CHAPTER 1

INTRODUCTION

1
1.1 STATEMENT OF PROBLEM
This is to study process costing and calculation of process cost in the process of Electronics
& Electrical Resistors with Special Reference to Cermet Resistronic Pvt Ltd

1.2 INTRODUCTION
Process costing is an accounting methodology that traces and accumulates direct cost, and
allocates indirect cost of a manufacturing process. Cost are assigned to products, usually in a
large batch, which might include an entire month`s production, eventually cost have to be
allocated to individual unit of product. It assigns average cost to each unit, and is the opposite
extreme of job costing which attempts to measure individual costs of production of each unit.
Process costing is usually a significant chapter. It is a method of assigning cost to units of
production in company’s production large quantities of homogeneous products.

Process costing is the type of operation costing which use to ascertain cost of product at each
process or stage of manufacture. Process costing is suitable for the industries producing
homogeneous product and were production is a continuous flow.

Cermet is an ISO 9001:2008 certified company is the leading manufacturer of electronic/

electric resistor in India. Manufacturers the widest range of resistor solely indigenous
technology. Has captured almost every niche in its market domains. Also provides
customized solution to Industries, with 47 years of research and development and more than
25 years of manufacturing experience.

Has a state of the art manufacturing setup, a well establish network in India and abroad and a
large customer base.

With a solid foundation laid by first generation entrepreneurs Mr N. S Khadikar Cermet

today is ably run by second generation entrepreneurs Mr Pradeep. N. Khadikar. Today is a
rock solid organization with a reputation built on its innovativeness and dynamism. The main
aim of research is to study the process costing in detailed, And the application of process
costing in Cermet Resistronic Pvt Ltd.

This research paper consists of six chapters that is introduction, profile of the company,
Concept of the study, research methodology, data analysis and interpretation, conclusion etc.

2
MEANING
Process Costing is a method of costing. It is employed where each similar units of production
involved in different series of process from conversion of raw materials into finished output.
Thus, .unit cost is determined on the basis of accumulated costs of each operation or at each
stage of manufacturing A product. Charles T. Horngren defines process costing as "a method
of costing deals with the mass production of the like units that usually pass the continuous
fashion through a number of operations called process costing." The application of process
costing where industries adopting costing procedure for continuous or mass production.
Textiles, chemical works, cement industries, food processing industries etc. are the few
examples of industries where process costing is applied.

Process costing is a method of costing under which all costs are accumulated for each stage
of production or process, and the cost per unit of product is ascertained at each stage of
production by dividing the cost of each process by the normal output of that process.

DEFINITION:

CIMA London defines process costing as “that form of operation costing which applies
where standardize goods are produced”

CHARACTERISTICS OF PROCESS COSTING

1. Clearly defined process cost centers will normally be set up for each operational
stage, which can be identified. Expenditure for each cost centre is collected and, at the
end of the accounting period, the cost of the completed units are then transferred into a
stock account or to a further process cost centre. Accurate records are, therefore,
required of units produced and part produced units and the total cost incurred by the
cost centers.
2. The cost unit chosen should be relevant to the organisation.
3. The cost of the output of one process is the raw material input cost of the following
process. The cost incurred in a process cost centre could include, therefore, costs
transferred from a previous process plus the raw materials, Labour and overhead costs
relevant to the cost centre.

3
4. Wastage due to scrap, chemical reaction or evaporation is unavoidable. The operation
or manufacturing should, however, be in such a way that wastage can be reduced to the
barest minimum.
5. Either the main product or by-product of the production process may require further
processing before reaching a marketable state.
6. Continuous or mass production where products which passes through distinct process
or operations.
7. Each process is deemed as a separate operations or production centres.
8. Products produced are completely homogenous and standardized.
9. Output and cost of one process are transferred to the next process till the finished
product completed.
10. Cost of raw materials, labour and overheads are collected for each process.
11. The cost of a finished unit is determined by accumulated of all costs incurred in all the
process divided by the number of units produced.
12. The cost of normal and abnormal losses usually incurred at different stages of
production is added to finished goods.
13. The interconnected processes make the final output of by-product or joint products
possible.
14. The production is continuous. The product is homogeneous, The process is
standardized. Output of one process become raw material of another process. The
output of the last process is transferred to finished stock
15. Costs are collected process-wise, Both direct and indirect costs are accumulated in
each process. If there is a stock of semi-finished goods, it is expressed in terms of
equivalent units. The total cost of each process is divided by the normal output of that
process to find out cost per unit of that process.

4
1.3 OBJECTIVE OF THE STUDY

 To study various products manufactured by the company Cermet Resistronics Pvt Ltd.
 To study the which process is used by the company in manufacturing Electronics
Resister.
 To study the Input, Output and Abnormal Gain, Abnormal Loss of the each process of
Cermet Resistronic Pvt. Ltd.
 To study the method of process costing followed by Cermet Resistronic Pvt. Ltd.
 To study various initiative for future expanding.

1.4 RESEARCH METHODOLOGY

In order to gather sufficient information on the topic, and to get the practical knowledge of
the subject matter and the way it is analyzed, both the sources of data, that is Primary Source
and Secondary Source have been used.

Primary Data: A Primary Data is a Data, which is collected by the researcher himself,
through his discovery and findings. There is no use of primary data as such in this study, as
the calculation of ratios was merely based on the data available at hand.

Secondary Data: A secondary data is a data, which is collected from other sources; where
one can take help of different reference books, or any other person for his research.

5
1.5 LIMITATIONS

1. Time provide to do this project was limited to 1 Year.

2. Due to time constrain the research did not cover all the products on Electronic
resister.
3. Since manager busy with other aspect of the business he is not able to provide enough
time to me.
4. Conclusion & findings and recommendation are based on information collected

1.6 IMPORTANCE AND SIGNIFICANCE

Process costing is an important process that Cermet Resistronic engages into keep track of
where there money is being spent in the production and distribution processes. Understanding
this cost is the first step in being able to control them It is very important that a Cermet
Resistronic chooses appropriate type of costing system for their product type and industry,
One type of costing system is used in manufacturing company like Cermet Resistronic pvt
ltd.

Is process costing that varies from other costing in some ways. In process costing unit costs
are more like averages. The process costing system require less book keeping than job or
order costing, Thus, Cermet Resistronic often preferred to use the process costing system.
Cermet company use process costing because in process costing all cost are accumulate for
each stage of production or process. Process costing plays important role in company because
the product of the company that is the resistor have to passes through no of process.

Costing is an important process that many companies engage in to keep track of where their
money is being spent in the production and distribution processes. Understanding these costs
is the first step in being able to control them. It is very important that a company chooses the
appropriate type of costing system for their product type and industry. One type of costing
system that is used in certain industries is process costing that varies from other types of
costing (such as job costing) in some ways. In process costing unit costs are more like
averages, the process-costing system requires less bookkeeping than does a job-order costing
system. Thus, some companies often prefer to use the process-costing system.

6
Process costing is appropriate for companies that produce a continuous mass of like units
through series of operations or process. Also, when one order does not affect the production
process and a standardization of the process and product exists. However, if there are
significant differences among the costs of various products, a process costing system would
not provide adequate product-cost information. Costing is generally used in such industries
such as petroleum, coal mining, chemicals, textiles, paper, plastic, glass, and food.

A company may manufacture thousands or millions of units of product in a given period of

time.

Products are manufactured in large quantities, but products may be sold in small quantities,
sometimes one at a time (automobiles, loaves of bread), a dozen or two at a time (eggs,
cookies), etc.

Product costs must be transferred from Finished Goods to Cost of Goods Sold as sales are
made. This requires a correct and accurate accounting of product costs per unit, to have a
proper matching of product costs against related sales revenue.

