COST ANALYSIS NIRANI SUGARS LTD,

EXECUTIVE SUMMARY
The Nirani sugar mill was originally established as a khandasri sugar factory of 1250 TCD in the year 1997-98. Subsequently making use of the govt of Indias liberalized policy. Govt of India notification DCS /S/ 14/ 97 dated 2-6-98, which conversion of khandasri sugar unit into vacuum pan sugar factories. Cost accounting is an old as the human being itself. Since the financial accounting has some limitation. Cost accounting has its own importance being an important category of accounting system. The cost accounting system is very helpful to sugar industry. After adopting cost accounting every business must analyze it cost accounting system very care fully Material, labour, over heads are the main elements of the Nirani Sugars Ltd. These elements play very important role in the organization. The company giving more importance to this on the other hand well trained labour force working towards the company objectives. Various records are maintained by Nirani Sugars Ltd and each department has its own cost records. During my project there is improper maintains of cost records by company.

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COST ANALYSIS NIRANI SUGARS LTD,

The study of Cost Analysis of sugar industry with special reference to Nirani Sugars Ltd Mudhol: Introduction of 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

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COST ANALYSIS NIRANI SUGARS 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.

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.

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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.

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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.

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COST ANALYSIS NIRANI SUGARS LTD, 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. 1. 2. 3. Total Sector Private Public Co-operative No of factories 189 62 315 566

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.

Diagram no#1

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COST ANALYSIS NIRANI SUGARS LTD,

35000 30000 25000 20000 15000 10000 5000 0

brazil india china usa thialand austrila mexico pakistan france germany russia indoneasia egypt

production consumption

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:
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:

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Table showing sugar cane availability in cultivated area:

Table no#2 Year 1980-81 1990-91 2000-01 2002-03 2003-04 2004-05 Cultivated area (%) 2.7 4.3 3.9 3.7 MMT 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.

SUGARCANE UTILIZATION
Table no#3 % Sugarcane utilization for

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Year 1980-1981 1990-1991 2000-2001 2001-2002 2002-2003 2003-2004 White Sugar 33.4 50.7 59.7 57.4 68.9 56.1 Guru and Khandsari Seed, feed and chewing 54.8 11.8 37.4 11.8 28.8 11.5 31.5 11.1 20.1 11.1 32.5 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 developd 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.

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

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COST ANALYSIS NIRANI SUGARS LTD, largest manufacturing of sugar so the sugar must be cheaper. It can be provide by our sugar industry.

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COMPANY PROFILE
Name of the company : M/S Nirani Sugars Ltd Kulali road MUDHOL
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Dist: Bagalkot Register Office : M/s Nirani Sugars Lokapur road MUDHOL At: Bijapur Muragesh .R. Nirani Sole trading concern Registered under companies Act of 1956 Auditor of company M/s Bhattad & Company K.S.I.I. D.C K.S.F.C Sangli Bank Jamakhandi S.B.I. Mudhol Branch Indian Bank Lokapur Gramen bank of mudhol

Branch Office Managing Director Status of the company Constitution of the firm

: : : :

Financial institution of the company Banker of the company

: :

HISTORY OF NIRANI SUGARS LTD

1.

M/s Nirani Sugars Ltd,, set up in 1996 was promoted by Mr.Murugesh R

Nirani. B.E, D.B.M., a technical Graduate and local MLA of Bilagi and Minister of large and Medium Scale Industry, Govt of Karnataka. He comes from an agricultural family from Bilagi Taluk of Bagalkot Dt. He started as an industrialist with setting up of a modern Khandasari Unit at Mudhol. He is also very actively involved as a Managing Director of Badgandi Sugars Ltd, a new 2500 TCD sugar

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COST ANALYSIS NIRANI SUGARS LTD, and Co-gen plant at his constituency Bilagi. The new unit has commenced commercial production in December 2005. He has also been recognized and awarded Bharat Udyog Ratna award from Govt of India. He has also taken over a sick mini cement plant of 100 TPD capacities at Mudhol area, which has now been put into commercial operation with a capacity of 200 TDP within a short span of time. He has also contributed his service in setting up residential school and D, Ed College at Mudhol.
2.

