput Accounting

As business became more complex and began producing a greater variety

of products, the use of cost accounting to make decisions to maximize

profitability came under question. Management circles became increasingly

aware of the Theory of Constraints in the 1980s, and began to understand that

"every production process has a limiting factor" somewhere in the chain of

production. As business management learned to identify the constraints, they

increasingly adopted throughput accounting to manage them and "maximize the

throughput dollars" (or other currency) from each unit of constrained resource.

For example: The railway coach company was offered a contract to make

15 open-topped streetcars each month, using a design which included ornate

brass foundry work, but very little of the metalwork needed to produce a covered

rail coach. The buyer offered to pay Rs.280 per streetcar. The company had a

firm order for 40 rail coaches each month for Rs.350 per unit.

The company accountant determined that the cost of operating the

foundry vs. the metalwork shop each month was as follows:

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 Overhead Cost by Hours Available per
Total Cost Cost per hour
Department month
Foundry Rs. 7,300.00 160 Rs.45.63
Metal shop Rs.3,300.00 160 Rs.20.63
Total Rs.10,600.00 320 Rs.33.13

The company was at full capacity making 40 rail coaches each month.

And since the foundry was expensive to operate, and purchasing brass as a raw

material for the streetcars was expensive, the accountant determined that the

company would lose money on any streetcars it built. He showed an analysis of

the estimated product costs based on standard cost accounting and

recommended that the company decline to build any streetcars.

Standard Cost Accounting Analysis Streetcars Rail coach

Monthly Demand 15 40
Price Rs.280 Rs.350
Foundry Time (hrs) 3.0 2.0
Metalwork Time (hrs) 1.5 4.0
Total Time 4.5 6.0
Foundry Cost Rs.136.88 Rs.91.25
Metalwork Cost Rs.30.94 Rs.82.50
Raw Material Cost Rs.120.00 Rs.60.00
Total Cost Rs.287.81 Rs.233.75
Profit per Unit Rs.(7.81) Rs.116.25

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 However, the company's operations manager knew that recent investment

in automated foundry equipment had created idle time for workers in that

department. The constraint on production of the rail coaches was the metalwork

shop. She made an analysis of profit and loss if the company took the contract

using throughput accounting to determine the profitability of products by

calculating "throughput" (revenue less variable cost) in the metal shop.

Throughput Cost Accounting

Decline Contract Take Contract
Analysis
Coaches Produced 40 34
Streetcars Produced 0 15
Foundry Hours 80 113
Metal shop Hours 160 159
Coach Revenue Rs.14,000 Rs.11,900
Streetcar Revenue Rs.0 Rs.4,200
Coach Raw Material Cost Rs.(2,400) Rs.(2,040)
Streetcar Raw Material Cost Rs.0 Rs.(1,800)
Throughput Value Rs.11,600 Rs.12,260
Overhead Expense Rs.(10,600) Rs.(10,600)
Profit Rs.1,000 Rs.1,660

After the presentations from the company accountant and the operations

manager, the president understood that the metal shop capacity was limiting the

company's profitability. The company could make only 40 rail coaches per

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month. But by taking the contract for the streetcars, the company could make

nearly all the railway coaches ordered, and also meet all the demand for

streetcars. The result would increase throughput in the metal shop from Rs.6.25

to Rs.10.38 per hour of available time, and increase profitability by 66 percent.

Activity-based costing

Activity-based costing (ABC) is a system for assigning costs to products

based on the activities they require. In this case, activities are those regular

actions performed inside a company. "Talking with customer regarding invoice

questions" is an example of an activity performed inside most companies.

Accountants assign 100% of each employee's time to the different

activities performed inside a company (many will use surveys to have the

workers themselves assign their time to the different activities). The accountant

then can determine the total cost spent on each activity by summing up the

percentage of each worker's salary spent on that activity. A company can use the

resulting activity cost data to determine where to focus their operational

improvement efforts. For example, a job based manufacturer may find that a

high percentage of their workers are spending their time trying to figure out a

hastily written customer order. Via ABC, the accountants now have a currency

amount that will be associated with the activity of "Researching Customer Work

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Order Specifications". Senior management can now decide how much focus or

money to budget for the resolutions of this process deficiency. Activity-based

management includes (but is not restricted to) the use of activity-based costing to

manage a business.

Marginal Costing

This method is used particularly for short-term decision-making. Its

principal tenets are:

 Revenue (per product) - Variable Costs (per product) = Contribution

(per product)

 Total Contribution - Total Fixed Costs = Total Profit or (Total Loss)

Thus it does not attempt to allocate fixed costs in an arbitrary manner to

different products. The short-term objective is to maximize contribution per unit.

If constraints exist on resources, then Managerial Accounting dictates that

marginal cost analysis be employed to maximize contribution per unit of the

constrained resource.

Concepts

Full cost accounting embodies several key concepts that distinguish it

from standard accounting techniques. The following list highlights the basic

tenets of FCA.

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 4. Accounting for costs rather than outlays

5. Accounting for hidden costs and externalities

6. Accounting for overhead and indirect costs

7. Accounting for past and future outlays

8. Accounting for costs according to lifecycle of the product

1. Costs rather than outlays

An outlay is an expenditure of cash to acquire or use a resource. A cost is

the cash value of the resource as it is used. For example, an outlay is made when

a vehicle is purchased, but the cost of the vehicle is incurred over its active life

(e.g., 10 years).

2. Hidden costs

With FCA, the value of goods and services is reflected as a cost even if no

cash outlay is involved. One community might receive a grant from a state, for

example, to purchase equipment. This equipment has value, even though the

community did not pay for it in cash. The equipment, therefore, should be valued

in an FCA analysis.

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3. Overhead and indirect costs

FCA accounts for all overhead and indirect costs, including those that are

shared with other public agencies. Overhead and indirect costs might include

legal services, administrative support, data processing, billing, and purchasing.