Managers need to maintain cost control over the manufacturing process. Process costing
provides managers with feedback that can be used to compare similar product costs from one
month to the next, keeping costs in line with projected manufacturing budgets.

A fraction-of-a-cent cost change can represent a large dollar change in overall profitability,
when selling millions of units of product a month. Managers must carefully watch per unit
costs on a daily basis through the production process, while at the same time dealing with
materials and output in huge quantities.

Materials part way through a process (e.g. chemicals) might need to be given a value, process
costing allows for this. By determining what cost the part processed material has incurred
such as labor or overhead an "equivalent unit" relative to the value of a finished process can
be calculated.

7
1.7 OUTLINE OF THE PROJECT

Chapter. No Content Page No.

1. INTRODUCTION
1.1 Statement of Problem
1.2 Introduction
1.3 Objective of the Study
1.4 Research Methodology
1.5 Scope of the Study
1.6 Importance of the Study
l.7 Outline of the project

2 CONCEPT OF PROCESS COSTING

2.1 Process Costing Meaning and Definition
2.2 General principle of process costing
2.3 Types of process costing
2.4 Features of Process Costing
2.5 Characteristics of Process Costing
2.6 Importance of Process Costing
2.7 Methods of Process Costing
2.8 Advantages of Process Costing
2.9 Limitation of process costing
2.10 Distinction between Job Order Costing and Process Costing
3 INFORMATION ABOUT CERMET RESISTRONICS PVT LTD
3.1 About The Company
3.2 Company Profile
3.3 Company’s Vision And Business Philosophy
3.4 Infrastructure
3.5 Future Plans
3.6 Product Portfolio
3.6.1 Film Resistors
3.6.2 Wire Wound Resistors
3.6.3 Thick Film / High Voltage Resistors
3.6.4 Special Type Resistors
3.7Our Distribution Network
3.8OurCustomers-
3.9 Products
3.9.1 Thick Film Resistors
3.9.2 Wire Wound Resistors
3.9.3 Special Type Resistors
4 DATA ANALYSIS & INTERPRETATION
5 FINDINGS AND CONCLUSION
6 SUGGESTIONS
APPENDIX
 Bibliography
References
 Questionnaire

Name of the Researcher Name of the Guide

Mr. Abdul Samad Hamad Al Mamari Prof : Madhumati Tadwalkar
Roll No.: 4382

8
 CHAPTER 2

CONCEPT OF PROCESS COSTING

9
2.1 REVIEW OF LITERATURE OF PROCESS COSTING

Process costing-

There are basic methods of determination unit cost; specific order costing and process
costing. Mass production concerns generally use process costing since they manufacture
standard type of products and are involved in continuous or successive operation. A product
passes through the various well defined and different stages of production which are called
“processes”. Thus, a process is an organisational entity of a concern in which specific or
repetitive work is done. Each process is a cost unit in itself. Costs are accumulated by each
process by the method of averaging. Normally, the identity of individual order is lost in the
general flow of production.

MEANING:

Process costing is a form of operating costing where a series of separate processes is requires
to produce the finished product or provide service. In a manufacturing firm, the raw material
converted into finished goods as they pass through various processes, accumulating cost as
the material moves from one process to another process. Row material put into production
and then at each subsequent stage or process, direct material, labour and overhead costs are
added. In process costing system, the output or finished product of one process becomes the
input or raw materialof the other process, until the product being manufactured is completed.

Process costing is an accounting methodology that traces and accumulates direct cost, and
allocates indirect cost of manufacturing process. Costs are assigned to products, usually in
large batch, which might include an entire month’s production. Eventually costs have to be
allocated to individual unit of product. It assigns average cost to each unit, and is the opposite
extreme of job costing which attempts to measure individual cost production of each unit.

Process costing is the type of operating costing which is used to ascertain the cost of product
at each process or stage of manufacture.

DEFINITION OF PROCESS COSTING-

According to C.I.M.A London, “process costing is that forms of operation costing where
standardise goods are produce.”

10
According to Charles T. Horngren, “process costing deals with the mass production of like
unit that usually pass in continuous fashion through a series of production step called
operation or process.”

Kohler, in his book, “Dictionary for Accountants”. Defines process costing as “a methodof
cost accounting whereby costs are charged to processes or operation and averaged over unit
produced.”

In this way, process costing refers to method of cost accounting under which cost are
accumulated for each separate and independent but inter-related process. Process costing is
used in manufacturing concern where material have a pass through two or more processes for
being converted in to finished goods. For example, in case of cotton textiles,the first process
may be spinning and second may be weaving and the final process may be finishing.
Similarly, an electronic manufacturing concern may have assembling, wiring, soldering as
process. Further,an oil refinery company may have crushing, refining and finishing as
process.

2.2 General principle of process costing

The general principle of process costing can be summarised as follows:

1. Identification of cost of items

The majority of items cost can ordinarily be identified with specific process and
collected and accumulated separately for each period.
2. Designing of production records
Production record of each process are so designed which would show the quantum of
production for each period.
3. Calculating of unit cost
The total cost of each process is divided by the total production by the processes for
arriving at the unit cost of the article processed.
4. Inclusion of cost of spoilage / wastage
The cost of any normal spoilage or wastage is included in the cost of the units
produced.
5. Transfer of cumulative cost

11
 The cumulative cost of process is one which transferred to process two and the cost of
process two is added to it, then it is transferred to process three and it is continuous till
the final process is completed.

2.3 Types of process costing

Process costing use in case of industries, which involve processing of a product through
different stages. The various types of processing are as follows.

1. Continuous sequential processing

In case of this processing a product has to pass through different cost centres or stages of
manufacturing continuously and in succession one after the other during a period. The
processing being continuous and identical, the costing unit for each centre or stage are
identical during any period. Examples of this type of processing are cement-making, paper-
making, refining of crude petroleum, etc.

2. Discontinuous process

In case of this processing, a process is independently operated for the individual products as
such at frequent intervals. The costing unit in case of this processing, dependent upon the
product may vary even for the same cost centre. Example of this processing are dye
manufacturing, fruit preservation, vegetable canning, yam spinning, etc.

3. Parallel processing

In case of this processing, the operation or stages through which the product has to pass run
parallel and separately. All these parallel processes ultimately join with the end process.
Examples of this type processing aremanufacturing different components which ultimately
join in the assembly process to make product, meat packing etc.

4. Selective processing

In case of this processing, the combination of the processes or stage of operation depends
upon the end-product to be commercialised. Example of this type of processing are cooked
meat, chloride compounds like bleaching power of zinc chloride or hydrochloric acid, etc.

12
2.4Features Of Process Costing

In the case of process costing, production follows a series of sequential processes. Since the
product manufactured passes through various processes, production is continuous activity.
Units produce are uniform and, therefore, product differentiation is not possible. Following
are the main feature of process costing.

1. The entire production activity is characterised by a number of stages of production

i.e. process. each process includes number of operations. The boundaries of the
process are determined by similarly of work performed, supervision and physical
location of men and machine in the plant.
2. The product and processes are standardising.
3. Production is in continuous flow and output of process one becomes the input of
second process and so on until the finished product is obtained.
4. Costs flows the production process i.e. cost incurred in one process are transferred to
the next process along with output.
5. Costs are ascertained for each process at the end of the period.
6. Units of production are uniform and homogeneous. As a result, unit cost of each
process is obtained by averaging the total cost of each process.
7. Total cost of the process is adjusted with normal losses, abnormal losses, abnormal
gains and scrap of process.
8. Process costing is used by the industries where the goods are produced through the
sequence of several processes. Process costing is suitable for industries like paint, oil-
refining, rubber, chemical, suar, paper, soap-making, and texttiles.etc. this method is
also employed where it is not possible to ascertain the prime cost of specific order.

