Professional Documents
Culture Documents
by
PARVATHI DEVI (520875269) Submitted in partial fulfillment of the requirement for the award of the Master of Business Administration
2008-2010
DECLARATION
I Parvathi.Devi student of M.B.A (Finance) of Acme College of Information Technology affiliated to Sikkim Manipal University. Hereby declare that the work presented in the project is based on my own research. This project has not been accepted for the award of any degree in any university and to the best of my knowledge and belief contain no material written by another person except where due reference or acknowledgement has been made.
DATE:
PARVATHI DEVI
ACKNOWLEDGEMENTS
I take this opportunity to acknowledge, all the people who rendered their valuable advice in bringing the project to function. As part of curriculum at Acme college, under SIKKIM MANIPAL UNIVERSITY Hyderabad the project enables us to enhance our skills, expand our knowledge by applying various theories, concepts and laws to real life scenario which would further prepare us to face the extremely Competitive Corporate World in near future. I respectfully express my gratitude Mr.Surendra Bhutoria Chief Finance Officer of Surana Telecom & Power ltd for giving me opportunity to undertake this project work. I express my gratitude to my faculty guide Mr.G.Srinivas Reddy (Finance Lecturer) Acme College, Hyderabad for his unparallel support throughout my project I have tried my level best to put my experience and analysis in writing this reports. I am grateful to Surana Telecom & Power Ltd as an Organization and its various employees for helping me to learn and explore many fields.
ABSTRACT
The establishment of Costs relating the responsibilities of executives to the requirement of a policy, and the continuous comparison of actual with cost sheet results, either to secure by individual action the objectives of that policy, or to provide a basis for its revision. The project is taken up with the object to study Cost Analysis System in Surana Telecom and Power Pvt Ltd. The project is mainly a study to know about the meaning of the Cost Accounting, Cost preparation Process and comparing cost provision with actual. The main aim of the study is to know the effectiveness of the current and if any requirements for improvements. Its also An indication and explanation of the important of the Cost Accounting technique An overview of the advantages and disadvantages of Costing An introduction to the methods for preparing cost sheet An appreciation of the uses of costs Conclusion is drawn on the basis of analysis of the cost accounting. The analysis reveals the company financial position i.e. its Expenditure and Revenue generated
TABLE OF CONTENTS
Chapters
Description
Page.No.
Chapter I
Introduction of the study Scope Objectives Methodology Review Of Literature Introduction of Cost Analysis Definition of Cost Analysis Characteristics of Cost Analysis Advantages of Cost Analysis Limitations of Cost Analysis Methods & Techniques of Cost Analysis Elements of Cost Analysis
Chapter II
Company Profile Data Analysis & Interpretation Findings & Conclusion Suggestion & Recommendation Bibliography Appendices
CHAPTER I
INTRODUCTION
INTRODUCTION
A Cost Analysis is a technique and process of ascertaining costs. It is a Terminology of Cost Accounting, the amount of Expenditure actual notional, incurred on or attributable to a given thing. The important reason behind my study is know the actual importance of cost in a manufacturing unit. The move behind this is to go through every detail which helps in the cost control and Ascertainment of profitability as well as presentation of information for the purpose of managerial decision making The rationale for conducting this study is be efficiently able to carry out the firms objective and yield higher profits by reducing the cost. It aims at analyzing the quantitative data measuring the accomplishments. My project focuses on a cost sheet or cost statement which present the information regarding the various elements of cost incurred in production during a defined period of time. The Cost Sheet is generally prepared at short intervals (weekly or monthly) and presents the total cost as well as cost per unit of products manufactured during the period. The Cost Sheet does not have any statutory format. It is not a part of the Accounting system. The purpose of Cost Sheet is to present the Element of cost in as much detail as possible. In order to provide comparison, a Cost may have information pertaining to the previous year in an additional column. Alternatively, standard costs may also be provided. Cost Sheet includes only such expenses that are a charge against profit. It shows a breakup of total cost into various elements, sales value of goods and Profit earned or Loss incurred during a period. Expenditure incurred towards servicing of dept, acquisition of assets, payments are not included in the Cost Sheet
SCOPE
The main review is done on the use of Cost Accounting and its common objective. It always expressed in terms of quality and money. It is the policy to be followed during the cost period for attainment of specified organization. Financial and quantitative statement of the action plan.
Based on management policy. The types of issue raised in my study are to relate the actual operation and performance of a firm in existences. This system which uses cost for controlling and reduction different activities of business. Division of organization on function basis into different sections for cost reduction of Surana Telecom and power LTD;
Preparation of separate cost for each cost centers for planning strategies for innovations and growth of the Company;
Consolidation of all functional cost to present overall Surana Telecom & power objective
Comparison of actual level performance against cost. Comparison process is stretched far enough to declare either attainment of objective or basis of revision of plan of action
Reporting the Variance with proper analysis to provide basis for future.
