accounting and costing system analysis at super asia fans

Final Project on Super Asia Fans 1

Accounting and Costing System analysis at Super Asia Fans

Final Project

Bsc Hons in Accounting and Finance

Submitted By:

Zain Hameed 05108032Mudaser Umer 05108044Zohaib Khalid 05108058

M Dawood 05108105Sharjeel Nasir 05108026

Submitted to:Sir Faisal Munir

Date: September 30, 2009

Group # 4 GIFT University


Executive SummarySuper Asia is rightly rated as largest growing industry of Gujranwala. It is a true example

of progress made by leaps and bounds. It is engaged in producing a large variety of

products touching the diverse industries like automobiles, electronics, home appliances,

and even food chains. It is a family owned business. Super Asia was found 30 years ago

and started to grow in 1980s. Super Asia is very successful in its various businesses

especially in Home Appliances. It is eagerly looking forward to modernize its culture and

diversify its investments in other areas as food chain. Super Asia believes in individual

importance in collective success. Mutual respect civility, creativity, and collective

activity towards common goals are considered as core values. Ethical behaviors greatly

affect decision making in company. Company believes in growing profitability. Super

Asia is also involved in many after sale and other services along with production, which

differentiate them from their local competitors. Super Asia is divided into units based on

the products e.g. there is different unit for fan and a different unit for motorcycle

production. There are four departments which serve all production units namely:

marketing, HR, sales, and accounting departments. Almost every department except HR

department, which consists of a single HR manager, has a supervising manager and

assisting staff working under him. Marketing department use a wide range of tactics to

enhance sales ranging from TV advertisements to lucky draws. HR department is not

performing all the functions in the manner in which it should perform. Sales department

works parallel to and in collaboration with marketing department and has a sales force as

assisting team to sales manager.

The main focus of the project is the evaluation of accounting system and cost efficiency.

The accounting department is headed by a chief accountant who is also General Manager

of the company. Accounting department serves all production units. Manager Accounts

deals with routine and operational matters of Accounting Department. This department

also performs the functions of Costing, Cost Accounting, and Finance. In its accounting

function, department performs recording, summarizing, classification, and reporting as

well. Company uses an integrated system of accounts with perpetual inventory system. A

customized accounting software, not very different from other available in market, is

used in the company. Costing function is not up to the mark as expected in such a large a



fast-growing industry. Standard and process costing is used. There is not consistent

policy for costing material issues. No separate material wastage reports are prepared.

Labor costing is done by using payrolls and time records. Manual time records are used.

Factory overheads are absorbed using production as a base. Monthly Budgets are

regularly prepared. Entry for sales is booked when GDN is communicated to Accounting

department by Godown, and entry for purchases is booked when invoice is received from

supplier. There is no defined policy for settling payables and receivables, and settlement

is mostly done on the directions of directors. The detailed production process is explained

in annexed chart.

There were no major flaws found in accounting system of Super Asia with the exception

of some small discrepancies. Costing System was not up to the mark as it should have

been for such a large organization with such huge growing trends. Also, the typical

conservative mentality of owners can be seen in the inadequate and insufficient safety

measures for the working labor on dangerous machines. Less focus on HR functions is

also another example. Company should understand its growing needs and should come

out of the conservative frame of mind of operating business. Their business is growing

and they must modernize their culture and systems to cope for the growing needs.

As a concluding note, it is observed that small businesses, with conservative and with

owners having wither no or traditional education, resent to the modernization of culture

and ways of doing business. When these small businesses grow into large organizations,

their typical mentality is automatically inherited. This is the case with Super Asia. May

be, they are doing a fine business at the present stage, but they have to accept the fact that

a revolutionary change in their organizational culture and structure is required to cope for

the prospective needs of their immensely growing business.



Project Outcomes

The following outcomes are typically achieved from implementation of relevant and

appropriate accounting techniques that focuses primarily on addressing internal control

system of the company:

1. Effective accounting practices that describe the full picture of the company’s

operations.

2. Clear identification of material, labor and factory overhead costing.

3. The project also describes the common vision and goals for all leaders in the

organization.

