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SUGGESTED MAKE UP PLAN(applicable in case thestudent is askedto re-do the assignment)REVISED ASSESSMENTGRADETUTORS COMMENT ONREVISEDWORK (IF ANY)

Date: Assessors Name / Signatures:

Assignment B

Ques 1 : Each student will be given one of the under mentioned industry forassignment work.

Education Industry

Manufacturing Industry

Hospital Industry

IT Industry

Transport Industry

The students will have to visit a company from the assigned industry, meetthe Accounts person and do the following:-

a. Find out and understand the Cost procedures followed by the company.b. If possible get a sample of cost sheet or Statement of AccountsA presentation on the above and recommendation for areas of improvementhas to be made.

Answer :-

Manufacturing IndustryNestle India

Profile:Nestle India is a subsidiary of Nestle S.A. of Switzerland. Nestle India

manufactures a variety of food products such as infant food, milk products,beverages, prepared dishes & cooking aids, and chocolates & confectionary.Some of the famous brands of Nestle are Nescafe, Maggi, Milkybar, Milo, KitKat, Bar-One, Milk maid, Nestea, Nestle Tomato ketchup, Nestle Milk,NestleFresh 'n' Natural Dahi and NESTLE Jeera Raita

Cost procedure followed in Nestl India Ltd.-

Tomato ketchup & Chocolates:-

A companys production process helps in determine the best way ofaccounting for its costs. Process costing works well whenever relativelyhomogeneous products pass through a series of processes and they receivesimilar amount of manufacturing costs. Nestle accounts for its vast chocolatechips production by using a process costing system.

Sequential Processing: The units typically pass through a series ofmanufacturing or producing departments, in each departments or process isan operation that brings the product one step closer to completion.

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Parallel Processing: This pattern require two or more sequential processesto produce the finished goods. Partially completed units are worked onsimultaneously in different processes and then brought together in a finalprocess for completion.

FLOW OF MANUFACTURING COSTS THROUGH THE ACCOUNTS OFPROCESS COSTING(Tomato Ketchup)

COST SHEETNestle India Ltd. (Chocolates)

Total output= 4,50,000 unitsParticulars Cost per unit Total CostRaw Material:

Picking DepartmentWork in Progress

Flavoring DepartmentWork in Progress

Bottling DepartmentWork in Progress

Materials:Fresh tomatoes

Sugar

SaltDistillation

Vinegar

Spices

Picking labour

Applied Overhead

Transferred in frompicking (includes all

manufacturing costs)

Materials:

Ketchup

Flavoring LabourApplied Overhead

Transferred in fromFlavoring (includes

all manufacturing

costs from pickingand flavoring)

Materials:

BottlesBottling Labour

Applied Overhead

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Cocoa Butter=3,00,000Sugar=3,00,000Cocoa Solids= 3,20,000Peanuts= 2,00,000 5.16 23,20,000Chocolate coated resins= 4,00,000Almonds= 3,00,000Vanillin= 1,00,000Honey=50,000Boston Baked Bean= 1,50,000

Direct Labour=7,00,000 1.56 7,00,000

Carriage on Material= 2,42,500 0.53 2,42,500Prime Cost 7.25 32,62,500

Factory Expenses:Fixed:Depreciation on Plants &Machinery=2,57,500Rent= 1,50,000Power & ConsumablesStores=1,50,000Factory insurance=1,50,000Supervisors Salary=50,000 2.35 10,57,500

Variable:Electricity charges=50,000Power & Consumable stores=1,00,000Running Expenses ofmachines=1,50,000

Factory Cost 9.60 43,20,000Office Administration ExpensesOffice staff salary=10,00,000Rent= 80,000Computer=1,20,000Furniture=3,00,000 4.40 19,80,000

Telephone= 10,000Carriage outward=20,000Depreciation on furniture=50,000Salaries of administrative =3,70,000Rent, rates & taxes=30,000Office and Administration costs 14.00 63,00,000Selling & Distribution ExpensesAdvertisement(print & local TVchannel)=4,00,000Petrol=1,00,000 2.00 9,00,000Delivery Vehicles=2,50,200Maintenance of deliveringVehicles=2,50,200Packing rates= 50,000Bad Debts written off= 1,00,000

Total Cost 16.00 72,00,000

Net Profit (20% on selling price) 4.00 18,00,000

Sales20.00 90,00,000

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Ques 2 :1. Discuss the technique of marginal costing as a key for managementproblems.2. The following is the trading and profit and loss account of M/s PremIndustries for the year ended 31 st March 2000.

