A PROJECT REPORT ON “Study of Production Cost” AT SAIKRUPA SUGAR KARKHANA PVT.LTD SUBMITTED TO “UNIVERSITY OF PUNE” IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA) SUBMITED BY Mr. Ravindra Vitthal Jagtap MBA II ( Finance ) 2013-2014 UNDER THE GUIDENCE OF Prof. Rahul Ghosale HSBPVT'S PARIKRAMA GROUP OF INSTITUTIONS COLLEGE OF MANAGEMENT, Kashti. Tal- Shrigonda, Dist: Ahmednagar, (M.S), India 2013-2014 HSBPVT'S PARIKRAMA GROUP OF INSTITUTIONS College of management, Kashti, Dist: Ahmednagar Department of computer managementDECLARATION I Mr. RAVINDRA VITTHAL JAGTAP Student of MBA II (Finance) 2011-2013 studying at HSBPVT’S GOI PARIKRAMA INSTITUTE OF MANAGEMENT declared that’ the project work entitled “COMPARITIVE ANALYSIS OF EXPENDITURE BUDGET”FOR HINDUSTAN PETROLEUM CORPORATION LIMITED. It was carried by me in the partial fulfillment Of MBA program under the University of Pune. This project was undertaken as a part of academic curriculum according to the university rules and norms and it has not commercial interest. and motive. It is my original work. It is not submitted to any other organization for any other purpose. PLACE: PUNE Date: (Rahul Ashok Ghosale) Roll NoAcknowledgement 1 am thankful to Director Dr. S.K Zaware Sir. The Director of Parikrama Group of institution, College and Head of Department of Finance who had given me and opportunity to do this project. 1 wish to express my deep sense of gratitude to Prof. Ghosale Rahul for his excellence guidance’s during his period of this project work were invaluable. Tam extremely grateful to Mr. A.V. Dhamdhere (Branch Manager) of Saikrupa Sugar Karkhana Pvt.Ltd, Shrigonda he has given the inspiration and valuable guidance. Last but not the least; I am thankful to library department of out college for making available books and also to those who have directly and indirectly help in preparation of this project report Date : Ravindra Jagtap Place : Kashti (MBA FINANCE) EC. ATI This is to declare that I am Ravindra Vitthal Jagtap, student of “Master in Business Administration” Course Period 2013-2014), H.S.B.P.V. Trust’s PARIKRAMA GROUP OF INSTITUTION, KASHTI have given original data and information to the best of my knowledge in the project report titled “PRODUCTION COST ANALYSIS” under the guidance of our Prof. Mr. Rahul Ghosale and that, no part of this informationhas been used for any other assignment but for the partial fulfillment of the requirement towards the completion of the said course. I have prepared this report independently and I have gathered all the relevant information personally, 1 have prepared this project for partial fulfillment of M.B.A (Finance) Post Graduate Course I also agree in principle not to share the vital information with any other person outside the organization and will not submit the project report to any other university. Place: Pune Ravindra Jagtap Date: / / MBA (Finance)INDEX Sr. No. Topic Page No. EXECUTIVE SUMMERY& INTRODUCTION COMPANY PROFILE OBJECTIVE RESEARCH METHDOLOGY REVIEW OF LITERATURE DATA ANALYSIS AND INTERPRETATION OBSERVATION & FINDING SUGGESSION LIMITATION 10 CONCLUSION BIBILIOGRAPHY ANNEXTUREEXECUTIVE SUMMARY The study of Production Cost Analysis of sugar industry with special refer ikrt uw Kharkhana Pvt.Ltd Hire z We have entered into an area of liberalization the development process has opened the doors of economy and in globalised economic environment it is necessary to protect the interest of consumers, investor, company and the country as a hole. In a liberalized economy, there is no role of traditional management in corporate world now only the professional management is required to control of the costs of the present day origination Moder area is called the industrial area. Every where there is vast developing in the field of industry. On account of the development of the industries, the modern industries require minimum cost of production and such as maximization of profits. For this purpose, they depend on the financial statements such as trading profits and loss account and balance sheet but these financial statements give information as whole. It means the entire industry is treated as one unit. It is difficult task to locate the errors, Cost account is recent development. It is the branch of financial accounting. It maintains the records unit wise, process wise, job wise, department wise. At the end, we can easily control are help in reduction of costs by preparation of the statements unit wise or job wise. So cost accounting is developed basically to remove the limitation of financial accountingThe Historical Background of the Indian Sugar Industry: ‘The sugar industry is proud to be an industry, which spreads the taste of sweetness to the mankind, The history of origin of this industry is as old as the history of main him self. Sugar is generally made from sugarcane and beet. In India, sugar is produced mainly from sugarcane. India had introduced sugarcane all over the worlds and is a leading country in the making sugar from sugarcane. ‘The sugars industry occupies potion in the organization industries of India. It ranks second next to cotton, textile industries in importance. The Sugars industrial established in 1830. It provides Employment to nearly 5 lakhs of people directly. There were more then 467 factories in the country in 1994-95 with an annual production of 150 to 200 lakhs tones. The sugars industries contributed revenue of the Central and State Government a sum or Rs 350 corores in the form of taxes. The sugareane is being grown in about 2.5 lakhs acres. Every year the crop is mostly contracted around Bijapur,Bagalkot,Belgaum, Mandya and coastal areas. This can be grown in all types of soil but higher yields can be obtained in a rich weet drained and medium despoils.National Scenario Of Sugar Industry: ‘The first sugar mill in the country was set up in 1903 in the United Provinces, ‘There are 566 installed sugar mills, of which 453 were in operation in the year 2002-03, and utilized 194.4 million ton of sugarcane (69% of total cane production) to produce 20.14 million tons of sugar. About 5 Lakh workmen are directly employed in the sugar. About 5 Lakh workmen are directly employed in the sugar industry besides many in industries, which utilize by-products of sugar industry as raw material. India is the largest consumer and second largest producer of sugar in the world. The Indian sugar industry is the second largest agro-industry located in the rural India Indian sugar industry has been a focal point for socio-economic development in the rural areas. About 50 million sugarcane farmers and a large number of agricultural laborers are involved in sugarcane cultivation and ancillary activities, constituting 7.5% of the rural population. Besides, the industry provides employment to about 2 million skilled/semi skilled workers and others mostly from the rural areas, The industry not only generates power for its own requirement but surplus power for export to the grid based on by- product-Bagasse. It also produces ethyl alcohol, which is used for industrial and potable uses, and can be used to the manufacture Ethanol, an ecology friendly and renewable fuel for blending with petrol. The sugar industry in the country uses only sugarcane as input; hence sugar companies have been established in large sugarcane growing states like Uttar Pradesh, Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh, In sugar year 2003- 04,these six states contribute more than 85%of total sugar production in the country; Uttar Pradesh, Maharashtra, and Karnataka together contribute more than 65%of total production, ‘The government of India licensed new units with an initial capacity of 1250 TCD up to the 1980s and with the revision in minimum