4. This project also describes the production process to guide the management.

6. This project includes the company’s strategy of strong marketing, including research,

advertising and promotions.

7. We also aim that this project enhances the credibility and financial image among

stakeholders.

8. Overall this project includes, more proactive direction-setting, decision-making and

problem-solving.



Company Profile

Super Asia is engaged in producing top order home appliances in South Asia.

Recognition of its achievements in quality products are manifested in the form of the ISO

9002 certification. The success tale spread well over 25 years when Super Asia produced

the first washing machine of Pakistan. Later on Super Asia started producing room air

coolers, gas and electric geysers.

Keeping in view the requirements and purchasing power of all the segments of the

society Super Asia has introduced different washing machines to meet their demands.

Super Asia has the honor to produce complete plastic body washing machine for the first

time in Pakistan.

Another hallmark in quality products is introducing the double action washing

technology through side and center Plaster. In Pakistan Super Asia has not only

introduced a large range of Room Air Coolers in plastic body, but in different sizes and

values as well.

Super Asia in order to maintain its superiority in producing public utility products has

introduced hot and cold, and only cold water dispenser. It was an instant success' due to

its design, effectiveness and affordable price amongst the consumers. Similarly the

complete range of super Asia fans is of international standard. There are different sizes,

colors in Ceiling, Pedestal, Bracket, Circu-matic and Exhaust Fans.

Research based products of Super Asia enjoyed a sense of superiority over similar

products in the open market. The objective is, however, to offer consumers products of

international quality at affordable price and this can be judge by the fact that they are

being exported to Saudi Arabia, Dubai, Bangladesh, Sri Lanka and Myanmar from the

last so many years, and their demand is growing day by day.

The success story of Super Asia is due to its chairman Haji Mohammad Yousaf while

Managing Director Haji Muhammad Afzal looks after the production aspects of the



factory. He has a critical approach towards the products and their prices offered by their

competitors.

Haji Muhammad Ashraf, Chief Executive of Super Asia has played a leading role in the

marketing aspects of the products. He is fully aware of modern trends in the International

Markets. It will not be out of place to mention the services of Mr. Faisal Afzal, Mr.

Abdul Razaq, Mr. Sohail Yousaf and Mr. Umer Ashraf, that is looking after different

departments of Super Asia. These four young fellows with their higher education and

thriving on the experience of their seniors have produced excellent results.

Apart from looking after the affairs of factory, chairman Haji Muhammad Yousaf is

equally paying his attention towards religious affairs and social work. He has constructed

a Masjid; Mian Muhammad Din Trust Hospital is another example, where free medical

treatment is being provided to factory workers, and the needy of nearby localities. (See

Chart-1)



HISTORY OF SUPER ASIA

Super Asia is family owned business. It was founded approximately 30 years ago as a

privately held factory of washing machines. The founder of factory was Mr. Haji

Muhammad Din (Late). The main campus of factory with its five departments is situated

near Chun Da Qila GT Road Gujranwala.

The mission of Super Asia focused on becoming a leader in home appliances

manufacturer in Pakistan. The factory carefully managed its production to ensure growth

in both national and international market. Super Asia’s products are very famous both in

Pakistan and worldwide. During the 1980-90s, Super Asia devoted its resources and

develops a huge factory and other businesses to make its place in the competitive

environment of Pakistan

Super Asia has acquired a reputation as a home appliances manufacturer holds a leading

position in the field of home applainces, they have also atarted other businesses like

polythene sheets and CNG stations. They are trying to develop their organisational

culture just like multi national companies.

There are many outlets of Super Asia all over the Pakistan which sold their products

direct to final users. The best-known are household products, sold worldwide under their

brand name in many countries of the world. The company's Corporate Functions

(departments) control, coordinate and monitor the activities of the Group, and provide

advice and support to Group Companies.

With many sales locations in Pakistan and huge exports, Super Asia is present on all of

the world's major markets. The company employs approx. 700 people.