2.5Characteristics of Process Costing

Process Costing Method is applicable where the output results from a sequence of continuous
or repetitive operations or processes and products are identical and cannot be segregated.

Process Costing enables the ascertainment of cost of the product at each process or stage of
manufacture.

The following features may be identified with process costing:

1. The output consists of products which are homogenous.

2. Production is carried on in different stages (each of which is called a process) having
a continuous flow.

13
 3. Production takes place continuously except in cases where the plant and machinery
are shut down for maintenance etc. Output is uniform and all units are identical during
each process. It would not be possible to trace the identity of any particular lot of
output to any lot of input.
4. The input will pass through two or more processes before it takes the shape of the
output. The output of each process becomes the input for the next process until the
final product is obtained, with the last process giving the final product.
5. The output of a process (except the last) may also be saleable in which case the
process may generate some profit.
6. The input of a process (except the first) may be capable of being acquired from the
outside sources.
7. The output of a process is transferred to the next process generally at cost to the
process. It may also be transferred at market price to enable checking efficiency of
operations in comparison to the market conditions.
8. Normal and abnormal losses may arise in the processes

2.6 IMPORTANCE OF PROCESS COSTING

Costing is an important process that many companies engage in to keep track of where their
money is being spent in the production and distribution processes. Understanding these costs
is the first step in being able to control them. It is very important that a company chooses the
appropriate type of costing system for their product type and industry. One type of costing
system that is used in certain industries is process costing that varies from other types of
costing (such as job costing) in some ways. In process costing unit costs are more like
averages, the process-costing system requires less bookkeeping than does a job-order costing
system. Thus, some companies often prefer to use the process-costing system.

Process costing is appropriate for companies that produce a continuous mass of like units
through series of operations or process. Also, when one order does not affect the production
process and a standardization of the process and product exists. However, if there are
significant differences among the costs of various products, a process costing system would
not provide adequate product-cost information. Costing is generally used in
such industries such as petroleum, coal mining, chemicals, textiles, paper, plastic, glass, food,
banks, courier, cement, and soap.
Industries using process costing

 Bottling industry
 Cement industry
 Coal industry
 Paint industry
 Electronic

14
  Ice industry
 Soap industry
 Sugar industry
 Steel industry
 Chemical industry
 Cocking gas etc.

Reasons for use

Companies need to allocate total product costs to units of product for the following reasons:
 A company may manufacture thousands or millions of units of product in a given
period of time.
 Products are manufactured in large quantities, but products may be sold in small
quantities, sometimes one at a time (automobiles, loaves of bread), a dozen or two at a
time (eggs, cookies), etc.
 Product costs must be transferred from Finished Goods to Cost of Goods Sold as sales
are made. This requires a correct and accurate accounting of product costs per unit, to
have a proper matching of product costs against related sales revenue.
 Managers need to maintain cost control over the manufacturing process. Process
costing provides managers with feedback that can be used to compare similar product
costs from one month to the next, keeping costs in line with projected manufacturing
budgets.
 A fraction-of-a-cent cost change can represent a large dollar change in
overall profitability, when selling millions of units of product a month. Managers
must carefully watch per unit costs on a daily basis through the production process,
while at the same time dealing with materials and output in huge quantities.
 Materials part way through a process (e.g. chemicals) might need to be given a value,
process costing allows for this. By determining what cost the part processed material
has incurred such as labour or overhead an "equivalent unit" relative to the value of a
finished process can be calculated.

Procedure for use

There are four basic steps in accounting for Process cost:

 Summarize the flow of physical units of output.

 Compute output in terms of equivalent units.
 Summarize total costs to account for and Compute equivalent unit costs.
 Assign total costs to units completed and to units in ending work in process inventory.

The journal entries for process costing are the same as those for job-order costing with one
exception. The entry to transfer cost from one work-in-process account to another is:

Work-in-process inventory-second department Debit (Left)

15
Work-in-process-first department Credit (Right)

2.7 Methods Of Process Costing

 FIFO method
- It follows the principle that material used should carry the actual experienced
cost of the specific unit used.
- It is more complex.
- It is more accurate.
It is used where size and cost is large.
 Weighted average method
- It is assume that all cost whether forms preceding period or the current one are
lumped together and assigned to produce units.
- It is simple to calculate.
- It is use when assigning a specific cost to an individual unit is not possible.
 LIFO Method:
In LIFO method the assumption is that the units entering into the process is the last one first
to be completed. The cost of opening work-in-progress is charged to the closing work-in-
progress and thus the closing work-in progress appears cost of opening work-in-progress.
The completed units are at their current cost.

2.8 ADVANTAGES OF PROCESS COSTING

Following are the advantages of process costing:

 It is convenient and easy to compute the cost of different processes as well as finished
product at short interval, say, daily, weekly or monthly.
 Due to the simplicity of cost records, process costing involves less efforts and
expenses on accounting.
 Production activity in process costing is standardised. Hence, managerial control and
supervision becomes easier.
 In case of process costing, It is possible to allocate expenses to different processes on
rational basis. This result into more accurate costing.
 In process costing, the products are homogeneous. As a result, cost per unit can be
easily computed by averaging the total cost and price quotation becomes easier.
 In process costing, products and processes are standardise. Hence it is easy to apply
standard costing.

16
2.9 Limitation of process costing

Following are the limitation of process coting

 The cost obtained at the end of the accounting period is historical in nature and is of
little use for effective managerial control.
 Science process cost is average cost; it may not be accurate for analysis, evaluation
and control of the performance of various departments.
 Once an error is committed in one process, it is carried over to the subsequent
process.
 Process costing does not evaluate the efficiency of individual workers or supervisors.
 Value of work-in-progress is computed on the basis of estimates which results in
further inaccuracies.

Example of an area where Process Costing is applied

A common example of an industry where process costing may be applied is "Sugar

Manufacturing Industry".

The processes in this industry are

 Cane Shredding

The cane is broken/cut into small pieces to enable easier movement through the
milling machine.

 Milling

The shredded cane is passed through rollers which crush them to extract cane juice.
[Similar to the cane juice extracted by the vendors who sell you sugar cane juice.]

 Heating and Adding lime

The extracted juice is then heated to make it a concentrate and lime is added to the
heated juice.

 Clarification

Muddy substance is removed from the concentrate through this process

 Evaporation

Water is removed from the juice by evaporation.

17
  Crystallization and Separation

Sugar crystals are grown from the dry juice concentrate in this process.

 Spinning

Molasses are separated from sugar using Centrifugals in this process.

 Drying

Sugar is obtained by drying the wet raw sugar obtained in the spinning process.

2.10 DISTINCTION BETWEEN JOB ORDER COSTING AND PROCESS COSTING

BASIS OF
DISTINCTION JOB ORDER COSTING
1 Specific order Performed against
specific orders
.2 Nature Each job many be different.
3 Cost Cost is determined for each
job separately
determination
4 Cost calculations Cost is compiled when a job
is completed
5 Control Proper control is
comparatively difficult as
each product unit is
different and the production is
not continuous
6 Transfer There is usually not transfer
from one job to another
unless
there is some surplus work.
7 Work-in-Progress There may or may not be
work-in-progress
8 Suitability Suitable to industries where Suitable, where goods are made
production isintermittent and for stock and productions is
Customer orders can be
identified in the value of
production.
PROCESS COSTING
Production is contentious
Product is homogeneous and
Standardized
Costs are compiled for each
process for department on time
basis i.e. for a given accounting
period.
Cost is calculated at
the end of the cost
period
Proper control is comparatively
easier as the production is1
standardized and is more suitable.
The output of one process is
transferred to another process as
input.
There is always some work-in-
progress because of continuous
Production.
Continuous.