Nirani sugars Ltd. Is presently operating a sugar mill of 5000 tones cane day

(5000 TCD). This sugar mill was originally established as a khandasari sugar factory of 500 TCD in the year 1997-98. In fact this was the most modern khandasari sugar factory & was first in the country to have started with high pressure boiler, turbo generator set with captive power generation, multiple effect pressure evaporator system with falling film evaporators etc. it successfully produced goods quality white crystal sugar. But as khandasari unit, it had its own constraints due to technical limitations and govt policies. 3. Subsequently, making use of the govt. of Indias liberalized policy, vide govt of

India notification DCS /S/14/97 dated 2-6-98, which permitted conversion of khandsari sugar Readopting vacuum evaporation & vacuum pan boiling systems along with related changes. NSL did not lose time to expand the capacity to 5000 TCD, side by side taking development measures to increase cane area & cane availability. Today NSL is a regular sugar factory with 5000 TCD capacity with improved efficiencies. 4. Having regard to the above, the new sugar projects in the country, are coming up with a capacity of 5000 TCD & more with the facility of cogeneration of power. A number of existing mills in the country are expanding to even bigger capacities like 7500 TCD, 10000 TCD & so on. 5. The cogeneration of power permits generation of surplus power, which is encashable and thus helps augmentation of income to the industry substantially on a sustained basis. The profitability of the cogeneration plant increases with increase in the size of the plant. Bigger cogeneration plants are feasible only with bigger sugar mills, either as forward integration or with back up support for fuel. 6. The market and the price for the power produced is assured as the surplus power so generated is under written by KPTCL through power purchase Agreement. The govt of Karnataka also shares the aforesaid viewpoint & encourages cogeneration of power by

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COST ANALYSIS NIRANI SUGARS LTD, sugar factories using bagasse as a fuel. In support of this, the govt has announced a capital subsidy of Rs. 25 lakhs per MW of surplus power, for such cogen projects. 7. 8. In fact NSL has already entered into an agreement with TATA power trading To match the sugar mill expansion from 5000 TCD to 10000 TCD, NSL proposes company Ltd. For sale of power at a price of Rs3.61 per unit. to double its cogeneration capacity also from 16MW to 48MW.

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COST ANALYSIS NIRANI SUGARS LTD,

LOCATION:Name of the company : M/S NIRINI SUGARS LTD Sy no-166 near kulali cross Jamkhandi Road Mudhol 587313. Register no : 9840/96

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COST ANALYSIS NIRANI SUGARS LTD,

OBJECTIVES OF NIRANI SUGARS LTD

1. Maximum utilization of man power production capacity and raw material for food recovery. 2. 3. Proper co-ordination and co-operating among its members. To manufacture good quality sugars and its by products with the help of the members who supply sugarcane raw material. 4. 5. To provide comparative market rate to the farmers. To inculcate modern techniques and methods of cultivation and To Supply seeds machines for the farmers. 6. 7. To maintain proper of transport for the formers during season. Utilization of raw material to the maximum level to get by Products like Molasses and to market them at proper rates. 8. To undertake such other activities are incidental and conductive to the development of the society. 9. 10. 11. Maintain continuous improvement programs in Technology. Help farmers to increase there yield through research & development. To produce good quality sugar at acceptable prices to meet the increasing demand

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COST ANALYSIS NIRANI SUGARS LTD,

PRODUCT PROFILE
The factory produces about 184400 Tones of plantation crystal white sugar. As per statute from Govt of India the sugar can be packed in 100 Kg net Gunny bags and 50 Kg net Polythene bags. As per the Indian sugar standards the sugar can be graded in 3 grades by size and color namely L, M, S (size) and 29, 30 (color). The factory envisages producing M30 and s30 grades. The storage of sugar will be done in a warehouse built in masonry and roofed with AC sheets. The size of the warehouse will be suitable to store about 50% of a seasons production. The molasses which is a by product, is a highly viscous liquid. The total production of molasses in a season will be about 40,480 Tone. Two steel storage tanks of capacity 4000 tone each will be added. This can accommodate about 2 months production. As the demand for molasses is high, it is proposed to sell the molasses to distilleries as raw material to produce alcohol. Beside the finished goods and molasses storage space is required for Bagasse, ash and filter mud. Adequate open will be provided for these in the factory for easy and smooth working of the factory. Main Product- White Crystal Sugar: The main product of the sugar manufacturing process is white crystal sugar. This white crystal sugar is manufactured in the following 3 grades: 1) L-30 [Large size sugar] 2) M-30 [Medium size sugar] 3) S1-30 [small size sugar] By-Products of Sugar Cane: The sugar mill produces many by-products along with sugar. A typical sugarcane comprising of 3000 ton capacity can produce 345 on of sugar, 6000 liters alcohol, 3 tons of yeast, 15 tons of potash fertilizer, 25 ton of press mud fertilizer and 750 KW of power from bagasse.