CORE VALUES AND BELEIFS

They believe in individual worth and integrity. All jobs within their organization have

real value. All team members deserve respect. They are committed to making a

contribution to their customers, their employees, and environment. Super Asia is focused

on providing better and quality products to their customers as they did not compromise

on quality.

Super Asia is a leader, in its industry and its communities. They pursue their objectives

with constant persistence. They never quit and always strive to achieve balance among

economic, social interests.

They believe in respect and civility. They behave toward each other in a positive,

supportive and dignified manner. Their systems and facilities are designed to provide a

safe and positive working environment. They collaborate actively through common goals,

objectives and solutions. They promote individual initiative and creativity.

Ethical behavior is at the root of all Super Asia’s decisions and actions. It is a basic value

of Super Asia’s that all team members be viewed by others as highly ethical and

thoughtful. Employees do what we say we will do. They actively consider the intended

and unintended consequences of all activities carried out in the company's name and act

accordingly.

Super Asia believes in profitable performance. Sustained growth and profitability are

essential to our health and prosperity as a company. The company uses its growing

profitability to assure that it can efficiently serve its customers, build equity for its

employees, create jobs, pay taxes and uphold our long tradition of service and success.



PRODUCTS

☼ Air Conditioners ☼ Fans

☼ Washing Machines ☼ Room Coolers

☼ Water Dispensors ☼ Geasers

☼ Microwave Ovens

☼ Motor Bikes

Note: Every product has different models.



SERVICES

Follwoing services are provided by Super Asia Company:

To provide customer prompt, quality and reliable services at their doorstep Super

Asia has a largest after sales service network through out the country.

To take care of customer appliances all service centers have latest tools,

equipments and machineries.

After sales service team consist of Engineers and highly qualified staff with great

professional approach due to this reason customer feels confident, once their appliance

are being maintained.

Super Asia after sale service also provides the facility to customer of lifting their

units from residence to service center and delivering within 48 hours.

Take care of our customers by remaining in contact with them so that they should

not face any type of problem.

Following are the Address of their branch offices:

Super Asia sales & service 89 temple road lahore. Mob:0300-8406116

Super Asia sales & service 405 jinnah colony Faisalabad. 041-647943

Super Asia sales & service Gulf Plaza Chandni chowk near Gondal CNG Ist floor

Flat no1 rawalpindi. 051-4843187,0321-5181000

Super Asia sales & service Ahmad park colony oppisite Jamia-Saqlain road near

Khanawal road Multan. 061-770225



SWOT ANALYSIS

Strengths Highest quality products in the market as determined by the customer and

distributor feedback.

Manufturer of mostly the raw materials.

Products rae reliable and according to teh customer needs.

The sales channel of the company is very strong.

The company conducted very strong advertisement for promoting its products.

The company is a market leader in the washing machine sector in the region.

Weaknesses Prices of the products are high.

Some sales segments of the company are weak like in Baluchistan and some areas

of NWFP Province.

Demand and supply of labor.

Need more sales people.

Delivery and other operational staff need training.

Customer service staff need training

Oppurtunities Could develop new products.

Local competitors have poor products.

Profit margins will be good.



Could extend to other major countries of the world.

Hire new specialist of the relevant field.

Launch more schemes for the products in order to attract customers.

Could seek better supplier deals. Search other suppliers who supplied raw

material at low costs.

Threats Any government legislation could affect the business.

Environmental effects would favor larger competitors.

Existing core business distribution risk.

Market demand very seasonal.

Retention of key staff critical.

Possible negative publicity.

Vulnerable to reactive attack by major competitors.



MAJOR DEPARTMENTS

Super Asia has four major departments which are given below:

Marketing Department

HR Department

Sales Department

Accounts Department



Marketing Department

In Super Asia Company Private Limited there is a separate marketing department which

performs all the essential marketing functions that are suitable for the company. In the

marketing department there are 25-30 employees are working. The promotional tools

which are used by the company for the marketing are:

Advertisement including print, electronic and internet etc

Brouchers

Bill Boards etc

There is a fixed budget for the marketing activities in the company. From the total budget

the marketing department consumes the 2.5% to 3.5% of the budget. The important

features of marketing campaigns are:

City Comparison: It means that the company implements its marketing tools from city

to city. They mainly target the large cities like Lahore, Karachi, Islamabad, Faisalabad;

Gujranwala etc. In these cities, the marketing campaigns are very intensive.