18
 CHAPTER 3
CERMET RESISTRONICS PVT. LTD

19
3.1 ABOUT THE COMPANY

INTRODUCTION-

Established in the year 1990, Cermet Resistronics Pvt. Ltd. has emerged as the
leading Manufacturer, Exporter and Supplier of a wide range of Electronics / Electrical
Resistors. With rich experience in research & development, we have carved a niche for
ourselves in the industry. Our company has outstanding growth rate of 40% every year along
with annual turnover of USD 3.00 Million with a share of exports 20%. Cermet Resistronics
Pvt. Ltd. has made a prominent mark in the field of resistor manufacturing. We are engaged
in manufacturing a wide array of products including Film Resistors, Wire Wound Resistors,
Thick Film / High Voltage Resistors, Fusible Resistors, etc.

Our company has maintained consistency in high quality standards and is well reckoned for
its custom built solutions available for various industries. Impeccable quality of our products
and transparent business operations have fetched prestigious certification of ISO
9001:2000. All the products are manufactured as per the ISO quality standards and our strict
quality norms. Our entity is an eco-conscious RoHS compliance company,
manufacturing Thick Film / Metal Glaze / High Voltage/ Hybrid / Flat Resistors in
environment friendly manner. We have vast network in India and we deal in a comprehensive
range of Metal film / Wire Wound/Carbon Film, Metal Oxide Resistors, Neutral Ground
Resistors (NGR), Wire Wound Power Resistors up to 1200 W, Dynamic Breaking Resistors
(DBR) & Zero Ohms Resistors (Tape Jumper).

OUR TEAM-

Our Company owes its success to the team of experts including engineers, that works
diligently and relentlessly to fulfil the company's objectives. It includes engineers, advisors
with Doctorate level in thin film & thick film, management personnel and others. The team is
managed by our mentors, who are highly experienced in the domain of resistor
manufacturing. Cermet's oldest member is Mr. N. S. Khadilkar, who has dedicated his career
in the development of efficient technology for manufacturing resistors. His son, Mr.Pradeep
Khadilkar is the Chairman and M.D. of Cermet Resistronics Pvt. Ltd. In addition, Mr.
Shedbalkar has also played a vital role in our company's success. He is a senior authority in
resistor and leads the production & research development. Under the guidance of our
mentors, young new recruits work with liveliness to fulfil the company's objectives.

20
 3.2 Company Profile
We are a manufacturer, supplier and exporter of film resistors, wire wound power resistors,
zero ohms resistors, neutral ground resistors, high voltage resistors, wire wound resistors,
electrical grade resistors, electronic grade resistor, silicon resistors, axial resistors,
aluminium housed ...

Business Type : Exporter / Manufacturer / Supplier

Year Established : 1990
Website : http://www.resistorcermet.com
Standard Certification : ISO 9001 : 2008
Film resistors, wire wound power resistors, zero ohms
resistors, neutral ground resistors, high voltage resistors,
Products,Exporter, Supplier wire wound resistors, electrical grade resistors, electronic
:
and Manufacturer grade resistor, silicon resistors, axial resistors, aluminum
housed resistors, radial resistors, fusible wire wound
resistor...

Contact Information
Company CERMET RESISTRONICS PVT. LTD.
Name

GATE NO. 61, PLATE NO. 01 AND 02, SINDEWADI,

Address
TALUKA BHOR, Pune - 412205, Maharashtra, India

Contact
Ms. Gauri Joshi (Marketing Manager)
Person

+919890003313

21
Our Achievements
Since our inception, we have created a number of benchmarks in the resistor industry
in India.
 The products are manufactured using state-of-art-plant & machinery. We have
a team of more than 100 people that consist of Doctorate level in thin film &
thick film advisors, highly experienced Management personnel engineers and
well trained, motivated workforce.
 We are the only manufacturers of thick film resistors in India. These are
special application type resistors such as high voltage & high Meg ohm types.
The Ohmic range of these resistors is up to 200 Gega ohms & voltage level up
to 25 kv.
 We also manufacture all types of resistors such as Carbon, Metal & Metal
oxide film, Wire wound & Thick film resistors. The range of these products
varies from 1/6 watt to 3000 watt and these are available in general purpose &
professional grades in close tolerances.
 We also manufacture resistors as per custom design. In short we are the
"RESISTOR HOUSE".

Our production plant-

We are committed towards achieving excellence and hence we shifted our plant to a
new place in Shindewadi, near Pune, in the year 2007. The plant has lot of greenery
around the premises, to ensure complete eco-friendliness. Some of the salient
characteristics of the entire plant are as follows:
 Ground floor has the office area, conference hall, hybrid resistor
manufacturing plant and stores
 Office has bird's-eye view of lush green scenic beauty of Katraj Mountains
 It has furniture that are made in pleasant tones
 The stores are neatly planned
 Hybrid / flat resistor manufacturing plant, first of manufacturing facility type
in India
 Facilities like smoke detector system, C.C.T.V. system, fire fighting system,
Public Address system are available
 The first floor of manufacturing plant has an ultramodern setup for
manufacturing Cermet's widest range of resistors in India. It has automatic
machinery that are based on ultramodern technology. On the same floor, it has
separate QC and RD departments.

22
Cermet Presence-

- A customer base of more than 650 across India & abroad

- Exports contributing 20% of turnover
- Exports to Germany, Italy, New Zealand, Russia, Brazil, China, Middle East, Turkey
- Participation in more than twenty International Trade Fairs & Exhibition

3.3 COMPANY’S VISION AND BUSINESS PHILOSOPHY

Cermet’s Vision

Cermet vision is backed by values that initiate, nurture and propagate scientific research,
product engineering and its conversion into an ethical business practice.

Cermet’s Business Philosophy

Cermet’s philosophy is driven by a desire to feed the inquisitive mind and channelize it to
generate products that not only form an indispensible part of an application but also are
revolutionary in their sheer range and the spectrum of applications. Cermet also thrives on
new challenges that are thrown up in its quest towards development of products and markets.
The backbone of Cermet’s existence has been its strong will to survive under adversities and
contribute to self-development resulting in value addition to the economic paradigm of the
country.

23
 3.4 INFRASTRUCTURE

 state-of-the-art Plant & Machinery

 Well-equipped Office and Factory Premises
 Qualified, Experienced, Visionary & Dynamic Management
 Well qualified Technical and Support Staff Teams
 Extensive Dealer & Distributor network

Cermet’s Pune location on one of the busiest inter-state highways (NH4), gives it a
distinct logistical advantage.

Growth Strategies
1. Augmenting & strengthening infrastructure and processes.
2. Improving technical and support skills through manpower utilization
optimization and getting a system in place to have a broader marketing initiative.
3. Tapping into markets not yet explored, both in terms of applications and
geography.
4. Following an SBU (Strategic Business Unit) concept to strategize growth.
5. Having offices abroad to facilitate exports & export marketing.
6. Getting into strategic tie-ups with either domestic or foreign partners of similar
interests to increase market visibility & reach, both domestically and internationally.