4. Past and future outlays

Past and future cash outlays often do not appear on annual budgets under

cash accounting systems. Past (or upfront) costs are initial investments necessary

to implement services such as the acquisition of vehicles, equipment, or

facilities. Future (or back-end) outlays are costs incurred to complete operations

such as facility closure and post closure care, equipment retirement, and post-

employment health and retirement benefits.

Inventories constitute the most significant part of current assets of a large

majority of companies in India. On average, inventories are approximately 60

per cent of current assets in public limited companies in India. Because of the

large size of inventories maintained by firms, a considerable amount of funds is

required to be committed to them. It is therefore, absolutely imperative to

manage inventories efficiently and effectively in order to avoid unnecessary

investment. A firm neglecting the management of inventories will be

jeopardizing its long-run profitability and may fail ultimately. It is possible for a

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company to reduce its levels of inventories to a considerable degree, e.g., 10 to

20 per cent, without any adverse effect on production and sales, by using simple

inventory planning and control techniques. The reduction in „excessive‟

inventories carries a favorable impact on a company‟s profitability.

Inventories are stock of the product a company is manufacturing for sale

and components that make up the product. The various forms in which

inventories exist in a manufacturing company are; raw materials.

Raw materials are those basic inputs that are converted into finished

product through the manufacturing process. Raw materials inventories are those

units, which have been purchased and stored for future productions.

Need To Hold Inventories

The question of managing inventories arises only when the company

holds inventories. Maintaining inventories involves typing up of the company‟s

funds and incurrence. Why do companies hold inventories? There are three

general motives for holding inventories.

A company should maintain adequate stock of materials for a continuous

supply to the factory for an uninterrupted production. It is not possible for a

company to procure raw materials whenever it is needed. A time lag exists

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between demand for materials and its supply. Also, there exists uncertainly in

procuring raw materials in time on many occasions. The procurement of

materials may be delayed because of such factors as strike, transport distribution

or short supply.., Therefore, the firm should maintain sufficient stock of raw

materials at a given time to streamline production. Other factors, which

may necessitate purchasing and holding of raw materials inventories, are

quantity discounts and anticipated price increase. The firm may purchase large

quantities of raw materials than needed for the desired production and sales

levels to obtain quantity discounts of bulk purchasing. At times, the firm would

like to accumulate raw materials in anticipation of price rise.

An effective inventory management should.

 Ensure a continuous supply of raw materials to facilitate to facilitate

uninterrupted Production,

 Maintain sufficient stocks of raw materials in periods of short supply and

anticipate price change,

 Maintain sufficient finished goods inventory for smooth sales operation,

and efficient customer service,

 Minimize the carrying cost and time, and

 Control investment in inventories and keep it at an optimum level.

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Determining an optimum inventory level involves two types of costs:

a) Ordering Costs and

b) Carrying Costs.

Ordering Costs

The term ordering costs is used in case of raw materials (or supplies) and

includes the entire costs of acquiring raw materials. They include costs incurred

in the following activities; requisitioning, purchase ordering, transporting,

receiving, inspecting and storing (store placement). Ordering costs increase in

proportion to the number of orders placed, and one view is that so long as they

are argued that as the number now can be used in other department.

Thus, these costs may be included in the ordering costs. It is more

appropriate to include clerical and staff costs on a pro rata basis.

Ordering costs increase with the number of order; thus the more

frequently inventory is acquired, the higher the firm‟s ordering costs. On the

other hand, if the firm maintains large inventory levels, there will be few orders

placed and ordering costs will be relatively small. Thus ordering costs decrease

with increasing size of inventory.

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Inventory Turnover Ratio

Kohler defines inventory turnover as “a ratio, which measures the number

of times a firm‟s average inventory is sold during a year”. In the view, this ratio

is considered to be a rough indicator of a firm‟s inventory management

efficiency.

Computation of inventory turnover ratios for different items of materials,

and comparison of the turnover rates provide a useful guidance for measuring

inventory performance. A low locking up of working capital on undesirable

items. Inventory turnover ratio may be calculated in different ways by changing

the numerator, but keeping the same denominator. For instance, the numerator

may be materials consumed, cost of goods sold or sales. Based on any one of

these, the ratio differs from industry to industry.

Inventory or stock turnover is measured in terms of the ratio of the value

of materials consumed to the average inventory during the period. The ratio

indicates the number of times the average inventory is consumed and

replenished. By dividing the number of days in a year by held, can be

ascertained.

Comparing the number of days in the case of two different materials, it is

possible to know which is fast moving and which is slow moving. On the basis,

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attempt may be made to reduce the amount of capital locked up, and prevent

over stocked of slow moving items.

Input-Output Ratio Analysis

Inventory control may also be exercised by the input-output ratio analysis;

input-output ratio is the ratio of the quantity of input of material to production

and the stand material content of the actual output. In the case of industries in

which both the raw materials and finished product are capable of begin

expressed in the same quantitative measurement such as kg. Metric tones, etc.,

the material input may be compared with the standard materials content of the

output in order to know whether the input is effectively made use of. For this

purpose, it is necessary to subject both material and finished products to quality

control test.

This type of analysis enabling comparison of actual consumption and

standard consumption indicates whether the usage of materials is favorable or

adverse. Thus the efficiency of operation can be judged indirectly. It is also

possible to find out the cost of raw material in the finished product by

multiplying material cost per unit by input-output ratio.

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Continuous Stocktaking

Stocktaking means physical verification of every item of stores by

counting. Weighing or measuring. Physical verification may be done either

periodically or continuously. Periodic stocktaking necessitates the issue of store

items during the period of physical verification. This in turn, results in

production build-up. Further, trained personnel are required for verification. An,

periodic stork taking lacks the element of surprise check. Be over, stock

discrepancies, if any will be left undetected till the accounting period.

Continuous stock taking overcomes the drawbacks of periodic

stocktaking. Under a system of continuous stocktaking. Under a system of

continuous stocktaking every item or ores is physically verified by trained

personnel who are independent the stores.

