Assignment Assessment Report

Campus: Level: Module Name: Students Name: e-mail id & Mob No Stream Mumbai ACL II Costing MIS & Budgetary Control Nikhil Ganesan nikhilganesan9@gmail.com Business Year/semester Assignment Type Assessors Name Reqd Submission Date Actual Submission Date Submitted to : Assignment B

Certificate by the Student: Plagiarism is a serious College offence. I certify that this is my own work. I have referenced all relevant materials. Expected Outcomes Assessment Criteria Grade based on D,M,P,R system

Nikhil Ganesan (Students Name/Signatures) Feedback

General Parameters
Clarity Analytical ThinkingResearch DoneFormatting & PresentationClear understanding of the concept Ability to analyze the problem realistically Research carried out to solve the problem Concise& clear thinking along with presentation

Subject Specific Parameters

1. Understanding the procedures of Costing 2. To be able to calculate the unit cost and prepare costing Profit & Loss statement Grades P M D Clarity of concept Precision in cost calculation and preparation of cost sheet Achieved Yes/No (Y / N)

Grade Descriptors A Pass grade is achieved by meeting all the requirements defined. Identify & apply strategies/techniques to find appropriate solutions Demonstrate convergent, lateral and creative thinking.

Assignment Grading Summary (To be filled by the Assessor)

OVERALL ASSESSMENT GRADE: TUTORS COMMENTS ON ASSIGNMENT: SUGGESTED MAKE UP PLAN (applicable in case the student is asked to re-do the assignment) REVISED ASSESSMENT GRADE TUTORS COMMENT ON REVISED WORK (IF ANY) Date: Assessors Name / Signatures:

Assignment B Ques 1 : Each student will be given one of the under mentioned industry for assignment work. Manufacturing Industry Hospital Industry IT Industry Transport Industry

The students will have to visit a company from the assigned industry, meet the Accounts person and do the following:a. Find out and understand the Cost procedures followed by the company. b. If possible get a sample of cost sheet or Statement of Accounts A presentation on the above and recommendation for areas of improvement has to be made. Ques 2 : 1. Discuss the technique of marginal costing as a key for management problems. 2. The following is the trading and profit and loss account of M/s Prem Industries for the year ended 31 st March 2000. To Material consumed To Direct wages To Works overhead To Administration overheads To Selling & distribution overheads To Net profit for the year 708000 371000 213000 95500 113500 69000 157000 0 By Sales 30000 units By Finished Stock (1000 units) By work-in-progress Material Wages Works Overhead 1500000 40000 17000 8000 5000

1570000

In manufacturing a standard unit, the companys cost records show that:

a. Work overhead have been charged to work-in-progress at 20% on prime cost.

b. Administration overheads have been recovered as Rs.3 per finished unit. c. Selling and distribution overheads have been recovered as Rs.4 per unit sold. d. The under-absorbed or over-absorbed overheads have not been adjusted into the costing P & L a/c. Prepare: 1. A costing profit & loss account indicating net profits. 2. A Statement reconciling the profit as disclosed by the cost accounts and that Shown in the financial accounts.

Ques 3 : Work out an appropriate cost sheet from the unit cost per passenger km for the year 2006-07 for a fleet of passenger buses run by a Transport Company from the following figures extracted from its books. 5 passenger buses costing Rs.50000, Rs. 120000, Rs. 45000, Rs.55000 and Rs.80000 respectively. Yearly depreciation of vehicles 20% of the cost. Annual repair, maintenance and spare parts 80% of depreciation. Wages of 10 drivers @ Rs.100 each per month, wages of Rs.20 cleaners @ Rs. 50 each per month. Yearly rate of interest @ 4%on capital. Rent of six garages @ Rs.50 each month. Directors fees @ Rs.400 per month, office establishment @ Rs.1000 per month, licences and taxes @ Rs.1000 every six months, realization by sales of old tyres and tubes @ Rs.3200 every six months, 900 passengers were carried over 1600 kms during the year.

ANSWERS
Ans 1: (a) The Industry under my consideration is Transport Industry. I chose this industry because my entire family is into this business. So this made my work easier. My father guided me with my assignment. The name of company is TTC (TATA-TO-CALCUTTA TRANSPORT COORPORATION). The cost procedures followed by the TTC, were those comprising Service (or Operating) Costing. This type of costing is a form of operation costing applicable where the concerned cost is the cost of producing and maintaining a service as in the Transport Industry. The transport industry consists of undertakings which provide service rather than producing commodities. Each vehicle is given a distinct number and all the basic documents will contain the assigned number of respective vehicles. A separate daily log sheet is maintained for each vehicle by the concerned driver which facilitates cost ascertainment and cost control. It is due to my fathers help and support I am able to produce the sample of cost sheet.