24
 3.5 FUTURE PLANS

Our Company is amongst the top 3 Indian companies that are manufacturing resistors.
Currently, we are manufacturing the widest assortment of resistors in India, which
includes special purpose resistors as well. In the near future, we plan to achieve
following objectives:

 Explore the global market

 Manufacture Specialized Power housed and High Voltage Resistors with / for
major European and U.S. Companies
 Promote our resistors for special applications such as H.V. capacitor,
Discharge, Automobiles, drives etc. in the global market
 Diversify and start the production of specialized plastic film or film foil
capacitors

3.6 PRODUCT PORTFOLIO

we are offering a wide range of resistors that are used for fan blower assembly, resistors for
air condition, fuel indicator, and others. These resistors are also offered in custom designs,
as per the specifications of our customers. This has made us the reliable "RESISTOR
HOUSE". Our range of resistors comprises:

3.6.1 Film Resistors

 Carbon Film

 Metal Oxide Film

 Metal Film

 Metal Film Fusible

 Power Film

 Metal Glaze

25
3.6.2 Wire Wound Resistors
 Silicon

 Axial

 Ceramic Encased Vertical

 Aluminium Housed

 Silicon

 Radial

 Ceramic Encased Vertical Flat

 Fusible wire wound

 Ceramic Encased Axial

 Ceramic

 Encased

 Radial

3.6.3 Thick Film / High Voltage Resistors

 Silicon Thick Film

 Unlacquered

 High Voltage Hybrid

 Thick film Hybrid type

 High Voltage & High Value

3.6.4 Special Type Resistors

 Automobile Applications

 Energy Meter Shunts & Current Sense

 Load Banks

 Heating & Flexible Heaters

 Zero Ohm & Tape Jumpers

 Mosquito Repellants

26
  Delta Connection Hybrid Delta

 Dynamic Breaking Resistors

In addition to the above-mentioned products, we also offer following products:

 Fusible film, fusible wire-wound Resistors

 Current sense Resistors

 Spark suppressor Resistors

 Pure non-inductive Resistors

 Thick film high voltage Resistors, Networks, arrays & dividers

 Surge protection Metal Glaze Resistors

 Silicon, Axial, Metal oxide high voltage high Meg Resistors

 Aluminium Housed, Dynamic Breaking Resistors & Load banks

Application Range

1.Railways
2.Automobile Industry
3.Power Electronic Industry
4.LT & HT Switchgears Industry
5.Capacitor Industry
6.Consumer Electronic Industry
7.Lighting Industry
8.Instrumentation
9.Lasers, X-rays
10.Special medico-electrical Applications

Solution for designer-

We are an eco-conscious and RoHSCompliance Company that manufactures a range of
resistors, which is highly popular in the market. Along with these resistors, we also offer
various solutions to the product designers. These solutions are provided to the following
sectors and applications:

 Auto Electronics

 Industrial Electronics

 Telecom Industry

27
  L.T. & H.T. Switchgears

 Low Voltage & High Voltage Power Supplies

 Entertainment electronics

 Instrumentation

 Lasers, X-rays other special medical electro applications

Quality assurance-

We are an ISO 9001:2001 certified company and hence we implement stringent quality
measures via our QC (Quality Control) department. The department is fully equipped with
various testing equipment’s that are highly sophisticated. It closely supervises and inspects
the resistor manufacturing processes, to ensure that only the best quality resistors are
marketed. Owing to our stringent quality measures and rigorous testing of the finalized
products, we have acquired success in ensuring the approval of Cermet products by:

Defence Standard

LCSO

ERTL (W)

BARC

BEL &RoHS compliance

3.7Our Distribution Network

We endeavour to achieve utmost customer satisfaction, by delivering our products within the
stipulated time frame, at the destination mentioned by our customers. For this, we have
created a wide distribution network, which is spread all over India. A brief of main cities and
distribution companies is as follows:

28
BANGLORE: Industrial Commercial Corporation, Maritime Data Systems

HYDERABAD:

COIMBATORE: Jaibalaji Engineering Services

PUNE: Smash Electronics, Rajiv Electronics, Electro Enterprises

MUMBAI: Electromark Devices (Bombay) Ltd., Silverline Components Pvt.

Ltd, Precious Electronics Pvt.Ltd.

DELHI: Radhika Agencies Pvt.Ltd., Capco India Electronics Division, Shree

Ram Marketing

VADODARA: Electrodeal

AHMEDABAD: R.R. Electronics

3.8OurCustomers-

We have a wide base of customers, who are based in different parts of India. Along with
catering to the requirements of sensitive defence requirements, we are catering to the needs of
more than 450 small and big companies. All our customers are reputed names in their specific
business and place repetitive orders for the thick film, metal glaze, high voltage, hybrid, flat,
and network resistors. Some our esteemed customers are as follows:

 ABB

 SIEMENS

 BARC

 EPCOS

 TYCO

 BTL

 VIDEOCON

 MIRC

 Honeywell

29
  Terminal Ballistic Labs

 CERN, Geneva

 Large Hadron Collider.

3.9 Products

Thin Film Resistors

Metal Film Fusible Resistors Metal Oxide Resistor Metal Film Resistor


Carbon Film Resistors

30
 3.9.1 Thick Film Resistors

Tubular Thick Film Resistors TO 220 Resistors Thick Film Voltage Divider

High Voltage Hybrid ResistorsUnlacquered Resistor High Voltage & High Value Resistor

Silicon Thick Film Resistors Metal Glaze Resistors



31
 3.9.2 Wire Wound Resistors

Dynamic Breaking ResistorsVitreousEnamelledAxialResistorVitreousEnamelledPowerResistors

Variable ResistorsAluminium Housed ResistorsCeramic Encased Radial Resistors


Ceramic Encased Vertical Flat ResistorsCeramic Encased Vertical Resistors

32


Ceramic Encased Axial ResistorsSilicon Radial ResistorsSilicon Axial & Fusible Resistors

3.9.3 Special Type Resistors



Tin Plated Copper Steel WireTin Plated Copper WireZero Ohm & Tape Jumper Resistors

Hybrid Delta Capacitor Discharge Resistors

33
 CHAPTER-4
DATA ANALYSIS AND
INTERPRETATION

34
COSTING PROCEDURE

For each process an individual process account is prepared.

Each process of production is treated as a distinct cost centre.

Items on the Debit side of Process A/c.

Each process account is debited with –
a) Cost of materials used in that process.
b) Cost of labour incurred in that process.
c) Direct expenses incurred in that process.
d) Overheads charged to that process on some pre-determined.
e) Cost of ratification of normal defectives.
f) Cost of abnormal gain (if any arises in that process)

Items on the Credit side:

Each process account is credited with
a) Scrap value of Normal Loss (if any) occurs in that process.
b) Cost of Abnormal Loss (if any occurs in that process)

35
Cost of Process:
The cost of the output of the process (Total Cost less Sales value of scrap) is transferred to
the next process. The cost of each process is thus made up to cost brought forward from the
previous process and net cost of material, labour and overhead added in that process after
reducing the sales value of scrap. The net cost of the finished process is transferred to the
finished goods account. The net cost is divided by the number of units produced to determine
the average cost per unit in that process. Specimen of process account when there is normal
loss and abnormal losses.
Dr Process account Cr

Particulars Units Amount Particular Units Amount

To Basic By normal
Material Xxx xx loss Xx Xx
To direct By abnormal Xx Xx
material xx loss
To direct By process 2 Xx Xx
labour xx A/C
To direct (output
transferred to
expenses xx
To Next process)
production xx
overheads
To cost of By Process I Xx Xx
Stock A/c.
rectification xx
of normal
defects

To abnormal
gain xx

Xx xxx Xx Xx

36
Process Losses:
In many process, some loss is inevitable. Certain production techniques are of such a nature
that some loss is inherent to the production. Wastages of material, evaporation of material is
unavoidable in some process. But sometimes the Losses are also occurring due to negligence
of Labourer, poor quality raw material, poor technology etc. These are normally called as
avoidable losses. Basically process losses are classified into two categories
(a) Normal Loss (b) Abnormal Loss

1. Normal Loss:
Normal loss is an unavoidable loss which occurs due to the inherent nature of the materials
and production process under normal conditions. It is normally estimated on the basis of past
experience of the industry. It may be in the form of normal wastage, normal scrap, normal
spoilage, and normal defectiveness. It may occur at any time of the process.