Objectives
My objective is study the cost analysis in a manufacturing unit is to get insight of the conceptual details of a cost analysis helps in formulating its pricing policies and prepare estimates and how much truth does this substantiate. Some of the important objectives are To ascertain the cost per unit of different products manufactured or services rendered by the undertaking. To maintained a systematic records of the cost incurred by analyzing and classifying the cost information so that necessary cost data and information is available. To point out how wastage of time, money, machinery, equipment occurs and to prepare such reports which may be necessary to control such wastage. For an effective communicating which is the basic essence of organizational aims objective to subunits so as to encourage them to play their part efficiently, My Cost effectively communicate this information to the employees at different level for maximum contribution to companies objective Coordination holds importance in synchronize the companys active factors effectively. To coordinate is to harmonies all the objective of a company so as to facilitate its successful working. A. each department works harmonious with the other B. each of them plays a specific role to accomplish an overall objective c. The sequential arrangement of activities of different department is to govern the overlapping of activities and wasting time. Motivation depends purely on how the workers can get involve mentally and physically to put on their maximum output. An active cost helps the employee to closely relate their personal interest with the organizations plan it acts like a motivation for plan achievement. Control in a functional cost a thorough discussion is done on the forecasted cost therefore there are a lot of cuts and adjustments to be made to fit in organizational objective. Feedback system helps in the extending of variation b/t the actual levels of performance and the forecasted cost. Approved plan: Master cost sheet is an approved summary of result to be expected from proposed plan of action. It serve as a guide to executives and departmental heads responsible for various objectives To develop an understanding the Surana telecom &Power Ltd in the management point of view in general and manufacturing unit in particular. Ascertaining the major
of cost and its actual implications of the costing process at Surana Telecom & Power Ltd
Methodology:
Data collection: Primary data collection from the company records and one to one interaction with the employees of the company Secondary data: Through business magazines literary books journals annual reports of the company and web based recourses Data analysis: Mainly analytical (qualitative) however quantitative tool will be employed as and when required Inferences and observations; Drawn on the basis of analysis done Conclusions and recommendations: To conclude the Project
Chapter -II
REVIEW OF LITERATURE
INTRODUCTION
Cost accounting is that part of management accounting which establishes budget and actual cost of operations, processes, departments or product and the analysis of variances, profitability or social use of funds. Managers use cost accounting to support decision making to reduce a company's costs and improve its profitability. As a form of management accounting, cost accounting need not follow standards such as GAAP, because its primary use is for internal managers, rather than external users, and what to compute is instead decided pragmatically. Costs are measured in units of nominal currency by convention. Cost accounting can be viewed as translating the Supply chain (the series of events in the production process that, in concert, result in a product) into financial values. Cost accounting has long been used to help managers understand the costs of running a business. Modern cost accounting originated during the industrial revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions. Management requires information to look into the future. Moreover, it has to ensure that adequate resources are made available and plans are achieved at the least cost. Formulation of budgets, pricing of new products or investment in new projects, etc are all examples of costing information being an aid to planning. Thus, costing helps management plan the product to be produced in order of priority, quantity of production, fixation of optimum selling price, associated costs and expected profits. Analysis, allocation and apportionment of costs requires considerable amount of clerical work. It involves huge financial burden on the concern.
Definition:
Method of accounting in which all elements of cost incurred in carrying out an activity or accomplishing a purpose are collected, classified, and recorded. This data is then summarized and analyzed to arrive at a selling price, or to determine where savings are possible. In contrast to financial accounting (which considers money as the measure of economic performance) cost accounting considers it as the economic factor of production. Accumulation, examination, and manipulation of cost data for comparisons and projections. Cost analysis is Accounting & Auditing and Statistics, Mathematics, & Analysis subjects. Method of arriving at selling price of an item with reference to another item without performing a cost analysis. It is employed usually where the two items are so similar that price differences between them can be identified and justified.
FORECASTE:
What will happen probable? What management will try and make happen i.e. planning
COST CONTROL:
often more important than the variable cost of a product, and allocating them to a broad range of products can lead to bad decision making. Managers must understand fixed costs in order to make decisions about products and pricing.
For example: A company produced railway coaches and had only one product. To make each coach, the company needed to purchase $60 of raw materials and components, and pay 6 laborers $40 each. Therefore, total variable cost for each coach was $300. Knowing that making a coach required spending $300; managers knew they couldn't sell below that price without losing money on each coach. Any price above $300 became a contribution to the fixed costs of the company. If the fixed costs were, say, $1000 per month for rent, insurance and owner's salary, the company could therefore sell 5 coaches per month for a total of $3000 (priced at $600 each), or 10 coaches for a total of $4500 (priced at $450 each), and make a profit of $500 in both cases.
Uniformity: The costing system must ensure that the various forms and records
used for collection and presentation of cost data is uniformity. Instruction to staff must be clear.
Minimal Clerical Work: Paper work is disliked by almost every one and yet it
is important. It must be kept to the minimum particularly in case of lower level employees providing manual labor.
Reconciliation: The system must ensure that figures in cost records can be
easily reconciled with that of financial records. The possibility of installing an integrated accounting system must be ensured
It reveals profitable and unprofitable activities. It helps in controlling costs with special techniques like standard costing and budgetary control It supplies suitable cost data and other related information for managerial decision making such as introduction of a new product, replacement of machinery with an automatic plant etc
It helps in deciding the selling prices, particularly during depression period when prices may have to be fixed below cost It helps in inventory control
It helps in the introduction of a cost reduction programmed and finding out new and improved ways to reduce costs Cost audit system which is a part of cost accountancy helps in preventing manipulation and frauds and thus reliable cost can be furnished to management A good system of costing affords an independent reliable check on the accuracy of financial accounts. Reconciliation of results shown by cost accounts and that by financial accounts establishes accuracy of both sets of books.
Cost Accounts records the time spent by each workers on a job or process. This helps the management in ascertaining the unit cost labor for each activity. The time and job cards indicate the loss caused by idle time. Suitable measures can be taken to minimize the same.
Cost Accounting will enable the management to measures its efficiency and then to maintain and improve it.
Unnecessary: It is argued that costing is of recent origin and many concerns have
prospered in the past and still prospering without any costing system. Hence, expenditure incurred in installing a costing system would be an unnecessary expenditure. It is to be remembered that the atmosphere under which industries are now operating is entirely different from what it was some fifty years ago.
Unproductive: It is argued that costing system adopted in many concerns has not
produced the desired results. Hence it is defective. There is no rigid system of Cost Accounting applicable to all industries.
Estimation: Cost Accounting works on a basis of estimates. The user does not receive
the time or exact cost. An error in estimation may throw up totally different results.
Suitability: Cost data is required for decision making purposes. Thus, a cursory
comparison may result in misleading conclusions.