They verify every item throughout the year in such a way at each item of

stores gets verified three or four times during the are. Since the stores staff will

not be able to know the particular items stores to be verified, there is an element

of surprise check in this system.

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Advantages

The relative merits of continuous stocktaking may be summarized as

follows:

1) Normal functioning of the production department is not affected.

2) Whole time specialized staff may be appointed for verification

3) It ensured surprise check.

4) Every item gets verified three for four times during the year.

5) Obsolete and slow-moving items can be detected by keeping a close

watch over the movement of stores items.

6) Stores discrepancies are immediately revealed.

7) Corrective action can be taken then and there without having to wait

till the end of the period.

8) Interim financial statements can be prepared.

Inventory Financing

“Inventory financing” in an organization engaged in production activity.

Technically Asset management is given under attention in view of global

competitiveness and free market, total asset of a production company comparator

fixed asset and current assets. The major components of inventory or stock.

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 In nutshell inventory or stock is required to be injected into the business

for ultimate further process and means till they are put into sales bracket and

ultimate realization or stock.

In nutshell inventory or stock is required to be injected into the business

for ultimate further process and means till they are put into sales bracket and

ultimate realization of money.

Thus the concept of Inventory involves.

 Acquiring or buying of desired goods.

 Putting into market processes.

 Sales and realization of cash.

Lead Time

Lead-time is defined as the period, which elapses the recognition of direct

relationships between lead-time and inventory, during lead-time there is no

delivery of material, and the consuming departments are served form the existing

inventories. Both lead-time and consumption rate can the increased without

notice and inventories are generally geared up for this contingency.

As lead time increases, inventories increase correspondingly lead time is

the time taken for identifying the need and placing the order, for procuring from

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suppliers, for shipping transport, receipt and inspection of the items, to the

delivery of finishing production. These are the different types of Lead Time.

Cost of Holding Inventory

Inventories tie up funds they are expose a firm to number of risks and

costs. The inventory problem is one of balancing the various costs. So that the

total cost is minimized. The different costs are material cost, cost of ordering,

holding or carrying the inventory, under stocking cost and Over-Stocking cost.

Re-Order Point

The Re-Order Point indicates when an order should be placed and

depends upon the consumption rate and the duration of lead-time. The simplest

method is to place an order when the inventory is depleted to the lead-time

consumption level. However, an organization will have to take care of the long

lead-time with sufficient initial stock and then follow it up regularly with EOQ

cycles.

Stock

In inventory Control, different terms are used such as safety stock, reserve

stock, buffer stock and so on. The buffer stock provides for normal consumption

during and average lead-time. The reserve stock provides for an increased

consumption rate, while safety for an increasing lead-time.

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Variety Reduction

In organizations, which have to stock innumerable items, it is imperative

to reduce the number of items carried in an inventory number of items,

particularly the different small items that are sparingly used.

In the case of work-in-progress, the increase in varieties may be due to

technical there are also variety increase in output, if an organization policy is to

have as many varieties as possible.

Material Planning

Production plans have to be converted into material plans so that the

quality and time schedule of requirement.

Service Level

The concept of service is mere easily handled than the risk of running out

of stock. The degree of service indicates a percentage of the number of

replenishment orders which arrive without difficulty and make it possible for a

firm to render and adequate service to the customer.

a) Percentage of customer orders, which can be delivered immediately

from stock.

b) Percentage of products, which can be delivered immediately from

stock.

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 c) Percentage of the time during which stock is available.

d) Average waiting time for those customers to who delivery cannot be

made immediately from stocks.

Obsolete Inventory and Scarp

An inventory becomes obsolete of changes in product design or because

of technological changes obsolescence cannot be controlled without a proper

identification of inventories, which might become obsolete from time to time.

No manufacturing system can be cent percent efficient, therefore, there is

bound to some scrap, adapting corrective measures and by proper maintenance

of machines. The salvage of scrap is an art.

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Objective of the study

 To understand the cost accounting management undertaken in the

company.

 To analysis the system of fund administration in the study unit

 To know financial efficiency of the company

 To analysis the capital structure of the company and its effectiveness

in operation

 To offer suggestions for further improvement of the company in the

near future.

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Limitation of the Study

 The study covers a period of five years only, That is from 2017 – 2018 to

2021 – 2022. This research has been contained only to financial

statements available in the company.

 The analysis of past performance of the company can give broad outline

only, it provides the prediction of future only to some extent only. This

study has been made on the basis of information‟s contained in the

financial statement.

 The research has registered the quantitative factors from the financial

statements but failed to the qualitative factors such as reputations, prestige

of the business with public though cannot be measured in terms of money

but for the success of the business.

 The efficiency and loyalty of its employees integrity of the management

etc., which are a equally important for the success of the business, are not

capable of being translated in terms of money, and as such they do not

appear in the financial statement. These factors are not considered in the

study. This study does not considered in the performance of the company

except financial performance.

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 CHAPTER – II

COMPANY PROFILE

Introduction

Coimbatore Spinning& Weaving Mills was started in the year 1888. But

due to certain unforeseen circumstances the functioning of the mills was started

on 27th Sep, 1974. The mill is situated in Coimbatore near the way to

Krishnaswamy mudaliyar Road. The total land and area of the mill is 10 Acres

of Building and land of the company is 50,000 sq.ft. The share capital of the

company is Rs 4800000 Lakhs. The books of accounts are maintained through

double entry systems.

Detailed Profile of the Company

The Coimbatore spinning and weaving mil was established in the year

1888. The mill has an installed capacity of 35060 spindles. The mill was

nationalized by the government of India and mill was managed by National

Textiles corporation limited, New Delhi after corporation (TN & P) Limited,

now mill is again transformed bank to NTC Ltd. New Delhi. It is one of the mills

of NTC Ltd out of 15 units. The company has always emphasizes the need too

maintain high productivity standard. It has highest productivity standards in

respect of spinning and weaving. The mill is producing yarn, ranging from 255

to 62.