economic size to 2500 TCD, the Government issued licenses for setting up of 2500 TCD plants thereafter. The government de-licensed sugar sector in the year of 11 September.1988The entrepreneurs have been allowed to set up sugar factories of expand the existing sugar factories as per the techno-economic feasibility of the project. However, they are required to maintain a radial distance of 15 Kms from the existing sugar factory. After de-licen and the existing plants have substantially increased their capacity. ., a number of new sugar plants of varying capacities have been set up ‘There are 566 installed sugar mills in the country as on March 312005, with a Production capacity of 180 lacks Mts of sugar, of which only 453 are working. These mills are located in 18 states of the country. The sector wise break up’s as follows: Table no#1 SILNo._| Sector No of factories 1 Private 189 2 Public 6 3 Co-operative _| 315 Total 566 International Sugar Industry: Demand- Supply: Brazil and India are the largest sugar producing countries followed by China, USA, ‘Thailand, Australia, Me production increased from approximately 125.88 MMT in 1995-1996 to 149.4 MMT in 2002-2003 and then declined to 143.7 MMT in 2003-2004, whereas consumption increased steadily from 118.1 MMT in 1995-1996 to 142.8 MMT in 2003-2004 as shown Pakistan, France and Germany. Global sugar in below given chart. The word consumption is projected to grow to 160.7 MMT by 2010 and 176.1 MMT by 2015. The world’s largest consumers of sugar are India, China, Brazil, USA, Russia, Mexico, Pakistan, Indonesia, Germany and Egypt. According to USDA. Foreign Agriculture Service, the consumption of sugar in Asian countries has increased at a faster rate, as a direct result of increasing population, increasing per capita income and increased availability. 10Diagram no#l 35000 30000 25000 20000 15000 10000 5000 0 ugar It Sugar industry contributes about Rs.1650 Crores to the Central Exchequer as excise duty and other taxes annually, In addition, about Rs.600 Crores is realized by the State Governments annually through purchase tax and cess on cane. At the prevailing sugarcane price, the total sugar cane produced in the country value at about Rs.24000 Crores per year World Sugar Trade: Word trade in raw sugar is typically around 22 MMT and white sugar around 16 ‘MMT. Brazil is the largest importer, followed by EU, Thailand, Australia and Cuba. The largest importers are Russia, Indonesia, UK, South Korea, Japan, Malaysia, the Middle East, and North Africa.World sugar prices fell steadily from 1994-1995 till 1998-1999 and have been almost stable at those levels. The trend seems to have now reversed and refined sugar prices have increased by 30% in the last 5 quarters — from 9.16 cents per pound in January, 2004 to 12.02 cents in March,2005 (Source: USDA Foreign Agriculture Services), Sugarcane Availability: Table showing sugar cane availability in cultivated arec ‘Table no#2 Year Cultivated area (%) | MMT 1980-81 27 154 1990-91 = 241 2000-01 = 296 2002-03 43 300 2003-04 39 = 2004-05 37 236 Sugarcane occupies about 2.7% of the total cultivated area and it is one of the ‘most important cash crops in the country. The area under sugarcane gradually increased from 2.7 million hectares in 1980-81 to 4.3 million hectares in 2002-03, mainly because of much larger diversion of land from other crops to sugarcane by the farmers for economic reasons. ‘The sugareane area, however, declined in the year 2003-04 to 3.9 million hectares and to 3.7 million hectares in 2004-05, mainly due to drought and pest attacks. From a level of 154 MMT in 1980-1981, the sugarcane production increased to 241 MMT in 1990-1991 and further to 296 MMT in 2000-2001. Since then, it has been hovering around 300 MMT until last year. In the season 2003-2004, however, production declined to 236 MMT mainly due to drought and pest attacks. Not only sugarcane sugarcane acreage and sugarcane production has been increasing, even drawl of sugarcane by the sugar industry has also been increasing over the years. In India, sugarcane is utilized by sugar mills as well as by traditional sweeteners like guru and khandsari producers. However, the diversion of sugarcane to guru and khandsari is lower in states of Maharashtra and Karnataka, as compared to Northem states like UP. 12SUGARCANE UTILIZATION ‘Table no#3 ‘% Sugarcane utilization for Year White Sugar | Guru and Khantilwati feed and|chewing 1980-1981 33.4 54.8 18 1990-1991 50.7 374 18 2000-2001 59.7 28.8 ILS 2001-2002 STA 31.5 I 2002-2003 68.9 20.1 i 2003-2004 | 56.1 32.5 ire Sugar Production: Most of the sugar in India is manufactured and sold as “White Crystal Sugar” which is produced by Double Suspiration Process, while the norm in developed and emerging nations is refined sugar, which is produced by the Phosphoflotation Process. Most of the mills in India are not equipped to make refined sugar Mills which are designed to produce refined sugar can manufacture sugar not only from sugarcane but also from raw sugar which can be imported. Therefore, such mills can run their production all the year round, as opposed to single state mills, which are dependent upon the seasonal supply of sugarcane. 1BConclusion India is a largest consumer of sugar in the world and second largest manufacturer of sugar followed by China, USA, Thailand, Germany, and Pakistan. In the sugar industry the top position is Brazil as it is a world largest manufacturer of sugar. As seeing the consumption of sugar the India is having a big market for sugar industry. As it is a large~ scale industry it provides large profit for the country and it can also be helpful for development of industrial infrastructure. India is a world’s largest consumer and second largest manufacturing of sugar so the sugar must be cheaper. It can be provide by our sugar industry. 14MMPANY PROFILE Name of the company : MIS Saikrupa Sugars Pvt.LtdRegister Office Limited (SSKL) Branch Office Managing Director Status of the company Constitution of the firm Financial institution of the company Banker of the company Shirgonda road HIRADGOAN Dist: Ahmednagar M/s Saikrupa Sakhar Karkhana Shirgonda road HIRADGOAN Dist: Ahmednagar At: Hiradgoan Sole trading concern Registered under companies Act of 1956 History Of Saikrupa Sugar Kharkhana Pvt.Ltd SRI SAIKURUPA SUGAR & ALLIED INDUSTRIES LTD.Brief Profile of the Company Saikrupa Sakhar Karkhana Limited (SSKL) is a Company registered in the State of Maharashtra under the Companies Act, 1956, It is one of the foremost companies started in Maharashtra in the private sector after de licensing of sugar industry, Company had set up a sugar unit at Devdaithan engaged in manufacturing of sugar with installed capacity of 1250 TCD in the year 2000. This unit is debt free today. There is no outstanding term loan today on this factory. Currently there are two Sugar Factories of the company, running in the name of Unit-1 and Unit-Il Unit-l situated at Village Devdaithan is engaged in manufacturing of sugar with installed capacity of 1250 TCD, established in the year 2000. To make the company more viable and financially profitable, SSKL came up with integrated project of 7500 TCD capacity Sugar Plant and 60 KLPD ethanol plant and 40 MW (2 x 20 MW) capacity Cogeneration Power Plant as SSKL Unit Il, near village Hiradgaon, Shrigonda, tehsil, Ahmednagar district of Maharashtra, which has come under production in January, 2011 This project is one of the biggest projects of Maharasthra. There is no such other plant on MH with this capacity. Management Details: Key Promoters of the Company: This company was promoted by Shri Babanrao Bhikaji Pachpute,. He has good experience for over two and half decades in the sugar industry. He has handled