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

HSBPVTS PARIKRAMA GROUP OF INSTITUTIONS COLLEGE OF

MANAGEMENT,
Kashti. Tal- Shrigonda, Dist: Ahmednagar, (M.S), India

2013-2014

HSBPVTS 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 HSBPVTS GOI PARIKRAMA
INSTITUTE OF MANAGEMENT declared that the project work
entitled
COMPARITIVE ANALYSIS OF EXPENDITURE
BUDGETFOR 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:
Ghosale)
No

(Rahul Ashok
Roll

Acknowledgement
I 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.
I wish to express my deep sense of gratitude to Prof. Ghosale Rahul for his
excellence guidances during his period of this project work were invaluable.
I am 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)

DECLARATION
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. Trusts 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
3

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. I 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

EXECUTIVE SUMMERY& INTRODUCTION

COMPANY PROFILE

OBJECTIVE

RESEARCH METHDOLOGY

REVIEW OF LITERATURE

DATA ANALYSIS AND INTERPRETATION

OBSERVATION & FINDING

SUGGESSION

LIMITATION

10

CONCLUSION
BIBILIOGRAPHY
ANNEXTURE

Page
No.

Chapter 1

Executive
Summary
&
Introduction

EXECUTIVE SUMMARY
The study of Production Cost Analysis of sugar industry with special
reference to Saikrupa Sugar Kharkhana Pvt.Ltd Hiradgaon :
Introduction of Production Cost Accounting
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
Modern 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

INDUSTRY PROFILE

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 sugarcane 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 byproductBagasse. 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 200304,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-licensing, a number of new sugar plants of varying capacities have been set up
and the existing plants have substantially increased their capacity.
There are 566 installed sugar mills in the country as on March 31st 2005, 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 ups as follows:

Table no#1
Sl. No.

Sector

No of factories

1.

Private

189

2.

Public

62

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, Mexico, Pakistan, France and Germany. Global sugar
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
in below given chart. The word consumption is projected to grow to 160.7 MMT by 2010
and 176.1 MMT by 2015.
The worlds 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#1

Contribution of Sugar Industry to Indian Economy:

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.

Sugar Prices:
11

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 area:
Table no#2
Year

Cultivated area (%)

MMT

1980-81
1990-91
2000-01
2002-03
2003-04
2004-05

2.7
4.3
3.9
3.7

154
241
296
300
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 sugarcane 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, sugarcane
production declined to 236 MMT mainly due to drought and pest attacks. Not only
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 Northern states like UP.
12

SUGARCANE UTILIZATION
Table no#3
Year
1980-1981
1990-1991
2000-2001
2001-2002
2002-2003
2003-2004

% Sugarcane utilization for

White Sugar
Guru and Khandsari
Seed, feed and chewing
33.4
50.7
59.7
57.4
68.9
56.1

54.8
37.4
28.8
31.5
20.1
32.5

11.8
11.8
11.5
11.1
11.1
11.4

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.

13

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 largescale industry it provides large profit for the country and it can also be helpful for
development of industrial infrastructure. India is a worlds largest consumer and second
largest manufacturing of sugar so the sugar must be cheaper. It can be provide by our
sugar industry.

14

Chapter 2

Company
Profile

COMPANY PROFILE
Name of the company

:
15

M/S Saikrupa Sugars Pvt.Ltd

Shirgonda road
HIRADGOAN
Dist: Ahmednagar
Register Office
Limited (SSKL)

M/s Saikrupa Sakhar Karkhana

Shirgonda road
HIRADGOAN
Dist: Ahmednagar

Branch Office

At: Hiradgoan

Managing Director

Status of the company

Sole trading concern

Constitution of the firm

Registered under companies

Act of 1956

Financial institution
of the company

Banker of the company

History Of Saikrupa Sugar Kharkhana Pvt.Ltd

SRI SAIKURUPA SUGAR & ALLIED INDUSTRIES LTD.
16

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-I and Unit-II.
Unit-I 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 II, 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 Attorney at the Aurangabad High Court of Law. He has bachelors
degrees in Commerce (B.Com) and law (LLB) from University of Pune.
Shri Vikram Babanrao Pachpute, Director, has a MBA from UK and a bachelors degree in
Commerce. He is elder son of Mr. Babarao Pachpute. He is managing commercial part of the
company.

LOCATION:Name of the company

:
17

M/S Saikrupa Sugars Pvt.Ltd

Shirgonda road
HIRADGOAN

Dist: Ahmednagar
Register Office
Limited (SSKL)

M/s Saikrupa Sakhar Karkhana

Shirgonda road
HIRADGOAN
Dist: Ahmednagar

.
Register no

18

Competitors Information:
The main competitors are as follows:

Shrigonda sugar Factory Ltd.

