Summer Training Report

On

COSTING
LAKSHMI PRECISION SCREWS LTD
ROHTAK
Submitted in partial fulfillment of the award of degree of
MASTER OF BUSINESS ADMINISTRATIVE

Submitted to: Submitted by:

Mr. Jitender Kumar Nitin Bansal

M.B.A. 2 YEAR

ID-09mb020

Submitted to
Department of Management Studies
The Technological Institute of Textile & Sciences
Bhiwani
Sept 2010

1
DECLARATION

I Nitin Bansal MBA 2 year 3rd Semester, The Technological Institute of Textile &
Sciences Bhiwani hereby declare that the summer training report entitled “costing of LPS
” is an original work and the same has not been submitted to any other institute for the
award of any other degree. The interim report was presented to supervisor on __________,
2010 and the pre-submission presentation was made on . The feasible
suggestions have been duly incorporated in consultation with the Supervisor.

Countersigned

Signature of the Candidate

Signature of the Supervisor
Forwarded by

Director/Principal of the Institute

2
ACKNOWLEDGEMENT

I am very grateful to all the employees of “LPS” Rohtak, who made me understand
various aspects of costing during my summer training at their office.

Their co-operation and help during my training at their office can be highlighted by
the fact that they not only provide me with the required literature.

The credits for helping me undergo this employable experience goes to all “LPS”
Rohtak especially Mr. AJAY GOYAT.

(SIGNATURE)

Nitin Bansal

3
TABLE OF CONTENTS

Sr. No. Title Page No.

1. Declaration

2. Certificate

3. Acknowledgement

4. Preface

5. Industry Profile

6. Company profile

7. Banker

8. Introduction to Project: -Costing

9. Importance of study

10. Objective of the study

11. Significance of the study

12. Scope the study

13. Research methodology

14. Analysis And interpretation

15. Finding

16. Suggestions

17. Limitations

18. Bibliography

4
PREFACE

As a part of curriculum it is imperative for the students passing this course to

undergo training is an organization of repute to understand it’s functioning and have a
practical exposure of management. I was thus assigned summer training for two months
with “LAKSHMI PRECISION SCREWS LIMITED” Rohtak.

Finance makes businesses. It must be managed efficiently because it is lifeblood of

any business organization. No business can exist and survive without finance. The aim of
this Project Report is to bring out the importance of finance for any organization for
performing many of its function well at tine and on continuous basis. Finance is essential
for each and every organization whether big, small trading and manufacturing etc.

 For any organization/business firm “costing” is essential to attain long term goals.
Different types of budget are necessary for different types of operations. Without
costing no firm can pace a single step.

 As the part of my M.B.A programme, I was accorded the opportunity to under go

project of LPS during IIIrd Sem. During the period in association with the company the
topic of “costing of LPS” was taken up. I have put my sincere efforts for analysis.

5
Industry Profile

 Meaning of fasteners & types

 Uses
 Improved input front
 Production
 Export opportunity

6
INDUSTRY PROFILE

MEANING OF FASTENERS AND TYPES

A fastener is a broad term for nut, bolds & screws. It is an alternate of welding and
riveting. Fasteners can be classifying broadly in to two categories: -
1. Depending on their tensile
2. Mild Steel (MS) & high tensile fasteners.

USES
Mile steel fasteners are used in general application & produced by the SSI &
unorganized sector.
On the other trend (HT) fasteners that are relatively technology advance, are
manufactured by organized sector.
In India fasteners are used in textiles, machine tools, pumps automobiles & general
engineering largest consumer 50% HT fasteners.

MAJOR MANUFACTURES
In India there are 4 major players in fasteners industries:

1. Sundaram fasteners
2. Sterling tools
3. Precision fasteners
4. LPS

A Sundaram fastener Industries (SFI) is a leader of automotive fasteners. While,

precision fasteners limited (PFL) leads in industrial fasteners. Both are trying to enter in
the each other segment industry.

7
IMPROVED INPUT FRONT

Until a few years ago producer of HT fasteners had to input as much as 60% of
their Raw Material like careful steel & cold heading quality steel due to poor quality. But
availability of good steels in India also has changed the scenario. Now days Bihar alloys,
Shri SR alloys, Steel Authority of India Ltd, Salam Steel Corporation are producing the
special steel for fasteners.
The automobile boom is the major reason for continuous growth of fasteners
industry because the total sale of automobile (passenger cars, 2& 3 wheelers, multiutility
Vehicles, sport utility vehicles) has achieved the total figure of 10 lakhs figures and
commercial vehicles sales has also earned a growth of continuous increase in total sale.
The engineering segment has also registered 25 % growth, which is also a major
consumer of fasteners.

PRODUCTION

Near about 200000 metric ton of fasteners are being produced by various fasteners
manufactures in organized and unorganized sector.
Sundaram fastener is the largest manufacturer of HT fasteners. Which produces
approximately 48000 metric tons of high quality HT fasteners and it crossed the sales
figures of Rs. 800 crore in year 2000-2001.
Precision fasteners also have done well. It’s sales went up 32% to Rs. 251 Crore in
2000-2001.
LPS has also come in a long way. It crossed the 4475 tones mark of production in
2000-2001 years and total sales of 8640 Lakh.