Paper work: it is argued that as the cost system requires the use of number of forms,
after some time it becomes stereotyped and degenerates into a matters of forms and rulings.
contracts, jobs or batches, each of which is authorized by a special order or contract. Thus job costing, contract costing and batch costing come under the category of specific order costing.
2. Continuous Processing:
The ICMA defines continuous processing as the basic costing method applicable where goods or services results from a sequence of continuous or repetitive operations or processes to which costs are charged before being averaged over the units produced during the period. The goods or services produced are standardized. It includes process costing including for joint products and by products, operating in services costing and unit or output costing.
(A)Process Costing:
This is used in mass production industries manufacturing standardized products in continuous processes of manufacturing. Costs are accumulated for each process or department. For spinning mills, process costing is employed. Accurate records are maintained of number of finished goods and unfinished goods (work in progress), normal and abnormal loss at each process etc. As the processes are in a sequence, the output of one process is charged as input for the next process. Procedures are clearly defined for separating costs in the events of two or more products being simultaneously produced by a particular process. It is applied in Brewing, Oil Refining, and chemical, Textile, Food Processing and many other industries
Multiple costing:
It refers to application of more than one costing methods in case of same organization. It is suitable in case of organizations producing a number of unrelated products or components required to be assembled into a final product. It is necessary to ascertain the cost of each component separately. This method is prominently used in toy manufacturing companies, automobile factories, watch factories and other industries requiring large-scale assembly.
Techniques of Costing
Techniques of costing refers to the specialized procedures adopted for ascertaining the cost of products or services for certain special purposes under special conditions, and for providing relevant cost data to the management for purpose of cost control, management policy and managerial decision making. The various techniques are stated as under:
1. Historical Costing:
It refers to ascertainment of cost after they are actually incurred. It has very limited use, as no control can be ascertained over actual costs. Although it helps periodic comparison, it is similar to a postmortem action akin to financial accounting.
2. Marginal Costing:
It is technique that distinguishes b/t fixed and variable costs. The marginal cost of a product is its variable cost. The fixed costs of the period are written off against total contribution earned in that period, where contribution is the excess of sales realization over marginal cost. Even the inventory is valued only at marginal or variable cost. Marginal Costing technique is used to determine the impact of changes in volume or change in product mix or shut down of a production unit or current profits.
3. Direct Costing:
It is a technique where in only the direct costs are charged to operations, processes or products and the indirect costs are written off against profits of the period. Direct costing technique is very similar to marginal costing technique, since most direct costs are variable in the nature. It is a useful tool for decision making.
4. Absorption Costing:
It is a technique that takes into account the total cost of running an enterprise. It is also known as Total Costing or Full Costing. It is a traditional technique and does not distinguish b/t various kinds of costs, particularly fixed and variable costs. It values inventory also at a total cost. It is useful in preparation of job estimates or quotations.
5. Standard Costing:
It is a technique that establishes pre-determined estimates of costs of products and services and then compares them with actual costs as they are incurred. It is very detailed and requires considerable development work before it can be put the greatest benefits is obtained in case of substantial degree of repetitive activity in the manufacturing process. It facilitates formulation of production and pricing policies before the actual start of production.
6. Uniform Costing:
Uniform costing refers to the use of the same costing methods, principles and techniques by several organizations to facilitate common control and comparison of stocks. Uniform costing normally does not contain advanced or novel features, but ensures that there are similar costing foundation and reports in all organizations that may belongs to the same groups, industry or trade association. It is not a distinct technique in itself, but only a tool that facilitates comparison.
Cost Concepts
1. Cost:
The Institute of Cost & Management Accountant (ICMA) has defined cost as the amount of expenditure actual or notional, incurred on or attributable to a specified thing or activity. It is the amount of resources sacrificed to achieve a specific objective. A cost must be with references to the purpose for which it is used and the conditions under which it is computed. To take decisions, managers wish to know the cost of something. This something is called a Cost Unit.
2. Cost Unit:
A cost unit is anything for which a separate measurement of costs is desired. A product, service, department, project or an educational course can all be cost units. Cost units
are chosen not for their own sake but to aid decision-making. Thus, a cost unit is a quantitative unit or product or service in relation to which costs are ascertained. The cost units may be units of production such as tons of cement produced, or units of services such as consulting man hours, Cost units can be single cost unit such as meters of cloth or composite or compound cost unit such as passenger kilometers.
3. Cost Centre:
According to ICMA, London, Cost Centre is a location, persons or items of equipment is respect of which costs may be ascertained and related to cost units for control purposes. It is simply a method by which costs are gathered together, according to their incidence, usually by means of cost centre codes. It is a smallest element of an organization in respect of which costs are charged and ascertained. Maintenance Department, a Public Relations Officer, a printing machine are all examples of cost centers. The establishment of cost centers serves two important purposes. Firstly, cost ascertainment made possible by collecting and charging cost to each cost centre. Secondly, cost control is ensured as costs can be more closely looked at and more easily monitored by a responsible official. The setting up of cost centers depends on numerous factors such as organization of the factory, conditions of cost incidence, availability of information system, requirement of the costing system and management policy.
ELEMENTS OF COSTS
Elements of cost refer to the essential components or parts of the total cost of a cost unit. Total cost can be classified on the basis of traceability into Direct Costs and Indirect Costs. Costs can also classify based on their physical characteristics into Material, Labour and Overheads. The various components of Total cost can be stated as Element of cost. Let us understand each of the elements of cost in details
ELEMENTS OF COST
Material
Labour
Other Expenses
Direct Indirect
Direct
Indirect Direct
Indirect
INDIRECT MATERIAL:
Indirect Material is that which cannot be conveniently identified with individual cost units. They are required to be distributed amongst multiple cost units. Such material does not form a part of a finished product. In a spinning mill, engineering department spares, maintenance spares, lubricating oils, greases, ring travelers etc. some material, although forming part of the product, may not be treated as direct materials if they are used in measuring the same. For example, the thread used in stitching of dress material will be treated as indirect material.