To Material consumed 708000 By Sales 30000 units 1500000

To Direct wages 371000By Finished Stock (1000units) 40000

To Works overhead 213000 By work-in-progress

To Administration overheads 95500 Material 17000To Selling & distribution

overheads 113500 Wages 8000To Net profit for the year 69000 Works Overhead 5000

1570000 1570000

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

a. Work overhead have been charged to work-in-progress at 20% on primecost.b. Administration overheads have been recovered as Rs.3 per finished unit.

c. Selling and distribution overheads have been recovered as Rs.4 per unitsold.d. The under-absorbed or over-absorbed overheads have not been adjustedinto the costing P & L a/c.

Prepare:

1. A costing profit & loss account indicating net profits.2. A Statement reconciling the profit as disclosed by the cost accounts andthat

Shown in the financial accounts.

Answer :-COSTING PROFIT AND LOSS ACCOUNT

Particulars Amount

(Rs.)

Particulars Amount(R

s.)

To Material

Consumed

7,08,00

0

By Sales 15,00,000

To Wages 3,71,00

0

By Closing

Stock

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To Work

Overhead

2,15,80

0

Finished

Good

40,000

To

Administrative

Overhead

93,000 WIP 30,000

To Selling &

Distribution

1,20,00

0

To Net Profit 62,200

Total 15,70,

000

Total 15,70,00

0

Working Note:

Cost Sheet

Particulars Amount

Material 708000Wages 371000

Prime Cost 1079000

Add: Factory/Work Overhead 215800

Less: Closing Stock of WIP 30000

Factory Cost/Work Cost 1264800

Add: Administrative Overhead 93000

Cost of Production 1357800

Less: Closing Stock of finished goods 40000Cost of Goods Sold 1317800

Add: Selling & Distribution Expense 120000

Cost of Sales 1437800

Add: Profit 62200

Sales 1500000

Reconciliation Statement

Profit as per costing P&L statement 62200

Add: over absorbed overhead/expenses

excess Factory /work overhead 2800

over absorbed selling & dist. Expenses 6500 9300

71500

Less: Under absorbed overhead/expenses

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under absorbed administrative expenses 2500

Profit as per financial Accounts 69000

Calculation of Finished Good units during the year & Administrationoverhead during the year:

Total Finished good units during the year = Unit sold-Opening stock + Closingstock

= 30000 - 0 + 1000

= 31000Administration overheads have been recovered as Rs.3 per finished unit

= 31000*3= 93000

Ques 3 :

Work out in appropriate cost sheet from the unit cost per passenger km forthe year 2006-07 for a fleet of passenger buses run by a Transport Companyfrom the following figures extracted from its books.

5 passenger buses costing Rs.50000, Rs. 120000, Rs. 45000, Rs.55000 andRs.80000 respectively. Yearly depreciation of vehicles 20% of the cost.Annual repair, maintenance and spare parts 80% of depreciation. Wages of10 drivers @ Rs.100 each per month, wages of Rs.20 cleaners @ Rs. 50 eachper month. Yearly rate of interest @ 4%on capital. Rent of six garages @Rs.50 each month. Directors fees @ Rs.400 per month, office establishment@ Rs.1000 per month, licences and taxes @ Rs.1000 every six months,realization by sales of old tyres and tubes @ Rs.3200 every six months, 900passengers were carried over 1600 kms during the year.

Answer :-

Cost of buses= Rs. 50,000 + 1, 20,000 + 45,000 + 55,000 + 80,000= Rs. 3, 50,000

Yearly Depreciation (20% of cost) = Rs. 70,000

Yearly Repairs (80% of Depreciation) = Rs. 56,000

Operating Cost- Sheet

For the year 2006-07Particulars Amount (Rs.) Amount (Rs.)(A)Standing ChargesWages ofdrivers(10x100x12)

12,000

Wages of cleaners(20x50x12)

12,000____________ 24,000

Interest(4% on capital) 14,000Directorsfees(Rs.400x12)

4,800

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Licence & Taxes(Rs.1000x2)

2,000

Office establishment(Rs.1000x12)

12,000

Garage rent(6x50x12) __ 3,60060,400

(B) Maintenance ChargesRepairs, Spare parts etc. 56,000(-) Sale proceeds from

old tyres & tubes

6,400

___________]= 49,600(C) Operating ChargesDepreciation 70,000

Total(A+ B + C) 1,80,000(E)Passenger Km.Carried(900x1600)

14,40,000

(F) Cost per passenger Km.

Rs.(1,80,000/14,40,000) 0.125