Crushing capacity-3500 TCD
Recovery-10.5%
Sugar production-4000 Qtls (per day)

Kukadi sugar Factory Ltd.

Crushing capacity-4500 TCD
Recovery-11.2%
Sugar production-9000 Qtls (per day)

Daund sugars Ltd

Crushing capacity -5000 TCD
Recovery -12%
Sugar production 10000Qtls (per day)

19

Vision Mission & Goals

Vision
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

To expand its installed capacity, achieve end-to-end integration for all its plants to
improve margins and reduce business cycle.
Achieve greater raw material security.
Increase its focus of corporate and high value consumers.
To become the most efficient and market driven integrated processor of sugarcane
in the world.
While enabling the team to grow in a learning and motivating atmosphere,
participating in the all round development of community.
Delivering consistently on returns to all its shareholders.
Bringing over all productivity and efficiency through out the organization,
especially by value addition of its by products in sugar effluent waste etc.
Producing the best quality sugar to satisfy the domestic and internal norms

20

Chapter 3

OBJECTIVE

21

Objectives Of Saikrupa Sugar Kharkhana Pvt.Ltd

OBJECTIVE OF THE STUDY
The following are the objective of study
1. To study the cost of production.
2. To identify the cost unit and cost centre.
3. To identify the difficulties of installation of cost accounting system.
4. To study the operating efficiency and cost control technique.

22

Chapter 4

Research
&
Methodology

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:

Is collecting from company data of accounts.

24

Chapter 5

Review
of
Literature
PRODUCT PROFILE

25

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.
In a 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-inprocess 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.

It helps the management for implementing cost control and decision making.

2.

It helps for calculation of cost of production.

3.

It helps 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.(I.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.

Labor cost:
These are costs of remuneration, such as wages salaries, commission, bonus etc.
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.

Expenses:
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

2.

Administration overheads

3.

Selling overheads

4.

Research and development overheads

5.

Distribution overheads.

Function wise Classification:Costs classified on the basis of function wise are as follows:

Production cost or manufacturing cost or work cost

Administration cost

Selling cost

Distribution cost

1. Production cost:
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

Foremens salary

Cleaners salary and wages

Gatekeepers salary

Salary of time keeping department

Tools operators wages

Store keeping department salary

2)

Factory rent and rates

3)

Insurance of factory
29

4)

Consumable stores

5)

Indirect materials cost such as cotton waste, nuts and bolts, lubricating oil, nails
etc.

6)

Gas, fuel and water, stationery to the factory

7)

Depreciation on factory equipment, factory building, plant and machinery

8)

Repairs of factory equipment, factory building and machinery

9)

Depreciation on loose tools

10) Laboratory expenses

11)

Labor welfare expenses

12) Canteen expenses

13) Over time wages
14) Contribution to workmens compensation fund

Administration cost:
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)

Directors 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

Selling cost:
Other expenditures incurred for sales and stimulating demand and for securing

orders are known as selling cost.

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

Distribution cost:
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.

Rent and 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 interest 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.
c) Cost control and cost reduction.
d) Ascertaining the profit of each activity.
e) Assisting management in decision making.

Advantages of cost accounting:

a) Discloses profitability of activities.
b) It helps in cost control.
c) It helps in formulating policies.
d) It helps in decision making.
e) It guides in fixed selecting prices.
f) It helps for fixing the standard of efficiency of workers.
g) It facilitates the assessment of tax.
h) It helps to judge the financial position & credit worthiness of the business.

Disadvantages of cost accounting:

a) Absence of a readymade system.
b) Cost differences.
c) Cost data have no usefulness in themselves.
d) It is 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:

Single cost:
It is a single unit cost for example per tone, per kilogram.
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
product. Here both direct and indirect expenses are incurred. Machine shops, Welding
shops and assembly shops are examples of production cost center.
Service Cost Center:
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 etc), make or buy decision fixation of sale price of the product etc.
35

Cost estimation as well as cost ascertainment both are interrelated and are of
immense use to the management in case a concern 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 describe 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 case 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
Material control.
36

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.

Advantages of cost reduction:

a) In so far as an individual company is concerned, cost reduction results in profit
improvement. The more the profits, the more stable the company becomes.
b) Society will be benefited by reduced prices which may be possible by savings
from cost reduction programmers.
c) Workers and staff of the industry may also be benefited through increased wages
and improved welfare amenities.
d) The country also stands to gain immensely by cost reduction programmers.
e) Internal revenue will increase through more tax revenues.

Areas of cost reduction:

Cost reduction methods may be applied in the following areas:
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.
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

Finance tools and techniques of cost reduction

Distinction between cost control and cost reduction:

1) Cost control aims at achieving the predetermined costs, where as cost
reduction aims at reducing costs.
2) 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.
3) 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 concerned with maintenance of
performance according to the predetermined standards.
4) 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.
5) 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.