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Location

Coimbatore Spinning & Weaving Mill is situated in Somasundaram mill

road. It is in Coimbatore district. The company building and 10 acres of land the

company building is of 50000 sq.ft.

Branches

The head office of the national textile corporation Ltd is suited at New

Delhi it has main branches.

Number of Workers

The mill as on 1st March 2008 has on roll strength of 347 employees. The

MTC general manager is MR. R.Radha Krishna Nayar.

Particulars No. of workers

Workers

- Permanent 308

- Badhies 8

- Apprentices 7

Managerial & 13

Technical

Clerical 26

Total 347

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 The mill‟s General Manager is Mr. S.Udhaya Kumar. The total

Employees strength is 308 and technical staff is 39 . There are 3 shift in a day, it

also produces polyester / cotton, yarn that is 505, 605, P.C for saree, Blouse

Material and shirtings.

Share Capital

Coimbatore Spinning & Weaving Mills is a public limited company with

over 600 share holders and share capital of 3466000Rs Lakhs fully paid up

shares. The total installed capacity35060 spindles it has authorized capital of

2500 Lakhs.

Objective of the Company

Coimbatore spinning and weaving mills, which was found s yearly as in

1888, was nationalized in the year 1974 under this sick textiles undertaking act ,

1974. In our country, next to agriculture, textile industry is the largest sources of

employment engaging 1000 of women. However, during the Mid 21st Century

many textile mills closed down.

Due to mismanagement thus sending 1000 of workers, unemployed.

Hence the government nationalized approximately 46 sick textile mills and

Coimbatore spinning & weaving mills was one among them. The following were

objectives government of nationalizing these.

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  To provide employment to thousands of workers who were rendered

unemployed due to the closure of the textile mills.

 Re-organizing an rehabilitate such sick textile undertaking with a view to

produce the interest of the general public

 Augmentation of production of different varieties of yarn and cloth

 Distribution of the yarn and to at fair price to consumers, power 100m.

Manufacturers, defense personal and uniform materials of employees of

other public sector units.

 At times of nationalization, profit earning was not an objective. But as

times changed , with the introduction of Deli censing policy by the

government of India and signing of the GATT agreement by the Indian

government the textile mills in organized sector had to face still

competitive market from the small sick units, with the globalization of

trade and commerce textile industry had to have competition in the

international market from other countries.

Rules and Regulation of Mill

The mill follows a certified joint standing order dated 30.04.80. The

orders are formed under the industrial employment out of 1936. There order

includes the following:-

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 It includes classification and definition, of workers like permanent,

laborers both temporary, casual and apprentice.

 It also include rules regarding the issue of departmental tickets of worker

man, attendance and late coming date.

 It include rules regarding manner of payment of unclaimed wages, shift

working procedure for the grant of leave to workman , liability for search

and closure of departments.

 It also gives rules regarding laps off workman for causes beyond the

control of management or general manager closure due to sick and

resumption of work after temporary closure.

 It also includes regarding termination of employment of workmen,

liability for workmen to give before voluntary leaving the service out of

omission constituting misconduct like warning, fine with adding

increment, demotion, suspension, dismissal and red verse of grievance

against fair treatment.

 It also gives rules regarding issue of service certificate and retirement.

 There rules and regulation deal elaborately the acts of misconduct,

enquiry proceedings, and disciplinary action for various misconduct

committed by workers.

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 CHAPTER - III
RESEARCH METHODOLOGY
Research Methodology is a science of collecting, identifying and

presenting facts in such a way that it leads to unearthing some truths (or) angles

of reality. Research in common parlance refers to search for knowledge. In fact,

research is an art of scientific investigation. Research Methodology is the

science of collecting, identifying and presenting facts in such a way that it leads

to unearthing some truth or angles of reality.

Scope

The study could be conducted to understand the various costs in the

company and the relationship between costs and profitability areas etc. Still

effective working of the company can be understood and worked. Cost

accounting Management, Financial Analysis, working capital analysis etc can

also be carried an in future to make the spinning mills in popularity and with life.

Area of the study

Coimbatore Spinning& Weaving Mills, Coimbatore.

Period of Coverage

For this study the researcher take from the year 2017 to 2022

32
Methodology

The researcher has undertaken case study method to discuss the cost

accounting management of the company. This study is descriptive, analytical

and conclusive. The secondary data has been collected and analysed. The data

collected from the annual reports of the company, books and journals constitute

the secondary data.

Tools Used For Analysis

The collected data have been analysed by using various tools and

techniques with a view of evaluating cost accounting management of the study

audit. To analyse the cost accounting management of the company the following

tools were used:-

 Administrative overhead

 Administrative overhead to cost of production

 Factory overhead to cost of production

 Direct wages to cost of production

 Selling & distribution expenses to sales

 Quality control expenses to sales

 Packing cost to cost of production circulation or productivity of net

working capital

33
  Circulation of utilization or productivity of cash, receivables and

inventory.

 Turnover of cash

 Depreciation provision to gross block:

 Gross profit margin ratio

 Inventory turnover ratio

 Inventory turnover ratio

 Inventory to working capital ratio

Apart from these for the sake of understanding a few diagrams, graphs

and tables have also been included in the present study. The researcher has made

an attempt to present the information‟s easier to understand through charts,

diagrams and tables.

Statement of the problem

Finance is considered as the life blood and nerve center of a business in

order to smooth running of the concern. It has been rightly termed as universal

lubricant, which keeps the enterprise dynamic. As new business extracts right

from the very beginning is expected to take much care on the utilization of

financial resources based upon the importance in applications not only in the

process of concerning an idea of business but also to promote, establish the

34
business acquired the fixed assets and so on. Even an existing concern may

requires further finance for making improvements or expanding the business.

Thus the importance of finance cannot be our emphasized and the subject of

business finance lies becomes at mot important both to the academicians and

practicising managers.