Sales Schemes: Company gives schemes on their products in many cities of Pakistan.

Incentives: Company gives incentives to its dealers in every city of the country.

Lucky Draws: In order to attract the customers and dealers, the company introduces the

lucky-draws for both the customers and dealers. The main example is Dealer’s

convention that is held in the company for once a year. These lucky draws are launched

in the large cities as well as small cities of Pakistan.

According to the marketing department of the company, the main purpose of their

product is to provide quality and durability to its customers. They are also concerned with

the appearance and packaging of their products. According to their view, their product



should not only work accurately but it must look beautiful when placed in the house or in

the shop. The company targets the middle class families in all over the country but these

criteria are changed from city to city and products to products depending upon the per

capita income of the people of that city. Mostly the customers of the company are the

middle class families.

There are many outlets in approximately every city of Pakistan. In every outlet the

customer can purchase all the products of the company. The new models, which are

newly launched, first come to the large cities and then to the small cities, but they are

easily available everywhere in Pakistan. As described in the above methods of

advertisements for the company’s product, the main channel of advertisement is

electronic then print and then other miscellaneous methods. (See Chart # 2)

In the long run, the products of the company, saves the money, and cost of the company.

However the company’s products are little bit costly but they provide quality in their

products like fans, washing machines, air conditioners etc. People who purchase their

products feel ease of using their products in the long run. For example the washing

machines of the company will last for 20-25 years working efficiently in the houses. The

major benefit of the products is that they reduce the bills of the electricity.

The things which make their product really different, new better and unique as compared

to their competitors are:

Basic quality of their products

Repeating customers

More publicity

New designs

Innovation etc.

The company won many wards like:

Brand wards,

Export trophy in their washing machines,



Yearly brand wards,

Quality standard awards etc

To handle the complaints about the product in any city, there are complaint centers in

Karachi, Lahore, Rawalpindi, Faisalabad and Multan. So the customers can satisfied by

their nearby complaint service centers. If there is complaint of serious nature then the

concerned manager is sent from the head office to resolve the complaint.

It is necessary for the company, to spend on advertisement for remain in the market

relative to their competitors. The biggest selling points of the company are Lahore,

Karachi, Rawalpindi, Faisalabad, Peshawar etc, but this also depends upon the per capita

income of the people living in that city. The company conveys their goodwill, past

experiences and quality with their products to their customers. There is no fixed time to

run the advertisement both on print and electronic media. It mostly depends upon the

season. If there is the season of the product then the advertisement runs but after the

season they will drag the advertisement and launch the new one for their next seasonal

product.

According to the marketing department of the company, it is strongly important that a

beautiful model displays their product in the advertisement because the people get very

satisfaction when they see that a popular model uses their products. So, it is an

encouraging tool for promoting their sales. The company also performs the international

marketing by giving their advertisements in the international channels like HBO, Star

World, Filmax etc and the internationally watched Pakistani channels like ARY Digital

network, GEO TV network etc.



Human Resource Department

An HR manager is there to perform the functions of HR department. They believe that

such neglected size of HR department is sufficient in such a large ad fast-growing

organization to fulfill the needs of HR. The company wants that their employees are

professional, competent and have discipline in their work and manners.

Company provides the training and develops their employees where necessary. The

management is sent for doing courses like quality standard courses and other

management and computer courses. The employee performance is measured through

their performance evaluation forms that are provided to HR manager. These forms are

confidential and just remain in the hands of the Board of Directors and HR managers of

the company.

The work environment in Super Asia is reasonably good for the employees. It was told

that employees feel good while working in the premises of the company. The mission and

policies are documented and are pasted in many locations inside the company’s premises.

The employee records are maintained through company’s software. That software is

specially designed for performing that task.