the responsibility as Chairman of Shrigonda SSKL since 1984 Shri Rajkumar Sudam Dhamdhere, CEO and Managing Director, is a first Generation entrepreneur who started a construction firm in Aurangabad in 1998 and grew it to it a big level. ‘Today, MR, Dhamdhere is well known in the real estate market at Aurangabad. He also has extensive knowledge of Sugar industry. Prior to starting his own company, Mr. Dhamdhere practiced as a Government Attomey at the Aurangabad High Court of Law. He has bachelor’s degrees in Commerce (B.Com) and law (LLB) from University of Pune. Shri Vikram Babanrao Pachpute, Director, has a MBA from UK and a bachelor’s degree in Commerce. He is elder son of Mr. Babarao Pachpute. He is managing commercial part of the company. LOCATION: Name of the company : MIS Saikrupa Sugars Pvt.Ltd Shirgonda road HIRADGOAN 7Dist: Ahmednagar Register Office M/s Saikrupa Sakhar Karkhana Limited (SSKL) Shirgonda road HIRADGOAN Dist: Ahmednagar Register noCompetitors Information: The main competitors are as follows: Shrigonda sugar Factory Ltd. Cru ing capacity-3500 TCD Recovery-10.5% ‘Sugar production-4000 Qtls (per day) Kukadi sugar Factory Ltd. Crushing capacity-4500 TCD Recovery-11.2% Sugar produetion-9000 Quis (per day) Daund sugars Ltd Crushing capacity -000 TCD. Recovery -12% Sugar production — 10000Qts (per day) 19ision ‘The main vision of the company is to develop the rural area & provide the better infrastructure facilities to the localities & to farmers. Mission The mission of the company is to pay the better returns for its shareholder in terms of higher cane rate & to the stakeholders in terms reasonable salary & wages. Goals of Saikrupa Sugars Pvt.Ltd 4 To expand its installed capacity, achieve end-to-end integration for al its plants to improve margins and reduce business cycle 4 Achieve greater raw material security. 4 Increase its focus of corporate and high value consumers. To become the most efficient and market driven integrated processor of sugarcane in the world. 4 While enabling the team to grow in a learning and motivating atmosphere, participating in the all round development of community. 4 Delivering consistently on returns to all its shareholders. 4 Bringing over all productivity and efficiency through out the organization, especially by value addition of it’s by products in sugar effluent waste etc. 4 Producing the best quality sugar to satisfy the domestic and internal norms 20Objectives Of Saikrupa Sugar Kharkhana Pvt.Ltd OBJECTIVE OF THE STUDY The following are the objective of study To study the cost of production. To identify the cost unit and cost centre. 3. To identify the difficulties of installation of cost accounting system, > To study the operating efficiency and cost control technique.23METHOD OF DATA COLLECTION Research Methodology: This is analytical research area where we analyses information with cause and its effects relationship. This analysis leads to the simple conclusions of whether to lend money to the institution for business. Also if the money is lend then there is reality the norms are not always perfect and hence it is essential to priorities stringent parameters and secondary parameters, Research Type Analytical Source of Data Primary and Secondary Analysis Tool used Financial Analysis Research has its special significances in solving various operational and planning problems of business and industry. Research methodology is the way to systematically solve the research problem, Methodology differs from person to person. Right methodology is the fulfillment of predetermined goals and objectives. Methodology is related with the pattern or method of work researcher follow. While working in the organization, researcher got much information during practical work apart from this; the methodology applied to collect the necessary information is discussed below. Researcher first went to finance dept and collected the requisite data SOURCES OF DATA Sources of data 1. primary data 2. secondary data Primary data:- * Is collecting through interview of financial departmental heads Secondary data:- + Iscollecting from company data of accounts, 24MEANING OF COST Cost in simple words, means the total of all expenses. Cost is defined as the amount of expenditure incurred on a given thing, Thus it is that which is given or sacrificed to obtain something, ICMA London “Cost is the amount of expenditure incurred on or attributable to a given thing.” Ina business where selling and distribution expenses are quite nominal, the cost of the article may be calculated without considering the selling and distribution overheads. While in a business, where the nature of the product requires heavy selling and distribution expenses calculation of cost without taking in to account selling and distribution expenses may prove very costly to the business. ‘Then cost may be factory cost, office cost, cost of sales and even an item of expense is also termed as cost. Prime cost includes expenditure on direct material, direct labor and direct expenses. Money spent on materials is termed as cost of materials the spent on labor as cost of labor and so on, Thus, the used of term cost without qualification is also quite misleading. Again, different costs are found out for different purposes. To work-in- process is valued at factory cost while stock of finished goods valued at office cost. Numerous other examples can be given to show the term cost des not mean the same thing under all circumstances and for all purposes. Many items of production are handled in an optional manner, which may give different costs for the same production or job without in any way of cost accounting 26ELEMENTS OF COST Elements of cost mean the essential parts or components of goods or service or jobs. In other words elements of cost are part of the total cost and include the main item of expenditure incurred for production of goods, services and jobs. Analysis and classification of cost Cost is the amount of expenditure incurred for production of goods and services. ‘Thus cost is composed of three elements, viz, material, labor, and expenses Classification of cost Cost classification is the process of grouping costs according to their common features or characteristics. Classification is essential to find out the cost of production, Objective of classification of cost 1. Ithelps the management for implementing cost control and decision making. 2. Ithelps for calculation of cost of production. 3. Ithelps for valuation of work-in-progress. Element wise classification Cost classified on the basis of element wise is as follows 1, Material cost 2. Labor cost 3. Expenses Material Cost: This is “the cost of commodities supplied to an undertaking,”(J.C.M.A) Materials are further divided in to two parts (1) Direct materials (2) Indirect materials. 271) Direct materials: Direct materials are those materials which can enter into and form of the finished product. Direct materials cost is the which can be conveniently identified and allocated to cost units. 