The importance of corporation finance has arisen because of the facts that

present day business activities are predominantly carried on company or

corporate form of organization. The advent of corporate enterprise has resulted

into:

(i) The increasing in size and influence of the business enterprises.

(ii) Wide distribution of corporate ownership, and

(iii) Separation of ownership and management .

The above three factors have further in creased the importance of

corporate finance as the owners is hare holy in a corporate enterprise are widely.

Scattered and the management is separated from the ownership. The

management has to ensure the maximization of owner‟s economic welfare. The

above factors brought great attraction to the research to carry on study on

financial area. And thus a study on financial performance Analysis was carried

out.

35
Chapterisation

 The first chapter consists of “Introduction” deals with a clear description

of origin of cost accounting management, Meaning of cost accounting

management, concepts, types, and Principles of cost accounting

management.

 The second chapter consists of “Company profile” in this chapter we can

study about the Coimbatore spinning Mills.‟

 The third chapter “Research Methodology” consists of the Scope of the

study, objectives and its details. The various methodology, tools used and

chapter scheme.

 The fourth chapter “Data Analysis and Interpretation”.

 The final chapter, the fifth chapter, “Findings, suggestions and

conclusion”, consists of the final interpretation of the study.

36
 CHAPTER – IV

COST ANALYSIS AND INTERPRETATION

Administrative Overhead

The administrative overhead deals with the total administrative overhead

with that of the total factory overheads. The ratio states that the percentage of
amount spent for the administrative overhead ie office expenses based on factory
cost.
Total administrative overhead
= ------------------------------------------
Total factory overheads

TABLE - 4.1

ADMINISTRATIVE OVERHEAD

PARTICULARS 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Total
Administrative 216784899.80 232816052 225267682 213575605 212656781
Overhead
Total Factory 60817297 45580093.25 98400605 100881036 98533318
Overheads
Administrative 3.5 5.10 2.28 2.11 2.158
Overhead

Inference

The above table 4.1 deals with the ratio of administrative overheads to
factory overheads. The ratio for the year 2017 – 2018 was 3.5 , in the year 2018
– 2019 it was 5.10 that is the administrative overheads has increased compared
to the previous year, in the year 2019 – 2020 it was 2.28, in 2020 – 2021 it was
2.11 and in the year 2021-2022 it was 2.158.

37
 CHART - 4.1

ADMINISTRATIVE OVERHEAD

Administrative overhead

2021-2022
2.158

2020-2021
2.11

2019-2020
2.28

2018-2019
5.1

2017-2018
3.5

0 1 2 3 4 5 6

38
Administrative Overhead to Cost of Production

The proportion of administrative overheads to the cost of production is

dealt here it states the relationship between the amount spent on the

administrative overhead during a certain period.

TABLE 4.2

ADMINISTRATIVE OVERHEAD TO COST OF PRODUCTION

PARTICULARS 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Administrative
Overhead 216784899.80 232816052 225267682 213575605 212656781
Cost of
production 138010392 226859452 223199350 213115121 21001121
Administrative 1.57 1.03 1.01 1.00 1.01
overhead to cost
of production

Inference

The above table 4.2 deals with the administrative overheads to cost of

production. During the year 2017 – 2018 it was 1.57, 2018 – 2019 it was 1.03,

2019 -2020 it was 1.01, 2020 -2021 it was 1.00 and during 2021 – 2022 it was

1.01.

39
 CHART - 4.2

ADMINISTRATIVE OVERHEAD TO COST OF PRODUCTION

Administrative overhead to cost of

production

2021-2022
1.01

2020-2021
1

2019-2020
1.01

2018-2019
1.03

2017-2018
1.57

0 0.5 1 1.5 2

40
Factory Overhead To Cost Of Production

The cost of production includes various elements and one among them is

the factory overheads. The ratio deals with the amount spent for factory

overheads.

TABLE 4.3

FACTORY OVERHEAD TO COST OF PRODUCTION

PARTICULARS 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Factory overhead 60817297 45580093.25 98400605 400881036 98533318
Cost of
production 138010392 226859452 223199350 213115121 21001121
Factory
Overhead To 0.44 0.20 0.44 0.47 0.47
Cost Of
Production

Inference

The above table 4.3 deals with the factory overheads to cost of

production. During the year 2017 – 2018 it was 0.44, 2018 – 2019 it was 0 .20,

2019 -2020 it was 0.44, 2020 -2021 it was 0.47 and during 2021 – 2022 it was

0.47. The ratio is found to be with the same level of amount spent for as factory

overhead.

41
 CHART - 4.3

FACTORY OVERHEAD TO COST OF PRODCUTION

Factory overhead

2021-2022
0.47

2020-2021
0.47

2019-2020
0.44

2018-2019
0.2

2017-2018
0.44

0 0.1 0.2 0.3 0.4 0.5

42
Direct Wages to Cost of Production

The ratio deals with the amount of direct wages to cost of production

given in the industry. The amount of direct wage spent for a specific period can

be found out by dividing direct wages to that of the cost of production.

TABLE 4.4

DIRECT WAGES TO COST OF PRODUCTION

PARTICULARS 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Direct wages & 27049505 50778694 40431240 53805701 55964321
salary
Cost of
production 138010392 226859452 223199350 213115121 21001121
Direct Wages
To Cost Of 0.196 0.223 0.18 0.252 0.266
Production

Inference

The above table 4.4 deals with the direct wages to cost of production.

During the year 2017 – 2018 it was 0.196, 2018 – 2019 it was 0.233, 2019 -2020

it was 0.18, 2020 -2021 it was 0.252 and during 2021 – 2022 it was 0.266.

43
 CHART - 4.4

DIRECT WAGES TO COST OF PRODUCTION

Direct wages to cost of production

2021-2022
0.266

2020-2021
0.252

2019-2020
0.18

2018-2019
0.223

2017-2018
0.196

0 0.05 0.1 0.15 0.2 0.25 0.3

44
Selling & Distribution Expenses to Sales

The above ratio is calculated to know the amount spent on selling &

distribution expenses to sales. In order to find the ratio for a particular year the

corresponding years selling and distribution expenses amount to sales should be

divided.