The attendances of the employees are maintained through time card machine and through

punching system. If the employee of any department wants to get leave he will meet to

the concerned manager in that department. He will provide a leave certificate for an

evidence of the leave. If an employee comes late frequently then he will be fined by

deducting the amount for being late from his salary. But, this policy was not found as

implemented properly.

There is no special dress code in the company. The employee and management personal

can wear both Shalwar Qameez and Pent Shirt while working in the company. There is

no equal employment opportunity provided to the employees. As described about the

workplace is sufficient for the employees to work.



The HR Manager designs all the jobs and assigns the responsibilities to every employee

and management personnel. The job redesigning is not practiced in the company like job

rotation, job enlargement, and job enrichment. The work timings are fixed. Mostly the

work is done through shifts and every shift has fixed hours. There is no concept of team

work in the company. Only when the new product is launched, a meeting is held in which

the director of the concerned department briefs the employees and management the

specifications of the products and receives their feedback.

There is no customer service division in the factory. The attitude of the employees

towards work is serious. They are bound to work in their concerning department. No

employee shall be allowed to waste time during working hours otherwise he will face

penalty. The company evaluate the job of any employee by the reports made by his

concerning supervisors and output generated by the employee.

There are approximately 1300 employees working in the factory including top

management. From 1300 employees, 1000 are on contract basis and 300 are on salary

basis. The salaries are given to the management through banking channel and the wages

of the workers are given in cash. The wages are paid 2 times in a month i.e. after 15 days.

The salary is paid to the management at 21st of every month. There are certain bonuses in

the factory but it is in limited amount i.e. Aftari in Ramzan, Eid bonuses and 15 days

bonus salary. If the management personnel do not want to work in the company, he will

put his resignation before the Human resource manager and quit his job.



Sales Department

In Super Asia Company Private Limited, there is a separate sales department. The

supervision of that department is in the hands of sales-promotion manager.

Sometimes he reports to the directors, probably more often to general manager. Sales

management performs function mainly of directing and controlling the details of their

sales activities. Sales promotion is chiefly concerned with devising plans for stimulating

sales and methods for putting these plans into operation.

Because of the stress of competition, it has become increasingly necessary to equip

salesmen with more assistance by the way of improved equipments, portfolios, kits, sales

manuals, bulletins, house organs and advertising booklets, and to provide the stimulus of

special sales campaigns and contests. Following are the key functions of the sales

department of Super Asia Private Company Limited:

Recruiting salesmen and also setting up their compensation

It also assigns the sales region to the salesman.

Training the sales person in knowledge of the goods and in methods of selling

them.

Supervising and directing the sales activities.

Supervising and checking the expense accounts, route lists, detailed reports and

daily letters from the customers or dealers

Determining sales quotas, providing bonuses and prizes, conducting sales contests

and special sales campaigns.

Preparing, or directing the preparation of, sales manuals, or salesmen's

handbooks, giving detailed information about the company, the products, and the sales

principles and methods involved in selling.

Cooperate with the marketing department and sell the company's products relative

to the advertisements.

Obtaining reports from different sales region concerning the reaction to the

company's advertising and that of competitors.



Cooperate with the production department in the matter of qualities, quantities,

containers, packages, sizes and seasonal goods, and reporting their reaction on dealers

and consumers.

Making investigations of the products or offering to discover new uses and new

appeals to dealer or consumer.

Conducting, or arranging for, special market surveys and analyses of sales region

with a view to discovering new markets for the goods or new methods of developing old

markets.



Accounts Department

The accounting department of Super Asia is practicing the integrated system of

accounting. The general manager of the company acts as the chief accountant. No other

chief accountant is there for this matter. General Manager reports to the company head.

