VANDANA BANSAL & ASSOCIATES,

COST ACCOUNTANTS

Vandana Bansal B COM(H)CMA,

House No-279,Sector -17,

Faridabad

9891232140(M)

0129-4071519 Landline

Email:vandana21_cost@yahoo.co.in

Alternate email :vbacost@gmail.com

www.vandanaassociates.com

To,

The Managing Director,

SUB: COSTING SERVICES PROVIDERS

Respected Sir,

We are professionally qualified cost

Accountants and also holder of certificate of

Practice of cost accountancy from ICWAI from last 7 years

providing all types of costing services which

are given below :

1} PRODUCTWISE/COMPONENTS WISE COSTING REPORTS.

Development of costing system on that basis product

wise costing reports will be made which includes each

and every element of cost incurred by the company at

each stage of production and also includes apportion

ment & allocation of overheads.Preparation of product

wise /componentswise costing profit &loss reports

will assist to increase overall profitability of company.

2} Maintanace of costing records as per sec209(i)d

under the companies act1956 in which Componentwise costing

profit & loss will have to be calculated & reconcilied with

financial profit & loss Accounts.

3} PREPARATION OF COST AUDIT REPORTS AS PER SECTION 233 UNDER

COMPANIES ACT1956 whose order has issue by Ministry of finance

Govt of India

4}Valuation and certification of cost of production as per cas-4 at the time of interunit

stock transfer under rule 8 of central Excise and also order issued by central

excise as per circular : 692/2003 dated 13/2/2003 for valuation of goods captively

consumed.

5} INVENTORY AUDIT OF THE COMPANIES AND SUGGESTION FOR ITS

REDUCTION AND ITS CONTROL

which involves details checking of stock records and also

Physical verification of all of types of stock is undertaken to find

out shortcoming in inventory records and give suggestion for inventory

reduction and its control so that production of items will not be stop

due to deficiency of stock of material & also blockage of money

unnecessary due to holding of lots of stock will not take place.

6} INTERNAL AUDIT OF COSTING RECORDS AND REPORTS BEING

MAINTAINED BY THE COMPANY

interrnal audit of costing reports maintained by the company and

give suggestions for improvement required in costing records where there

is deficiency in costing reports and also give guidelines to be followed

for cost reduction and cost control.

BENEFITS FROM PRODUCTWISE /COMPONENTS COSTING REPORT

In the present competitive world where inputs cost is rising on continuous basis

now it becomes necessary for management to know effect of increasing/decreasing

input cost of resources on the total cost of the component/item so that decision for

sale price be taken accordingly , employer must know cost incurred at each stage of production of each and every components produced in the factory , if total costs

of the component excludes any cost/expenses involves at any stage of production, it mean it will be loss to the company

The Following are the benefits from components wise cost reports are as under :

1} (Material cost +labour cost+direct expenses)/variable cost + Fixed cost /fixed overheads ) =total cost of the components will be known . A company must recover

from Customer at least variable cost of the component. As regards fixed cost Company has to bear whether there is production or not ,the fixed cost is sunk cost.

2} Sale price and profit margin decision will be taken accordingly when total cost of

components will be known which includes each and every cost/expenses incurred

at each stage of production as per process flow chart/sheet .

3} When Company is selling many products/components to same customer ,they

can decide to sell more quantity /numbers of items in which there is

more profit/margin and sell less number of items /quantity in which they have

less profit /margin to increase their overall profitability from a customer.

4} Now a days ,it is buyers/customer market , the sale price decision is in hands

of customer ,so the manufacturer has not control over the sale price .

It is only the cost incurred on components /products ,they must know and take

Steps to reduce as well as control cost of components/products.

at each stage of production specially rejection,wastage of resources

so that cost of components will arrive at the optimum level

Besides maintaining quality of components.

5} Costing of new developed items can be known,the sale price decision is to be

taken accordingly .

6} Analysis of consumption of material and production through

electroplating /furnace /steamer is to determine cost per item incurred at that

stage and cost has to be reduced and controlled accordingly .

7} Management can keep internal control on the cost /expenses incurred by the

at each stage of production of items and take steps reduce cost of items at

reasonable cost by maintaining quality of items.

C} STEPS TO BE TAKEN TO KNOW COMPONENT COST

1}Depth Study of the Production cycle which includes each and every process of

operation of items in depth .Verification and checking of each and every records

maintained in the company related to production of items and expenses/cost

incurred for production of items.

2} After deep study , we make format required to be maintain or do modifications

in records already made in consultation with management to be filled up to

preparation of components wise costing reports. The Format are related to

production of items and records of expenses incurred at each stage .

3} Based on our past assignment experience basis,we have found the following

records of expenses are not made which are directly/indirectly effect on cost of

components those records must be maintained as given below

a} Daily Production reports must contain the details of no of qty produced

ok,rejected ,cycle time on machine/by labour Same be checked and signed by

responsible person.

b} Details of expenses incurred for running of diseal generator set for electric

power gernation for calculation of average power cost per unit through DG SET

electricity board and also its allocation ,apportionment to power cost of machine

run production so that machine hour rate will be known and on that basis

machining cost of the component will be calculated.

c} Expenses related for running of compressors .

d} Calculation of machine hour rate which includes each and every expenses

incurred for running of machine to know machining cost of the components

which directly effects on cost of components.

e} Data of consumable material used for electroplating /furnace/steamer /heat

treatment must be maintained and also records of itemwise quantity process

must be maintained in order to know material cost per item

f} Calculation of cost incurred at each stage of production of each items whether

through machine , labour and other expenses/cost .

g} Calculation of fixed cost /overheads cost includes factory overheads,selling

overheads ,personnel overheads ,financial overheads and its allocation &

apportionment to variable cost of the components in order calculation of total

cost of components.

h} Calculation of variance analysis of standard vs actual cost /consumption of

material,labour,machines.

i} Calculation of profitability on each and every items produced during the period.

So that steps can be taken to increase over all profitability of the company.

The following are the steps to reduce and control the cost of components

a} Reduction in product cycle time in order to reduce the processing cost

incurred through machine and labour .

b} the cost reduction programme is formulated in order to

1} Reduce cost

2} increase profitability

c} in order to reduce the material cost following steps must be taken

new supplier are to be identified ,Renegotiate with existing suppliers

to have better credit terms & lower price .

d} To consider to replace high cost material with low cost material of the