2) Indirect Materials: — Indirect materials are those materials which cannot be conveniently identified with cost units, ‘These are c1 of remuneration, such as wages salaries, commission, bonus ete. Of the employees of an undertaking 1) Direct wages: Wages paid to laborers who are directly engaged in converting raw materials into finished products. It is also called Direct Labor, Productive Labor, and Prime cost. 2) Indirect Labor: Indirect labor is not directly engaged in the production of ‘goods but only to assist or help in production of goods or services. xpenses: ‘The expenses means the cost of services provided to an undertaking and the notional cost of the use of owned assets. In other-words costs other than the material and labor are called expenses. Direct Expenses: Direct expenses are those expenses which can be specifically incurred in connection with a cost unit, E.g. hire of special plant for a particular job, Indirect expenses: Indirect expenses are those expenses which cannot be directly identified with a particular job. Overheads: ‘An overhead includes indirect material, indirect labor, and indirect expenses. In general terms, overhead comprise all expenses incurred for in connection with the general organization of the whole or part of the undertaking that is the cost of operation supplies 28and services used by the undertaking and including the maintenance of capital assets. The main groups into overheads may sub divided are as follows 1. Manufacturing overheads z Administration overheads 3. Selling overheads 4. Research and development overheads 5. Distribution overheads Function wise Clas: fication: Costs classified on the basis of funetion wise are as follows: + Production cost or manufacturing cost or work cost = Administration cost * Selling cost "Distribution cost 1, Pre ic if: This is the cost which begins with supplying of materials, labor and service and ends with the completion of production other terms used in this connection are factory overhead. Examples: 1) _ Indirect labor © Foremen’s salary © Cleaner’s salary and wages * Gatekeepers’ salary * Salary of time keeping department © Tools operator’s wages * Store keeping department salary 2) Factory rent and rates 3) _ Insurance of factory 294) 5) 6) 0) 8) » 10) 1) 12) 13) 14) 2 Consumable stores Indirect materials cost such as cotton waste, nuts and bolts, lubricating oil, nails etc Gas, fuel and water, stationery to the factory Depreciation on factory equipment, factory building, plant and machinery Repairs of factory equipment, factory building and machinery Depreciation on loose tools Laboratory expenses Labor welfare expenses Canteen expenses Over time wages Contribution to workmen’s compensation fund This consists of all expenses incurred in the direction control and administration of an undertaking, Examples: 1) Salaries of office staff, accounts, MD, GM 2) Director's fees 3) Bank charges 4) Postage stationery telephone 5) Rent rates of office 6) _ Insurance of office building and equipments 7) Depreciation on office building equipment and furniture 8) _ Printing charges of office 9) Audit fees 10) Legal charges 303 Selling cost: Other expenditures incurred for sales and stimulating demand and for securing orders are known as selling cost. 4 Examples: 1, Salaries and commission of salesmen 2. Show room expenses 3. Samples, free gifts 4. Commission to agents or distributors 5, Advertising and Publicity expense 6. Marketing expenses 7. Expenses incurred for recovering the bad debts 8. Subscription to trade Journals and commercial Journals It is an expenditure incurred for distributing the goods Examples * Packaging cost © Carriage outwards © Warehousing costs, such as repairs, depreciation lighting of warehouse * Loading charges * Dispatch expenses * Shortage of finished goods in warehouse ‘© Finished goods damaged in transit Classification according to Behavior: Some costs are increased or decreased in production directly; some costs remain unaffected while others change but not in direct proportion to the change in volume of production. These are: 1 Variable cost 311. Fixed costs. 2. Semi-Variable or Semi-Fixed costs Variable cost: These cost an in direct proportion to the volume of output. Cost per unit will remain the same. If output increases total variable cost also increases and if output decreases total variable cost also decreases. e.g.: Direct materials Direct wages Power Fixed cost: The total fixed costs remain unaffected either with the increase or decreases in the output. But cost per unit goes on changing, © Rentand rates of building. * Depreciation of building. * Insurance, * Interest on capital ‘© Municipal taxes Fixed cost can be further classified into 1) Committed fixed costs 2) Discretionary fixed costs 1) Committed fixed cost: Consist largely of those fixed costs that arise from the possession of plant, equipment & basic organizational structure. For example, once building is elected and plant is installed nothing much can be done to reduce the costs such as depreciation 2) Discretionary cost: ‘Are those which are set a fixed amount for specific time period by the management in the budgeting process? These costs directly reflect top management policies have no particular relationship with the volume of output. These cost therefore be reduced or entirely eliminated, if the circumstances so require. Examples of such costs are Research & Development costs advertising & sales promotion costs, 32donation management consulting fees etc. ‘These costs are also termed as managed of programmed costs. Semi-Variable cost: These costs are partly fixed and partly variable. These costs are thus partly affected by fluctuations in the level of activity. Examples: Depreciation, Repair & maintenance, Telephone expenses. Other type of costs: Decision making costs: Decision making costs are special purpose costs that are applicable only in the situation in which they are complied they have no universal application. They need not tie into routine financial accounts to the accounting rules. Controllable and uncontrollable cost: Controllable costs are those which can be influenced by the action of a specific member of the understanding costs which cannot be so influenced are termed as uncontrollable cost. For example the expenditure incurred by the room is controllable by the foremen in- charge of that section but the hare of the tool room expenditure which is apportioned to a machine shop cannot be contracted by a machine shop forces. Differential, Incremental or Decrement cost These are costs which do not involve cash outlay. ‘They are not included in cost accounts but are important for taking into consideration while making management decisions, For example nterest on capital is ignored in cost account through it is considered in cost financial accounts. In case two projects require unequal outlay & cash the management must take into consideration interest on capital to judge the relative profitability of the projects. According to ICMA London “Costing is the techniques & process of ascertaining costs” These techniques are the rules & regulations to govern or regulate the process of ascertaining the costs or services. ‘Therefore these rules & regulations are carried from unit to unit immediately to the industry & formation of policy. ‘Thus costing is a routine work of cost ascertainment, 33Objectives of cost accounting: a) Ascertainment of cost. b) Determination of selling price. ©) Cost control and cost reduction 4) Ascertaining the profit of each activity. ) Assisting management in decision making. Advantages of cost accounting: a) Discloses profitability of activities. b) Ithelps in cost control ©) Ithelps in formulating policies 4) Ithelps in decision making, ©) It guides in fixed selecting prices. £) Ithelps for fixing the standard of efficiency of workers. g) It facilitates the assessment of tax. h) Ithelps to judge the financial position & credit worthiness of the business, Disadvantages of cost accounting: a) Absence of a readymade system b) Cost differences. ©) Cost data have no usefulness in themselves. 4) Itis not true or exact cost. Cost unit and Cost center: Cost unit: It is a unit of product, service or time in relation to which costs may be ascertained or expressed. We may for instance determine the cost per tone of steel, per tone kilometer of a transport service or cost per machine hour. 34Types of cost units: 4 Single cost: It is a single unit cost for example per tone, per kilogram. 