TABLE 4.5

SELLING & DISTRIBUTION EXPENSES TO SALES

PARTICULARS 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Selling & 3347141 4622561 5883868 4573683 4983192
distribution
expense
Sales 131882657 196771211 228804172 186611739 191133651
Ratio 0.025 0.023 0.025 0.024 0.026

Inference

The above table 4.5 deals with the selling and distribution expenses to

sales. During the year 2017 – 2018 it was 0.025, 2018 – 2019 it was 0.023, 2019

-2020 it was 0.025, 2020 -2021 it was 0.024 and during 2021 – 2022 it was

0.026.

45
 CHART - 4.5

SELLING & DISTRIBUTION EXPENSES TO SALES

Selling & distribution expenses to

sales

2021-2022
0.026

2020-2021
0.024

2019-2020
0.025

2018-2019
0.023

2017-2018
0.025

0.021 0.022 0.023 0.024 0.025 0.026 0.027

46
Quality Control Expenses to Sales

The above ratio deals with the quality control to sales. That is it states the

relationship between the sale and the amount spent on the quality control. In

order to find the ratio for a particular year the corresponding amount of quality

control has to be divided by the sales.

TABLE - 4.6

QUALITY COTROL EXPENSES TO SALES

PARTICULARS 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Quality control 498011 713444 740206 701152 723316
expenses
Sales 131882657 196771211 228804172 186611739 191133651
Ratio 0.003 0.0036 0.0032 0.00375 0.0037

Inference

The above table 4.6 deals with the quality control expense to sales.

During the year 2017 – 2018 it was 0.003, 2018 – 2019 it was 0.0036, 2019 -

2020 it was 0.0032, 2020 -2021 it was 0.00375 and during 2021 – 2022 it was

0.0037.

47
 CHART - 4.6

QUALITY COTROL EXPENSES TO SALES

Quality control expenses to sales

2021-2022
0.0037

2020-2021
0.00375

2019-2020
0.0032

2018-2019
0.0036

2017-2018
0.003

0 0.001 0.002 0.003 0.004

48
 TABLE 4.7

PACKING COST TO COST OF PRODUCTION

PARTICULARS 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Packing cost 572502 766355 778282 1028364 1136452

Cost of
production 138010392 226859452 223199350 213115121 21001121
packing cost to
cost of 0.0041 0.003 .0034 0.0048 0.0054
production

Inference

The above table 4.7 deals with the packing cost to cost of production.

During the year 2017 – 2018 it was 0.0041, 2018 – 2019 it was0.003, 2019 -

2020 it was .0034, 2020 -2021 it was .0048 and during 2021 – 2022 it was

0.0054.

49
 CHART - 4.7

PACKING COST TO COST OF PRODUCTION

Packing cost to cost of production

2021-2022
0.0054

2020-2021
0.0048

2019-2020
0.0034

2018-2019
0.003

2017-2018
0.0041

0 0.001 0.002 0.003 0.004 0.005 0.006

50
 Circulation or Productivity of Net Working Capital

The method used to measure the effectiveness of net working capital is to

divide net sales by net working capital. The ratio is computed as follows:-
Net Sales
Productivity or Turnover of net = --------------
Working capital Net working capital

The improvement in the utilization of net working capital is assessed by

examining the behavior of net working capital turnover a period of time.

TABLE 4.8
PRODUCTIVITY OF NET WORKING CAPITAL
Particulars 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
Net sales 135086379.02 201848942.94 232496868.28 188639137.57 118939432.17
Net
working
Capital (12261949.90) 13466205.47 17417073.13 (1885181.31) 2231578.01
Ratio -11.01671269 14.9670182 13.348791 -10.0642 53.298353

Inference

The above table 4.8 gives details about Productivity of Net working
capital. The net working capital is assessed and it is found that the Net sales has
been in a decreasing trend.

The ratio for the year 2017-2018 was -11.016 , in the year 2018-2019 it
was 14.97, in the year 2019-2020 it was 13.34, in the year 2020-2021 it was -
010.064 and in the year 2021-2022 it was 53.29. The negative figures are due to
non concentration on the working capital ratio.

51
 CHART - 4.8

PRODUCTIVITY OF NET WORKING CAPITAL

Productivity of net working

capital
60
53.298353
50

40

30

20 14.9670182 13.348791

10

0
2017- 2018- 2019- 2020- 2021-
2018 2019 2020 2021 2022
-10

-11.01671269 -10.0642
-20

52
Circulation of utilization or productivity of cash, receivables and inventory

After examining the productivity or utilization or turnover of gross and

net working capital, the next step is to examine the turnover or productivity or

utilization of each components of gross working capital. These ratios help

finding out how near, in term of times, the current assets are to cash.

TURNOVER OF CASH

The cash turnover ratio denotes the circulation of utilization of cash

during a period of time. It is computed as:-

Net Sales
Turnover of cash = --------------------------------
Average cash balance

It shows the number of times the average cash balance of a firms turned

over during the year. The higher the turnover, the less the cash balance required

for any given level of sales.

53
 TABLE 4.9

TURNOVER OF CASH

Particulars 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Net Sales 135086379.02 201848942.94 232496868.28 188639137.57 118939432.17
Average
cash
balance 790756.445 2160716.065 1186784.46 166323.22 170995.395
Ratio 17.08318407 93.2787728 19.590488 11.34172 69.557097

Inference

Table 4.9 shows Turnover of cash. This shows the amount of cash kept

after receipt of sales amount. The ratio for the year 2017-2018 was 17.08, in the

year 2018-2019 it was 93.27, in the year 2019-2020 it was 19.59, in the year

2020-2021 it was 11.34 and in the year 2021-2022 it was 69.55.