Practical & difficulties of cost accounting system:

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 trained staff:
Cost accounting is a specialized job in itself. In the beginning therefore
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 objective:
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 simple:

The system should be informative and simple.

Cost Audit:
Definition:
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
Input

Finished Goods
Process

40

O/P

PROCUREMENT OF SUGAR
CANE
IMBITION WATER

MILLING
BAGASSE

RAW JUICE
CONDENSATE WATER

EXHAUST STEAM
SULPHURDIOXIDES + LIME

SULPHURED JUICE
CONDENSATE WATER

EXHAUST STEAM

CLEAR JUICE
EXHAUST STEAM

JUISE + MUD

VAPOURS

CONDENSATE WATER

SYRUP
SULPHURDIOXIDE GAS

EXHAUST STEAM, VAPOURS

VAPOURS, CONDENSATE WATER

MASSCUITE
FINAL MOLASSES

STEAM OR SUPER HEATED WASH WATER

SUGAR

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 0C. 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 100-1050 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 58-600 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.

Application of process costing 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
Distilleries
Plastic Manufacture
Sugar Industries
Food Manufacture
Fertilizer Industry
Glass Industry
Drug and Medicines
Producing Industries
Aluminum Industry
Timber Industry
Rubber Industry

43

Characteristics of Process Costing System:

(1) It is a 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) It helps for calculation of cost in short period.
(2) It helps for calculation of cost of each process as well as finished product.
(3) It involves less clerical works and expenses.
(4) It helps for control over production and costs.
(5) It is easy to allocate the expenses to processes in order to have accurate costs.

Disadvantage of Process Costing System:

(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

Concepts in Process Costing System:

(1) Process Losses:
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 etc., 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.

45

FORMAT OF PROCESS ACCOUNT

Particulars

Input

Cost

Total

per

Cost

Particulars

Output

Cost

Total

per

Cost

Units introduced

XX

Unit
XX

XX

Normal Loss

XX

Unit
XX

XX

Materials

XX

XX

XX

Scrap

XX

XX

XX

Labor

XX

XX

XX

Abnormal Loss

XX

XX

XX

Overheads

XX

XX

XX

Sale of by products

Abnormal Gain

XX

XX

XX

Sent to warehouse XX

XX

XX

XX

XX

XX

XXX

(if any)

for sale

Actual

output XX

transferred to next
process

Total

XXX

XXX

XXX Total

46

XX

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.

It gives the breakup of by cost elements and sub-division

It discloses the total cost as well as cost per unit of production.

It helps for fixing selling price.

The main advantages of a cost sheet are as follows:

1)

It provides the total cost figure as well as cost unit of production.

2)

It helps in cost comparison.

3)

It facilitates the preparation of cost estimates required for submitting tenders.

4)

It provides 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)

Direct material
Direct labour
Prime cost
Add : Works over head
Works cost / Factory cost
Add : administrative over head
Cost of production
Add : selling and distribution over head
Cost of sales

XX
XX
XXX
XX
XXX
XX
XXX
XX
XXX

Cost

per

unit

(Rs)
XX
XX
XXX
XX
XXX
XX
XXX
XX
XXX

Cost reduction and cost control techniques used in Saikrupa Sugars

Pvt.Ltd
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.

Difficulties in installation of cost accounting system in Saikrupa Sugars

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.

Difficulties to calculate costs of work in progress in sugar:

There is a difficulty in calculation of work in progress in sugar industry.

Recommendation for installation of cost accounting system:

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 etc for keeping cost records.

The following are the cost centers in Saikrupa Sugars Pvt.Ltd:

1) Production Cost Center:
a) Packing.
b) Quality control.
c) Boiler section.
d) Storage section.
e) 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 Quintal

Transportation

Per trip / per K.M

Water charges

Per thousand Liters

Oil & diesel

Per liters

Canteen

Per person served

Electricity

Per K.W.H.

Boiler

Per thousand kilo grams of steam

FUNCTONAL ANALYSIS
The functional of the organization are divided in to following
Department and one divided in to sections.

1.

Production

Laboratory Section
Manufacturing Section
51

2.

Human Resource Development

3.

Engineering Section
Go down Section

Administrative Section
Shares Section
Security Section
Vehicle Section
Time office section

Finance
1. Accounting Section

4.

General Account Section

Cane Account Section

Marketing Section

Cane Development Section

Purchase section
Sale Section

Production Department
Production department is a most important part of the factory and it is divided into
two departments.
1.
2.

1.

Engineering department
Manufacturing department

Engineering department
52

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 fabcrising etc, are done in the workshop 75% of work of machinery are
done in workshop. This department having following machines.
1.
2.
3.
4.
5.