8
EXPORT OPPORTUNITY

The concept of outsourcing fasteners is under going a sea change globally. Auto
giants around the world have identified countries to buy a particular component depending
upon technology and cost. Arun Sharma, president PFL explains ‘India has very good
scope in this of globalize purchase and many auto giants are looking at India as a sourcing
lease’.
Quality is an important factor in export but not the only criterion; what is more
important is timely deliveries and after sales service through there is a vast potential to
export fasteners to DEMs abroad, it has not been exploited due to difficulties in setting up
service points near each of the DEM manufacture. Hence the domestic producer foray
abroad is limited to the replacement market.
To the successful in exports, Indian companies don’t require foreign technical
collaboration, as a fastener is not a very hi-tech item. What is required is a foreign tie up
for marketing and after sales service. This is evident from the fact that recently the market
leader, Sundaram fastener tied up with kamax – were Rudolf Kellies, Germany for
marketing. As India prepares to join the international economic mainstream, there will be
many such tie-ups.

9
COMPANY PROFILE
2005

LAKSHMI PRECISION SCREWS LTD.

46/1 MILE STONE, HISSAR ROAD
ROHTAK-124001, HARYANA
Tel.: +91-1262-248288/248289/249920/249921
Fax.: +91-1262-248297/249922
Email: [email protected] /[email protected]
Website: www.lpsindia.com

10
BRIEF INTRODUCTION OF COMPANY

LPS Limited was promoted by Late Sh. Bimal Parsad Jain. LPS was incorporated as a Pvt.
Limited Company on 27th Dec., 1968. It was converted into a Public Limited Company in
August 1971. At present it is operating as LPS Limited.

LPS Plant-II is another step forward in progress of the company.

The company has started with only one machine 3/8’’ Bolt Maker. Now it has wide
range of machine producing a wide range of products. Today the company is the leading
manufacturer of High Tenslile Fasterners in India. The Quality of the product is well
accepted in the market so demand is growing very fast and to meet the demands and
expand its production range the company is adding more production facilities.

Besides LPS the other leading companies are Sundram Fastners of TVC group, Un-
Brako and Guest Keen Williams. Recently Pandatogon Screws and Fasteners Limited has
also been introduced.

The installed capacity at present is about 8795 mt and annual turnover of the
company is 74 crores approximately. The number of employee are 2000 which only 20 at
the time of installation.

Company has covered 23500 sq. yards. The screws, nuts and bolts range from 3mm
to 24mm in diameter. The products are marked under name and style of LPS.

11
BOARD OF DIRECTORS

L.K.Jain Chairman & Managing Director

D.K.Jain Vice Chairman & Managing Director

V.K.Jain Whole Time Director

R.K.Jain

S.D.Jain

J.R.Desai

M.M.Lal

S.R.Singh

S.K.Aggarwal

M.H.P.Byramji

B.S.Aggarwal

12
MANAGEMENT TEAM

S.K.Jain

Gagan Jain

Gautam Jain

Amit Jain

Niklesh Jain

B. B. Chhabra

R. k. Aggarwal

S. P. Arya

Sanjay Narula

R. P. Khanna

R.k. Rawat

Pardeep Dhawan

Sanjeev Sharma

AGM (FINANCE) & COMPANY SECRETARY

H.P.S. Chugh
AUDITORS

N.G. Gupta & Co.

Chartered Accountants
Delhi

13
OUTLINE

1) Name of the Company : LAKSHMI PRECISION

SCREWS LTD.

2) Founded on : March 10, 1972

3) Head Office & Factory : 46/1, Mile Stone

Rohtak - 124 001
Haryana (India)

4) Chairman & Managing Director : Lalit Kumar Jain

5) Total Assets : 978 Mill. INR (March’ 2004)

($19 Million)

7) Annual Sales : 1123 Mill. INR (March’ 2004)

($24 Million)

8) Employees

Production Office QC R&D Others Total

372 90 48 60 54 624
55% 14% 8% 10% 9% 100%

9. Factory

(Unit : m x
m)
SECTION PLANTS TOTAL
PLANT I PLANT II
w.e.f. 1972-73 1993-94
LAND 19,000 44,000 63,000
BUILDING 16,000 23,000 39,000

14
COMPANY ORGANISATION

Board of Directors

Chairman & Managing Director

Quality Management
Corporate Strategy

Marketing R&D Planning Production QA General

D S D L C P P P P P F H E
E A E A E R L L L U I R D
V L V B N O A A A R N D P
E E E O T D N N N C A
L S L R R U N T T H N
O O A A C I A C
P P T L T N I II S E
M M O I G E
E E R O
N N Y N
T T

15
CHRONOLOGICAL HISTORY OF LPS

1959 Established Nav Bharat Industries as small parts

manufacturer.

1972 Established Lakshmi Precision Screws Pvt Ltd as Socket Head Screws
Manufacturer

1973 Technical tie-up with the German firm M/s Richard Bergner.

1977 Acknowledged quality source of fastener.

1978 Technical tie-up with M/s Richard Bergner expires.

1983 Secured self certification status from FORD.

1984 Declared Public Limited Company.

1986 Secured self certification status from M/s Lakshmi Machine Works.

1988 Established as manufacturer-exporter.

1991 Received Regional Export Award from Engineering Export Promotion Council,
(EEPC) India.

1992 Received Regional Export Award from EEPC for the second Consecutive year.

1993 Received Regional Export Award from EEPC for the third consecutive year.

16
HISTORY (Contd.)

1993 Established Plant - II.

1994 Received Employment Generation Award from Director of Industries, Haryana

State.