54
 CHART - 4.9

TURNOVER OF CASH

Turnover of cash

2021-2022
69.557097

2020-2021
11.34172

2019-2020
19.590488

2018-2019
93.2787728

2017-2018
17.08318407

0 20 40 60 80 100

55
Depreciation Provision To Gross Block

This ratio gives a relationship between depreciation provision and gross

block. Depreciation provisions are maintained for future purpose when the asset

gets totally scrap the amount of depreciation provision s utilized to replace the

asset.

Formula

Depreciation provision
Depreciation Provision to gross block = ----------------------------
Gross Block

TABLE 4.10

DEPRECIATION PROVISION TO GROSS BLOCK

Year Depreciation Provision Gross Block Ratio

2017 – 2018 1267979360.00 785731038.82 1.613758
2018 – 2019 126281049.00 783699900.36 0.161134
2019 – 2020 115678610.00 768226449.04 0.150579
2020 – 2021 117754969.00 769496810.04 0.153029
2021 – 2022 116422106.79 767054184.78 0.151778

Inference

Table 4.10 shows the relationship between depreciation provision to gross

block of Assets. The ratio for the year 2017-2018 was 1.613 , in the year 2018-

2019 it was 0.161, in the year 2019-2020 it was 0.1505, in the year 2020-2021 it

was .153and in the year 2021-2022 it was 0.1517.

56
 CHART - 4.10

DEPRECIATION PROVISION TO GROSS BLOCK

Depreciation provision to gross

block

2021-2022
0.151778

2020-2021
0.153029

2019-2020
0.150579

2018-2019
0.161134

2017-2018
1.613758

0 0.5 1 1.5 2

57
Gross Profit Margin Ratio

This ratio is also known as gross margin. It is calculated by dividing gross

profit by sales. Thus,
Gross Profits
Gross Profit Margin = ---------------------------
Sales

It states the relationship between prices, sales volume and cost. A change
in the gross margin can be brought about by change in any of these factors. The
gross profit margin represents the limit beyond which fall in sale price are
outside the tolerance limit. Further, the gross profit ratio can be also used in
determining the extent of loss caused by theft, spoilage, damage and so on.
Higher the ratio betters the position.

TABLE 4.11

GROSS PROFIT MARGIN RATIO

Year GROSS PROFIT SALES Ratio

2017 – 2018 (170010237.75) 135086379.02 -1.25853
2018 – 2019 108854991.22 201848942.94 0.540092
2019 – 2020 (109291853.24) 32496868.28 -3.36315
2020 – 2021 (8194516041) 188639137.57 -4.34402
2021 – 2022 (156669924.39) 118939432.17 -1.31722

Inference

The above table 4.13 gives details about the gross profit margin ratio. The
ratio for the year 2017-2018 was -1.258 , in the year 2018-2019 it was 0.5400, in
the year 2019-2020 it was -3.363, in the year 2020-2021 it was -4.344and in the
year 2021-2022 it was -1.3172. The negative figures are due to the gross loss
situation prevailing in the respective years.

58
 CHART - 4.11

GROSS PROFIT MARGIN RATIO

Gross profit margin ratio

1 0.540092

0
2017- 2018- 2019- 2020- 2021-
2018 2019 2020 2021 2022

-1

-1.31722
-1.25853
-2

-3

-3.363315
-4

-4.34402
-5

59
 Inventory Turnover Ratio

The Inventory turnover ratio denotes the circulation of utilization of

inventory during a period of time. It is computed as:-

Net Sales
Turnover of cash = --------------------------------
Average Inventory

It shows the number of times the average cash for inventory is turned over

during the year. The higher the turnover, the less the cash balance required for

any given level of sales.

TABLE 4.12

INVENTORY TURNOVER RATIO

Particulars 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Net Sales 135086379.02 201848942.94 232496868.28 188639137.57 118939432.17

Average
Inventory
29718645.98 30161560.0 34368034.69 42878626.37 577854858.68
Ratio 4.54550921 6.68231162 6.764916 4.399375 0.2058292

Inference

Table 4.12 shows Turnover of Inventory. This shows the amount of cash

kept for inventory after receipt of sales amount. The higher the better the

position. The ratio for the year 2017-2018 was 4.45 , in the year 2018-2019 it

was 6.68, in the year 2019-2020 it was 6.76, in the year 2020-2021 it was4.399

and in the year 2021-2022 it was0.205.

60
 CHART - 4.12

INVENTORY TURNOVER RATIO

Inventory turnover ratio

7 6.68231162
6.764916

5
4.399375
4 4.54550921

1
0.2058292
0
2017- 2018- 2019- 2020- 2021-
2018 2019 2020 2021 2022

61
 Inventory to Sales Ratio

The ratio indicates the rate at which the inventory is turned into sales.

The lower the ratio, the more efficient the management of inventories and vice

versa. It is a valuable yardstick for measuring selling efficient and quality of

inventory.

Inventory to Sales Ratio = Inventory

---------------
Sales

TABLE 4.13

INVENTORY TO SALES RATIO

Particulars 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Inventories:- 23286280.692 37036839.40 31699229.97 54058022.77 61512894.58

Net Sales 135086379.02 201848942.94 232496868.28 188639137.57 118939432.17
Ratio 0.172380671 0.18376102 0.1363426 0.286568 0.5171783

Inference

Table 4.13 deals with inventory to sales ratio. Lower the ratio better the

position. The ratio for the year 2017-2018 was 0.17 , in the year 2018-2019 it

was 0.18, in the year 2019-2020 it was 0.136, in the year 2020-2021 it was

0.2865 and in the year 2021-2022 it was 0.517.