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COST ANALYSIS NIRANI SUGARS LTD,

Nature of Business Carried

Nature of Business carried NSL is involved in the activity of manufacturing white crystal sugar products which is the main product. The process of production involve conversion of 1) Raw sugarcane to sugar, 2) Raw sugar into refined sugar Molasses, Bagasses are its by products. 1. MOLASSES: Molasses is the final effluent obtained in the preparation of sugar by repeated crystallization. Molasses is the brown colored residue after sugar has been tracted from the juice. Molasses still contains some quantity of sugar, but this sugar cannot be extracted by usual technology. It is the end product from a refining process carried out to yield Sugar. Sucrose and invert sugars constitute a major portion (40 to 60%) of Molasses. The yield of Molasses per ton of sugarcane varies in the range of 3.5% to 4.5%. Molasses is mainly used for the manufacture of ethyl alcohol (ethanol), Yeast and cattle feed. NSL produces alcohol from the molasses left after the extraction of sugarcane juice, which can be used both for potable purpose as well as an industrial chemical. Further this alcohol can be again purified to produce fuel and ethanol that can be blended with petrol. Ethanol is in turn used to produce portable liquor and downstream value added chemical such as acetone, acetic acid, buttonhole, acetic anhydride, etc. Face stiff competition from production through the petrochemical route. The government controls the export of molasses through export licenses issued for every quarter. Molasses and alcohol-based industries were decontrolled in 993 and are being controlled by respective state government policies. Nearly 70% of the alcohol produced is consumed by the potable alcohol sector.

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COST ANALYSIS NIRANI SUGARS LTD, 2. BAGASSE: Bagasse is a fibrous residue of cane stalk that is obtained after crushing an extraction of juice. It consists of water, Fiber an relatively small quantities of soluble solids, the composition of bagasse varies based on the variety of sugarcane, Maturity of cane, Method of harvesting and the efficacy of the sugar mill. The usual bagasse composition is given below.

Table no#4 CONTENT Moisture Fiber Soluble solids RANGE % 46-52 43-52 2-6

Bagasse is usually used as a combustible in the furnaces to produce steam, which in turn is used to generate power; it is also used as raw materials for production of paper and as feedstock for cattle. By making use of bagasse, sugar mills have been successful in reducing dependence on state electric boards for power supply, for example requirement for FY98 from captive generation from steam turbines. Further this bagasse based cogeneration plant is eligible for carbon credit compensation under the Kyoto protocol. The residue product from distillery operation blended with chemicals is being sold as bio-fertilizers.

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COST ANALYSIS NIRANI SUGARS LTD, 3. Power Generation Plant: Power plant uses the fiber of the processed sugar cane (bagasse) as fuel to generate electricity in an environmentally responsible manner. An integrated 15 M.W. power generates and supplies electricity to the state grid produced from sugar cane waste used to rotate turbines 5 M.W. power is utilized in the plant remaining power is supplied to KPTCL.

ORGANIZATION STRUCTURE OF NSL

Chairman & MD Board of Directors BABASAB PATIL : Murugesh. R. Nirani. (B.E.Civil. MBA) : H .R. Nirani. Advocate
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: Kamala .M. Nirani : L .R.Nirani : S .R.Nirani Administration : Sangamesh .R. Nirani (Executive Director) : R .V .Vatnal (Technical Director) : S .V. Karriyannavar (CEO) : S .C .Iitnal (GM of Plant) : M .R. Dabade (Dy GM, Production) : M .S. Heggalagi (Manager, PMP) : B .S. Khandekar (GM, Cane) : M .M. Hiremath (Finance) : S .C. Salagare (Chief Engineer) : S .G. Yaragatti (Stores purchase officer) : M .R. Agnihotri (Personnel officer)

Competitors Information:
The main competitors are as follows:
Godavari sugar Ltd.