1995 Accredited in Mechanical & Chemical Testing by A2LA, USA to meet Fastener
Quality Act of US.

1995 Accredited in Mechanical Measurement, Mechanical & Chemical

Testing by National Accreditation Board for Calibration & Testing
Laboratories (NABL). Government of India.

1996 Certified to ISO-9002.

1998 Installed Bolt Maker (AF 2525) to add production capacity

to 12200 MT.
- Self Certification status from TELCO.
- Technical Tie-up with Sunil Machinery Corporation, Korea.
- Joint Venture with Bossard AG-Switzerland.

1999 Licenced Manufacturers of TORX Screw from Camcar Co. –USA.

2000 QS 9000 Certification.

HISTORY (Contd.)

2001 ISO/TS-16949 Certification.

- ISO-14001 Certification.

2002 Implemented ERP–SAP R/3.

- Golden Peacock Award.

2003 Approved Volvo Global Suppliers.

17
MAIN PRODUCTS

Division Products
Precision Cold Forming parts for Automobile
Engine Parts ( Con Rod, Cylinder Studs,
Counter Weights, Cylinder Head, Rocker Arm,
Engine Mounting, Main Bearing etc.)
Bolts & Nuts Chasis Parts (Wheel Bolts, Wheel Hub Bolts &
for Nuts, Axle Bolts/Pin, Flanged Bolts, Collar Bolt,
Automobiles Shock Absorber Mounting Pins etc.)
Washer Assemblies Bolts
The other critical & safety parts bolts
Construction parts (Friction Grip)
Bolts & Nuts for Agriculture Industry
FASTENERS Bolts & Nuts for Industrial Machinery
Cold formed parts for Automobile (Piston Pins, Switch Body,
Ball Joints, Gear Blanks, Rocket Shaft, Ball Pins, Plunger etc.)
Pins for Hydraulics & Pumps
Bolt for Refrigeration Compressor
Friction Grip Bolts & Nuts for Construction Industry
Socket Head Cap Screw
Low Head Socket Bolt
Shoulder Bolt
Button Head
CSK
Standard Set Screws
Fasteners Hex Wrench Keys
Hex Head Bolt
Dovel Pin
Nuts
Friction Grip Bolts
Track Shoe Bolts
Stainless Steel Hex Head
Stainless Steel Socket Head Cap Screws

18
MISSION OF LPS

 To be a growth-oriented professional company promoting high standards of business

ethics and producing best quality products thereby achieving international standards of
excellence.
 To establish a strong R & D facility to fulfill the demands of the automotive industry as
comprehensively as possible.
 To make each member of the company feel proud and empowered by fostering a
culture of participation and innovation.
 To strive for reduction in defects and achieve 6 sigma and beyond so as to make quality
a way of life in LPS.
 To reduce cycle time in all processes as a step towards over-all improvement.
 To provide prompt and excellent service to customers anywhere in the world.
 To maximize shareholder’s wealth.

VISION OF LPS: -
19
Be recognized as the best and preferred supplier of national/international standard.

MOTTO: -
Total customer satisfaction and market leadership.

TARGET: -
Annual growth rate of 30% out of which export should contribute up to 50%
PLAN: -
Continuous up gradation of process and technology and development of
new products.

FUNCTION: -
System oriented approach.

PEOPLE: -
The driving force behind it.

IMAGE: -

To build up a high degree of customer confidence by sustaining international

standards of excellence in product quality, performance and service. To fulfill
the expectations which shareholders, employees, customers and country have
from LPS.

LPS PLANT – II
20
Lakshmi precision screws ltd. is one of the leading manufacturers and

suppliers of high tensile fasteners such as bolts, screws, nuts and similar

parts for automobile and other industrial sectors. LPS ltd. was founded

by shri Bimal Parsad Jain, in 1993, under the name of Nav Bharat

industries. LPS plant 2 was established in 1993. The company has latest

machines imported from abroad Japan, Germany and Taiwan. In

addition, the company has heat treatment; automatic microprocessor

controlled planting and phosphating plants. To update the both product

and process requirements, the company has its own research and

development cell which is well equipped with most modern chemical

and psychical labs.

OBJECTIVES OF LPS

21
BUSINESS MISSION: -

To achieve and maintain a leading position as supply of quality (precision)

fasteners and to serve the national and international market in th3 field of fasteners.

GROWTH: -

To ensure a steady growth in business to as to fulfill national expectation and

expand international operations.

PROFITABILITY: -

To provide a reasonable and adequate return on Capital employed primarily

through improvements in operational efficiency, capacity utilization and producing &
generating efficiency, capacity utilization and producing & generating adequate internal
resource to finance the company’s growth.

