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A
SUMMER TRAINING PROJECT
ON
PRODUCT COSTING OF PISTON
UNDER TAKEN AT
FEDERAL MOGUL GOETZ INDIA LTD
PATIALA (Punjab)
Submitted to Punjab Technical University, Jalandhar in partial
fulfillment of the requirements for the degree of
Master of Business Administration
(Session 2009-2011)
Submitted by:
SAHIL KUMAR
SWAMI VIVEKANAND INSITUTE OFENGINEERING & TECHNOLOGY
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ACKNOWLEDGEMENT
I hereby want to thank Federal Mougal Goetz India Ltd. and its members for their help
given to me during my training. I was thrilled to find that people here were very co-
operative and helped me in all ways possible. They were very eager in solving my
queries and were ready to help all the time.
Moreover, I want to take this opportunity to thank Ms. SHUBKAMNA Despite being
one of the busiest people in the bank he took out time to attend to my questions. So for
this, I want to thank him for his co-operation and knowledge that he has imparted to me.
SAHIL KUMAR
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DECLARATION
I, SAHIL KUMAR hereby declare that the project entitledPRODUCT COSTING assigned to me by FEDERAL MOGULGOETZE (INDIA) LTD, during my 8 weeks training for the
partial fulfillment of MBA is the original work done by me and theinformation provided in the study is authentic to the best of my
knowledge.
This study has not been submitted to any other institution oruniversity for the award of any other degree.
SAHIL KUMAR
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TABLE OF CONTENTS
SR. NO. PAGE NO.
ACKNOWLEDGEMENT 02
CERTIFICATE BY PROJECT GUIDE 03
DECLARATION 04
01 INTRODUCTION
Company Profile [Goetze (India) Ltd.
Company profile [federal mogul
Federal Mogul Goetze (India) Ltd.
07
08
12
02 SCOPE & OBJECTIVE OF STUDY
Research Methodology
Limitations
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33
03 PRODUCT COSTING
Product Costing of Goetze (India) Ltd.35
04 CONCLUSION
SWOT Analysis
Findings & Suggestions
70
72
05 BIBLIOGRAPHY 76
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Chapter 1
INTRODUCTION
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COMPANY PROFILE
It is good to have goodwillIt is good to have enthusiasmBut it is essential to have training
Pt. J.L.Nehru
The above quoted lines by the great soul Pt.J.L.Nehru rightly tell us that training isa very necessary part in ones life of one wants to achieve success &have properknowledge about a particular aspect.
Federal Mogul Goetze (India) Limited was established in 1954 as a joint venture
with Goetze-Werke of Germany.
Goetze-Werke of Germany is now owned by Federal-Mogul Corporation of USA,
a 6.3 billion company and one of the largest manufacturers of automotivecomponents in the world.
Federal Mogul Goetze (India) Limited is the largest manufacturer of PISTONS &
PISTON RINGS in India.
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Federal Mogul Goetze (India) Limited
Manufacturers of world class Pistons, Piston Rings, Sintered Parts & Cylinder
Liners covering wide range of applications: Two / Three - Wheelers, Cars, Jeeps,
Tractors, Light Commercial Vehicles, Heavy Commercial Vehicles, Stationary
Engines & High out-put Locomotive Diesel Engines. Widest range of Piston Rings
& Pistons varying from a 30mm to 300mm Dia. The most modern
production facilities at Bangalore & Patiala are TS 16949 and ISO14001
certified & at Bhiwadi TS 16949 certified. Market leaders both in OE
and Replacement Market. Exports too many countries.
Federal Mogul Goetze (India) Ltd. based in Bangalore was established in 1954 as
a joint venture between Goetze-Werke of Germany and Escorts Ltd. Goetze-
Werke, is however now part of Federal Mogul Corporation of US, a 6.17 billion
company and one of the largest manufacturers of automotive components in the
world. The Group's principal activities are the manufacture of piston rings (OE) for
shell moulding process and production of edible oil and leather garments exports.