And sub heads i.e. directors. The costing methods used in company are:

Standard Costing

Process costing

The accounting department can be further divided into three parts on the basis of

functions performed by it namely:

Accounting

Costing

Finance

Accounting

This function is concerned with the:

Recording of transactions in the proper books at the proper time

Booking Receivables and payables

Maintenance of accounting records

Recovering Receivables and paying payables according to directors’ directions or

company policy whichever is applicable

Preparing periodical mandatory and ad-hoc reports

Preparing Financial Reports

Dealing with Taxation Authorities

Preparing Payrolls

Working on Customized Accounting Software

Customized Software

Company uses customized software to fulfill its accounting needs. This software is not

very different from many other software used in the market but is slightly altered to fulfill

the special needs of the industry and especially the company. This software is capable of



dealing with perpetual inventory system and integrated books of accounts. This software

also provides many reports automatically like variance report.

Costing

See the Cost Sheet (Chart # 12)

Under this heading, the accounting department in Super Asia is performing the following

functions:

Annual Budget Preparation

Costing of Products

Preparation of Variance reports

Ensuring flexibility in standard costing system

Estimating overheads and deciding the basis of their absorption

Classification of costs

Ensuring Cost efficiency

Collection, evaluation and analysis of cost records

The costing can be divided into three major areas.

Material Costing

The company issued the raw material mostly on the basis of First in first out (FIFO) and

Average cost method but it also issues the material on the basis of Last in first out (LIFO)

in special circumstances. In process costing, the losses and wastage of material is also

calculated at the time of the loss or wastage and it is added in the operational cost of the

product. No separate cost reports are made for the losses and wastages. Store ledger cards

are maintained electronically. The complete cycle for recording of material costs can be

seen in Chart-2

Labor Costing

Labor handling varies from process to process. Standard Costing is used and a variance

report is generated at the end of each desired period.



Work center is defined for the labor.

Labor is bound to work in their work hours at their work places.

There is two kinds of labor: the permanent and on contract

The contractual labor is under control of contractors

There is 60% labor that work on piece rate and remaining 40% work on the

salary.

Overtime payments are made for extra work done to salary workers only but at

normal time rates.

Payroll of labor

As there is an integrated system of accounting, Payroll sheets are prepared by the

accounts department. It includes the following data:

Date of payment

Total hours worked

Daily attendance

Production units

Name of the concerned department in which the person is working.

Factory Overheads (FOH)

Factory overheads includes following expenses:

Depreciation

Cleaning and lubrication of machinery

Tools and equipments

Electricity

Gas

Oil etc.

Overheads are absorbed on the basis of production.

Budget

Like every company, Super Asia also makes the budget for the production requirements.

The budget may be of three types:

Monthly budgets



Half yearly budgets

Annual budgets

Seasonal budgets

Monthly budgets are made more frequently by the company. Remaining four is rarely

made. These budgets cover the production estimates on the basis of estimated sales.

Material and labor requirements are also set on the basis of decided production.

Payables and Receivables

Recording and settling of payables and receivables is an important decision in any

company. It puts a great impact on the current financial position and liquidity position of

a company.

Accounts receivable

Sales Department receives sales order from customer and communicate it to Accounting

Department and Godown. From Godown, goods are delivered to customer and a GDN is

communicated to Accounting department. On the basis of GDN, Accounting department

generates an invoice and books the entry. (See Chart-4)

Accounts payables

Factory, when required, communicates, informally, a requisition for material to store

room. Store room communicates this requisition to purchase department. Purchase

department places an order with supplier for the required items. Supplier delivers goods

along with a GDN from supplier. Goods are received and inspected at gate and sent to

store room. A GRN is communicated to Accounting department. Supplier also sends an

invoice to accounting department after receiving the signed GDN returned by Gate.

Accounting Department books entry on its basis. (See Chart-5)

Payments

There is no defined payment policy of the company. Payments are made by Accounts

department but on the directions of the directors. Mostly, directors decide the terms of

payments and no defined policy is followed in this regard.



Receipts

There is no defined receipt policy. This function is also performed by accounting

department. It is done on the directions of the directors and not by following some

defined policy.