BUSINESS OF THE ORGANISATION

22
Here the organization in a manufacturing concern. It deals in the

domestic market and in the international market. The company

produces the High quality products, which are well accepted in both

domestic and foreign market. The Main market of LPS comprises of

1. DOMESTIC

 Automotive

 Aviation

 Heavy & light machinery

 Railways

 Machine tools, jigs& fixture

 Refrigerator & air conditioning

2.INTERNATIONAL

 Australia

 Germany

 Hong Kong

 Japan

 Singapore

 Sweden

 U.K

 South Korea

 South Africa

GROWTH IN PRODUCTION & SALES

23
YEAR/ SECTION 95-96 96-97 97-98 98-99 99-00 00-01 01-02

PRODUCTION, TONNES
PER YEAR
6529 6385 5753 5607 6656 6165 6424

SALES, MILLIONS INR

(TOTAL)
735 691 684 706 816 834 816

DOMESTIC MILLIONS INR 440 403 335 358 439 472 508

EXPORT MILLIONS INR 295 288 348 348 378 362 308

24
MAIN MARKETS

A) DOMESTIC (USER INDUSTRIES)

• Automotive

• Aviation

• Heavy & Light Machinery

• Hydraulic/Pneumatic Pumps

• Machine Tools, Jigs & Fixtures

• Railways

• Refrigeration & Air Conditioning

25
MAIN MARKETS (Contd.)

B) INTERNATIONAL (COUNTRIES)

• Australia

• Germany

• Holland

• Hongkong

• Japan

• Singapore

• South Africa

• South Korea

• Sweden

• Switzerland

• United Kingdom

• United States of America

CERTIFICATES

1. NABL

2. ISO / TS 16949

3. ISO 14001

4. Volvo Global Supplier Certificate

26
LAKSHMI PRECISION SCREWS LIMITED
HEAD OFFICE & FACTORY
46/1, MILE STONE, HISSAR ROAD,
ROHTAK-124 001, HARYANA (INDIA)
Tel.: +91-1262-248288/248289/249920/249921
Fax : +91-1262-248297/249922
Email.: [email protected]; [email protected],

BANGALORE OFFICE
305 A, Mittal Tower, 3rd floor, M G Road
Bangalore - 560 001 (India)
Phone : +91-80-25588587
Fax : +91-80-25597232
Email.: [email protected]

MUMBAI OFFICE
153-A, Mittal Tower, Nariman Point
Bombay - 400 021 (India)
Phone : +91-22-22821918/22843864/22325061/22325062
Fax : +91-22-22834492
Email : [email protected]. in

KOLKATA OFFICE
8, Canning Street,
3rd floor, Room No.303,
KOLKATA-700 001.
Phone :+91-33-2210754
Fax : +91-33-4739087/ 2107269 / 2210754
Email: [email protected]

NEW DELHI OFFICE

146, New Cycle Market, Jhandewalan Extn.
New Delhi – 110 055 (India)
Phone : +91-11-23527642/23532135
Fax : +91-11-27532138
Email: [email protected]

LPS-RECOIL DIVISION
505, 5th Floor, Ansals Mejestic Tower,
G-17, Community Centre, Vikas Puri, New Delhi-110018
Phone :+91-11-25617894
Fax: +91-11-25514043
E-mail: [email protected]

27
COST ANALYSIS

Cost: -

In general `cost means the amount of expenditure incurred On

or attributable to a given thing however the term cost cannot be Exactly

defined its interpretation depends upon

a) The nature of the business or industry

b) The context in which it is used

In a business where selling and distribution exp. Are quite nominal

The cost of the article may be calculated without considering the

Selling and distribution overheads while in a business where the

Nature of the product requires heavy selling and distribution

Expenses. Calculation of cost without taking into account selling and

Distribution expenses may prove very costly to the business moreover

Cost of sales and even an item of expense is also termed as cost

Element of cost
There are three broad elements of cost

a) Materials

Direct & indirect material

b) Labour

Direct & indirect Labour

c) Expenses

Direct & indirect Expenses

d) Overheads

Direct & indirect Overheads

28
ELEMENTS OF COST

DIRECT DIRECT DIRECT OVER

MATERIAL LABOUR EXPENSES HEADS

FACTORY OFFICE SELLING

OVER OVER &DISTRIBUTION
HEADS HEADS OVER HEADS

INDIRECT INDIRECT INDIRECT

MATERIALS LABOUR EXPENSES

29
Components of total cost

a) Prime cost

b) Factory cost

c) Office cost

d) Total cost

Prime cost = direct material + direct labour + direct expenses

Cost centers: -
Person, location or term of equipment for which cost may be
ascertained.

Prime cost = direct material + direct labour + direct expenses

Works cost = Prime cost + factory overhead

Cost of production =works cost + administration overhead

Cost of sale = cost of production + selling & distribution overhead

Factory overhead:-
Indirect labour

 Salary paid to work manager

 Salary of store keeper,

 Time keeper etc

30
Indirect expenses:

 Rent, rate of insurance

 Power

 Depreciation of factory building, plant

 Gas, steam, water, lighting and heating

 Oiling & cleaning

Office and administrative overhead:

 Indirect expenses

 General expenses

 Bank charges

 Legal charges

 Office salaries

 Telephone, postage & telegram

Indirect labour:

 Salaries & fees of director’s, CEO and their staff

 Salaries of cost accountant, financial accountant and their staff

 Salaries and allowance of legal administrative, public relation officer

31
Selling and distribution overhead:

Indirect material
 Catalogues, price list, mailing literature

Indirect labour

 Salaries and commission of salesmen and sales manager

 Wages of non-driver

 Indirect expenses:

 Traveling exp.