The company is amongst the largest manufacturer of automotive pistons, gudgeon
pins in India and covers complete range of bi-wheelers, passenger cars, three
wheelers, LCVs, trucks, HCVs etc, and has a market share of 36%. The company
caters to both OE (Original equipment) and RM (replacement market) segment of
automotive industry. The major customers of the company include Telco, Ashok
Leyland, Bajaj, TVS, Mahindra & Mahindra, Maruti, defence and the Indian
Railways. The companys manufacturing facilities are situated at Bangalore and
Patiala. The companys plants are situated at Alwar, Bhiwandi, Bangalore and
Patiala.
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The present product range covers Piston Rings which constitute the Ring Activity
and Pistons, Piston-Pins and Circlips in Piston Activity. The company is the largest
manufacture of Piston Rings and Pistons in the country.
Over a period of time, keeping in view the nature of demand, additional capacities
were created besides upgrading technology to growing trends by virtue of stream
ling quality culture, adaptation of latest technology & equipment.
Technology leadership matched with innovated thinking has made GOETZE
products to enjoy a high degree of customer confidence and is the first choice of
every discerning customer for applications ranging from Bi-wheelers to Battle
Tanks.
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Our History
1899 1940: Founded on Innovation1941 1956: Diversifying for Success1957 1974: Going Global
1975 2005: A Bright FutureFederal-Mogul Corporation is an innovative and diversified $6.3 billion globalsupplier of quality products, trusted brands and creative solutions to theautomotive, light commercial, heavy-duty truck, off-highway, agricultural, marine,rail and industrial markets. The 45,000 people of Federal-Mogul located in 35countries drive excellence in all they do.
Companys globally networked engineering and technical centers in the U.S.,Europe and Asia enable to bring customers breakthroughs in advanced technologyand innovation.
Federal Mogul is a premier supplier of products, services and solutions to originalequipment manufacturers that use quality components in their vehicles andautomotive systems, and to aftermarket customers who sell companys worldrenowned brand-name replacement parts through repair shops and retail outlets. As
partner with a global network of suppliers whose commitment to excellence and
on-time deliver is crucial to company success.
For more than a century, Federal Mogul has developed the innovative productswhich customers need to produce in the next generation of vehicles. Federal-Mogul has been creating value through innovation and leading technology formore than 100 years. Today, the company is a key player in the globalmarketplace, serving industries that range from automotive and commercial
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vehicles to railroad and aerospace. Customers know they can rely on Federal-Moguls quality excellence in products, trusted brands and creative solutions.
This company started with a bold idea and over time grew into a FORTUNE 500companies with a global workforce thousands strong. The Federal-Mogul team hascelebrated countless victories and worked hard to overcome the inevitablechallenges.
Federal-Mogul is a global supplier of automotive components, modules and
systems serving the world's original equipment manufacturers and the aftermarket
industry. The company utilizes its engineering and materials expertise, proprietary
technology, manufacturing skill, distribution flexibility and marketing power to
deliver quality products and services, and leading brands. Federal-Mogul is
focused on driving global profitable growth and creating value to satisfy customer,
employee and stakeholder expectations.
Headquartered in Southfield, Michigan, the Company, which reported sales of $6.3
billion in 2005, employs 42,000 people worldwide. Federal-Mogul was founded in
Detroit in 1899. The Companys principal customers include many of the worlds
foremost original equipment manufacturers of automotive, light commercial,
heavy-duty truck, agricultural, marine, rail and industrial vehicles and equipment
as well as the worldwide aftermarket.
Federal-Moguls products are sold under a variety of power brands, including but
not limited to, AE engine products, ANCO wipers, Champion spark plugs
and wipers, Fel-Pro gaskets, Ferodo brake pads, Glyco bearings, Goetze
piston rings, Moog chassis products, National wheel-end components, Nral
pistons, Payen gaskets, Sealed Power engine products and Wagner lighting
and brake products
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BRAND
Federal-Mogul Goetze (India) Limited
Manufacturer of world-class pistons, piston rings, sintered parts and cylinderliners covering a wide range of applications including two/three-wheelers, cars,SUVs, tractors, light commercial vehicles, heavy commercial vehicles, stationary
engines and high output locomotive diesel engines.
Widest range of piston rings and pistons varying from 30mm to 300mm diameter.
The most modern production facilities at Bangalore, Patiala and Bhiwadi arecertified TS 16949, ISO14001 and OHSAS 18001.