Production ProcessIt includes all the processes from procuring raw material to the delivery of final and

finished product to the customer. All this can be explained by viewing chart -3 and Chart-

7

Procurement/Production and storage

As it can be seen in this chart, production process of a fan starts with following basic

elements

Fan body

Rotor

Copper wire

Unbent blades

Miscellaneous parts

All of these things are available in local as well as foreign markets and are purchased on

competitive rates. Fan Body and rotor are also produced in factory by using Roller Die

Casting method. Billets are purchased from local market to be used as raw material in this

process. Now, Fan body and rotor are not stored and are sent directly to production

facility for further processing. Copper wire, blades, and other miscellaneous parts are

stored in a store room.

The procurement process can be understood in detail in Material costing chart.

Threading and Finishing

This process can be further split into two sub-processes

Internal threading and finishing

External threading and finishing

External threading and finishing

In this process fan body is fitted on a lath machine by a worker. This machine rotates the

body at high speed. While rotation, a tool is touched with this body, which not only



ensures that it comes into right shape but also finishes it. It caters only the external part of

body.

Internal threading and finishing

This is similar to external threading. The difference is only that in this process the

internal part of the fan body is threaded and finished.

Drilling and Tapping

In this process, holes are made in the fan body as desire by using latest drill machines.

Both single and punch drilling is used for this process. Then after checking, this body is

taken to the fitting department.

Rotor turning

In this process, Rotors are threaded and finished to make sure that they will be easily fit

in the fan body.

Rotor Grinding

This process is concerned with grinding any undesired parts of rotor. It means it is done

to fit i9t in the fan body and to ensure efficient winding on it.

Winding

The rotor, which is finalized after grinding and checking, is then brought for winding. In

this process copper wire is issued from store room and is wound on the rotor by using

machines. Insulators are also paced between the winded wire and the router surface to

avoid short-circuit. Two machines are used for complete winding of the rotor. This

winded rotor is then taken to fitting department to be placed in the fan body.

Fitting

In this process, the winded rotor, stator, barring and other miscellaneous parts are fitted in

the fan body to complete it. Fan body is also balanced in this process. After fitting and



balancing, this body is again checked finally. Defected pieces are sent to concerned

departments for rectification.

Blade Bending

Unbent-blades are issued form store and are bended on machines. This process takes

place parallel to threading, grinding, winding etc.

100% testing before packing and paint

When fan is complete, it is sent for 100% final testing. In this process blades are fitted for

some time to check the rpm and other variables. Slight changes in the shapes of blades

are made on spot for rectification. When finally passed, blades are removed and are sent

separately along with the body to for paint and packing.

Paint and packing

When finally passed in testing, body and blades are sent for paint. After paint, these are

again sent for packing. Blades are packed separately from body.

After packing, these are sent to Godown. From here, fans are issued when sold.

Note: A detailed process flow chart of ceiling fan production can be seen in Chart-13



Conclusion and Findings

Accounting Function is not wrongly labeled as the back bone of a company. If not

properly done, it can cause disruptions and deterioration in other functions as well as

overall efficiency of the organization. Regretfully speaking, accounting function has

never gained as much importance in the minds of the owners and investors on SMEs as it

should have been given. Change and innovation is always difficult to accept especially

for people from conservative societies and with either no or only traditional education;

consequently this resentment to change coupled with ignorance of benefits becomes

responsible for such neglected status of accounting function in SMEs. When these SMEs

grow into larger companies as family owned businesses, this frame of mind towards

accounting function is automatically inherited. This is the case with Super Asia and will

be discussed in detail afterwards.



Key Problems and Solutions

There is no uniformity in costing the materials issues. FIFO as well as LIFO and

even weighted average method are also used at time. According to management, these

methods are used for profit-smoothing.

Suggestion: This is a clear violation of IAS-2, which prohibits LIFO as a method of

costing material issues. This practice also violates Framework and IAS 8, which require

the policies to be consistent unless change is compelled by reasonable circumstances.

This practice should be abolished as no material benefits are gained from it.

Production facility is not in ideal format. The layout is not designed intelligently.

For eg. Fan body first has to go for threading and then for drilling. But in production

layout, drilling section comes before the threading section. Painting and production

departments are distant. This reduces the efficiency and wastes precious time and

energies.

Suggestion: Layout should be designed intelligently. Though not much needed, but if

company feels, a specialist can be hired temporarily to design the layout. It will certainly

save a lot of cost by improving efficiency.