 Bad debts.

 Advertisement

 Entertainment exp.

 Packing and loading exp.

 Trade exp.

 Carriage outward

 Depreciation of delivery vans

 Window dressing exp.

32
TYPE OF COST

Costs are mainly three types

a) Variable cost
b) Fixed cost
c) Semi Variable cost

Fixed cost:-

It is that cost, which does not vary with change in out, put

e.g. rent of building, interest on capital, insurance expenditure,

Manager’s salary.

FIXED COST

2
COST

0
0 1 2 3 4
OUTPUT

Figure 1

33
2 Variable Cost:-

It is the cost, which vary more or less

Proportionately with variations in the volume of out put.

e.g. raw material, labour, fuel, power, light, sales commission,

packing expenses.

VARIABLE COST

5
4
3
COST

2
1
0
0 1 2 3 4 5
OUTPUT

Figure 2

34
Semi-variable Cost:-

These are those costs which are neither

fixed nor variable in relation to out put. They do not change in the

same ratio in relation in which the output changes.

e.g. dep. Cost of repairs & maintenance etc.

SEMI VARIABLE COST

3
COST

0
0 1 2 3 4 5
OUTPUT

Figure 3

35
COST ANALYSIS OF L.P.S.

Cost accounting is a recent development in the accounting world after

The first world war the industrialist become more and more cost

Conscious.

This is because

1) Growing competition between manufactures

2) Increasing Govt. control over pricing

Today it has assumed so much of important that if an industrial

Concern does not have an efficient costing system its very survival

Many become difficult

36
WHAT IS COSTING

Costing is the technique and process of ascertaining cost

WHY NEED FOR COST ACCOUNTING

1) Determining selling prices: -

Cost accounting provides information

Regarding the cost of make and sale such products of course many

Other factors such as the condition of market the area of distribution

The quantity, which can be supplied by the management before

Deciding the price. But the cost plays a dominating role.

2) Determining and controlling efficiency: - In cost accounting

Facilities measuring of the efficiency of the organization as a whole as

Well as dept. wise cost accounting also uses numbly of methods e.g.

Budgetary control, standard costing etc. for controlling cost. This

Greatly increases the operating efficiencies of the enterprise

Facilitating preparation of financial and other statements: -

In order to

Operate the business at a high of efficiency. It is essential for the

Management to a frequent review of production, sales and operating

Results. A developed cost accounting system provides immediate

Information regarding stock of raw materials, work in progress and

Finished goods. This also helps in speedy preparation of financial

37
Stateme

INSTALLATION OF COSTING SYSTEM

The Installation of costing system required careful consideration of

The following two inter-related aspects overcoming the practical

Difficulties in introducing the system e.g.

1) Lack of support from top management

2) Resistance from existing staff

3) Non-cooperation at other levels

4) Shortage of trained staff

5) Heavy cost

Main consideration
1) The product

2) The organization

3) The objective

4) The technique

5) Informative and sample

6) Methods of maintenance of records

7) Elasticity

8) Accuracy of data

9) Current practices

38
METHODS OF COSTING
Costing has been defined as the technique and process of ascertaining

Costs. The principles in every type of costing are same but the method of

Analyzing and presenting the costs differ with the nature of business

Job costing:

This method applies where work is undertaken to customer’s special

requirements. Cost unit in job costing is taken to be a job for which costs are

separately collected & ascertained. A job comprises a specific quantity of a

product to be manufactured as per customer’s specifications. For e.g. printing

press, painters, repair shops etc.

Contract costing:-

The difference between job & contract is that job is small & contract is big. It

is well said that contract is big job & job is a small contract. The cost unit

here is a ‘contract’ which is long duration & may continue over more than one

financial year, it is most ruited to constriction of building, dams, bridges,

roads etc.

39
Batch costing:-

In this method, the cost batch of identical products is ascertained of thus,

each batch of products is a unit of cost for which costs are accumulated. It is

used in production of readymade garments, shoes, toys etc.

Process costing:-

In this method a product passes through different stages so costs for each

process are accumulated. In order to arrive at unit cost, total cost of process is

divided by no. Of units . the finished product of one process is passed on to

next process as raw material. For e.g. sugar mills, textile mills, chemical

works & soap manufacturing etc.

Operation costing:-

It is refined from of process costing. A process may insist of no. of operations

& operation costing involves cost ascertainment for each operation instead of

process.

40
Single or unit costing: -

This method is used when production is uniform & consists of single or two

or three varieties of same product. Here, cost per unit of production is

ascertained of as units of output are identical, cost per unit is found by

dividing total cost by no. of units produced. It is used in floor mills, steel

production etc.

Operating costing: -

This method is used in undertakings, which provide services instead of

manufacturing products. This is regarded as variation of process costing as

costs are complied for specific period. For e.g. electricity companied, hotels

hospitals, cinemas etc.

Multiple or composite costing: -

It is an application of more than one method of cost ascertainment in respect

of the same product. It is used in industries where a no. Of components are

product separately manufactured & then assembled into final product. E.g.

television co., scooter or car manufacture, refrigerator manufacture etc.