Market leaders both in OEM and aftermarket. Exports to many countries.
Goetze and Goetze Brico provides leading-edge technologies and competitivesolutions for original equipment manufacturers and the automotive aftermarket.
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PROFILE
Federal mogul Goetze (India) Limited was established in 1954 as a joint venturewith Goetze-Werke of Germany.
Goetze-Werke of Germany is now owned by Federal-Mogul Corporation, a $6.3billion global company and one of the leading manufacturers of automotivecomponents in the world.
Federal-Mogul Goetze (India) Limited is the largest manufacturer of pistons and
piston rings in India.
Production Capacity:Piston rings 54.96 Million
Pistons 13.57 Million
Turnover:Dec, 31st 2009
INR 67253.44 Lacks
Net Profit (after tax): Dec, 31st 2009INR (689.23) Lacks
Product Range: pistons, piston rings, , lightalloy castings, sintered
products
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MILESTONES
1954 Incorporated as a JV with Goetze Werke
1957 Ring & liner production Patiala
1958 Piston production as escorts(Automotive Division)(Collaboration:Mahle)
Patiala
1960Cast iron / Forged pistonproduction started
Patiala
1968Pins / ring carrier productionstarted
Patiala
1977 Piston / ring production started Bangalore
1982Steel rings / Large borelocomotive piston
Bangalore
1985 Light alloy products Patiala
1989 Auto thermic pistons production Bangalore
1990Moly coated / IKA / chrome oilrings
Patiala
1992Large bore rings / pistons forbattle tanks
Bangalore
1994Composite pistons / new ringfoundry
Bangalore
1996 Escorts (Automotive Division) hived off into joint venture with M/SMahle, Germany
1997 Goetze TP (India) Ltd. - Manufacturer of steel rings
2001Merger of Federal-Mogul sintered products Ltd. with Goetze (India)Ltd.
2003 Merger of Escorts pistons activities with Goetze (India) Ltd.
2004Introduction of chrome-ceramic rings
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2004 Technical collaboration for pistons with Federal-Mogul Corporation
2006 Majority stakeholding acquisition by Federal-Mogul Corporation
2006Name changed "Goetze (India) Limited" to "Federal-Mogul Goetze(India) Limited"
Mission of the Company
Steadily moving towards leadership with piston with vision strategy seeing it asthe best way to leaders in business
Vision of the company
To be one of the worlds leading automotive solutions provider.
Share Holding Pattern:
Federal-Mogul Corporation. 51 %
Goetze India Ltd. 24.5 %
Teikoku Piston Rings Co. Ltd., Japan 24.5 %
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51
24.5
24.5
Federal Mugal
Goetze indialtdTeikoku piston
EXPORT DESTINATION
Dubai
Bangladesh
Singapore
Egypt
Mauritius
U.S.A
Germany
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Nepal
Sri Lanka
Uganda
COLLABORATIONS
A. GERMANY
Faun
Class
B. JAPAN
Yamaha
Kayaka
Mikni
C. UK
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JCB (Goetze)
Ford
D. USA
HUGHES
E. FRANCE
Bosch
Dynapal
PRODUCT RANGE
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FEDERAL MOGUL GOETZE (INDIA) LTD. BAHADURGARH, PATIALA
Goetze (I) Ltd., Bahadurgarh, Patiala was set up in 1954 with the collaboration of
M/s. Goetze Werke, Germany which started its production of Piston Rings for
automobile industry in 1957. The plant is situated at Bahadurgarh, about 10 kms.
From Patiala on the Patiala-Rajpura Road.
Considering the need of complete Piston assembly, Escorts Ltd. ventured into
manufacturing of Pistons in 1958 with the collaboration of M/s. Mahle GmbH,
Germany, which delivered the Indian automobile industry its Pistons in 1960.
Escorts entered in collaboration with M/s. SUKO GmbH, Germany for Piston
Rings in 1967 and manufacturing started in 1968. To meet the increasing
demand of market, in 1977, a parallel unit for manufacturing Pistons and Piston
Pins was set up in Bangalore.