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COST ANALYSIS NIRANI SUGARS LTD,

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

Shree Prabulingeshwar sugar works Ltd. Crushing capacity-4500 TCD Recovery-11.2% Sugar production-9000 Qtls (per day)

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

Ryatara sahakari sakkare karkhane niyamit. Crushing capacityRecoverySugar production-

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.

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COST ANALYSIS NIRANI SUGARS LTD,

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 Nirani Sugars 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

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

1.

Production
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COST ANALYSIS NIRANI SUGARS LTD, Laboratory Section Manufacturing Section Engineering Section Go down Section

2.

Human Resource Development

Administrative Section Shares Section Security Section Vehicle Section Time office section

3.

Finance
1. Accounting Section General Account Section Cane Account Section

4.

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. Engineering department Manufacturing department

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COST ANALYSIS NIRANI SUGARS LTD,

1.

Engineering department
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

1. 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. 2. 3. Determining and maintenance of temperature of boiling juice. Determining the percentage of water content in the dilution of Juice. Determining the percentage and content of chemicals to be added doming production. 25

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4. 5. 6.

Finding the PH of water through universal indicator. Choice of colour and size for sugar. To manage the time and quality.

Chemicals used in production of sugar

1.
2. 3. 4. 5. 6. 7. 8. 9. Burnt sugar Controller. Sulphar Orthophosphoric Acid Mill sanitation Antiscalant Floculent Viscocity reducer Hydro Sulphite of soda Hydrogen peroxide --------Bleaching agent and PH Major bleaching agent Bleagent agent

Preservative ----------Descaling agent setting aid Reduces viscocity Bleaching agent Bleaching agent

-: Functions:Bleaching agent: - Bleaches the juices and massecuites, and gives clarity. I II Preservative: - Keeps the purity of juice constant. That means, it Should not allow going down the purity of juice. Antiselant or Descalant: - It prevents the formation of scale. 26

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COST ANALYSIS NIRANI SUGARS LTD, III Iv. Setting aid: - It allows to settle down the solid partials in the Juice. 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. 2. 3. 4. 5. Crushing of sugarcane Juice clarification (Double sulphitation of clarification) Crystallization Curing Grading and Bagging.

PROCUREMENT OF SUGAR

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CANE
IMBITION WATER

MILLING
BAGASSE

RAW JUICE
EXHAUST STEAM SULPHURDIOXIDES + LIME CONDENSATE WATER

SULPHURED JUICE
EXHAUST STEAM CONDENSATE WATER

CLEAR JUICE
EXHAUST STEAM VAPOURS

JUISE + MUD
CONDENSATE WATER

SYRUP
SULPHURDIOXIDE GAS VAPOURS, CONDENSATE WATER EXHAUST STEAM, VAPOURS

MASSCUITE
STEAM OR SUPER HEATED WASH WATER

FINAL MOLASSES

SUGAR

1. Crushing of sugarcane BABASAB PATIL

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COST ANALYSIS NIRANI SUGARS LTD,

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.

2. Juice clarification (Double clarification)

The weighed juice is primarily heated in juice heated at65-700C. 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).

3. 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.

4. 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.

5. Grading and Bagging BABASAB PATIL

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COST ANALYSIS NIRANI SUGARS LTD,

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.

Godown Section:
In the production department the godown are maintained for store the sugar.

The Organization structure of godown section as follows : GODOWN KEEPER (1)

CLERK (1)

ATTENDER (2)
The sugar will be supplied to god owns through belts. Numbers of God owns Old Godown New Godowns Capacity New Godowns Old Godowns : : : : : 3 1 2 2 lakhas Bags (100kg) 50000 Bags (100kg)

Store Section: BABASAB PATIL

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COST ANALYSIS NIRANI SUGARS LTD, Organization structure of the store department

Store in charge (3) Store Keeper (3)

books

Store Helper (3)

The department maintains the following books 1. 2. 3. 4. Transport register Bin Card Bin Card entry Issues Identity

Human Resource Development

The management of Human Resource is a very complex and challenging task for those who are entrusted in the successful running of an organization to be able to stand up to the challenges efficiently the manages theoretically gained knowledge, but also be guide efficient in implementing their theoretically knowledge into practice successfully .