TECHNIQUES OF COSTING
41
1 Standard Costing:-

The preparation and use of Standard cost, their comparison with actual costs

and analysis of variance to their causes and points of incidence. Standard

costs are determined for each element of cost _direct material, direct labour,

overheads separately and then variations from actual costs are computed in

respect of each element distinctly so as to detect which part of costs needs

control and to which department, process or operation, the responsibility may

be placed.

2 Budgetary Costing: -

Budget is the expression of plan in financial form & budgetary control is a

technique applied to control of total expenditure on materials, wages &

overheads by comparing actual performance with planned one.

3 Marginal Costing: -

In this technique separation of costs into fixed & variable costs is of special

interest & importance. This is so because Marginal Costing regards only

variable costs as cost of products. Fixed cost is as period cost of no attempt is

made to allocate or apportion. this is transferred to costing P&L A/C of

period. This technique is used to study the effect on profit of changes in

volume or type of output.

4 Total Absorption Costing:-

42
It is traditional method of costing whereby total i.e. fixed & variable

costs are charged to products. But this is now days considered to have only

a limited application.

5 Uniform Costing:-

This term is used to refer to the use of uniform methods of costing for

different undertakings in the same industry.This helps to compare the

performance of one firm with that of other & thus to drive the benefit of

anyone’s better experience & performance.

PRODUCT COSTING SYSTEM IN L.P.S.

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This is based on manufacturing cost as direct cost and indirect cost

Which is calculated on historical for a particular period likely

General consumables consumption, salary & wages, tool

Consumption secondary dies consumption, power consumption,

General repair &maintenance, repair to machinery, water

Consumption, machine cost (depreciation) and other direct expenses

to each machine.

The direct manufacturing cost is directly absorbed to each machine.

In cost sheet hourly cost of labour, manufacturing (power,

Consumable, water, repair of machinery) and depreciation of

Machine used for various operation likely forging, secondary, and

Heat treatment, finishing which part of direct cost.

The cost per pc of manufacturing cost is calculated on the standard

Hourly output of each machine multiplied to hourly rate of each

Machine and for fixed cost hourly rate calculated on efficiency factor

Of each operation.

The sum of raw material cost/pc, labour cost/pc, manufacturing

Cost/pc, depreciation cost/pc and packing cost/pc is known factory

Cost/pc.

IMPORTANCE

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A) TO MANAGEMENT

1 Reveals profitable & unprofitable activities:- A system of

cost accounting reveals profitable & unprofitable activities so that steps

may be taken to reduce or eliminate wastage & inefficiencies occurring

in any form such as idle time, under utilization of capacity, spoilage of

material etc.

2 Helps in cost control:- Cost accounting helps in controlling costs

with special techniques like standard costing & budgetary control

3 Helps in inventory control:-Perpetual inventory system, which is

an integral part of cost accounting, helps in the preparation of interim

profit & loss account. Other inventory control technique like ABC

analysis, level setting etc. are used in cost accounting

4 Helps in cost reduction:= It helps in the introduction of a cost

reduction programme & finding out new & improved ways to reduce

costs.

5 Helps in decision-making:- It supplies suitable cost data & other

related information for managerial decision-making such as

introduction of new product line, replacement of old machinery with an

automatic plant etc.

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6 Aids in formatting policies:- Cost accounting provides such

information as enables the management to formulate various types of

polices like production, pricing

7 Helps in making estimates:- Adequate costing records provide the

reliable information upon which tenders & estimates may be prepared

8 Reveals idle capacity:- A concern may not be able to work to full

capacity due to reasons as shortage of demand, machine break down or

other difficulties in production. A cost accounting system can easily

work out the cost of idle capacity. So that may take immediate steps to

improve the position

9 Guides the fixing selling prices:- Cost is one of the most imp.

Factor to be considered while fixing the price of product. A system of

cost accounting guides the management in the fixation of selling prices

particularly during depression period when prices may have to fixed

below cost.

10 Checks the accuracy of financial accounts: Cost accounting

provides a reliable check on the accuracy of financial accounts of

accounting period

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11 Prevents frauds and manipulation:- Cost audit system, which is

a part of cost accounting, helps in preventing frauds of those reliable

cost data can be furnished to management & others.

12 Assist in increasing productivity:- Productivity of labour &

material can easily be improved/increased as costing measures the

productivity & suggests the ways to improve it.

13 Costing makes comparison possible:- If costing records are

regularly kept, the comparative cost data for different periods & various

volume of production will be suitable that will helps the management in

forming future lines of action.

14 Helps in channelising production on right lines:-Costing

makes possible for management to distinguish between profitable &

non-profitable activities so that it can only flows on the profitable

activities.

B) TO WORKERS

Workers are benefited by introduction of incentive plans which is an integral

part of a cost system. This results not only in higher productivity but also

higher earnings for them.

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C) TO SOCIETY

An efficient cost system is to lower cost of production the benefit of which is

passed on to public at large in from of price of goods or services.

D) TO GOVT. AGENCIES & OTHERS

A cost system produces ready figures for use by govt., wage tribunals, trade

unions etc. For use in problems like price fixation, wage level fixation,

replacement of industrial dispute etc.

PURPOSE OF COSTING

 To know the earning capacity or profitability

 To know the efficiency of machines

 To make the comparative study with others

 To know the trend of business

 To know the efficiency of management

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 To provide the useful information to the management

PROVISION FOR OPERATING POLICY

In this also helps the management in formulating operating polices.