INDIRECT LABOUR:
Indirect Labour is that Labour that cannot be conveniently identified with and allocated to a specific product, process, job or order. It is not directly engaged in productive operations. Indirect labour includes labour engaged in store keeping, material handling, maintenance, clerical activities etc. Indirect labour includes labour that is directly
identifiable with the finished product, but the cost is too small to merit separate measurement. For example, wages paid to trainees is taken as indirect labour.
OTHER EXPENSES All costs other than material and labour are termed as expenses. DIRECT EXPENSES:
Direct expenses, also known as chargeable expenses, includes all such expenditure other that expenses on direct material and labour that can be directly identified with a cost unit. Examples of direct expenses are Architect or Surveyors fee, cost of drawing and patterns, Royalty, Repairs and maintenance of plan obtained on hire etc.
INDIRECT EXPENSES:
Indirect Expenses are also called Overheads. They are also referred to as On Costs. They include indirect material, indirect labour, and other expenses, which cannot be directly charged to specific cost units. The overheads can be divided into three groups namely, (1) Factory overheads (2) Administrative overheads and (3) Selling and Distribution overheads.
ADMINITRATIVE EXPENSES:
Administrative expenses or overheads include all indirect expenses relating to administration and management of an enterprise. They are also called as Office
Overheads or Office on Costs. They include expenses incurred towards formulation of policies, planning and controlling the functions and motivating the personnel of the organization. Examples of administrative expenses are general office stationery, postage, telephone and telegram expenses, remuneration of managing directors, general managers, bank charges, legal expenses and audit fees etc.
ELEMENTS OF COST:
A cost is composed of three elements i.e. material, labour and expense. Each of these elements may be direct or indirect.
By grouping the above elements of cost, the following divisions are obtained:
1. PRIME COST = Direct Material + Direct Labour + Direct Expenses 2. WORK COST (FACTORY) = Prime Cost + Works or Factory Overheads 3. COST OF PRODUCTION = Works Cost + Administrative Overheads 4. TOTAL COST OR COST OF SALES = Cost of Production+ Selling & Distribution Overheads.
COST SHEET
Cost Sheet of ..for the period ended..
Particulars Direct materials consumed Opening stock of raw materials ADD: Purchase of raw materials Carriage on purchases LESS: Closing stock of raw materials Direct Wages Direct expenses PRIME COST ADD: Factory Overheads LESS: Sale of Scrap ADD: Work in Progress(Beginning) LESS: Work in Progress(closing) WORKSCOST or FACTORY COST ADD: Administrative Overheads COST OF PRODUCTIONOF GOODS SOLD ADD: Opening stock of finished goods LESS: goods Closing stock of finished Rs. XXXX XXXX XXXX XXXX XXXX Rs. Cost per unit Rs.
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
Xx Xx Xx Xx
Xx Xx
COST OF GOODS SOLD ADD: Selling & Distribution Overhead COST OF SALES or TOTAL COST NET PROFIT SALES
Xx Xx Xx Xx
For example:
month, and the fixed costs were still $1000/month, then each coach could be said to incur an overhead of $25 ($1000/40). Adding this to the variable costs of $300 per coach produced a full cost of $325 per coach. This method tended to slightly distort the resulting unit cost, but in mass-production industries that made one product line, and where the fixed costs were relatively low, the distortion was very minor.
For example:
if the railway coach company made 100 coaches one month, then the
unit cost would become $310 per coach ($300 + ($1000/100)). If the next month the company made 50 coaches, then the unit cost = $320 per coach ($300 + ($1000/50)), a relatively minor difference.
An important part of standard cost accounting is a variance analysis which breaks down the variation between actual cost and standard costs into various components (volume variation, material cost variation, labor cost variation, etc.) so managers can understand why costs were different from what was planned and take appropriate action to correct the situation.
The practice of paying workers on a 'set-piece' basis changed in favor of paying on an hourly rate. Modern companies tend to have relatively low truly variable costs (primarily raw material, commissions or casual workers) and very high fixed costs (worker salaries, engineering costs, quality control, etc.).
Equipment has become more complex and specialized and may be a very significant proportion of total costs. Changes in the level of full cost inventory create swings in profitability that is difficult to explain or understand. An increase in inventory can "absorb" costs of production and increase profits, while a decrease in inventory level will decrease profits.
Organizations with a wide range of products or services have processes which are common to several finished items, making cost allocation irrelevant or misleading.
As a result of the above, using standard cost accounting to analyze management decisions can distort the unit cost figures in ways that can lead managers to make decisions that do not reduce costs or maximize profits. For this reason, managers often use the terms "direct costs" and "indirect costs" to replace the standard costing, to better reflect the way allocation of overhead is actually calculated. Indirect costs (often large) are usually allocated in proportion to labor cost, other direct costs, or some physical resource utilization.
For example: If the railway coach company now paid its workforce a fixed monthly
rate of $8,000 (total) and its other fixed costs had risen to $2,600/month, the total fixed costs would then be $10,600/month. The unit cost to make 40 coaches per month would still be $325 per coach ($60 material + ($10,600/40)), but producing 100 coaches would result in a unit cost of $166 per coach ($60 + ($10, 600/100)), provided the company had the capacity to increase production to that level.
Managers using the standard cost for 40 coaches per month would likely reject an order for 100 coaches (to be produced in one month) if the selling price was only $300 per unit, seeing that it would result in a loss of $25 per unit. If they analyzed the fixed vs. variable cost distinction, they would see clearly that filling this order would result in a contribution to fixed costs of $240 per coach ($300 selling price less $60 materials) and would result in a net profit for the month of $13,400 (($240 x 100) - 10,600).