No of units of normal loss: Input x Expected percentage of Normal Loss.

The cost of normal loss is a process. If the normal loss units can be sold as a crap then the
sale value is credited with process account. If some rectification is required before the sale of
the normal loss, then debit that cost in the process account. After adjusting the normal loss
the cost per unit is calculates with the help of the following formula:

Cost of good unit:

Total cost increased – Sale Value of Scrap
Input – Normal Loss units

37
2. Abnormal Loss:
Any loss caused by unexpected abnormal conditions such as plant breakdown, substandard
material, carelessness, accident etc. such losses are in excess of pre-determined normal
losses. This loss is basically avoidable. Thus abnormal losses arrive when actual losses are
more than expected losses. The units of abnormal losses in calculated as under:

Abnormal Losses = Actual Loss – Normal Loss

The value of abnormal loss is done with the help of following formula:

Value of Abnormal Loss:

Total Cost increase – Scrap Value of normal Loss x Units of abnormal loss
Input units – Normal Loss Units

Abnormal Process loss should not be allowed to affect the cost of production as it is caused
by abnormal (or) unexpected conditions. Such loss representing the cost of materials, labour
and overhead charges called abnormal loss account. The sales value of the abnormal loss is
credited to Abnormal Loss Account and the balance is written off to costing P & L A/c.

Dr Abnormal loss A\c Cr

Particulars Units Rs Particular Units Rs
To Process By bank
A/c. Xx xx Xx Xx
By Costing P & Xx Xx
L
A/c.
Xx Xxx Xx Xx

38
3. Abnormal Gains:
The margin allowed for normal loss is an estimate (i.e. on the basis of expectation in process
industries in normal conditions) and slight differences are bound to occur between the actual
output of a process and that anticipates. This difference may be positive or negative. If it is
negative it is called ad abnormal Loss and if it is positive it is Abnormal gain i.e. if the actual
loss is less than the normal loss then it is called as abnormal gain. The value of the abnormal
gain calculated in the similar manner of abnormal loss. The formula used for abnormal gain
is:

Abnormal Gain

Total Cost incurred – Scrap Value of Normal Loss x Abnormal Gain Unites
Input units – Normal Loss Units

The sales values of abnormal gain units are transferred to Normal Loss Account since it
arrive out of the savings of Normal Loss. The difference is transferred to Costing P & L A/c.
as a Real Gain.

Dr Abnormal gain A/c Cr

Particulars Units Rs Particular Units Rs

TO normal To Process
loss A/c Xx xx A/c. Xx xx
To Costing P Xx xx
&L
A/c.
Xx Xx Xx xx

39
  Costing procedure under process costing

For the purpose of costing. The factory is divided into various department each department
representing a particular processes. A supervisor is appointed for each department to
supervise the functioning of his department. Each process is cost centre and, thus, costs are
accumulated for each process. A separate account is prepared for each process to which costs
of material, labour, direct expenses and overheads are recorded. Following are the main
element of cost in process costing;

1. Material:
Materials required for each process are drawn from the stores by way of material
requisitions. No distinction made between direct and indirect material. The value of
material issued is debited to the process account. When the output of first process
becomes the raw material of next process, the account of receiving process is debited
with the cost of transfer in addition to the cost of additional material, if any, added to
that process.
2. Labour:
Wages of worker engaged wholly in a particular process are debited to that process. if
the worker are engaged in number of processes, the wages are apportioned to the
different processes on the basis of time spent. General, the direct labour cost is very
small part of the cost of production in case of process costing.
3. Direct expenses:
Direct expenses are the expenses which can be easily identified with the process.
Depreciation, insurance, electricity, repairs and maintenance etc. are some of the
example of direct expenses which may be directly attributed to a process and thus, are
debited to the process concerned.
4. Production Overhead :
Production overhead is the major constituent of the cost of production in the case of
process costing. Production overheads are the expenses which are common to more
than one process costing i.e. which cannot be directly allocated to any process.

40
 Note: The objective is to study various product manufacture by Cermet Resistronic Pvt
Ltd, is fulfilled by the following question.

Q.1) which products are manufacture by the Cermet Resistronic Pvt Ltd?

We manufacture the resistors. We produce following different products.

Silicon Thick Film Resistors Metal Glaze Resistors Carbon Film Resistors

Hybrid Delta Capacitor Discharge Resistors

Figure .5.1

Interpretation-

Film Resistors

Carbon Film, Metal Oxide Film ,Metal Film, Metal Film Fusible , Power Film, Metal Glaze

Wire Wound Resistors

Silicon, Axial, Ceramic Encased Vertical, Aluminium Housed, Silicon, Radial, Ceramic
Encased Vertical Flat, Fusible wire wound, Ceramic Encased Axial, Ceramic, Encased,
Radial

Thick Film / High Voltage Resistors

Silicon Thick Film, Unlacquered, High Voltage Hybrid, Thick film Hybrid type, High
Voltage & High Value

41
Special Type Resistors

Automobile Applications, Energy Meter Shunts & Current Sense, Load Banks, Heating &
Flexible Heaters, Zero Ohm & Tape Jumpers, Mosquito Repellents, Delta Connection Hybrid
Delta, Dynamic Breaking Resistors

In addition to the above-mentioned products, we also offer following products:

Fusible film, fusible wire-wound Resistors, Current sense Resistors, Spark suppressor
Resistors, Pure non-inductive Resistors, Thick film high voltage Resistors, Networks, arrays
& dividers, Surge protection Metal Glaze Resistors, Silicon, Axial, Metal oxide high voltage
high Meg Resistors

42
 types of worker
10%

skilled worker
semi skilled worker
unskilled worker
30%

60%

Interpretation-

For manufacturing of our different products we need different kind of workers such as ,

Skilled worker (60%)

Semi-skilled worker (30%)

Unskilled worker (10%)

43
Interpretation-

As different product contained different values, that’s why to differentiate or to understand

the value of the product different colour codes are being used in production process. Different
colour codes show the different values of the product. For eg. Silicon thick film contain
golden, brown, black and yellow colour where carbon film resistor contain golden, brown,
black and red colour the values of both product are identified by the different colours used
for them.

44
Note-The objective is to study the different process used in Cermet Resistronic Pvt Ltd
is fulfilled by the following question.

Interpretation-

As we are the manufacturing company and our product have to pass from different process to
get final finished product. Our product passes through following process, cutting, Welding,
welding, colouring, after completing all the process the product were packed properly and
sale into the market.

45
 Product A is obtained after it passes through three distinct processes. Are required to
prepare Process accounts from the following information:

Abnormal Gain A/C.

DR. CR.

PARTICULARS UNITS RS. PARTICULARS UNITS RS.

TO NORMAL LOSS XXX XXX BY PROCESS A/C. XXX XXX

A/C.

TO COSTING XXX XXX

P & L A/C.

XXX XXX XXX XXX

PARTICULARS PROCESS

X Y Z TOTAL

RS. RS. RS. RS.

MATERIAL 5,200 3,960 5,924 15,084

DIRECT WAGES 4,000 6,000 8,000 18,000

PRODUCTION OVERHEADS 18,000

1,000 Units @ Rs. 6 Per Unit were introduced in Process X. Production overhead to be distributed as
100% on Direct Wages.

ACTUAL OUTPUT NORMAL LOSS

UNIT RS. PERCENTAGE% VALUE OF SCRAP

PER UNIT

PROCESS X 950 5% 4

PROCESS Y 840 10% 8

PROCESS Z 750 15% 10

46
SOLUTION :
PROCESS X A/C.
DR. CR.
PARTICULAR UNITS RS. PARTICULAR UNITS RS.

MATERIAL INTRODUCED 1,000 6,000 NORMAL LOSS 50 200

@ RS. 6 PER UNIT

MATERIAL 5,200 TRANSFERRED TO 950 19,000

PROCESS Y @ RS. 20
PER UNIT
DIRECT WAGES 4,000

PRODUCTION

OVERHEADS 4,000

1,000 19,200 1,000 19,200

PROCESS Y A/C.