4 Composite costs: It is a composite of two or more simple cost units. It is used where the simple cost is not possible for ascertain cost. Cost units are usually the units of physical measurement like number, weight, area, volume, length, time and value. Cost Center: It is defined as a location, person or an item of equipment for which cost may be ascertained and used for the purpose of cost control, Cost centers are two types Production Cost Center: It is a cost center where raw material is handled for conversion in to finished produet. Here both direct and indirect expenses are incurred. Machine shops, Welding shops and assembly shops are examples of production cost center. vi ter: It is a cost center which serves as an ancillary unit to a production cost center. Power house, gas production shop, material service centers, plant maintenance centers are examples of service cost centers. Mixed Cost Centers: It is cost center, which is engaged in both the production and service, For example, carpenter shop manufacturing as well as undertaking repair work Cost estimation and cost ascertainment: Cost estimation is the process of pre-determining the costs of a certain product job or order. Such pre-determined may be required for several purposes such as budgeting, measurement of performance efficiency, preparation of financial statements (valuation of stock ete), make or buy decision fixation of sale price of the product ete. 35Cost estimation as well as cost ascertainment both are interrelated and are of immense use to the management in case a concem has a sound costing system, the ascertained costs will greatly help the management in the process of estimation of rational accurate costs which are so necessary for a variety of purpose stated above. Cost ascertainment is the process of determining the cost on the basis of actual data, Hence, computation of historical cost is cost ascertainment while computation of future costs is cost estimation, Cost allocation and cost apportionment Cost allocation and cost apportionment are the two procedures, which deseribe the identification and allotment of costs to cost centers, Cost allocation refers to the allotment of whole item of cost to cost centers or cost units while, cost apportionment refers to the allotment of proportions of items of cost centers or cost units. Thus the former involves the process of charging direct expenditure top cost centers or cost units. While the later involves the process of charging indirect expenditure to cost centers or cost units for example the cost of labor engaged in a service department can be charged wholly and directly to it Canteen expenses of the factory cannot be charged directly and wholly to it. Its proportionate share will have to be found out. Changing of cost in the former ease will be termed as “Allocation of costs” while in the later as “Apportionment of costs”, Cost reduction and Cost control: The cost control is defined as “The regulation by executive action of the cost of operating an undertaking particularly where such action is guided by cost accounting”. Cost control is exercised through setting standard or norms or targets and comparing actual performances there within a view to ascertaining deviation form set targets or norms or standards and taking corrective actions to ensure that future performance conforms to the set standards or norms or targets Cost control techniques: Among the techniques which have become popular for ensuring cost control are 4 Material control 36Ce Labor control Overhead control Budgetary control. Standard control Control of capital expenditure Productivity and Accounting rations. Cost reduction: Cost reduction may be defined “as the achievement of real and permanent reduction in the unit cost of goods manufactured or service rendered without impairing their suitability for the use intended or diminution in the quality of the product” Adv a) b) °) qd) e) Are redt Mn: In so far as an individual company is concerned, cost reduction results n profit improvement. The more the profits, the more stable the company becomes. Society will be benefited by reduced prices which may be possible by savings from cost reduction programmers. Workers and staff of the industry may also be benefited through increased wages and improved welfare amenities ‘The country also stands to gain immensely by cost reduction programmers, Internal revenue will increase through more tax revenues. red : Cost reduction methods may be applied in the following areas 4 Product Design: Cost reduction begins with the improvement in the design of the product. An investigation into the possibilities of cost reduction should be made. Both when introducing new design and when making improvement in the existing design 4 Factory organization and production methods: All efforts should be constantly made to reduce the cost by the adoption of new methods of organization and new production methods. + Factory Layout + Administration + Marketing 374 Finance tools and techniques of cost reduct Distinction between cost control and cost reduction: y 2 3) 4) 5) Pre Cost control aims at achieving the predetermined costs, where as cost reduction aims at reducing costs. Cost control is a runtime exercise, which is carried out for attainment of operational efficiency, where as cost reduction aims at permanent and real savings by continuous search The process of cost control is to lay down a target, ascertain actual performance, compare it with the target and take corrective action, On the other hand, cost reduction is not concemed with maintenance of performance according to the predetermined standards, Cost control seeks adherence to standards where as cost reduction is a challenge to the standards themselves. Cost reduction assumes that there are chances of improvements in predetermined standards The aim of cost control is to see that actual costs do not exceed the predetermined costs so it is a preventive function. On the other hand, cost reduction is corrective function because it challenges the predetermined costs and seeks to improve the performance by reducing cost of increasing production, m1 1) Lack of support from top management: Manager or MD do not supporting the cost accounting system because they are thinking that cost accounting is an obstacle and disturbs the work. Therefore top ‘management does not support whole heartedly. 2) Resistance from the existing accounting staff: The existing financial accounting staff may be offer resistance to the system because of a feeling of their being declared under the new system. 38This fear can be done away with by explaining to the staff that the cost accounting system would not replace but strengthen the existing system, 3) Non co-operation at other level: ‘The foremen and other supervisory staff may resent the additional paper work and may not co-operate I providing the basic data, which is so essential for the success of the system, This needs re-orientation and education of employed. They have to be told of the advantages that will accrue to them and the organization. 4) Shortage of t Cost accounting is a specialized job in itself. In the beginning therefore ed staff: qualified staff may not be available. However, this difficulty can be overcome by giving the existing staff requisite training and additional staff, if required 5) Heavy costs: Unnecessary sophistication and formalities lead to heavy cost. ‘The cost accounting office should serve as a useful service department. Main consideration: 1) The product: The nature of the product determines to a great extent the type of cost accounting system to be adopted. For e.g. a product requiring high value of material content requires elaborate system of material control 2) The organization: The existing organization should be disturbed as little as possible. It becomes necessary top ascertainment the size and type of organization before introducing the cost accounting system. 