Administrative Section:
Administrative department is the main department in the organization this department is connected with so many sections like. 1. 2. 3. 4. Shares Section Security Section Vehicle Section Time office Section

1. Shares Section :-

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COST ANALYSIS NIRANI SUGARS LTD, Share Section is the sub section of the administrative department in the organization. The company having 2 types of shares. a) Preference Shares b) Equity Shares 2. Security Section :The security section is operating under administrative department. It is also working in 3 shifts as maintained under time office section

The main works of this section are as follows:1. 2. 3. 4. 5. They are maintaining the peace & discipline within a factory. To maintain workers attendance. They check the incoming raw material as per vouchers. Avoid the misuse of items. The out going material with paper gate pass will be recorded in outwards and they are sent outwards. 6. They submit daily report activity to the managing director.

Structure of Security Section

Security Officer

Security Supervisor

Security Head Guard

Security Guard

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COST ANALYSIS NIRANI SUGARS LTD, Total employee is 16. There are two type of Weigh Bridge in the factory and capacity of each weigh bridge is 40 tons. It acts as weighment of sugar cane, seeds and other factory Weighment

Vehicle Section:The organization chart of this section

Vehicle Section Clerk Attainder Drivers

Time office Section:Structure of time office Head Time keeper Time keeper Office clerk
The factory runs there shifts in section First Shift Second Shift Third Shift General Shift : : : : 6 -00 am To 2-00 pm 2-00 pm To 10-00 pm 10-00 pm To 6-00 am 9-00 am To 6-00 pm

The main functions of the office department BABASAB PATIL

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COST ANALYSIS NIRANI SUGARS LTD, 1. 2. 3. Arranging duty to workers. Distribution of salary according to workers attendance. Sanctioning of leavers to workers.

Attendance:Time office maintain two types of attendance method a) b) Manual attendance Punching attendance

a) Manual Attendance:Factory give attendance cards to employees enter the coming Time in factory and out time in factory and signature of time office Officer. This is all entered attendance card by the time office officer.

b) Punching Attendance:This system is based software here all the information is Already entered in the computer regarding the employee name Department and shift time. The employee must show the card to punching machine and giving the finger impression to machine automatically entered in the employees list.

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COST ANALYSIS NIRANI SUGARS LTD,

Finance Department
1. Account Sections:Account department is divided in to two main sections, they are. a) b) General Account Section Cane Account Section

a)

General Account Section:-

This section maintains all the transactions. Income Tax Sales Tax and commercial Tax procedures are done by this section the Varieties maintained by this section is. a) b) c) d) e) Advance register Bank register Contractors register Depositors register Fixed asset register

b)

Cane Account Section:-

To ease the transaction with formers this section has been separated. The main function of this sections has been is to maintain records of those suppliers names who supplies the sugar cane to the factory and they maintains register of payment The registers maintained by this section are: a) self harvest payment register b) harvest bill c) cultivator payment register

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COST ANALYSIS NIRANI SUGARS LTD,

Marketing Department:-

a)

Cane Development Department a)

b) Development Section Procurement Section

a) Development Section:The organization set up of this department is as follows

Chief Cane Development Officer (CCDO) Cane Development Officer

Assistant Cane Development Officer

Filed Assistant

Slip Boy

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COST ANALYSIS NIRANI SUGARS LTD,

Objectives of CDO:1. 2. 3. 4. 5. 6. To get best quality of sugar cane to the factory in right time To improve the variety of cane To develop the backward area To provide all facilities like seeds, fertilizers unloading & Loading charges. To maintain registration of cane gong and plantation To undertake seed distribution programmer

Cane development programmer 1.

2 3. 4. 5. 6. 7. Plantation of high yield verity of sugar cane Lift irrigation schemes D G sets & Oil Engines Seed treatment Biological test control Soil analyses & Soil treatment Past harvesting & sugar loses

Types of Gangs 1. 2. Local gangs :It means local people groups is local gangs

Lose gangs:-

All lose gongs are comes in Maharashtra company will be paid 1,60,000 in advance one lose gangs including 8 pair and this gangs 16 to 18 tons sugar cane supply per day.

3.

Tractor attaches gangs:-

Company will be Rs 200000 paid in advance Tractor attach gangs is including 10 to 12 pair This gangs 22 ton sugar cane supplied per day.

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COST ANALYSIS NIRANI SUGARS LTD,

4.