These are

1) Determine of cost-volume profit relationships

2) Shutting down or operating at a loss

3) Continuing with the existing plant and machinery or replacing

4) Them by improved and economical means.

THE FOLLOWING ACCOUNTING HEADS ARE IN

L.P.S.

Manufacturing expenses

 Consumable stores, spare parts and tools

 Electricity, water and diesel

 Job work charges

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 Repair to machinery

 Testing charges

 R&D expenses

 Technical know how Fee

Personal expenses

 Salaries, wages and other amenities

 Bonus

 Co’s contribution towards gratuity trust, P.F., E.S.I.

 Staff welfare

 Staff recruitment & training

 Watch & ward expenses

Selling & distribution expenses

 Packing expenses

The other accounting heads of balance sheet are shown separately in

Cost sheet under these with fixed percentage of administration cost,

sales & marketing and other expenses.

CONTRIBUTION
The difference between sales and variable cost is known as

Contribution

PROFIT/VOLUME RATIO
Establishes a relationship between the contribution and the sales

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Value.

BREAK – EVEN POINT

The point, which breaks the total and the sales to show the level of

Output or sales at which there shall be neither profit nor loss is

Regarded as break-even point.

Importance of the study

This two month training in any organization, though it seems a more

practical any fulfillment of diploma is very much important for a

student of PGDM. The purpose the study is develops the ability to

decision making. A right decision at right time itself helps an org. to

run smoothly without any problem arising on regular basis. Personal

relationship and industrial must be smooth by this training. This

training in any org. gives an idea of how decision is taken tactfully

before any Problem comes to an employee.

Objectives of the study

To know the cost analyze & to make the reader familiar about the financial
aspects of the LPS.

Here the main objective of the study is as follow

 To know the cost position of the organization.

 What management system adopted by the organization to inform

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all the Departments.

 To provide a reasonable & adequate return on capital through

improvement

 Efficiency, utilization, producing & generating adequate internal

resources to Cost the company growth.

Significance of the study:

1. To get acquainted the readers the information regarding costing

2. Aspects of the company.

3. To analyze the cost progress among last year.

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Scope of the study

It become quite difficult rather impossible to make judgment about the

position of any business by way of analyze the cost statements of one

year. To get a view about the business happenings, the past data of some

years relating to the problem are studied and is determined. The

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present study covers a period of two years from march 2003 to

march 2005. A large period may prove inconvenient while a shorter

period would not give desired results. A period of four to six years is

to be considered to be the optimum one.

FOCUS OF THE PROBLEM

Any type of research study suffers from certain limitations relating to either

the research itself or to the topic through. The degree and nature of the

limitations varies with the topic.The present study has been undertaken to

analyze of LPS Ltd. It aims to study how efficiency the costing is being

managed in the company and how for it contribution to the overall objective
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of maximization of shareholder wealth and the organization wealth.

Costing

Machine costing

Machine hour rate

Machine hour rate depends upon following

1) Period

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2) Production

3) Actual planned hours

4) Actual running hours

5) Actual down time hours

6) Down time

Actual down time hours = Actual planned hours - Actual

running hours

Down time = Standard hours/ Actual planned hours/Budgeted

hours - Actual running hours

1) M.H.R. = Total expenses/total Actual planned hours

2) M.H.R. = Total expenses/total Actual running hours

3) M.H.R. = Total expenses/total Standard hours

4) M.H.R. = Total expenses/total Standard running hours

RESEARCH METHODOLOGY

The procedure adopted for conducting the research requires a lot of

attention as it has direct bearing on the accuracy, reliability and adequacy of
results obtained. It is due to this reason that research methodology, which we
used at the time of conducting, the research needs to be elaborated upon. It
provides the researcher criteria by which we can decide which techniques and
procedures will be applicable to a given problem. At the same times it helps
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the researcher to clearly state what course of action he selects at the time of
conducting the research and why he select then so that they can be evaluated
by others also.

RESEARCH PROBLEM: -
In research process, the first and foremost step happens to be that of
selecting and properly defining a research problem. A research problem, in
general refer to some difficulty which a researcher experiences in the
context of either a theoretical or practical situation and wants to obtain a
solution for the same.
The present project has been undertaken to analyse the various type of
budget i.e. sale budget variable/semi variable expenses budget, depreciation
budget. Also to see whether, there are deviation between budget and actual
if yes, than what cause behind this.

RESEARCH DESIGN: -

A research design is the arrangement of conditions for collection and

analysis of data in a manner that aims to combine relevance to the research
purpose with economy in procedure. In fact research is the conceptual
structure within which research is conducted; it constitutes the blueprint for
the collection, measurement and analysis of data.