From 1 October 1996, Escorts Ltd. entered into joint venture with M/s. Mahle
GmbH, Germany with the formation of the new company Escorts Mahle Ltd. in
1998, Goetze also became a part of Federal Mougal, a well-known group of
USA. In June 2000, both Escorts Mahle Ltd. and Goetze have become QS-9000
certified companies.
The present capacity of the company is 549.60 lacs nos. Piston Rings and
135.68 lac nos. Pistons (on 302 working days). The total capital employed as on
31 Dec 2009 is 168.84 crores in Ring Activity and Piston Activity. The
workforce including managers and supervisors is 830 nos. in Ring Activity and
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1420 in Piston Activity as on 31 Dec 2009. The turnover of the Patiala Plants
280.39 crores excluding Excise (combined in Ring Activity and Piston Activity)
as on 31 Dec 2009.
PRODUCTS MANUFACTURED AT PATIALA PLANT
Pistons
Piston Rings
Cylinder Liners
Gudgeon Pins
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d) COMMERCIAL VEHICLES (LCVs & MCVs)
Telco
e) DEFENCE
Vehicles Factory, Jabalpur
f) COMPRESSORS
Telco
g) STATIONERY ENGINES
Kirloskar Oil Engines Ltd.
Greaves Ltd.
Birla
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Chapter 2
ORGANISATION
OFFEDERAL MOGUL
GOETZE (INDIA) LTD
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ORGANISATION GOALS
The company has laid down for itself goal of improving the value to thecustomers through:
LEADERSHIP: to maintain leadership in following categories
Market share: to maintain its status as brand leaders in the country for
Piston and Piston Pins.
Product Development: to develop Piston and Piston Pins for all new
applications as identified.
Technology: modernization and upgradation of technology to the
latest improvements to meet customer requirements.
CUSTOMER SATISFACTION:
It shall strive to achieve customer satisfaction rating more than 90%.
TECHNICAL REQUIREMENT:
Products are manufactured as per specifications based on DIN /
JIS / IS / MAHLE NORMS / SUKO NORMS as also against
customers specific requirements.
QUALITY:
To improve quality consistently through quality assurance and
process control.
DELIVERY:
To strive to achieve 100% on time delivery as per customer
requirements
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ORGANISATION STRUCTURE
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CHAIRMAN
EXECUTIVE
DIRECTOR
VICE
PRESIDENT
CHIEF (plant
Services)
CHIEF
(Manufacturing)
CHIEF
(Finance)
CHIEF
(Stores)
CHIEF
(Personnel)
MANAGERS
STAFF
SUB STAFF &WORKERS
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ORGANISATION SET UP
The organizational set up of the following departments is studied in detail:
1. Finance Department
2. Personnel Department
3. Purchase and Store Department
4. Production Department
FINANCE DEPARTMENT
D.G.M. (Finance), Patiala who is directly responsible to Plant Head (Finance and
Accounts), one of the most reputed Functional Department in GOETZE (INDIA)
LTD. C.G.M. manage the Department and under him there are two managers, one
is Finance Manager and other is Costing Manager. The Finance Manager isassisted by two supervisors one of these is responsible for cash and bank balances
and other is responsible for bills payable. Each supervisor is given two or three
assistants to work under him.
The amount of investment to be put in current assets like cash in hand, bank
balance, loans and advances, inventories, accrued expenses; dividends payable etc.
all are decided by Finance Department.
The realization of cash for the purpose of raw materials components and spares to
pay wages and salaries to incur day to day expenses and overhead costs, to meet
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selling costs to provide credit facilities to customers and to maintain inventories is
also the function of this department.
The formulation of policies with regard to profitability risk and liquidity, decisions
about comparison and level of current assets and liabilities, formulation of
production policy to keep the production steady by accumulating inventories,
formulation and execution of credit policy is also the function of Finance
Department.
This Department is responsible for handling transaction relating to purchase of raw
material as well as accounts relating to sales. It is also concerned with payment of
all expenses incurred by the company like purchase of raw material, electricity
bills, repairs etc. It is also concerned with valuation of various costs relating to
inventories.