3) The object ‘The objective and information, which the management wants to achieve and acquire, are also to be cared for. 4) Technical details: The system should be introduced after a detailed study of the technical aspects of the business efforts should be made to secure the sympathetic assistance and support of the principal members of the supervisory staff and workmen 395) Informative and simp! ‘The system should be informative and simple. Audit: ielladiione ‘The term ‘audit’ concerns the examination of books of accounts and necessary vouchers to ascertain the accuracy of accounting transaction. According to the Institute of Cost and management Accounts of England, Cost Audit is defined as the verification of cost accounts and a check on the adherence to the Cost Accounting plan. Functions of cost auditing: 1) To verify that the cost accounts are correctly kept in accordance with the principles of costing employed in the industry. 2) To measure that the cost accounting routine lay down by the business is properly carried out. 3) To detect errors and prevent frauds possible misappropriation. Process Costing:- Means_ ‘When the raw materials are fed in to the machinery as an input, we get output. In order to convert the raw material into finished product i. e. input into output, it has to pass or move through different stages. Each stage is known as a process Raw Materials Finished Goods Process: oP [sre frees | ——$ 40IMBITION WATER, KH BAGASSE, KO RAW JUICE EXHAUST STEAM fy CONDENSATE WATER | SULPHURDIOXIDES + LIME KK CE EXHAUST STEAM. ee CONDENSATE WATER | EXHAUST STEAM KY— JUISE +MUD | VAPOURS: a CONDENSATE WATER | _varouns, conpensate ware | — MASSCUITE Steak on ren wean wast war} —+ —! OEE { 411. Crushing of sugarcane ‘Sugarcane is harvested in the fields. Dressed and bundled in small bundles stocked in Lories, tractor or bullock carts supplied to factories, weighed and crushed in set of mills. Crushing takes place mainly in two stages. First, preparation and then milling. The milling takes place after preparing the cane in leveler and cutter. Milling is done by passing the prepared cane blanked through sets of mills. Weighted water also is added in the course of crushing for better extraction of juices. After crushing the bagasses is sent to boiler as fuel and juice sent for processing after weighment. 1. Juice clarification (Double clarification) The weighed juice is primarily heated in juice heated at65-70°C. It undergoes a process of clarification i.e. addition of lime and sulpher dioxide simultaneously. The juice thus sulphited heated again in another set of juice heaters at 100-105 C and the hot juice is sent to a clarifier. Where it settles and clear juice is decanted out from the Clarifier and sent for evaporation in a set of multiple effect evaporator Bodies designed for steam economy (quadruple effects of evaporation) The juice thus evaporated gets concentrated to form thick syrup of about 58-60° C brix), 2. Crystallization ‘The syrup thus sulphited in syrup. Salphitor is sent to pan floor for further crystallization in vacuum pans, The syrup collected gets in supply tanks is taken to pans for pan boiling, where the syrup is further boiled attains super satiation stage. In such a condition sugar grains are formal and hardened, developed to form a mass called massecuite. The massecite is dropped in crystallizers and cooled to complete the process of crystallization, 3. Curing In centrifugals the massecuite is cured i.e. sugar crystals are separated from mother ligouor in high speed centrifugal machines. The sugar crystals thus separated are properly dried by blowing hot air and cold air. The molasses is collected in separate tanks and Used for further boiling to recover more sugar. 4. Grading and Bagging. The dried sugar after passing through elevator goes to the grade for graduation. The sugar falls into the bins with this fall sugar is packed in bags. ‘The graded sugar is bagged weighted for 100kg & they are stitched numbered and stocked in the sugar go down in different lots as per grade and color. 42Definition of Process Costing: Lunt and Riply observes, “Process costing is used to ascertain the cost of each stage of ‘manufacture where material is passed through various operations to obtain a final product to result with products in many cases at different stages.” Applicati M2 ing in the Industries: ‘The industries in which process costing system may be used are many. In fact a process costing system can usually be devised in all industries except where Job, Batch or Unit operation costing is necessary. In particular, the following are examples of industries where process costing is applied. Paper Manufacture Paint Manufacture Dis lies Plastic Manufacture Sugar Industries Food Manufacture Fertilizer Industry Glass Industry Drug and Medicines Producing Industries Aluminum Industry Timber Industry Rubber Industry 43ist ins (1) It isa form of Operation Costing in which the cost of the product is ascertained at each Stage or process of its manufacture. (2) The output of one process becomes input of next process and that of last process is transferred to the finished stock (3) The production of goods is continuous (4) The finished product is the result of two or more processes. (5) The product is standardized. (6) Cost per the unit is the average cost. (7) Cost of each process is collected. Advantages of Process Costing System: (1) Ithelps for calculation of cost in short period (2) Ithelps for calculation of cost of each process as well as finished product. (3) It involves less clerical works and expenses. (4) Ithelps for control over production and costs. (8) Iis easy to allocate the expenses to processes in order to have accurate costs. Disadvanta ‘Process Costin: mn: (1) Average cost is not accurate cost. (2) Costs are historical (3) Work-in-progress is required to be ascertained at the end of an accounting period for calculating the cost of continuous process. Valuation of work-in-progress is generally done on estimated basis which introduces further inaccuracies in total cost. 4) There is a wide scope of errors while calculating average costs. An error in one average cost will be carried through all processes to the valuation of work-in-process and finished gods. 44While converting raw material into finished goods certain wastage may arise at various stages of production. Such loss or waste may due to evaporation, inefficiency ete., and such wastage is known as process losses. Process losses may be classified into (a) Normal Loss and (b) Abnormal Loss (a)_Normal Loss: Any loss arising due to normal factors like evaporation, withdrawals for tests, shrinkage, sampling, unavoidable spoiled quantities etc. Constitute normal loss. These losses cannot be avoided. Total Cost Normal Loss = ‘Total Units — Normal Loss (b)_ Abnormal Loss: Any losses arising due to abnormal factors are known as abnormal loss. Such loss is over and above normal loss, These losses may arise from the factors like carelessness, machine breakdown, accident, use of defective material etc. (2) Process Gains: Abnormal Gain: If the actual loss is greater than normal loss, it is known as abnormal loss. But if the actual loss is less than normal loss a gain, is obtained which is called abnormal gain or effectiveness. Treatment for Abnormal Gain — The value is calculated as if it good units. It is debited to the process account and credited to abnormal gain account.FORMAT OF PROCESS ACCOUNT Particulars Input | Cost | Total | Particulars