A company can use the resulting activity cost data to determine where to focus their operational improvement efforts. For example, a job based manufacturer may find that a high percentage of their workers are spending their time trying to figure out a hastily written customer order. Via ABC, the accountants now have a currency amount that will be associated with the activity of "Researching Customer Work Order Specifications". Senior management can now decide how much focus or money to budget for the resolutions of this process deficiency. Activity-based management includes (but is not restricted to) the use of activity-based costing to manage a business.
CHAPTER III
COMPANY PROFILE
1.1
One of the core areas of the companys business is manufacture of jelly Filled Telephone Cables. The company started this division in the year 1994-95 and has manufacturing facilities at Hyderabad & Goa. The company manufactures cable from the range of 5 pairs to 800 pairs with a total production capacity of 2.9 million CKM. The latest technology and testing facilities have let to the units being recognized and approved by the BSNL, MTNL, and Indian Railways (IR) and Airtel
The demand for cable is expected to decrease in future. Mitigating this to some extend is lower incidents of sales tax and income tax, low component of depreciation on its plans in Goa and low marginal financial cost to the company. Therefore, the company is continuously shifting its focus on other divisions.
1.1
Keeping pace with the change in technology, the company started manufacturing of Optical Fiber Cables in the year 1995. A sophisticated plant equipped with the state -of-the-art equipment from ROSENDAHL-KOBELKO helps the division produce 6000 route kilometers of pairs 6, 12, 24 fiber optic cables and accessories such as branch closures, optical fiber termination boxes and tool kits.
With the present trend of rapid technological up gradation in the Telecommunication Sectors, communication network. In order to meet this new challenge, in the year 2001 under backward Integration Plan, the company established its manufacturing facility for
Optical Fiber (which is the main raw material for manufacture of Optical Fiber Cables) at Hyderabad with an annual capacity of 2.5 lacks km initially, with Optical Fiber Drawing Towers equipment from KOBELCO of Japan.
With the growing concern over Global Warming and fast depletion of fossil fuels, worldwide the importance of generating power from non conventional energy resources such as Wind, Solar, etc, is being recognized. Recently your Company has made a foray into the non-conventional energy sector with a wind power project with an initial capacity of 1.25 MW at kapatgudda, Karnataka State. The project was commissioned on 30.03.07. The Company is also eligible for carbon credit for this project.
experience, execution skills and strong management bandwidth in terms of streamlining capacity expansion plans to sustain the accelerated growth rates. Most of the players witnessed a poor performance over the past few years with poor demand from the Power Sectors, a sluggish economy and declining performance of the Telecom cable business. However, there has been a sharp swing in the performance from the previous year with a healthy demand scenario, especially from the Power sector, resulting in improving utilization levels and a sharp improvement in margins. With a strong demand expected to flow over the next few years, most of the players are ramping up operations by aggressively adding capacities. The product mix is also witnessing a Change with focus on HT Cables. With cost rationalization, higher operating leverage and improved product mix, the margins of the major players are expected to stabilize at higher levels of around 14-16%. Thus a strong demand potential, healthy growth in revenues and positive outlook on profitability drives creates a bullish view on the sectors.
2.3 Infrastructure:
The Indian economy continues to surge ahead. The strong economic growth has augured well for Indian real estate market. Almost 80% of the real estate development is IT Parks & residential space and the rest comprises of offices, hotels, malls and entertainment avenues. Technology sector and the outsourcing story coupled with the demographic shift Characterized by rising disposable incomes and increased consumer spending has changed the face of commercial real estate market in India. It has been estimated that there is a demand for approximately 75-85mn .sq .ft of IT space over the next 5 years. The housing boom, despite firming up of interest rates on housing loans, continued its fourth successive year of price rise. 2007-08 witnessed a sharp price increase, with price rises ranging from 20-505 depending upon cities and locations within the cities. India possesses the elements of very strong demand growth on the housing market in the coming decades. In a very conservative scenario in which the average household size remains constant at the present-day level, the backlog of demand cannot be unwound and no shift in quality take place, each year some 4.7 million housing units would have to be completed up to 2030. This figure is based on additional demand of roughly 2.7 million housing units and annual replacement demand of roughly 2 million dwellings.
including Germany, Japan, and the United States, which comprises the potential export market for the Company.
performance environment, which characterizes the organizational climate that delivers that business strategy. The company has low labour turnover and has adequate system to reward and recognize the employee contribution towards the growth of the company.
5.3 Infrastructure
The Company has acquired several pockets of land in SEZ, IT Parks and Hardware Parks in various places in India where the Company will build IT/ITES Infrastructure. The Company has started the preliminary work for all the projects as detailed in the New Project Initiatives segmentation of the Directions report and the construction work will soon commence.
commence by Nov/Dec08. Thereafter, the Company shall also venture into the manufacture of SPV Cells.
7.
FINANCIAL
PERFORMANCE
&
OPERATIONAL
Fixed Assets:
During the year company has added Fixed Assets amounting to Rs252.39 Lakhs.
Inventories:
Inventories as on 31st March, 2010 amounted to Rs 1359.26 Lacks in the previous year.
Sundry Debtors:
Sundry Debtors amounted to Rs 1505.30 lakhs as on 31 st March, 2010 as against Rs 948.12 lakhs in the previous year. These Debtors are considered good and realizable.
Current Liabilities:
Sundry Creditors represent the amount payable to vendors for supply of goods. Advances received from Customers denote monies received for the delivery of future services.
Expenditure:
During the year company incurred expenses amounting to Rs 1173.64 Lakhs as compared to Rs 1020.52 Lakhs in the previous.
Depreciation:
The Company has provided a sum of Rs 220.32 Lakhs towards depreciation for the year as against Rs235.65 Lakhs in the previous year.
Net Profit:
The Net Profit of the Company after tax is Rs919.48Lakhs as against Rs 817.88 Lakhs in the previous year.