It deals with determination of monthly wages, salaries of employees, fringe
benefits of retirement, provident funds deduction, incentives, bonus and all the
rewards, which the employees get for rendering their services to the company
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Functions of Finance Department
Cash Flow:
C.F. statements are being prepared by the plant, to be conveyed to HO. These
include sources as well as application of funds. Similarly applications of funds
related to the salary, payment to suppliers. Major expenses (like Electricity,
Telephone Bills, Excise duty and other personal & sales & administration
expenses).
Costing:
The costing is being done for all the products manufactured at the plant. These
relate to Piston, Ring, Cylinder Liners and Light Alloy Products. The Historical
base is being followed for costing purposes.
Consumption:
Every item being received in the plant for consumption. Input is being accounted
for at the plant. The ledgers are maintained for every receipt and issue.
Management Information System (MIS):
At the end of every month, profit & loss A/C is being prepared, highlighting the
sales, the expenses and profit/loss there on. Similarly first information report (FIR)
on the projected profit is prepared to find out the profits at the start of month.
Working capital management
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RESEARCH METHODOLOGY
The methodology used for the collection of data has been divided into two groups:
Primary Data
This data is based upon personal discussion with managers, officers and other
employees working in various sections of Finance Department, Piston Ring
Foundry Shop and Piston Ring Machine Shop.
Secondary Data
It is mainly based upon office records, Cost-sheets and other published documents
of Federal Mogul Goetz (India) Ltd., Bahadurgarh, and Patiala.
OBJECTIVES
The major objectives of present study are as follows:
Major Objectives:
To study the manufacturing process of pistons.
To calculate cost per piston.
Minor Objectives:
To study whether the firm is able to cover its cost of production.
To study whether the firm is utilizing its productive capacity efficiently.
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Chapter-4
PRODUCT
COSTING
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COSTING
It is essential to calculate the amount of expenditure (actual or notional) incurred
on or attributable to, a given thing so that the profit objective of producing it can be
determined.
Costing is the process of ascertaining the cost of activities, processes, products or
services. Cost accounting is the classifying, recording and appropriate allocation of
expenditure for the determination of cost of products or services and for the
presentation of suitably arranged data for purposes of control and guidance of
management. It includes the ascertainment of the cost of every order, job, contract,
processes, services or unit as may be appropriate. It deals with the cost of
production, selling and distribution. It is thus the provision of such analysis and
classification of expenditure as will enable the total cost of any particular unit of
production or services to be ascertained with reasonable degree of accuracy and at
the same time to disclose exactly how much total cost is constituted (i.e. value of
material used, amount of labour and other expenses incurred) so as to control and
reduce its cost. Thus, cost accounting relates to the collection, classification,
ascertainment of cost and control relating to the various elements of cost. Itestablishes budgets and standard costs and actual cost of operations, processes and
departments.
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COSTING - AN AID TO MANAGEMENT
Costing mainly helps the management in three ways:
PLANNING
In planning, the management is concerned with laying down of objectives and
determining the courses of actions to be followed out of the several alternatives
available to achieve those objectives. Planning is thinking in advance, thus costing
provides the management tools to set targets and determining the course of actions.
DECISION MAKING
Management has to take multiple types of decisions. All rational decisions are
based on accounting information. Costing helps the management to take different
types of decisions like
Fixation of prices
Whether or not price should be reduced for increasing level of sales
Whether the change in production is followed
Determination of most profitable levels of production
Whether the product should be exported or not
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Whether the production should be discontinued due to current loss etc.
CONTROLLING
Controlling is that par of management activity where by managers compare actual
performance against the planned performance, find out the deviations and take
remedial steps to remove the deviations to make an improvement in performance
because promptness is the essence of an effective control.
Other ways by which costing helps the management are
classification and subdivision of costs
control of materials, labour and overhead costs
business policies
budgeting
standards for measuring efficiency
best use of limited resources
instrument of management control
cost audit
social factors
price determination expansion
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OBJECTIVES OF COST ACCOUNTING
The objectives of cost accounting are ascertainment of cost, fixation of selling
price, proper recording and presentation of costs data to the management for
measuring efficiency and for cost control. The aim is to know the methods by
which expenditure on materials, wages and overheads is recorded, classified and
allocated so that the cost of products and services may be accurately ascertained,
these costs may be related to sales and profitability may be ascertained. Yet with
the development of business and industry, its objectives are changing day by day.