Output | Cost | Total per | Cost per | Cost Unit Unit Units introduced [XX [XX |XX _ | Normal Loss XX XX [XX Materials: XX XX XX Scrap XX XX =| XX Labor XX [XX [XX |AbnonmalLoss | XX XxX [XX Overheads xx |XX |XX _| Sale of by products Abnormal Gain |XX |XX | XX__| Sent to warehouse | XX Xx | XX (ifany) for sale Actual ‘output | XX XX |XX transferred to next process ‘Total XXX_[XXX_| XXX | Total XX XX_[XXX 46Presentation of total cost: First of all are classified on the basis of nature, such as materials, labor and other expenses. Further distinction should be made of direct and indirect costs. All the direct costs are grouped under the headings of prime costs and indirect costs are known as overheads. All these cost are grouped under separate heads and present the cost data to the management in the form of statement. Cost Sheet: A cost sheet or a cost statement is “a document which provides for the assembly of the detailed cost of a cost center or cost unit’. It is a detailed statement depicting the sub-division of cost arranged in a logical order under different heads. = The prime cost. = The works cost. * Cost of production = The total cost. = Itgives the breakup of by cost elements and sub-division = Itdiscloses the total cost as well as cost per unit of production. + Ithelps for fixing selling price. ‘The main advantages of a cost sheet are as follows: 1) Itprovides the total cost figure as well as cost unit of production. 2) _Ithelps in cost comparison. 3) It facilitates the preparation of cost estimates required for submitting tenders, 4) Itprovides sufficient help in arriving at the figure of selling price 5) It facilitates cost control by disclosing operational efficiency. 47Format of cost or cost sheet Particular Total cost (Rs) | Cost per unit (Rs) Direct material XX XX Direct labour XX, XX Prime cost XXX. XXX ‘Add : Works over head XX, XX Works cost / Factory cost XXX, XXX, ‘Add : administrative over head XX XX Cost of production XXX XXX ‘Add : selling and distribution over head XX, XX Cost of sales XXX, XXX, 481) Avoiding of excessive overtime. 2) Reduced wastage in packaging of sugar. 3) Reduction in transportation cost of sugar cane. 4) Simplification of the process of production 5) Suitable communication system with telephone intercom. 6) Purchase computer for accounting process. 7) Keeping minimum level of inventory. 8) Effective and economical purchases of materials, Pvt.Ltd: Lack of support from top management: In existing system there is no time for top management to check the regular accounting process. In this case there is no additional work should be taken in the company. Non-co-operation of supervisors: ‘The sugar is the essential for day-to-day activities so the supervisors have no time to record the different things related to costs, Heavy costs: For installation of cost accounting system is heavy cost to company. For the installation of cost accounting system in Saikrupa Sakhar Karkhana Limited (SSKL)the separate department should be made. Dif ic work in progre us ‘There is a difficulty in calculation of work in progress in sugar industry. R lation for it ion of . 491) Divide the department according to the revenue producing and non revenue producing department this helpful in determining cost centers. 2) Simplify the working procedure in each cost center and design suitable and proper forms and records for each of the departments. 3) Fix the procedure for collection of both cost and non cost data for each center. 4) Fix the standard for incurrence of costs in cost center. 5) Prepare forms, cards reports, and books ete for keeping cost records. The following are the cost centers in Saikrupa Sugars Pvt.Ltd: 1) Production Cost Center: a) Packing b) Quality control. ©) Boiler se d) Storage section ¢) Pan section, f) Mill section. g) Power generation. 2) Marketing Cost Center: a) Transportation cost center. 3) Administration Cost Centers: a) Security and maintenance of plant. b) Human Resource Development. The following are the cost units of Saikrupa Sugar Kharkhana Pvt Ltd: ‘Name of the item Cost unit Sugar cane Per Tone 50Sugar Per Quinial Transportation Per trip/ per KM Water charges Per thousand Liters Oil & diesel Per liters Canteen Per person served Per K.W.H. Per thousand Kilo grams of steam EUNCTONAL ANALYSIS. ‘The functional of the organization are divided in to following Department and one divided in to sections Laboratory Seetion Manufacturing Section SI% Engineering Section Go down Section 2, Human Resource Development Administrative Section Shares Section Security Section Vehicle Section Time office section SOOOS 3. Finance 1. Accounting Section ° General Account Section > Cane Account Section 4. Marketing Section % Cane Development Section % Purchase section % Sale Section Pre ‘ion Departmen: Production department is a most important part of the factory and it is divided into two departments, 1, Engineering department 2. Manufacturing department 1, Engineerin; rtmeni‘The engineering department maintains all the work connected with plant and machinery. Engineering department aims at enhancement of the feeding capacity of factory. The department is assisted by workshop, Workshop _ Spares are fabricated using the lathe machine in the workshop and shaping like square, cutting faberising etc, are done in the workshop 75% of work of machinery are done in workshop. This department having following machines Lathe machines for round job. Shaping machine of 32 inch for right angle planning hacksaw machine for cutting Redial drilling machine for drilling hole Grainding machine for tool grainding where 5. Manufacturing department Manufacturing department is divided in to 3 sections, a) Laboratory department >) Manufacturing Department ©) — Godown 1. Laboratory department Laboratory plays a significant role in sugar production, The key activity of laboratory is checking the content of sugar in the Sugarcane and fixing the correct shape and size of sugar. The Laboratory prepares hourly reports which advice in the addition of other chemicals in the production. Activities of the laboratory 1. Determining and maintenance of temperature of boiling juice. 2. Determining the percentage of water content in the dilution of Juice. 3. Determining the percentage and content of chemicals to be added doming production. 4, Finding the PH of water through universal indicator. 535. Choice of colour and size for sugar. 6. Tomanage the time and quality. Chemicals used in production of sugar 1, Burnt sugar -- Bleaching agent and P"™ Controller. 2. Sulphar --- Major bleaching agent 3. Orthophosphoric Acid ---_ Bleagent agent 4 Mill sanitation _ Preservative 5. Antiscalant -- — Descaling agent 6. Floculent -- setting aid 7. Viseocity reducer -- Reduces viseocity 8. Hydro Sulphite of soda Bleaching agent 9. Hydrogen peroxide -~- Bleaching agent -: Functions:- Bleaching agent: - Bleaches the juices and massecuites, and gives clarity. 1 Preservative: - Keeps the purity of juice constant. That means, it Should not allow going down the purity of juice. 1 Antiselant or Descalant: - It prevents the formation of scale. IIL Setting aid: - It allows to settle down the solid partials in the 54Juice. Iv. Viscosity reducer: - It decreases the viscosity of the Massecuties and increases the rate of boiling. 2. Manufacturing Department:- Sugar manufacturing involves mainly 5 stages as mentioned below. 1. Crushing of sugareane 2. Juice clarification (Double sulphitation of clarification) Crystallization 4 Curing 5. Grading and Bagging W.O.T. Analysis Hi ikrt i Khark Pvt.Li (STRENGTH, WEAKNESS, OPPORTUNITIES, THREATS) STRENGTHS: > Ithas own co - generation unit (62MW). > Sufficient water resources, > Good communication media. 