HUMAN
RESOURCES
DEVELOPMENT
AND
INDUSTRAIL
RELATIONS:
The company believes that the quality of its employees is the key to its success in the long run and is committed to provide necessary human resource development and training opportunities to equip them with skills, which would enable them to adapt to contemporary technological advancements. The Company is also maintaining a residential colony for its employees. Industrial Relations during the year continues to be cordial and the Company is committed to maintain good industrial relations through negotiations, meetings etc. As on 31st March 2008, the company has a total strength of 119 employees.
BOARD OF DIRECTORS
G. Mangilal Surana O. Swaminatha Reddy R. Surrender Reddy S.R Vijayakar Dr. R.N Sreenath Narender Surana Devendra Surana S.Balasubramanian - Chairman - Director - Director - Director - Director - Managing Director - Director - Whole time Director
BANKERS
State Bank of India Development credit Bank Limited Corporation Bank HDFC Bank Limited
STATUTORY AUDITORS
Sekhar & Company Chartered Accountant 133/4, R.P Road, Secunderabad-500003.
INTERNAL AUDITORS
Luharuka & Associates Chartered Accountants 5-4-187/3&4, Soham Mansion 2nd Floor, Above Bank of Baroda M G Road, Secunderabad-500003.
DIRECTORS RESPOSIBILITY
Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respect to Directors Responsibility statement, it is hereby confirmed: (1) That in the preparation of the accounts for the financial year ended 31st March, 2008; the applicable accounting standards have been followed along with proper explanations relating to material departures; (2) That the Directors have such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the State of Affairs of the Company at the end of the financial year and of the Profit or Loss of the Company for the year under review; (3) That the Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provision of the Companies Act, 1956 for Safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (4)That the Directors have prepared the Accounts for the financial year ended 31 st March, 2008 on a going concern basis.
B. use of Estimates
The Preparation of Financial Statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and reported amount of revenues and expenses during the reporting period. Difference b/t the actual results and estimates are recognized in the period in which the results are known materialized.
D. Leased Assets
Premium paid on Leased Assets is amortized over the lease period and annual lease rentals are charged to Profit and Loss Account in the year it accrues.
E. Depreciation
Depreciation is provided on written down value methods, except for Wind Power Plant for which Straight Line Method is followed, at the rate and in the manner prescribed in schedule XIV to the Companies Act, 1956.
F. Impairment of Assets
An assets is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
G. Investments
Current investments are carried at the lower of cost and quoted/fair value, computed category wise. Long Term Investment is stated at cost. Provision for diminution in the value of long-term investment is made only if such decline is other than temporary in the opinion of the management.
H. inventories
Items of Inventories are measured at lower of cost or net realizable value, after providing for obsolescence, if any. Cost of inventories comprises of all cost of purchase including duties and taxes other than credits under CENVAT and is arrived on First in First out
basis. Semi fix shed goods are valued at cost or net realizable value whichever is low. Finished goods are valued at cost including excise duty payable or net realizable value whichever is low. Cost includes direct Material, Labour cost and appropriate overheads.
L. Turnover
Turnover includes sale of goods, services, sales tax, service tax and adjusted for discounts (net), excise duty. Inter-Unit sales are excluded in the Main Profit and Loss account.
N. Segment Reporting
Companys operating Business, organized & Managed unit wise, according to the nature of the products and service provided, are recognized in Segments representing one or more strategic business units that offer products or services of different nature and to different Markets. Companys operations could not be analyzed under geographical segments in considering the guiding factors as per accounting Standard-17 (AS-17) issued by the Institute of Chartered accountants of India.
4. Gratuity cost amounting to Rs 0.84 Lakhs has been included in schedule 18 under contribution to Provident and other funds.
Sources of Funds
a) b) Share Capital Reserves and Surplus 1 2 113,022,000 758,660,988 871,682,988 113,022,000 708,926,682 821,948,682
14,716,360
6,706,717 66,960,974
70,524,415 68,456,511
Net deferred Tax Liability Total Application of Funds Fixed Assets (At cost)
a) Gross Block b) Less Depreciation c) Net Block capital work-in-progress Investment (at cost)
14
7,605,400
6,942,300
967,672,439 967,871,908
43,974,677
CHAPTER -V
ANALYSIS
As This Company has two units that is SURANA TELECOM & POWER LIMITED of Hyderabad unit (STL of Hyd) and SURANA TELECOM & POWER LIMITED of GAO unit ((STL of GAO) The analysis has done on b/w this two unit of cost sheet.
1) SALES: Table.1
INTERPRETATION:
The sales of STL (Hyd) unit amounts to Rs 200540678.8 and the sales of STL (GAO) unit amounts to Rs 388298312.6
ANALYSIS:
The sales of STL (Goa) unit are high because the sales of Jelly Filled Telephone Cable are higher as compare to STL (Hyd) the sales are low because the sale of Jelly Filled Telephone Cable are nil.
INTERPRETATION:
There is a Loss in STL (Hyd) unit which amounts to Rs 9795463.19 and Profit in STL (Goa) unit which amounts to Rs 71607241.61
ANALYSIS:
As the sales are high in STL (Goa) unit and Expenses are low there is a Profit where as in STL (Hyd) unit the sales are low and Expenses are high there is a Loss.
INTERPRETATION:
The Material Consumed of STL (Hyd) unit amounts to Rs 193744317 whereas of STL (Goa) unit amounts to Rs 253962722.8.
ANALYSIS:
The Material Consumed of STL (Goa) unit is high because its Purchases are high, where as the Material Consumed of STL (Hyd) unit is low because its Purchases are low
INTERPRETATION:
The Prime cost of STL (Hyd) unit is amounts to Rs 205300223 where as the Prime cost of STL (Goa) unit is amount to Rs 308305585.6.