DR. CR.

PARTICULAR UNITS RS. PARTICULAR UNITS RS.

TRANSFERRED FROM 950 19,000 NORMAL LOSS 95 760

PROCESS X

MATERIAL 3,960 ABNORMAL LOSS 15 600

DIRECT WAGES 6,000 TRANSFERRED TO

PROCESS Z @ RS. 40
PER UNIT 840 19,000

PRODUCTION

OVERHEADS 6,000

950 34,960 950 34,960

47
 PROCESS Z A/C.
DR. CR.
PARTICULAR UNITS RS. PARTICULAR UNITS RS.

TRANSFERRED FROM 840 33,600 NORMAL LOSS 126 1,260

PROCESS Y

5,924 FINISHED GOODS 750 57,000

MATERIAL
(@ RS. 76)

8,000
DIRECT WAGES

PRODUCTION
8,000
OVERHEADS

ABNORMAL GAIN @ RS.

76 PER UNIT 36 2,736

876 58,260 876 58,260

ABNORMAL LOSS A/C.

DR. CR.

PARTICULAR RS. PARTICULAR RS.

To Process Y 600 By Cash (sale of Scrap of 120

Abnormal Loss units)
By Costing Profit And
Loss A/C. 480

600 600

48
 ABNORMAL GAIN ACCOUNT
DR. CR.
PARTICULAR RS. PARTICULAR RS.

TO PROCESS Z A/C. 360 BY PROCESS Z A/C. 2,736

TO COSTING P&L A/C. 2,376

2,736 2,736

49
Working Note:-
PROCESS Y:-
(A) Normal loss:- 950 X 10 == 95 Units
100
Scrap value = 95 X 8 = Rs. 760.
(B) Abnormal loss Units
Normal production 950-95 855
Actual production 840
Abnormal loss 15

(C) Cost of Normal Production. 34,960 - 760 = 34,200.

Cost of Normal Production per unit 34,200 = Rs. 40 per units
845
Cost of Abnormal Loss:- 40 X 15 = 600
Abnormal Loss has been credited with Rs.120 being the amount realized from the sale of
scrap and Abnormal Loss.
PROCESS Z:
(A) Normal Process. 15% of 840 units = 840 X 15 = 126 Units
100
Sale of scrap = 126 X Rs. 10 = Rs. 1,260

(B) Abnormal gain Units

Actual production 750
Estimated production 714
36

The Cost of Abnormal Gain has been calculated in the usual way
Abnormal Gain A/C has been debited with Rs.360 being less amount, recovered on the sale
of loss of units which were 90 units instead of normal 126 units. i.e., 36 x 10 = Rs. 360.

50
 Note – the objective to study the method of process costing followed by Cermet
Resistronic were fulfilled by the following question.

In the books of Cermet Resistronic Pvt Ltd

Stores ledger (FIFO Method)

Receipts Issues Balance

Date quantity Rate Amt Quantity Rate Amt(rs) quantity rate Amt(rs)
(rs)
Jan-4 1000 10 10000 1000 10 10000
Jan-18 500 12 6000 500 12 6000
Jan-19 600 10 6000 400 10 4000
500 12 6000
Jan-24 700 15 10500 400 10 4000
500 12 6000
700 15 10500
Jan-25 400 10 4000 450 12 5400
50 12 600 700 15 10500
Jan-26 500 16 8000 450 12 5400
700 15 10500
500 16 8000
Jan28 450 12 5400 650 15 9750
50 15 750 500 16 8000
Jan-30 650 15 9750 350 16 5600
150 16 8000

Interpretation-

We used the FIFO method of process costing, which means the raw material purchased first
should issue first to the production department for the completion of production process.

FIFO method

- It follows the principle that material used should carry the actual experienced
cost of the specific unit used.
- It is more complex.
- It is more accurate.
It is used where size and cost is large.

51
Note- The objective to study various initiatives for future expansions were fulfilled by
the following question.

Plastic capacitors

planed export contribution

30

25
export contribution (%)

20

15

10

0
2014 2015 2016 2017
year

Interpretation-

Our future plans for expansion of our business are as follows,

1. Expect to triple are turn over.

2. Export contribution to grow 25% .
3. Switch to high value items manufacturing.
4. Power electronic will grown by about 40-50% and we have planned to have focus
there.
5. Explore the global market.
6. Diversify and start the production of specialized plastic film foil capacitors

52
Note- The hypothesis that process costing have a direct impact on minimise the
abnormal wastage material, labour, involved in Cermet Resistronic Pvt Ltd is been
proven by the following question.

Total sales

Total cost

Total semi variable cost

Total fixed cost

Interpretation-

Process costing analyse the manufacturing process at each and every process. It detects any
inefficiencies and loop hols in manufacturing products. So corrective steps will take to come
over such inefficiencies related to material, labour, and overheads, and company will not
suffer from big losses. This timely analysis of every process and elimination of inefficiencies
helps to control the abnormal wastage of material, labour and overheads.

53
Note- The hypothesis that there is direct relationship between process costing and
profitability of the company is been proven by the following question.

Interpretation-

Process costing elimanets the abnormal wastage of rersources, which helps organisation to
work efficiently and use resources at maximum level. Which leads to increase the
productivity of the company by using resources at par.

Increseing productivity helps to incrrease the profitability of our company.

54
 80000

70000

60000

50000
profit (Rs)

40000

30000

20000

10000

0
2013 2014 years 2015 2016

Interpretation-

Our company grow very well, and the profit of our company “Cermet Resistronic Pvt Ltd
were increase every year.

55
Note- The hypothesis that process costing is an effective method in manufacturing
industries are been proven from the following question.

Statement showing cost of abnormal loss, closing WIP and units

Transferred to the next process
Particulars Cost per Equivalent Total cost
unit unit Rs.

Abnormal Loss
Materials 4.00 400 1,600
Labour 2.00 320 640
Overheads 1.00 320 320

2,560

Closing WIP
Material 4.00 900 3,600
Labour 2.00 630 1,260
Overheads 1.00 630 630
7900 units
transferred to next 5,490
Process

(i) Cost of opening 4,000

WIP (80 units)
(ii) Cost incurred on
opening WIP
Material -- -- --
Labour 2.00 320 640
Overheads 1.00 320 320

960
(iii) Cost of
completing 7100
units
Material 4.00 7100 28400
Labour 2.00 7100 14200
Overheads 1.00 7100 7100

49700

Total (I + ii + iii) 54600

56
Interpretation-

As process costing helps us to know the abnormal loss and we can control it the right time to
control the cost of the company. And reduce the cost of the product and increase the
profitability of the company. Its an effective method in our company.

57
 Statement of cost for the year ended March 2015

Particular Amount Amount

Opening stock of Raw Material 60000
Add: purchases of Raw Material 50000

Less: closing stock of Raw Material 110000

Material consume 105000
Add: direct wages 5000 20000

Prime cost 125000

Indirect wages 3000
Factory expenses 15000
143000

Add: opening stock of work in progress 6500

149500
Less: closing stock of work in progress 4000

Works cost 145500

Add: admin expenses 5000

Cost of production 150500

Add: opening stock of finished goods 4500

155000
Less: closing stock of finished goods
6000
Cost of goods sold 149000

Selling and distribution expenses 3000

Cost of sales 152000

PROFIT 70000

SALES 82000
Interpretation-
Costing methods are accounting methodology that traces and accumulates as direct cost of
manufacturing process. We followed the following method of costing. For e.g.
1. Fixed cost
2. Variable cost
3. Direct cost
4. Indirect cost
These methods are used in preparation of cost statement.
As we are the manufacturing concern and to manufacture the final product, the raw material
had to passes from various processes. So we also follow the process costing methods in our
organisation.