There is no special arrangement to keep an eye on the labor. Many departments

are distant from each other and some supervisors are not enough to keep an efficient wath

on such scattered production facility.

Suggestion: Cameras should be placed in production facility to keep an eye on the labor.

By this, efficiency of labor definitely increases. It also ensures that labor is using safe

work practices.

Time in and out is marked and recorded manually. This is not an efficient

practice. It also requires manual work and records.

Suggestion: Card punching system should be used instead. Separate software, parallel to

but connected with the accounting software, should be used. It will also remove or at

least reduce many problems of costing labor and generating payrolls.

Safety measures are not up to the mark in production processes. Labor force is not

equipped with proper safety equipments and dresses. This increases the chances of

accident, causing increase in cost. Also, it is a severe violation of labor laws and law of



morality. Providing labor with such equipments creates a sense of satisfaction in their

mind that their company cares for them; consequently, they are motivated and work with

better efficiency.

Suggestion: Labor should be provided safe environment and equipments. A separate

team can be made to ensure safety measures.

Company can be regarded as a company with all powers concentrated in few

hands. Yes! Decision making is highly centralized. This centralization even causes a

disregard with company policy when directors’ orders confront with it. Mostly, directors’

orders are preferred to company policy. Managers become loyal to directors and not with

company.

Suggestion: Powers should be delegated to lower ranks to ensure faster decision making

and innovation. Owners should fight the fear in their minds that empowering employees

will cause their powers to die. This approach is not good universally.

Costs of Production reports are not regularly prepared. This is not merely a

documentary deficiency. It cannot be decided that which material is being wasted and

which one is being used efficiently. Also efficient or otherwise purchasing is not pointed

out.

Suggestion: A proper cost of production report should be maintained at least monthly.

This will ensure strict watch on the wastages and would definitely provide benchmarks

for improvement. Continuous cost efficiency is not possible without such practice.

In Super Asia Company, there is no separate head of department for Accounts,

Marketing and Purchase departments. Only lower managers are handling these

departments. They report to the directors of the company directly, most of the times. The

lack of proper chain of command coupled with absence of proper qualified person on the

head seat of each specialized function causes problems in chain of command and

improvement methodologies.

Suggestion: There is a need of separate Head of Department for every department which

would not only run the operations of the department but will also report to the director of

the company. That will increase the efficiency of the operations of the department and

also make a proper chain of command in that organization. This will also increase the

chances of improvement and advancement of functional areas.



The allocation of the budget to marketing department is insufficient. The

company allocates 2.5% to 3.5% of their total budget to their marketing department. This

budget is very low for running their marketing and promotion campaigns. This causes a

potential decrease in sales causing per unit fixed cost to rise.

Suggestion: Increasing marketing budget will boost up the sales. The increased amount

of sold units will cause a reduction in per unit fixed cost resulting in better price

competitiveness.

There is no separate Human Resource Department in the company. Only a Human

Resource Manager is there who handles all the responsibility of that department. The HR

functions are not performed properly causing inadequate hiring and performance

evaluation. This results in unskilled people to take their place in company without

passing a proper channel. Also de-motivation is also a fruit of such practices.

Suggestion: HR functions should be performed in a better manner. Hiring should be done

through a proper and merit based channel to ensure right people are present at the seats.

Fixed Asset handling in not adequate. No fixed asset register is maintained.

Depreciation methods are not properly defined.

Suggestion: There should be a separate Fixed Asset officer to take care of and keep

records of the precious Fixed Assets of the company to ensure better handling

documentation along with avoidance of maintenance and theft losses.



References www.superasia.biz

Interview with Human Resource Manager(Major Muhammad Zubair)

Interview with marketing Manager(Mr. Hafiz Shabbir)

Interview with Accounts Manager (Mr. Muhammad Iqbal)


http://www.superasia.biz/

accounting and costing system analysis at super asia fans

Documents

sales department

hr department

marketing department

cost accounting

accounting function

accounting departments

sales manager

executive summarysuper