55> Sufficient infrastructure. > Attendance maintained on Software bases, WEAKNESS Poor marketing strategies > Poor promotional activity. > Imbalance between sugar cane available and factory crushing capacity per day. OPPORTUNITIES > ‘They can establish a liquor industry by using its by products > Providing the electricity power to the KPTCL. > Ifimporting of Sugar is restricted the company cabs grab the market as possible as. > The company is located in the rural area so labours availability is sufficient and cheaper. THREATS: > > > > > Free imports. Unstable Government. Poor agricultural policy. Low availability of working capital Decreased in the average production rate of sugarcanMaterial costing. Year Tones Rate per tone | Amount consumed, 2010-2011 136903.6842,_| 950 130058500 2011-2012 202997.6470_| 850 172548000 2012-2013 215068 1000 215068000 572010-11 matrrial cost chart 2011-12 2012-13 ja Seriest ‘The raw material consumption from the year 2010-11 — 2011-12. In case of 2012-13 the quantity of sugar cane consumed 136903.6842 tones and it is increased to 202997.6470 and 215068 respectively in the year 2011-12 and 2012-13. Hum ‘Departments ‘Total no of employees 2011 2012 2013 ‘Administration and HOD 41 43 44. Manufacturing and engineering | 340 345 351 ‘Cane department 65 68 70 58Security office 19 20 22 Civil 7 15 19 Human Resourse department Administrative Manufacturing Cane —Secunty office. Civil &HOD — and engineering All the department the manufacturing and engineering department having more number ‘of employees. This increasing trend indicates is a increasing production, Department wise salary per annum Departments 2011 2012 2013 Administration and HOD 1,95,600 2,09,341 2,16,651 Manufacturing and engineering __| 7,50,596 7,90,900 8,07,175 Cane department 1,60,156 1,80,300 1,95,200, Security office 42,000, 45,000 48,000 Civil 41,000, 43.300 46,000 59i Administrative Manufacturing Security office 52011 2012 102013| cane &HOD and engineering Over heads Particulars 2010-11 | 2011-12 2012-13, Factory overhead. 9,180,600 15,972,950 237,300,00 ‘Administration and overheads | 1,530,100 | 2,381,850 3,744,000 Selling and distribution overheads | 3,763,937 4,140,990 13,868,850 Total 14,474,637 22,495,790 41,342,850 60mfactory aver head '@ administrative over head [selling & distribution over he 2010-11 2011-12 2012-13 Seeing the table the factory over heads increasing considerably it indicates growth in production. Since the manufacturing and engineering department constitutes major part in total number of employees and wages the factory overheads also forms major part in total overheads. STATEMENT OF COST SHEET OF SAIKRUPASUGAR KHARKHANA PVT LTD Particulars 2010-11 2011-12 2012-13 Purchase of raw material 130,0585,00 | 172,548,000 | 215,068,000 Closing raw material - - - Raw material consumed 130,058,500 | 172,548,000 | 215,068,000 Freight inwards 13,005,850 18,395,725 24,032,400 Prime cost 143,064,350 | 190,943,725 | 239,100,400 61Factory over heads 9,180,600 15,972,950 | 23,730,000 Depreciation on building 7,000,000 7,5000,00 2,000.00 Depreciation on machinery 1,200,000 1,7000,00 2,200,000 Depreciation on electrical’s 250,000 300,000 350,000 Work cost 154,694,950 | 210,416,675 | 267,380,400 Office over heads 1,530,100 2,381,850 3,744,000 Depreciation on computer 30,000 60,000 70,000 Depreciation on office equipments 150,000 200,00 300,000 Cost of production 156,485,050 | 213,058,525 | 271,494,400 Opening stock of finished goods 1,534,065 | _ 3,928,720 4,149,800 Tess closing stock of finished | 4,090,840 | 8,839,620 17,337,000 goods Cost of goods sold 153,928,275 | 208,147,625 | 258,307,200 Selling over heads 3,763,937 | 4,140,990 13,868,850 Cost of sales 157,692,212 212,288,615 272,176,050 Analysis of cost sheet Prime cost: The prime cost in 2010-11 143,064,350 and in 2011-12 it was increased to 190,943,725 and 2012-13 it was increased to 239,100,400 .This cost is inerease to year by year Work cost: The work cost in 2010-11 154,694,950 and in 2011-12 it was increased to 210,416,675 and 2012-13 it was increased to 267,380,400.Cost of production: The cost of production in 2010-11 156,485,050 and in 2011-12 it was increased to 213,058,525 and 2012-13 it was increased to 213,058,525. Cost of goods sold: The cost of goods sold in 2010-11 153,928,275 and in 2011-12 it was increased to 208,147,625 and 2012-13 it was increased to 258,307,200. Cost of sales: The cost of sales in 2010-11 157,692,212 and in 2011-12 it was increased to and in 212,288,615 2012-13 it was increased to 272,176,050.Findings: 1. The increasing prime cost is because of is increasing material consumed by the company. 2. The work cost is increasing by year to year because in factory over heads also increasing.3. The cost of production is to increasing because office overheads and depreciation of office equipments. 4, The cost of goods sold is high increasing in year to year. 5. The cost of sales year by year due to increasing in sales. Particulars 2010-11 2011-12 2012-13 Sales 58063755 159273632 260120510 Less: variable cost 45818596 130849400 183355675 65Contribution 12245159 28424232 76764835 Less: fixed cost 1988986 3128956 4355859 EB.LT. 10256173 25295276 72408976 Total cost 47807582 133978356 187711534 sales cost analysis 300000000 250000000 200000000, Bales ‘150000000 an ‘100000000 ‘50000000 o 2 3 The EBIT for the year 2010-11 was 10256173, in the year was 2011-12 was 25295276, and in the year 2012-13 was 72408976. It shows the increasing in EBIT year to year Findings of th i = Raw material consumption is increasing. The increase in sugar cane consumption from the year 2010-11 to 2011-12 was 75.37% and that from the year 2011-12 to 2012-13 was 80.22% = Over head of the firm was increasing from the year 2010-11 to 2011-12 was 57.47% and from the year 2011-12 to 2012-13was 65.20% 66Prime cost of the firm was increasing from the year 2010-11 to 2011-12 was 74.92% and from the year 2011-12 to 2012-13 was 79.85% Work cost of the firm was increasing from the year 2010-11 to 2011-12 was 73.51% and from the year 2011-12 to 2012-13 was 78.69% Cost of production of the firm was increasing from the year 2010-11 to 2011-12 was 73.44% and from the year 2011-12 to 2012-13 was 78.47% Cost of goods sold of the firm was increasing from the year 2010-11 to 2011-12 was 73.95% and from the year 2011-12 to 2012-13 was 80.58% Cost of sales of the firm was increasing from the year 2010-11 to 2011-12 was 74.28% and from the year 2011-12 to 2012-13 was 78%Suggestion: 1. As prime cost, cost of production are increasing in the firm exercise cost reduction and cost control techniques like material control, labor control, over head control, capital expenditure control. 2. As the raw material cost is increasing the firm should using new techniques to reduce it. 1) Like the firm allowed near to the sources of raw material, 2) Reducing raw material usage in production down time.LIMITATIONS:- " Confidential data was not allowed to be accessed or published in project report. * Duration of project is restricted to 60 days & thus most important limitation of research is shortage of time. Due to which study was not possible. * Busy schedules of employees sometimes make difficult to get data from them, 10Conclusion In this study is attempt to made analyze the cost analysis of the sample unit .Since the Saikrupa Sakhar Karkhana Limited (SSKL) is facing heavy competition in an around area of the region, It is essential to focus on the aspect of cost, profitability ete Cost accounting is a recent development. It is the branch of financial accounting. It maintains the records unit wise, process wise, job wise department wise, we can easily control in reduction of costs by preparation of the statement unit wise or job wise.Bibliography 74