(b) A sample cost sheet OF TTC CO-ORPORATION

Cost Sheet For the month of MARCH 2011

Expenses No->

Vehicle

WB- WB/12A/6 WB05A/2310 785 56C/5832 4 rs.1200 RS.500 rs.130 rs.56 1886 ------654 -------2344 4884 4765 1234 465 8777 ----20125 5 rs.1200 RS.500 rs156 rs.87 1943 5000 -----------7654 14597 5645 1342 765 7654 ----30003 6 rs.1200 RS.500 rs.134 rs 75 2841 6743 2876 8765 -----21225 233 567 456 5443 6554 34478
ANS-2ADEFINITIONS OF MARGINAL COSTING Marginal costing, as one of the tools of management accounting helps management in making certain decisions. It provides management with information regarding the behavior of costs and the incidence of such costs on the profitability of an undertaking. Marginal costing is defined as the ascertainment of marginal costs and of the effect on profit of changes in volume or type of output by

Capacity (in tones)-> Fixed Costs: Garage Rent Insurance Motor vehicle Tax Interest on Capital Total: Maintenance Costs: Tyres & tubes Repairs Paintings Overhauling Total:

Operating Costs: Petrol Engine oil Lubricating oil, grease, etc 20125 Wages of operators Depreciation Total :

30003

34478

Grand Total: ( A+B+C) Kilometres run Load Carried (Tones) Days On Road Percentage Utilization Tones kms run Cost Per tone km. Fixed Maintenance Operating
differentiating between fixed costs and variable costs.

Marginal costing is not a separate costing. It is only a technique used by accountants to aid management decision It is the technique of presenting cost data wherein variable costs and fixed costs are shown separately for managerial decision-making. It should be clearly understood that marginal costing is not a method of costing like process costing or job costing

Technique of marginal costing as a key for management problems

Cost Volume-Profit: Cost-volume-profit (CVP) analysis expands the use of information provided by breakeven analysis. A critical part of CVP analysis is the point where total revenues equal total costs (both fixed and variable costs). At this breakeven point (BEP), a company will experience no income or loss. This BEP can be an initial examination that precedes more detailed CVP analyses. The components of Cost-Volume-Profit Analysis are: Level or volume of activity Unit Selling Prices Variable cost per unit Total fixed costs Sales mix Cost-volume-profit analysis employs the same basic assumptions as in breakeven analysis. The assumptions underlying CVP analysis are: The behavior of both costs and revenues in linear throughout the relevant range of activity. (This assumption precludes the concept of volume discounts on either purchased materials or sales.) Costs can be classified accurately as either fixed or variable. Changes in activity are the only factors that affect costs. All units produced are sold (there is no ending finished goods inventory). When a company sells more than one type of product, the sales mix (the ratio of each product to total sales) will remain constant. Break Even Point: Breakeven point represents that volume of production where total cost equal total revenue resulting into a no-profit no-loss situation. If output falls below that point, there is loss and if output exceeds the point there is profit. Therefore at breakeven point: Revenue = Total Cost Sales = S = C = Fixed Cost + Variable Cost

 Sales-variable Cost = Contribution = Fixed Cost It can be concluded that at breakeven point the contribution earned just covers the fixed cost and at levels below the point contribution earned is not adequate to match the fixed cost and at levels above the point contribution earned more than recovers the fixed cost. Profit Volume ratio (PV ratio) Profit volume ratio is the ratio of contribution denoting the difference between sales and variable cost. Since in the short term fixed cost does not change, Profit/volume ratio also measures the rate of change of profit due to change in the sales volume. Thus, p/v ratio = contribution /sales x100 It is influenced by sales and variable or marginal cost. If the sales price increases without corresponding increase in marginal cost the contribution increases and the Profit volume ratio improves. Similarly if the marginal cost is reduced with sale price remaining same Profit/Volume ratio improves. The advantage of profit/volume ratio are that it can be used to measure profitability of each product or group of them separately so that the necessity for continuance of such production can be examined. It may also be used to measure the profitability or each production centre, process or operation.

ANS-2B-

Costing Profit And Loss A/C

Dr. Cr.

Particulars

Amoun Amount t To Raw materials Consumed 708000 To Direct Wages 371000 To Works Overhead 213000 To Administrative 95500 Overhead 113500 To Selling & Distribution 69000 To Trading Profit (p/l) 428800 To Costing Profit C/D-

Particulars

By Sales By Finished Stock By Work-in-Progress C/D(@20% of Prime Cost) By Materials C/DBy Wages C/DBy Works Overhead By Admin. cost recovered (@ 8 per Units 199880 Produced) By Selling Cost 0 recovered (@ 4 per unit sold)

Amoun Amount t 150000 0 40000 215800 17000 8000 5000 93000 120000 199880 0

Units Produced= Closing Finished Stock + Units Sold = 1000 + 30000 = 31000.

Working Notes Particulars Amount Amount

Raw materials consumed Direct Wages Prime Cost Works Overhead Works Cost Administration Overhead Cost of Production Opening Finished Goods (-) Closing Finished Goods Cost Of Goods Sold Selling Overhead Cost of Sales Profit Sales Nil 40000

708000 371000 1079000 2130000 1292000 95500 1387500 (-40000) 1347500 113500 1461000 39000 1500000

ANS-3
Operating Cost Sheet For the year ended

Particulars
Standard Charges : Wages of Drivers (10*100*12)
Wages of Cleaners (20*50*12)

Amount
12000 12000 ..

Amount

24000 14000 4800 12000 2000 3600 ..

Interest(4% on Capital) Directors fee (400*12) Office Establishment(1000*12) Licence and Taxes (1000*12) Garage rent(6*50*12)

TOTAL Maintenance Charges:

Repairs, spares parts, Etc Less: Sales Proceeds from old tyres and duties

60400
.

56000 (-6400) .

49600

Operating Charges: Depreciation

70000

70000

Grand Total: (A + B + C)

180000 1440000

Passengers Kms. Carried (900 * 1600)

0.125

Cost of passengers km. (Rs. 180000/1440000)