58
Interpretation-

As we are the manufacturing company and to produce the final product it goes under various
processes like cutting, winding, colouring, coating and so on,

That’s why we always have to keep watch on all processes, cermet company use process
costing because in process costing all cost are accumulate for each stage of production or
process, and cost per unit of product is ascertained at each stage of production by dividing the
cost of each process by the normal output of the process. Process costing plays important
role in company because the product of the company that is the resistor have to passes
through no of process.

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Interpretation-

Process costing helps us to in decision making process. Better decision making Early in the
process avoids costly and time consuming changes late in the product cycle.

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Interpretation-

Our product were applied by various industries such as follows,

Application Range

Railways, Automobile Industry, Power Electronic Industry, LT & HT Switchgears Industry,

Capacitor Industry, Consumer Electronic Industry, Lighting Industry, Instrumentation,
Lasers, X-rays, Special medico-electrical Applications

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 CHAPTER -5
FINDINGS AND CONCLUSION

62
FINDINGS
 For manufacturing of our different products we need different kind of workers such
as, skilled worker (60%), Semi-skilled worker (30%), unskilled worker (10%)
 As different product contained different values, that’s why to differentiate or to
understand the value of the product different colour codes are being used in
production process.
 As we are the manufacturing company and our product have to pass from different
process to get final finished product.
 The input and output of each process are calculated shown in the above account. The
input of first process is raw material issued by the store as per the requirement of
production department.
 The output of first process becomes the input of next process or second process, or if
require additional component also introduce into that process. Both the output of first
process and the additional units called as the input of second process. And it follows
same till the end process.
 As per shown in the above account the normal loss, abnormal loss and abnormal gain
are calculated. Normal loss is the loss which cannot be controlled any way. But the
abnormal loss is the los in excess which can be controlled by taking corrective
measures. Abnormal gain is the excess actual production over expected production.
 They used the FIFO method of process costing, which means the raw material
purchased first should issue first to the production department for the completion of
production process.
 Process costing analyse the manufacturing process at each and every process. It
detects any inefficiencies and loop hols in manufacturing products. So corrective steps
will take to come over such inefficiencies related to material, labour, and overheads,
and company will not suffer from big losses. This timely analysis of every process
and elimination of inefficiencies helps to control the abnormal wastage of material,
labour and overheads.
 Process costing elimanets the abnormal wastage of rersources, which helps
organisation to work efficiently and use resources at maximum level. Which leads to
increase the productivity of the company by using resources at par.
 Increseing productivity helps to incrrease the profitability of our company.

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 Our company grow very well, and the profit of our company “Cermet Resistronic Pvt
Ltd were increase every year.
 As process costing helps us to know the abnormal loss and we can control it the right
time to control the cost of the company. And reduce the cost of the product and
increase the profitability of the company.
 Costing methods are accounting methodology that traces and accumulates as direct
cost of manufacturing process.
 Cermet company use process costing because in process costing all cost are
accumulate for each stage of production or process, and cost per unit of product is
ascertained at each stage of production by dividing the cost of each process by the
normal output of the process.
 Process costing helps us to in decision making process. Better decision making Early
in the process avoids costly and time consuming changes late in the product cycle.

64
CONCLUSION

The case study explain process costing in detail and the application process costing in Cermet
Resistronics Pvt Ltd, even though the topic has small amount of theory but the practical work
has made the study more informative.

Process costing probably the most widely used method of apportionment of cost.

It is used in mass production industries producing standard product like metal, sugar,
chemical etc.

In all such industries goods produced are identical and homogeneous. Processes are
standardise goods are produce without waiting for any instruction or order customer ad put
into warehouse for sales.

Row material move down the production line through a number of process in a particular
sequence and the cost are compiled for each process or department by preparing a separate
account for each process the products are standardise and homogeneous.

Cost per unit produce is the average cost, which is calculated by dividing the total process
cost by number of units produce.

The sequence of operation or process is specific and pre-determined, some loss of material in
the process (due to chemical action or evaporation) are unavoidable. Process of raw material
may give rise to the production of several products these several products produce from same
raw material may be termed as joint product and by product.

My visit in the Cermet Resistronic Pvt Ltd was to meet and collect regarding information
about my topic “process costing”. It was very useful and relevant visit in the company.

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CHAPTER -6
SUGGESTIONS

66
SUGGESTIONS

Accounting has not lost its purpose at all. In order to achieve aggressive target cost reductions
and continuously improve business processes, cost management ownership should be driven
down to lower levels in organizations and linked to the processes that deliver the outputs.

The purpose of process cost management is to support management’s decisions and provide
modeling tools to help evaluate alternative products and process designs. Cermet Resistronic
can be viewed as a what-if analysis tool to model new opportunities. Cermet Resistronic is
also being used by kaizen production teams to understand and control process costs because it
allows them to quickly assess the cost advantages of several suggestions. It also ties financial
goals to quality and process improvement objectives.

Management uses it as a tool to make strategic decisions about resources. Finally Cermet
Resistronic can also help make investment decisions by estimating the cost savings from
different process and showing which projects should be given priority.

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APPENDIX

68
Bibliography

Reference Books
1. Nirmal Gupta, chavvi sharma, Cost Accounting (theory and practices) 2nd
edition for b. com course, Ane Books Pvt Ltd, New Delhi.
2. Prin. Dr Sudhakar .U. Jadhaver, Prof.Dr S.D. Khairker, Prof, S.N. Nanaware,
Advance Cost Accounting And Cost System (paper I), Success Publication,
Pune-30.
3. C.R Khothari, Research Methodology Methods And Techniques (2 nd revised
edition) New Age International Pvt Ltd Publishers, New Delhi-02.
4. Prin. Dr Sudhaka.U. Jadhaver , Prin. Dr M.D.Lawronce, Prof. Dr. Jalindar
murtadak, Research Methodology For Business, success Publication , Pune-
41

Websites

1. www.resistorcermet.com
2. www.resistronic.com
3. www.process costing/Wikipedia.com
4. https://coursehero.com
5. www.google.co.in

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 QUESTIONNAIRE

Q.1) Which products are manufacture by the Cermet Resistronic Pvt Ltd?

Q.2) Which type of worker do you required in Cermet Resistronic Pvt Ltd?

Q.3) What are different colour codes for different product?

Q.4) Which different process are followed in manufacturing the different products in “Cermet
Resistronic Pvt Ltd?”

Q.5) How to calculate the input and output of each process of Cermet Resistronic?

Q.6) How to calculate normal loss abnormal gain and abnormal loss for different processes in
manufacturing different product by your company?

Q7) Which method of process costing used in Cermet Resistronic?

Q.8) What is your future plan for expansion of business of Cermet Resistronic?

Q.9) How process costing help Cermet Resistronic to minimise the abnormal wastage of
material, labour and overheads?

Q.10) How process costing helps Cermer Resistronic Pvt Ltd to increase the profitability of
the company?

Q.11) What is profitability scenario of the company “Cermet Resistronic Pvt Ltd?”

Q.12) Why did you think process costing is an effective method in manufacturing company
like yours “Cermet Resistronic Pvt Ltd?”

Q.13) Which costing method used in Cermet Resistronic Pvt Ltd?

Q.14) why process costing is an important in manufacturing company, like yours “Cermet
Resistronic Pvt Ltd?”

Q.15) How process costing helps you in decision making?

Q.16) In which industries your product were applied?

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