ANALYSIS:
The Prime Cost of STL (Goa) unit is high because its Direct Expenses are high, where as the Prime Cost of STL (Hyd) unit is low because its Direct Expenses are low.
INTERPRETATION:
The Work Cost of STL (Hyd) unit amounts to Rs195107623.7, where as the Work Cost of STL (Goa) unit amounts to Rs323600058
ANALYSIS:
The Work cost of STL (Goa) unit is high because its Electricity Expenses are high which amounts to Rs 6477816, as compare to STL (Hyd) unit the Electricity Expenses are low which amounts to Rs 4446262.64.
6) COST OF PRODUCTION: TABLE.6 UNITS STL (Hyd) STL (Goa) COST OF PRODUCTION 204052062.5 3699233.92
INTERPRETATION:
The Cost of Production of STL (Hyd) unit amounts to Rs 204052062.5, where as the Cost of Production of STL (Goa) unit amounts to Rs 3699233.92.
ANALYSIS:
The Cost of Production of STL (Goa) unit is high because its Telephone Charges are high which amounts to Rs 366338, as compare to the Cost of Production of STL (Hyd) unit are low because its Telephone Charges are low.
INTERPRETATION:
The Cost of Goods Sold of STL (Hyd) unit is Rs 205864037.5; where as the Cost of goods sold of STL (Goa) unit is Rs 308189675
ANALYSIS:
The Cost of Goods Sold of STL (Goa) units are high because remaining other Expenses are high, as compare to STL (Hyd) units are low because other Expenses are low.
8) TOTAL COST: TABLE.8 UNITS STL (Hyd) STL (Goa) TOTAL COST 210336142 323600058.1
INTERPRETATION:
The total cost of STL (Hyd) unit is 210336142, where as the Total cost of STL (Goa) unit are 323600058.1.
ANALYSIS:
The Total cost of STL (Goa) unit are high because its Transportation Charges are high which amounts to Rs 6873019, as compare to STL (Hyd) unit its Transportation Charges are low which amounts to Rs 3048588.
CHAPTER V
CHAPTER -VI
CHAPTER-VII
BIBLOGRAPHY
CHAPTER VIII
APPENDICES
COST SHEET OF STL GOA UNIT FOR YEAR ENDED 31-3-2010 PARTICULARS OPENING STOCK 0F R.M STOCK TRANSFER FROM STL UNIT-1 ADD-PURCHASES STEEL TAPE R.M TO OTHERS JOINTING KIT COMPONENTS OTHER PURCHASES FAST EITHERNET TO E1 CONVERTS GALVANISHED M.S WIRE POLYESTER TAPE NYLON CABLE BINDER YARN PVC TELECOM TAPE HEAT SHRINKABLE PROFIT F.R.P RODS POLYESTER FILM MASTER BATCHES FILING COMPOUND CLEARING LIQUID BRANCH OFF CLIPS SHEATH CONNECTORS S.SCHANNELS A.L CANNISTERS CC RODS A.L FOIL HDPE LDPE GRANUALERS ADD-CARRIAGE INWARDS AMOUNTS AMOUNT 8258603 69744728.79 AMOUNT
4280800.99 3744608 1970080 2484 29987120 680292 917446 1438999 83866 2038115 538270 2555540 2608906 4447737 381790 151449 167516 829475 786408 119243916 20218173 3112863 4623106 204808960 2379208 207188168 10098630 212296 20917851 31228777
207188168 285191499.8
LESS-MODVAT ON RAW MATERIAL MODVAT ON CAPITAL GOODS CLOSING STOCK OF RAW MATERIALS
31228777
MATERIAL CONSUMED DIRECT EXPENSES CUSTOM DUTY CLEARING CHARGES JOBWORK OTHERS STORE & SPARES STORE CONSUMABLES CONSUMABLE STORES TOTAL DIRECT EXPS DIRECT WAGES SALARY HOUSE RENT ALLOWANCE LEAVE ENCHASEMENT SERVICE CHARGES ALLOWANCES LABOUR CHARGES E.S.I CONTRIBUTION (EEY'S) P.F CONTRIBUTION (EEY'S) STAFF & LABOUR WELFARE TOTAL DIRECT WAGES PRIME COST FACTORY OVERHEADS DIESEL FOR GENERATORS ELECTRICITY EXPS WOODEN DRUMS PACKING MATERIAL HANDLING CHARGES FREIGHT & CARTAGE REPAIRS & MAINTENANCES TO MACHINERY R & M TO BUILDING R & M TO ELECTRICALS LAB MAINTENANCE R & M TO OTHERS R & M TO CDMA PHONES PETROLS R & M TO VEHICALS FACTORY MAINTENANCE LEASE RENT LESS-FREIGHT CHARGES
253962722.8
3187633 6500 13167 2850 6625 2138061 113319 268465 105420.8 5842040.8
5842040.8 308305585.6
308305585.6
3687007 6477816 7123123 1040815 3720 199805 2901463.47 47859 249852 1772 375035 14448906 209622 222414 34013 248500 37271722.47 9616681