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

5. Manufacturing department
Manufacturing department is divided in to 3 sections
a)
b)
c)

Laboratory department
Manufacturing Department
Go down

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.

To manage the time and quality.

Chemicals used in production of sugar

1.

Burnt sugar
Controller.

---

Bleaching agent and PH

2.

Sulphar

---

Major bleaching agent

3.

Orthophosphoric Acid

---

Bleagent agent

4.

Mill sanitation

---

Preservative

5.

Antiscalant

---

Descaling agent

6.

Floculent

---

setting aid

7.

Viscocity reducer

---

Reduces viscocity

8.

Hydro Sulphite of soda

---

Bleaching agent

9.

Hydrogen peroxide

---

Bleaching agent

-: Functions:Bleaching agent: - Bleaches the juices and massecuites, and gives clarity.
I

Preservative: - Keeps the purity of juice constant. That means, it

Should not allow going down the purity of juice.

II

Antiselant or Descalant: - It prevents the formation of scale.

III

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 sugarcane

2.

Juice clarification (Double sulphitation of clarification)

3.

Crystallization

4.

Curing

5.

Grading and Bagging.

S.W.O.T. Analysis History Of Saikrupa Sugar Kharkhana Pvt.Ltd

(STRENGTH, WEAKNESS, OPPORTUNITIES, THREATS)

STRENGTHS:
It has 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
If importing 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

Chapter 6
56

Data Analysis
&
Interpretation

Material costing
Year

Tones

Rate per tone

Amount

2010-2011
2011-2012
2012-2013

consumed
136903.6842
202997.6470
215068
57

950
850
1000

130058500
172548000
215068000

matrrial cost chart

250000000
200000000
150000000
Series1
100000000
50000000
0
2010-11

2011-12

2012-13

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.

Human resource department

Departments
Administration and HOD
Manufacturing and engineering
Cane department

Total no of employees
2011
41
340
65

2012
43
345
68
58

2013
44
351
70

Security office
Civil

19
7

20
15

22
19

Human Resourse department

400
350
300
250

2010-11

200
150

2011-12
2012-13

100
50
0
Administrative Manufacturing
& HOD
and engineering

Cane

Security office

Civil

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
Administration and HOD
Manufacturing and engineering
Cane department
Security office
Civil

2011
1,95,600
7,50,596
1,60,156
42,000
41,000

59

2012
2,09,341
7,90,900
1,80,300
45,000
43,300

2013
2,16,651
8,07,175
1,95,200
48,000
46,000

900000
800000
700000
600000

2011

500000

2012

400000

2013

300000
200000
100000
0
Administrative Manufacturing
& HOD
and engineering

Cane

Security office

Civil

Over heads
Particulars

2010-11

2011-12

2012-13

Factory overhead
Administration and overheads
Selling and distribution overheads
Total

9,180,600
1,530,100
3,763,937
14,474,637

15,972,950
2,381,850
4,140,990
22,495,790

237,300,00
3,744,000
13,868,850
41,342,850

60

25000000
20000000

15000000

factory over head

administrative over head
selling & distribution over head

10000000

5000000
0
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 SAIKRUPA SUGAR 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
Freight inwards
Prime cost

130,058,500

172,548,000

215,068,000

13,005,850

18,395,725

24,032,400

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

1,000,000

1,5000,00

2,000,00

Depreciation on machinery

1,200,000

1,7000,00

2,200,000

Depreciation on electricals

250,000

300,000

350,000

154,694,950

210,416,675

267,380,400

1,530,100

2,381,850

3,744,000

Depreciation on computer

50,000

60,000

70,000

Depreciation on office equipments

150,000

2000,00

300,000

156,485,050

213,058,525

271,494,400

Opening stock of finished goods

1,534,065

3,928,720

4,149,800

Less :closing stock of finished

4,090,840

8,839,620

17,337,000

153,928,275

208,147,625

258,307,200

3,763,937

4,140,990

13,868,850

157,692,212

212,288,615

272,176,050

Work cost
Office over heads

Cost of production

goods
Cost of goods sold
Selling over heads
Cost of sales

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 increase 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.

62

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.

Chapter 6
63

Findings

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.

64

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.

Marginal income statement

Particulars
Sales
Less: variable cost

2010-11
58063755
45818596
65

2011-12
159273632
130849400

2012-13
260120510
183355675

Contribution
Less: fixed cost
E.B.I.T.
Total cost

12245159
1988986
10256173
47807582

28424232
3128956
25295276
133978356

76764835
4355859
72408976
187711534

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 the study

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%

Chapter 7
67

Suggestion:

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.

68

Chapter 9
69

Limitation

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.

70

Chapter 10
Conclusion
71

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 etc
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.

72

Bibliography
Chapter 11
73

Bibliography

74