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Faizullah khanFaizullah khan

ROLL NO.AHROLL NO.AH--522997522997MBA (FINANCE)MBA (FINANCE)


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TOPICTOPIC

Application of standard costingApplication of standard costing

in a manufacturing concernin a manufacturing concernkeeping in a view the variouskeeping in a view the various

variances.variances.


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Introduction to issueIntroduction to issue

Standard costs are usuallyStandard costs are usuallyassociated with aassociated with amanufacturing company's costsmanufacturing company's costs

of direct material, direct labor,of direct material, direct labor,and manufacturing overhead.and manufacturing overhead.

Situations in Standard Cost:Situations in Standard Cost:

If actual costs are less thanIf actual costs are less thanstandard costs:standard costs:

If actual costs are greater thanIf actual costs are greater thanstandard costs:standard costs:


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11 --Distinguish between a standard and a budget.Distinguish between a standard and a budget.

22 --Identify the advantages of standard costs.Identify the advantages of standard costs.

33 --Describe how standards are set.Describe how standards are set.

44 --Discuss the reporting of variances.Discuss the reporting of variances.

Process of Standard Costing:Process of Standard Costing:


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Practical study of thePractical study of the

organizationorganization Levi s denim.Levi s denim.


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History of levi,s StraussHistory of levi,s Strauss

In 1853, Leob Strauss,In 1853, Leob Strauss,

San Francisco in FranceSan Francisco in France

opened a small wholesale business thatopened a small wholesale business that

supplied miners and workers with worksupplied miners and workers with workclothes that were strong and did notclothes that were strong and did nottear easily.tear easily.

Later in 1872, Jacob Davis. Davis hadLater in 1872, Jacob Davis. Davis had

the interesting idea of adding copperthe interesting idea of adding copperrivets to the corners of the pockets torivets to the corners of the pockets tothe waist overalls Levi Strauss hadthe waist overalls Levi Strauss hadproduced.produced.


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Examples of StandardExamples of Standard

Cost of Materials andCost of Materials andPrice VariancePrice Variance

DateDate Account NameAccount Name DebitDebit CreditCredit

Jan. 8, 2010Jan. 8, 2010 Direct Materials InventoryDirect Materials Inventory 3,0003,000

Accounts PayableAccounts Payable 2,9002,900

Direct Materials PriceDirect Materials PriceVarianceVariance

100100


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DateDate Account nameAccount name DebitDebit CreditCredit

MarMar20102010

Direct Material inventoryDirect Material inventory 90009000

Direct material price varianceDirect material price variance 150150

Account payableAccount payable 91509150

DateDate Account nameAccount name debitdebit CreditCredit

Juna 1Juna 120102010

Direct material inventoryDirect material inventory 90009000

Direct material price varianceDirect material price variance 240240

Account payableAccount payable 87608760

ExampleExample --22

ExampleExample--33


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SWOT AnalysisSWOT Analysis

Strengths :Strengths : Levis follows a high standard of quality.Levis follows a high standard of quality. Enhancing the consumer retail experience. Enhancing the consumer retail experience. Levis products are unique and innovative in the Levis products are unique and innovative in the

style.style. Levis enjoys high brand equity.Levis enjoys high brand equity.

The products are renowned and are considered The products are renowned and are consideredas the most durable.as the most durable.

Weakness:Weakness: Levis products are considered as expensive.Levis products are considered as expensive.

Therefore a largeTherefore a large

percentage of people are reluctant to buy thepercentage of people are reluctant to buy theproducts.products. Many Competitors with better prices.Many Competitors with better prices. Weak in the information technology systems.Weak in the information technology systems.


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Opportunities :Opportunities :

Levis can do more well in the women section. This sectionLevis can do more well in the women section. This sectionis giveis give

less importance as compared to the men section.less importance as compared to the men section.

The kids section, which has been started from few years,The kids section, which has been started from few years,should alsoshould also

be given proper attention to gain customers.be given proper attention to gain customers.

Sales promotion can be increased by increasing theSales promotion can be increased by increasing theadvertisementsadvertisements

expenses so as to enjoy a large number of customers.expenses so as to enjoy a large number of customers.

Threats:Threats: Intense competition in the worldwide apparel industry couldIntense competition in the worldwide apparel industry could

lead tolead to reduced sales and prices.reduced sales and prices.

The revenues are inuenced by general economicThe revenues are inuenced by general economicconditionsconditions


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DATA COLLECTIONDATA COLLECTION

Data are collected byData are collected byFinancial ManagementFinancial Managementbooks, online articlesbooks, online articles


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CONCLUSIONCONCLUSION

I concluded that almost progress ofI concluded that almost progress ofvarious departments of organization isvarious departments of organization issatisfactory. Accounting For Cash &Shortsatisfactory. Accounting For Cash &Short--

Term Investment Statement highlights theTerm Investment Statement highlights thefinancial health of levis denimfinancial health of levis denim because thisbecause thisanalysis highlights the correct financialanalysis highlights the correct financialpicture of this organization. Due to thispicture of this organization. Due to this

analysis financial analyst is able toanalysis financial analyst is able tocompare the financial position of Leviscompare the financial position of LevisDenim with other organization.Denim with other organization.


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RECOMMENDATIONSRECOMMENDATIONS In order to avoid the misallocation of funds financial managerIn order to avoid the misallocation of funds financial manager

should have to make the plan before of financial decision. Thisshould have to make the plan before of financial decision. This

plan include whether the investment required or not.plan include whether the investment required or not.

Levis denim should have to use a computer based spreadsheetLevis denim should have to use a computer based spreadsheetprogram for quickly analyzing financial statements.program for quickly analyzing financial statements.

To plan for the future the financial manger must assess the firmsTo plan for the future the financial manger must assess the firms

present financial position and evaluate opportunities in relationpresent financial position and evaluate opportunities in relationto this current position.to this current position.

There is need of wellThere is need of well--experienced financial manager, becauseexperienced financial manager, becauseinexperienced financial manager cannot analyze the financialinexperienced financial manager cannot analyze the financialstatement in an effective way.statement in an effective way.

Company should employ a high experienced Financial person, toCompany should employ a high experienced Financial person, toanalyze the market to utilize the shortanalyze the market to utilize the short--term investment to getterm investment to get

the maximum profit.the maximum profit.


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ReferenceReference

ook Business.Book Business.

Organization data is collect toOrganization data is collect to

articles.articles. Cost accounting (planning andCost accounting (planning and

control) seventh edition. written bycontrol) seventh edition. written byAdolph Matz and Milton F. Usry .Adolph Matz and Milton F. Usry .


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Thank YouThank You

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