Cost Accounting

Azgard-9

Presented By:

Rising Starz

Introduction
1886as a first Ginning factory in Shamkot India.
In 1972the group became international by expanding to Ireland in the textile sector. In 1978 the group established a presence in the United States by acquiring Burke Mills Inc. in North Carolina. By 1980this presence was also expanding and fortified with the addition of another company Tennessee Textiles. Azgard9 Ltd is about a 100 million US $ company with sales offices in five (5) countries. The significance of nine for the members of Azgard

Products Of Azgard-9
Denim Jackets

Denim Jeans
Denim Skirts Cotton Jeans Denim Volts Denim Belts

For this Project report we choose Denim Jackets

Denim Shirts

Process Flow Chart

Raw Material

CAD

Cutting

Stitching

Washing

Finishing & Packing

Buttoning

Trimming

COSTS Description

VARIABLE Cost per unit

FIXED Cost per Year

Manufacturing : Fabric consumed In House Embroidery Chemicals Accessories Machine parts, Cutting Material Packing material Direct labor Indirect labor Non-manufacturing : Advertising Traveling, conveyance and entertainment Management Transport Stores consumed ( IT material, Medicines, Electrical, General items) Printing & stationery Communication Depreciation TOTAL 14400000 1187013 7306980 2917056 130788 1127796 54202431 795013160 263 3 12 115 3 17 56 105

CVP Analysis
Variable cost 574 x 12000 x 30= 206640000 Fixed Cost = 81272064
Unit cost =81272064/260000 = 255.76

Total per Unit Cost=829

Breakeven Point in Rs = fixed cost/ CM ratio =81272064/42.6 = 1907794.92 Rs

Breakeven point in Units =Fixed Cost/ CM per unit

= 81272064/426 = 190779.49 units

Profit Planning
Aggressive Profit target profit is 10000000 then target sales= 425521277 Conservative Profit conservative profit is 1000000 Sales to achieve conservative profit are 193126910. Average Profit conservative profit is 50000000

Sales conservative 308150384.

Contribution margin ratio (using the conservative)

Conservative sales = 308150384 CM Ratio= Total CM/Total Sales*100 =153360000/30815308*100 = 50% Margin of safety = total sales - break even sales = 308150384-1907794.92 =306242589.08 Degree of operating leverage = CM/Net Income =1 53360000/72087936 = 2.127

Relevant Cost for Decision Making

Special Order Azgard nine makes a single product whose normal selling price is 1000 per unit. A foreign distributor offers to purchase 12000 units for 800 per unit. This is a one-time order that would not affect the companys regular business. Monthly capacity is 380000 units, but Azgard 9. is currently producing and selling only 360000 units. Decision :Company will accept the offer because this order will generate profit of 3390000.Special order will not affect our normal production because we have the capacity to produce 15000 units more.

Special order Selling price Variable costs : Fabric consumed In House Embroidery Chemicals Accessories Machine parts, Cutting Material Packing material Direct labor Indirect labor Total per unit cost (15000*574) Contributing margin Fixed cost: Advertising Traveling, conveyance and entertainment Management Transport Stores consumed ( IT material, Medicines, Electrical, General items) Printing & stationery for office use Communication Depreciation Net Profit 14400000 1187013 7306980 ---574 263 3 12 115 3 17 56 105 3945000 45000 180000 1725000 45000 255000 840000 1575000 7677000 3390000 15000*800 12000000

2917056
130788 1127796 54202431

----3390000

Make or Buy Decision

Outside purchase price (750*360000) = 234000000
Own Producing
Total Cost = 287912064

Outsourcing
Total Cost = 224930367 Decision: After analysis of all the cost that occurs, we have decided to go for outsourcing. If we outsource then according to above table we will face the less cost. So we decide to purchase the jacket because our manufactured product cannot generate more profit after covering the all costs.

 Net profit =72087936 We have concluded that if the company makes special order it will earns more profit. Because the company have the extra capacity to produce 20000 jackets more and they are working on minimum capacity. Make or purchase function we conclude that it is more appropriate for company that it purchase from supplier rather than make product by it self.

Conclusion