Truck attaches gangs:-

This gang use only local sugar cane not available that time import sugar cane in long route.

Varity of Sugar cane

1. 2. 3. COC671 CO8603 CO8011 : : : 1200/ton 1230 /ton 1230/ton

Purchase Sections:
The organization structure of the purchase section Purchase Officer

Clerks

At tender

It is also an important section in administrative department in performing the activities purchasing in this section there are two employees one is purchase manager and another one is purchase assistant. . The purchase manager issues the purchase order from various section of the factory. He estimates the cost of purchase and according him go for direct purchase purchases through purchase committee.

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COST ANALYSIS NIRANI SUGARS LTD,

Sales Department: Functions of Sales Department

1. 2. Sale Sugar and Molasses. Subjection to production Department.

Objectives Sales Department

1. 2. Maximum Sales Maximum Earn Profit

Structure of Sales Department

1. 2. Sales Department heads Clerk

Years 2007-08 2008 Difficulties of Sales Departments:1. 2 3. 4. 5. Packing. Payment from party. Quality. Quantity. Staff behavior.

Sales 82 Crors 192 Crors

This factory is producing two varieties of sugars they are S -30 & M-30 grader the sale of the sugar occurs when gives a tender notice the sugar sold to that buyers who quotes highest price tender are called once in a week if the rate is not satisfactory the tender will be cancelled The sales of sugar are done unless there is instruction from the government certain government rules should be followed for sale of sugar according to the recent government rules they will be given some figures of bags to sell within a month.

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COST ANALYSIS NIRANI SUGARS LTD,

S.W.O.T.ANALYSIS FOR NIRANI SUGARS PVT LTD

(STRENGTH, WEAKNESS, OPPORTUNITIES, THREATS) STRENGTHS:
It has own co - generation unit (62MW). Sufficient water resources. Good communication media. 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

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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-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.

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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. 2. 3. It helps the management for implementing cost control and decision making. It helps for calculation of cost of production. It helps for valuation of work-in-progress.

Element wise classification

Cost classified on the basis of element wise is as follows 1. 2. 3. Material cost Labor cost 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. 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.

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COST ANALYSIS NIRANI SUGARS LTD, 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 and services used by the undertaking and including the maintenance of capital assets. The main groups into overheads may sub divided are as follows.

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COST ANALYSIS NIRANI SUGARS LTD, 1. 2. 3. 4. 5. Manufacturing overheads Administration overheads Selling overheads Research and development overheads 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) 2) 3) 4) 5) Indirect labor Foremens salary Cleaners salary and wages Gatekeepers salary Salary of time keeping department Tools operators wages Store keeping department salary Factory rent and rates Insurance of factory Consumable stores Indirect materials cost such as cotton waste, nuts and bolts, lubricating oil, nails etc. 45

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6) 7) 8) 9) 10) 11) 12) 13) 14) 2

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 workmens compensation fund Administration cost: This consists of all expenses incurred in the direction control and administration of

an undertaking. Examples: 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) Salaries of office staff, accounts, MD, GM Directors fees Bank charges Postage stationery telephone Rent rates of office Insurance of office building and equipments Depreciation on office building equipment and furniture Printing charges of office Audit fees Legal charges

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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 4 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.

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COST ANALYSIS NIRANI SUGARS LTD, These are: 1. 1. 2. 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 Variable cost Fixed costs. Semi-Variable or Semi-Fixed costs

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.

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COST ANALYSIS NIRANI SUGARS LTD, 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. management consulting fees etc. programmed costs. Examples of such costs are Research & Development costs advertising & sales promotion costs, donation These costs are also termed as managed of

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 incharge 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: BABASAB PATIL

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COST ANALYSIS NIRANI SUGARS LTD, 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.

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.

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COST ANALYSIS NIRANI SUGARS LTD,

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.

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.

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COST ANALYSIS NIRANI SUGARS LTD,

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. 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 fount out. Changing of cost in the former case will be termed as Allocation of costs while in the later as Apportionment of costs.

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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. 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.

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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 Finance tools and techniques of cost reduction

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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. management does not support whole heartedly. Therefore top

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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. 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.

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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. 5) Informative and simple: The system should be informative and simple.