The following are the main objectives are cost accounting:
To ascertain the cost per unit of the different products manufactured by a
business concern.
To provide requisite data and serve as a guide to price fixing of products
manufactured or services rendered.
To ascertain the profitability of each of the products and advice the
management as to how these profits can be maximized.
To exercise effective control of stocks of raw materials, work-in-progress,
consumables stores and finished goods in order to minimize the capital locked
up in these stocks.
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GENERAL PRINCIPLES OF COST ACCOUNTING
The following are the main principles of cost accounting:
Cause and effect relationship: Cause and effect relationship should be
established for each item of cost. Each item of cost should be related to its
cause as minutely as possible and the effect of the same on the various
departments should be ascertained. This cost should be shared only by those
units, which pass through the departments for which such cost has been
incurred.
Charge of cost only after its incurrence: Unit cost should include only
those costs, which have been actually incurred. For example, unit cost
should not be charged with selling cost while it is still in factory.
Cost accounting should ignore the convention of prudence: Cost
accounting statements should give the factual picture of profitability of the
project. If some contingencies need to be made, it should be shown
distinctly and separately.
Past cost should not form part of future costs: Past cost (which could not
be recovered in past) should not be recovered from future cost as it will not
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In this section important parameters are checked for each piston
like diameter, size, grooves and especially hardness.
PISTON MACHINE SHOP:
Piston machine shop consists of the following main sections:
PRODUCT LINES:-
There are around ten lines arranged in the product layout i.e.
blanks are fed into the first machine and finished pistons are obtained at the
end of the line. Planning and manufacturing is done batch wise. The
machine set up and inspection gauges are carried out lot wise or batch wise
for each machine. First line is used for pistons upto 100mm diameter. For
the pistons above 100mm of diameter next line is used. Third line is
exclusively for TATA pistons. Next two lines are of bi-wheelers and next
two lines are exclusively for MARUTI. Rest lines can be used for other
piston types. In each line similar type of machines are arranged, more or less
in the same sequence as the basis process is same across all the lines.
COATING:-
There are mainly three types of surface treatment (coating)
carried out i.e. Tin coating, Anodizing and Graphic coating based on
customer requirements. Latter two are mostly done for TATA pistons.
Anodizing is carried out on the crown surface to provide a resistance surface
at high temperature generated in the combustion chamber. Tin and graphic
coating is carried out for initial run lubrication. In tin coating, sodium
stannate solution liberates tin, which form metallic bonds on the piston
surface. In graphite coating, graphite particles are sprayed onto a heated
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Gross weight with R/R = Blank weight with R/R / {(100-Fdy scrap)/100*(100- M/c
scrap)/100}= .185/{(100-6.5/100*(100-8)/100}= .215 Kgs
NET RAW MATERIAL:Gross weight =.152 kgsRecovery = {final weight * m/c scrap}/{(100-m/c scrap)/100}
= {0.090* 8%)/0.92
= 0.008 kgsAlloy rate = Rs. 104.85 /kg
Net alloy requiredper piston (NAR) = Gross weight recovery
= .152-.008= .144 kgs
Cost of raw material = NAR * alloy rate= .144 * 104.85= Rs. 15.10 per piston
Scrap = Cutting loss+ Aluminium scrap+ Slag ash
Cutting loss Cost = Cutting Loss wt(kg) / {(100-m/c scrap)/100}
= .004 /.92
= .0043 kgs per blank
Recovery = scrap * rate (104.85 *87% Recovery of
Converted Alloy)
= .0043 * 91.20
= Rs. 0.39
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=Rs.
6.325
Blank wt. with R/R =0.215 kgs
Total cost =
6.325*0.215
= Re.1.36
Casting rate = total
manpower cost of casting/no. of castings per shift
= 50663003/26198.68
=Rs. 1933.80
Average casting
Per day
=411*80%
=329 castings
Shifts per piston
=1.121/329
=.00341
Personnel rate
=1933.80*.00341
=Rs.6.59
Heat treatment
Rate
=total personnel cost of heat/ total hrs.