TOTAL FACTORY COST ADD-OPENING STOCK OF WIP LESS-CLOSING STOCK OF WIP LESS-SALE OF SCRAP WORK COST ADMINISTRATION OVERHEADS PRINTING & STATIONARY POSTAGE & TELEGRAM TELEPHONE CHARGES INSURANCE RENT EMPLOYEES RESIDENT RATE & TAXES PROFESSIONAL & CONSULTANCY CHARGES SUNDRY BALANCE WRITEOFF INCIDENTAL CHARGES BOOKS & PERIODICALS TYPE APPROVALS FEES WATER CHARGES WATCH & WARD TESTING CHARGES TENDER A/C OCTROI CHARGES OFFICE MAINTENANCE MISC EXPENSES LEGAL & LICENSE FEES FILING FEES ENTERTAINMENT EXPS BANK CHARGES BANK CHARGES ON LC'S COST OF PRODUCTION ADD-OPENING STOCK OF FINISHEDGOODS LESS-CLOSING OF FINISHEDGOODS COST OF GOODS SOLD SELLING & DISTRIBUTION TRANSPORTATION CHARGES COMMISSION ON SALE CONVEYANCE TRAVELLING EXPS(INLAND) ADVERTISEMENT
27655041.47 27655041.47
217406 99992 366338 17914 7500 186046 131246 351592.29 33281 475 333517 25621 601951 152863 57926 4957 27630 13856 32973 11796 49626 103964.63 870763 3699233.92
3699233.92
SALES PROMOTION BUSSINESS PROMOTION DONATION TOTAL COST PROFIT GROSS SALES LESS-SALE OF JOINTING KIT JELLY FILLED TELEPHONE CABLE SALE OF POLY ALUMINIUM FOIL SALE OFBLACK SHEATING COMPOUND SALE OF EITHERNET TO E1 CONVERTS STOCK TRF TO STL UNIT 1 JOB WORK SALE OF OTHERS
8501396
388298312.6
COST SHEET OF SURANA TELECOM & POWER LTD YEAR ENDING 31-3-2010 PARTICULARS AMOUNT AMOUNT AMOUNT OPENING STOCK OF R.M 4011487 ADD-STOCK TRANFER TO GOA UNIT 2 408164.56 ADD-PURCHASES OF R.M JOINTING KIT COMPONENTS 85472 MASTER BATCHES 1446399 CC RODS 41690174 CDMA ACCESSORIES 2500 PURCHASE OF PREFORMS 17728000 RAW MATERIAL T JELL FILLEDCABLE 243152 R.M TO OPTICAL FIBRE 8803696 NYLON GRANUALS 11510110 RODVING TEX 891643 F.R.P RODS 6319754 OPTICAL FIBRE 8967098 COPPER CATHODES 3760553 COPPER MATALLIC SCRAP 9964882 POLYAMIDE CHIPS 330319 P.V.C COMPOUD 22257 NYLON CABLE BINDS YARN 2522710 CDMA-BATTERY CONNECTIONCABLE 6000
BLACK POLYTHENE GRANUALS POLYESTER TAPE POLYBUTYLENE TEREPTHALATE HDPE LDPE GRANUALS FILING COMPOND CLEARING LIQUID POLYAMIODE R.M TO OTHERS ADD : CARRIAGE INWARDS
LESS: MODVAT IN R.M MODVAT ON CAPTIAL GOODS CLOSING STOCK OF R.M MATERIALS CONSUMED DIRECT EXPENSES JOB WORK OTHERS STORES & SPARES STORES CONSUMABLE CLEARING CHARGES CUSTOM DUTY DIRECT WAGES LABOUR CHARGES SERVICE CHARGES SALARY LEAVE ENCHASHMENT ESI CONTRIBUTION (EES) PF CONTRIBUTION (EES) STAFF & LABOUR WELFARE GRATUITY HIRE CHARGES
143884 1428651 5735285 54288033 14142992 1184502 339691 562096 1001650 193121503 622814 193744317 193744317 198163969 183435 167289 32115718 32466442 32466442 193744317 19521 13218 2574608.5 1157026 4174895 7939268.5 99861 22600 2715784 2533 86370 253340 298781.5 83905 53463 3616637.5 11555906 205300223 496480 4446262.6 704221 1274237 205300223
PRIME COST FACTORY OVERHEADS ADD: DIESEL FOR GENERATOR ELECTRICITY EXP REPAIRS TO BUILDING
REPAIRS & MAINTAINENCE TO MACHINERY R & M TO ELECTRICITY R & M TO OTHERS R & M TO CDMA PHONES PETROL R & M TO VEHICLES PACKING MATERIAL WODDEN DRUMS FREIGHT & CARTAGE LESS : FREIGHT CHARGES
83968 176646 2888558 36940.05 34562 229656 2399030 185042 12955603 1389191 11566412
11566412
ADD: OPENING STOCK OF WIP LESS : CLOSING STOCK OF WIP LESS: SALE OF SCRAP WORK COST ADMINSTRATIVE OVERHEADS ADD- PRINTING & STATIONERY POSTAGE TELEGRAM TELEPHONE CHARGES INSURANCE RENT EES RESIDENCE RATES & TAXES PROFESSIONAL & CONSULTANCY CHARGES REGISTRATION CHARGES INCIDENTAL CHARGES TYPE OFF APPROVAL FEES WATCH & WARD TESTING CHARGES OFFICE MAINTAINENCE MEMBERSHIP FEES MISC EXPENSES LEGAL & LICENCE FEES FILLING FEES BOOKS & PERIODICALS BANK CHARGES BANK CHARGES ON LC DEPRECIATION TENDER A/C FINANCIAL CHARGES 259476 364490 134223 348795 34000 342634 320239 6742 186920 157857 588507 129542 21372 60980 62650 26180 5618 4808 2931 15601 4931758 208194 42010.8
8944438.8
COST OF PRODUCTION ADD: OPENING STOCK OF FINISHED GOODS LESS:CLOSING STOCK OF FINISHED GOODS COST OF GOODS SOLD ADD- TRANSPORTATION CHARGES COMMISSION SALES/RENT ADVERTISEMENT SALES PROMOTION BUSSINESS PROMOTION 3048588 845528 141823 334268.5 101897 4472104.5 4472104.5 TOTAL COST LOSS OPTICAL FIBER CABLES HS SLEEVES SALES OF COPPER WIRE ROD SALES OF CDMA WIL PHONES COPPER CATHODES OPTIC FIBRE BUNDLES/CABLES STOCK TRANSFERS TO GOA UNIT 2 STOCK OF R.M Total Sales 15731625 1383896 43063831 7000 3031592 65931681 69744729 1646325 200540679
200540678.8