Different research designs can be categorized as: -

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 Research design in case of exploratory research studies
 Research design in case of descriptive research studies
 Research design in case of diagnostic research studies
 Research design in case of hypothesis-testing research studies

The present study is Descriptive in nature. Descriptive research studies are

those studies, which are concerned with describing the characteristics of a
particular individual, or of a group. Studies concerned with specific
predictions, with narration of facts and characteristics concerning individual,
group or situations are all examples of descriptive research studies. The
design in such studies must be rigid and not flexible and must focus attention
on the following: -
 Formulating the objective of study
 Selecting the sample (how much material will be needed)
 Collecting the data (where can the required data be found)
 Analyzing the data
 Reporting the findings

SAMPLE DESIGN: -

A sample design is a definite plan determined before any data are actually
collected for obtaining a sample from a given population. The amount of
research work is always limited by shortage of time and resources. Due to
these limitations information should be such that it may be representative of
entire universe. So only alternative is of sampling.

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In present project a sample size of past two years (2003-2004 and 2004-
2005) is taken to study the problem. It has been done due to the time
constraint.

DATA COLLECTION: -

In dealing with any real life problem it is often found that data at hand are
inadequate, and hence, it becomes necessary to collect data that are
appropriate. The task of data collection begins after a research problem has
been defined and research design chalked out. While deciding about the
method of data collection to be used for the study, the researcher should
keep in mind two types of data viz., primary and secondary.
In present study we have made use of secondary data collected from
accounts of LPS.

ANALYSIS AND INTERPRETATION OF DATA: -

After the data have been collected, the task of analysis them are done. The
analysis of data requires a number of closely related operations such as
establishment of categories, the application of these categories to raw data
through coding, tabulation and then drawing statistical inferences.

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In present study we have critically examined the accounting data in detail.
It helps us to obtain better understanding of firm’s position and
performance.
Interpretation means drawing inferences and conclusion after conducting
detailed analysis.

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MACHINE HOUR RATE OF FORGING SECTION

DURING THE YEARS2003-04 & 2004-05

Machine Total Total Hourly

Name Variabl Fixed Rate
e Cost
Cost
164S 937 466 103
133L 597 381 978
63S 316 228 544
13B5SL 243 699 942
19B3S 456 474 930
½”BM 784 933 1717
5/16”B 323 415 738
M
8B5SL 808 1071 11519
1
3/8”BM 507 627 1134
AF2525 1634 4530 6164
134BS 363 499 862

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MACHINE HOUR RATE OF SECONADRY SECTION
DURING THE YEARS2003-04 & 2004-05

Machine Total Total Hourly

Name Variabl Fixed Rate
e Cost
Cost
DPR 16S 99 117 216
DPR 12LL 115 98 213
DPR 6S 49 76 125
DPR 8L 96 115 211
DPR 5L 62 72 134
MTR 15-I 136 51 187
MTGS 12 99 60 159
YC 530 62 52 114
WMW 132 75 207
MTR 15-II 136 59 195
UM-3S 71 152 223
MTR 15-III 130 58 188
PRX 24E 1173 1883 3056
HR 3 116 251 367
PW 10E 107 137 244
MTR 20 173 104 277
CGR 406H 179 203 382
UM 3D 262 1363 1625

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MACHINE HOUR RATE OF SECONADRY SECTION
DURING THE YEARS2003-04 & 2004-05

Machine Total Total Hourly

Name Variabl Fixed Rate
e Cost
Cost
MTR 15-IV 124 98 222
DRILL 31 279 310
JINNFA 51 50 101
PMT-I 36 107 143
PMT-II 36 43 79
PMT-III 33 19 52
NUT TAPPING 179 242 421
RC 16-I 87 70 157
RC 16-II 90 74 164
RC 16-III 63 66 129
RC 16-IV 65 96 161
RC 1812 80 171 251
GN 80P 48 87 135
VAUN 21 40 61
LT 16 94 92 186
LSLO 84 104 188
LT 2 83 110 193
TC 250 113 168 281

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FINDING

1 The down hours in some machine have been too high as

compared to the actual time hours of the machine on the daily

basis.

2 Out put of the machine was found to be at 60% efficiency.

3 Motivation level of causal labour due to this wages is

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SUGGESTIONS

 LPS should have control over the cost of sale. to do this LPS should go

through the cost effective management..

 They should control over the fixed expenses. Because in every year

actual value founded more than budgeted value and there is high

deviation between actual & budgeted.

 Down time hour can be decreased by decreasing the time in which

the tools and dies are changed for new product

 Efficiency of the machine can be increased by performing proper

and timely servicing and maintenance of the machine

 Last but not least motivation level of casual labour can be boosted

up by offering them the better wages overtime and attractive and

other facilities

 operator of machine should be qualified and experienced

they knowledge about the machine

 give the proper guide line to the operator

 tools & dies should be proper ISI marked company not temporary.

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LIMITATIONS

 The study of competitive firms could not be made. Thus comparative study

could not be possible.

 The data could have been analyzed and probed form different angles,

interpreted and studied more deeply, but it could be studied upto a limit. A

deeper insight could have revealed more and better results.

 The scope of the present study had to be limited due to paucity of time.

 The secret policies of LPS does’t allow us to use more data.

 It is only the study of interim of reports.

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BIBLIOGRAPHY

 Mittal, Maheshwari, Cost Accounting and financial Management,Shree

Mahavir Book Depot

 Kothari, C.R., Research Methodology-Methods and Techniques, New

Delhi, Wishwa prakashan Pvt. Ltd.

 Aggarwal, M.D., Aggarwal, N.P., Financial Management, Jaipur,

Ramesh Book Depot

 Records of L.P.S.

 Website: WWW.lpsindia.com.

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