62
 CHART - 4.13

INVENTORY TO SALES RATIO

Inventory to sales ratio

0.6

0.517183
0.5

0.4

0.3
0.18376102 0.286568
0.2

0.17238067
0.1 0.1363426

0
2017- 2018- 2019- 2020- 2021-
2018 2019 2020 2021 2022

63
 Inventory to Working Capital Ratio

It is computed as follows:-

Inventory
Inventory to working capital ratio = -------------
Working capital

TABLE 4.14

INVENTORY TO WORKING CAPITAL RATIO

Particulars 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

Inventories:- 23286280.692 37036839.40 31699229.97 54058022.77 61512894.58
Working
capital (12261949.90) 13466205.47 17417073.13 (1885181.31) 2231578.01
Ratio -1.899068328 2.75035454 1.820009 -28.67524 27.564752

Inference

Table 4.14 gives details about Inventory to Working Capital Ratio. The

ratio for the year 2017-2018 was -1.899, in the year 2018-2019 it was 2.750, in

the year 2019-2020 it was 1.820, in the year 2020-2021 it was -28.67 and in the

year 2021-2022 it was 27.56. The ratios are in negative because of the decrease

in the working capital.

64
 CHART - 4.14

INVENTORY TO WORKING CAPITAL RATIO

Inventory to working capital ratio

40
27.564752
30

20

10
2.75035454 1.820009

0
2017- 2018- 2019- 2020- 2021-
2018 2019 2020 2021 2022
-10
-1.899068328

-20

-30
-28.67524

-40

65
 CHAPTER - V

FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS

 The administrative overheads to factory overheads ratio for the year 2017

– 2018 was 3.5 , in the year 2018 – 2019 it was 5.10 that is the

administrative overheads has increased compared to the previous year, in

the year 2019 – 2020 it was 2.28, in 2020 – 2021 it was 2.11 and in the

year 2021-2022 it was 2.158.

 The administrative overheads to cost of production for the year 2017 –

2018 it was 1.57, 2018 – 2019 it was 1.03, 2019 -2020 it was 1.01, 2020 -

2021 it was 1.00 and during 2021 – 2022 it was 1.01.

 The factory overheads to cost of production the year 2017 – 2018 it was

0.44, 2018 – 2019 it was 0 .20, 2019 -2020 it was 0.44, 2020 -2021 it was

0.47 and during 2021 – 2022 it was 0.47. The ratio is found to be with the

same level of amount spent for as factory overhead.

 The Direct wages to cost of production for the year 2017 – 2018 it was

0.196, 2018 – 2019 it was 0.233, 2019 -2020 it was 0.18, 2020 -2021 it

was 0.252 and during 2021 – 2022 it was 0.266.

66
 The selling and distribution expenses to sales for the year 2017 – 2018 it

was 0.025, 2018 – 2019 it was 0.023, 2019 -2020 it was 0.025, 2020 -

2021 it was 0.024 and during 2021 – 2022 it was 0.026.

 The quality control expense to sales for the year 2017 – 2018 it was 0.003,

2018 – 2019 it was 0.0036, 2019 -2020 it was 0.0032, 2020 -2021 it was

0.00375 and during 2021 – 2022 it was 0.0037.

 The packing cost to cost of production for the year 2017 – 2018 it was

0.0041, 2018 – 2019 it was0.003, 2019 -2020 it was .0034, 2020 -2021 it

was .0048 and during 2021 – 2022 it was 0.0054.

 Turnover of cash ratio for the year 2017-2018 was 17.08 , in the year

2018-2019 it was 93.27, in the year 2019-2020 it was 19.59, in the year

2020-2021 it was 11.34 and in the year 2021-2022 it was 69.55.

 Depreciation provision to gross block of Assets for the year 2017-2018

was 1.613 , in the year 2018-2019 it was 0.161, in the year 2019-2020 it

was 0.1505, in the year 2020-2021 it was .153and in the year 2021-2022 it

was 0.1517.

67
 The gross profit margin ratio for the year 2017 – 2018 was -1.258 , in the

year 2018 – 2019 it was 0.5400, in the year 2019 -2020 it was -3.363, in

the year 2020-2021 it was -4.344and in the year 2021-2022 it was -

1.3172.

 The negative figures are due to the gross loss situation prevailing in the

respective years.

 Turnover of Inventory ratio deals with the amount of cash kept for

inventory after receipt of sales amount. The ratio for the year 2017-2018

was 4.45 , in the year 2018-2019 it was 6.68, in the year 2019-2020 it was

6.76, in the year 2020-2021 it was 4.399 and in the year 2021-2022 it was

0.205.

 Inventory to sales ratio for the year 2017 – 2018 was 0.17 , in the year

2018 – 2019 it was 0.18, in the year 2019 -2020 it was 0.136, in the year

2020-2021 it was 0.2865 and in the year 2021-2022 it was 0.517.

 Inventory to Working Capital Ratio. The ratio for the year 2017 – 2018

was -1.899, in the year 2018 – 2019 it was 2.750, in the year 2019 -2020 it

was 1.820, in the year 2020-2021 it was -28.67 and in the year 2021-2022

it was 27.56. The ratio are in negative because of the decrease in the

working capital.

68
5.2 SUGGESTIONS

 The Mill has to still concentrate more on cash transaction

 The cash in hand and at bank is not sufficiently maintained

 The Administrative expenses are to be still carefully handled.

 To avoid over-dues and bad debt in future period.

 The cost standards has to be prepared

69
5.3 CONCLUSION

The cost though sounds to be a revenue item. But still it has to be taken

care of, the study proved that the mill is taking care of the cost items in an

appropriate manner.

The risk and return are very important but contrary factors are to be

balanced to run the concern successfully and efficiently. The study has given the

research student an in depth knowledge about cost accounting management. The

concern has maintained a very short-term solvency.

70
 BIBLIOGRAPHY

1. KHAN.M.Y., and JAIN. P.K Financial Management New Delhi Tata

Megra – Hill Publishing Company Ltd., 1999.

2. SHARMA. R.K and GUPTHA SHASHIK Management Accounting

MADRAS Kalyani Publishers 1996.

3. PRASANNA CHANDRA, Financial Management, New Delhi Tata

Megra – Hill Publishing Company Ltd., 1998.

4. GAGANRAJ Dictionary of Finance New Delhi Himalaya Publishing

House 1998.

71