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 subdivision 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

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COST ANALYSIS NIRANI SUGARS LTD, 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) 2) 3) 4) 5) It provides the total cost figure as well as cost unit of production. It helps in cost comparison. It facilitates the preparation of cost estimates required for submitting tenders. It provides sufficient help in arriving at the figure of selling price. It facilitates cost control by disclosing operational efficiency.

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Format of cost or cost sheet

Particular 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

Total cost (Rs) XX XX XXX XX XXX XX XXX XX XXX

Cost

per

unit

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

Cost Audit:
Definition:

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COST ANALYSIS NIRANI SUGARS LTD, 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 Process

Finished Goods O/P

Definition of Process Costing:

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COST ANALYSIS NIRANI SUGARS LTD, 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

Characteristics of Process Costing System: BABASAB PATIL

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COST ANALYSIS NIRANI SUGARS LTD, (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.

Concepts in Process Costing System: BABASAB PATIL

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COST ANALYSIS NIRANI SUGARS LTD, (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.

FORMAT OF PROCESS ACCOUNT

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Particulars

Input

Cost per Unit XX XX XX

Total Cost XX XX XX

Particulars

Output

Cost per Unit XX XX XX

Total Cost XX XX XX

Units introduced Materials Labor

XX XX XX

Normal Loss Scrap Abnormal Loss

XX XX XX

Overheads

XX

XX

XX

Sale of by products

Abnormal Gain (if any)

XX

XX

XX

Sent to warehouse XX for sale

XX

XX

Actual process

output XX

XX

XX

transferred to next

Total

XXX

XXX

XXX Total

XX

XX

XXX

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Cost reduction and cost control techniques used in Nirani Sugars

1) Avoiding of excessive overtime.

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COST ANALYSIS NIRANI SUGARS LTD, 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 Nirani Sugars Ltd:

Lack of support from top management: In existing system there is no time for top management to check the regular accounting process. 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 Nirani Sugars the separate department should be made. In this case there is no additional work should be taken in the

Difficulties to calculate costs of work in progress in sugar:

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

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Recommendation for installation of cost accounting system:

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 Nirani Sugars 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 Nirani Sugars Ltd:

Name of the item Sugar cane Cost unit Per Tone 67

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Sugar Transportation Water charges Oil & diesel Canteen Electricity Boiler

Per Quintal Per trip / per K.M Per thousand Liters Per liters Per person served Per K.W.H. Per thousand kilo grams of steam

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COST ANALYSIS NIRANI SUGARS LTD,

Material costing
Year Tones consumed Rate per tone Amount

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COST ANALYSIS NIRANI SUGARS LTD, 2006-2007 2007-2008 2008-2009 136903.6842 202997.6470 215068 950 850 1000 130058500 172548000 215068000

matrrial cost chart

250000000 200000000 150000000 Series1 100000000 50000000 0 2006-07 2007-08 2008-09

The raw material consumption from the year 2006-2007 - 2008-2009. In case of 2006-2007 the quantity of sugar cane consumed 136903.6842 tones and it is increased to 202997.6470 and 215068 respectively in the year 2007-2008 and 2008-2009.

Human resource department

Departments Administration and HOD Manufacturing and engineering 2006 41 340 Total no of employees 2007 43 345 2008 44 351 70

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COST ANALYSIS NIRANI SUGARS LTD, Cane department Security office Civil 65 19 7 68 20 15 70 22 19

Human Resourse department

400 350 300 250 200 150 100 50 0 Administrative Manufacturing & HOD and engineering Cane Security office Civil 2006-07 2007-08 2008-09

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 2006 1,95,600 7,50,596 1,60,156 42,000 41,000 2007 2,09,341 7,90,900 1,80,300 45,000 43,300 2008 2,16,651 8,07,175 1,95,200 48,000 46,000

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COST ANALYSIS NIRANI SUGARS LTD,

900000 800000 700000 600000 500000 400000 300000 200000 100000 0 Administrative Manufacturing & HOD and engineering Cane Security office Civil 2006 2007 2008

Over heads Particulars

Factory overhead Administration and overheads Selling and distribution overheads Total

2006-2007
9,180,600 1,530,100 3,763,937 14,474,637

2007-2008
15,972,950 2,381,850 4,140,990 22,495,790

2008-2009
237,300,00 3,744,000 13,868,850 41,342,850

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COST ANALYSIS NIRANI SUGARS LTD,

