zmoney doesn't create man but it is the man who created money. -warren buffet

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Money doesn't create man but it is the man who created money. -Warren Buffet

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Page 1: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Money doesn't create man but it is the man who created money.

-Warren Buffet

Page 2: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

WELCOME TO ALL OF YOU

RAHUL JAIN(Striving for excellence)BCOM (H), MBA, ACS

Page 3: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Cost

Any expense incurred during the operations for providing the good or service to get the output into the hands of the customer

The customer could be the public (the final consumer) or another business

Controlling costs is essential to business success

Page 4: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Costing and Management Accounting

A field of accounting that provides economic and financial information for managers and other internal users.

Page 5: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Computing the cost of providing a service or manufacturing a product

Determining the behavior of costs and expenses as activity levels change

Analyzing cost-volume profit relationships within a company

Assisting management in profit planning and budgeting

Providing a basis for controlling costs and expenses by comparing actual results with

planned objectives and standard cost

Accumulating and presenting relevant data for management decision making

Need of Costing

Page 6: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Apparel Products Value ChainBy Lyn Fernando

Product Development

Selling & Distribution (Agents)

Outbound logistics

Manufacturing (cut, sew & finishing)FOB 10-25% of

Retail

Buyer (Retailer)

Raw materials /Accessories –40-70% of FOB

Design

Non availability of advanced product development facilities

Lack of Advanced Manufacturing

Technology

Lack of Specialty fabrics & Accessories

-Lack of Direct contacts/ Access to Retailer.

-Long lead time

- Cost of Agents

Proximity to market, regular sailings -sea &

Air. Electronic Data Interchange for documentation

• High Cost Structure ( Labour, Utility) Wastage use of CAD/CAM

• Labor Laws, Invest in Human Resources

• Lack of Skilled Management

•Low productivity,

• Proximity to Suppliers

•High energy cost

Need to develop strong networks & lobby groups. Free Trade Agreements,

concessionary tariffs

Dependency on imported raw material, long lead times,delays

at customs, documentation, EDI

Lack of design capabilities

Sourcing

100%

Page 7: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Basic elements of Cost

Material

Labor

Expense

Page 8: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Key terms

Tangible costs or benefits are those costs or benefits that an organization can easily measure in dollars.

Intangible costs or benefits are costs or benefits that are difficult to measure in monetary terms.

Direct costs are costs that can be directly related to producing the products and services .

Indirect costs are costs that are not directly related to the products or services , but are indirectly related to them.

Page 9: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Key terms

Opportunity cost What you give up for certain in exchange for a

chance at something better. Interest The cost of borrowed money

Page 10: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Costs Fixed – are not influenced

by the amount produced but can change in the long run e.g., insurance costs, administration, rent, some types of labour costs (salaries), some types of energy costs, equipment and machinery, buildings, advertising and promotion costs

Variable– vary directly with the amount produced, e.g., raw material costs, some direct labour costs, some direct energy costs

Semi-fixed – where costs not directly attributable to either of the above, for example, some types of energy and labour costs

Page 11: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

COST SHEET

Page 12: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Prime Cost

Direct Material Consumed+ Direct Labor+ Direct Expense

Page 13: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

MANUFACTURING COSTS DIRECT MATERIALS

Materials

Raw materials• The basic materials and parts that are used in the

manufacturing process• Raw materials physically and directly associated

with the finished product are called direct materials

Page 14: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

INDIRECT MATERIALS

• Indirect Materials are raw materials which cannot be easily associated with the finished product.• Not physically part of the finished product • Cannot be traced because their physical

association with the finished product is too small in terms of cost

• Accounted for as part of Manufacturing Overhead

Page 15: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

LABOR and Expenses

Factory Labor

• Direct Labor: The work of factory employees which is physically and directly associated with converting raw materials into finished goods.

• Indirect Labor: Efforts which have no physical association with the finished product or it’s impractical to trace the costs.

Direct Expenses: directly associated with cost centerIndirect Expenses• Classified as Manufacturing • Overhead

Page 16: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

Prime cost -ExampleCONTENT AVG. CONSUMPTION/ SHIRT AVG.PRICE/UNIT

(Rs.)TOTAL COST(Rs.)

Fabric 2.10mts. 56 117

Thread 200mts. 9/spool 4.5

Button 11pcs. 0.25 2.75

Label 3pcs 0.20 0.60

Polybag 1pcs 2.10 2.10

Collar band card board 1pcs 0.10 0.10

Card board 1pcs 0.80 0.80

Clips 4 pcs 0.10 0.40

Pin 8 pcs. 0.05 0.40

Butterfly 1 pcs. 0.35 0.35

collarbone 2 pcs. 0.25 0.50

fusing 25 cm 30/mt 7.50

Direct Labor cost35.66 35.66

Direct expenses 11 11

Prime cost 219.21

Page 17: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

MANAGERIAL COST CONCEPTS

• Manufacturing: Activities and processes that convert raw materials into finished goods.

• Manufacturing Costs include:– Direct materials

– Direct labor

– Direct Expense

– Manufacturing overhead

Page 18: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

MANUFACTURING OVERHEAD

•Consists of costs that are indirectly associated with manufacturing the finished product.•Includes:

• Indirect materials • Indirect labor • Indirect expenses such as Depreciation on factory buildings and machines • Insurance, taxes, maintenance on factory facilities

Manufacturing Overhead

Page 19: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

FACTORY OVERHEADS- Examples

Salary paid to merchandiser Salary paid to production manager Floor incharge salary Q.A. + Q.C. Plotting boy CAD operator Salary paid to fabric head Salary paid for line supervisor Salary paid to machinery maintenance House keeping Guard Medical care taker Fuel Electricity Water consumption Oil and Consumables Needles Rent/Depreciation on Factory Assets

Page 20: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

OFFICE AND ADMINISTRATION OVERHEADS: Examples

Salary paid to: chairman MD GM Receptionists HR persons Accountants Purchases Dept. Persons Office Boys Telephone Expenses Stationary Expenses Electricity Expenses of office Rent/Depreciation on Office Assets

Page 21: ZMoney doesn't create man but it is the man who created money. -Warren Buffet

SELLING AND DISTRIBUTION OVERHEADS- Examples

Salary paid to selling and marketing staffAdvertisement costSample distribution Export documentation Testing expense Buying agent commission ConveyanceTrade Fair and other Promotional expensesWebsite and ecommerce expenses