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=435689/89842.04
=Rs.4.85 /hr
Cost per piston = (oil per hr*gross m/c time)/60
=4.85*14.13/60
=Rs.1.142
3) Maintenance
Total cost of maintenance on:
Manpower =Rs. 726300
Tools =Rs. 523000
Repairs =Rs. 1651500
Spares =Rs. 5424080
Total cost =Rs.7598580
Total hrs =1043054.5 hrs
Total Maintenance Cost
= total cost/ total hrs.
=14858000/1043054.5
=Rs. 14.245
Fixed cost =48.88%
=14.245*48.88%
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EFFICIENCY BONUS:
Bonus is calculated as a percentage on the personnel cost.Personnel cost of foundry=Rs. 4.712EB =21.43% of foundry cost
=Rs. 1.01Personnel cost ofmachine shop =Rs. 18.369
EB =16.52% of machine cost=RS. 3.034
Total EB =1.01+ 3.034=RS. 4.044
PLANT AND ADMINISTRATION COST:
Total P & A cost =Prime cost- raw material- components- EB
=59.588- 10.085- 4.044=Rs. 45.459
%age =9.03%Plant and admin Cost =45.459*9.03%
=Rs. 4.10
INSPECTION COST:Personnel cost of workers=Rs.9382044Personnel cost of managers=Rs.14092025%age of managers to workers cost
=150.20%
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DESCRIPTION COST (RS.)
VARIABLE FIXED TOTAL
GROSS ALLOY COST 15.12 15.12
LESS:- ALUMINIUM SCRAP 4.275 4.275
NET RAW MATERIAL COST 10.83 10.83
COST OF COMPONENTS:-
FOUNDRY COST-
STORES AND SPARES 1.092 1.092
DIESEL FOR FOUNDRY 0.872 0.872
OILS AND LUBS 0.068 0.068
MAINTENANCE 1.26 1.26DIES 0.90 0.90
POWER AND FUEL 4.63 4.63
PERSONNEL 8.43 8.43
DEPRECIATION 0.49 0.49
SUB TOTAL(FOUNDRY COST) 8.822 7.94 16.762
MACHINE SHOP COST-
STORES AND SPARES 1.91 1.91
OILS AND LUBS 1.14 1.14
MAINTENANCE 1.71 1.71TOOLS 0.57 0.57
POWER AND FUEL 1.53 1.53
PERSONNEL 29.33 29.33
DDEPRECIATION 6.02 6.02
SUB TOTAL(MACHINE SHOP COST) 6.86 35.35 42.21
EFFICIENCY BONUS 4.044 4.044
PRIME COST 27.159 32.429 59.588
INSPECTION COST 4.56 4.56
P & A COST 4.10 4.10
PACKING COST(PRIMARY & SECONDARY) 1.03 0.73 1.76
TOTAL COST 28.189 41.819 70.008
CORPORATE AND INTEREST COST 14.0016 14.0016
TOTAL COST PER PISTON 28.189 55.82 84.01
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Cost of production:
Cost of production must be reduced so that company can face competition in
the market and can reduce its prices. For example, in case of piston ring for
Yamaha, cost of production per ring is Rs. 100.47. But, its selling price is Rs. 92
per ring. I.e., company is suffering due to price less than the cost. Thus, the
company should try to reduce its cost of production.
Budgeting:
The company has adopted incremental approach for the preparation of its
budgets. Such approach carries forward previous years inefficiencies because
previous years figures are taken as a base for the development of a budget. Thus
incremental approach does not promote operational efficiency because it does not
require managers to review their past activities.
The company may use Zero Base Budgeting as a managerial tool where
taking zero as a base, a budget is developed on the basis of likely activities for the
future period.
Control of scrap and defectives:
To increase the profitability, company should try to reduce scrap and
defectives. These should be standardized properly by following standard costing
system. The actual scrap and defectives should be compared with the
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BIBLIOGRAPHY
Cost Accounting by S.P. Jain, K.L. Narang, Kalayani Publishers
Cost Accounting Theory and Problems by S.N. Maheshwari, S.N.
Mittal, Shree Mahavir Book Depot
Cost Accounting Study Material Board of Studies, The Institute of
Chartered Accountants of India
www.goetzeindia.com
Annual Reports Of FMGL
http://www.goetzeindia.com/http://www.federal-mogul.com/en/http://www.goetzeindia.com/