25000000

20000000

15000000

factory over head administrative over head selling & distribution over head

10000000

5000000

0 2006-07 2007-07 2008-09

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 NIRANI SUGARS LTD Particulars Purchase of raw material Closing raw material Raw material consumed Freight inwards Prime cost Factory over heads 2006-2007 130,0585,00 130,058,500 13,005,850 143,064,350 9,180,600 2007-2008 172,548,000 172,548,000 18,395,725 190,943,725 15,972,950 2008-2009 215,068,000 215,068,000 24,032,400 239,100,400 23,730,000 73

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COST ANALYSIS NIRANI SUGARS LTD, Depreciation on building Depreciation on machinery Depreciation on electricals Work cost Office over heads Depreciation on computer Depreciation on office equipments Cost of production Opening stock of finished goods Less :closing stock of finished goods Cost of goods sold Selling over heads Cost of sales 153,928,275 3,763,937 157,692,212 208,147,625 4,140,990 212,288,615 258,307,200 13,868,850 272,176,050 1,000,000 1,200,000 250,000 154,694,950 1,530,100 50,000 150,000 156,485,050 1,534,065 4,090,840 1,5000,00 1,7000,00 300,000 210,416,675 2,381,850 60,000 2000,00 213,058,525 3,928,720 8,839,620 2,000,00 2,200,000 350,000 267,380,400 3,744,000 70,000 300,000 271,494,400 4,149,800 17,337,000

Analysis of cost sheet:

Prime cost: The prime cost in 2006-2007 143,064,350 and in 2007-2008 it was increased to 190,943,725 and 2008-2009 it was increased to 239,100,400 .This cost is increase to year by year . Work cost: The work cost in 2006-2007 154,694,950 and in 2007-2008 it was increased to 210,416,675 and 2008-2009 it was increased to 267,380,400. Cost of production: The cost of production in 2006-2007 156,485,050 and in 2008 it was increased to 213,058,525 and 2008-2009 it was increased to 213,058,525. 200774

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Cost of goods sold: The cost of goods sold in 2006-2007 153,928,275 and in 2008 it was increased to 208,147,625 and 2008-2009 it was increased to 258,307,200.

2007-

Cost of sales: The cost of sales in 2006-2007 157,692,212 and in 2007-2008 it was increased to and in 212,288,615 2008-2009 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.

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COST ANALYSIS NIRANI SUGARS LTD, 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 Contribution Less: fixed cost E.B.I.T. Total cost BABASAB PATIL

2006-2007 58063755 45818596 12245159 1988986 10256173 47807582

2007-2008 159273632 130849400 28424232 3128956 25295276 133978356

2008-2009 260120510 183355675 76764835 4355859 72408976 187711534

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sales cost analysis

300000000 250000000 200000000 150000000 100000000 50000000 0 1 2 3 187711534 159273632 133978356 sales total cost 260120510

58063755 47807582

The EBIT for the year 2006-2007 was 10256173, in the year was 2007-2008 was

25295276, and in the year 2008-2009 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 2006-07 to 2007-08 was 75.37% and that from the year 2007-08 to2008-09 was 80.22% Over head of the firm was increasing from the year 2006-07 to 2007-08 was 57.47% and from the year 2007-08 to 2008-09 was 65.20% Prime cost of the firm was increasing from the year 2006-07 to 2007-08 was 74.92% and from the year 2007-08 to 2008-09 was 79.85%

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COST ANALYSIS NIRANI SUGARS LTD, Work cost of the firm was increasing from the year 2006-07 to 2007-08 was 73.51% and from the year 2007-08 to 2008-09 was 78.69% Cost of production of the firm was increasing from the year 2006-07 to 2007-08 was 73.44% and from the year 2007-08 to 2008-09 was 78.47% Cost of goods sold of the firm was increasing from the year 2006-07to2007-08 was 73.95% and from the year 2007-08 to 2008-09 was 80.58% Cost of sales of the firm was increasing from the year 2006-07 to 2007-08 was 74.28% and from the year 2007-08 to 2008-09 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.

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Conclusion
In this study is attempt to made analyze the cost analysis of the sample unit .Since the Nirani Sugars Ltd 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.

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Bibliography G.B.Baligar cost accounting, ashok prakshan, 2004

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