f-302 final
TRANSCRIPT
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DEPARTMENT OF FINANCE
UNIVERSITY OF DHAKA
Cost Accumulation
Process of a
Manufacturing Company
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Submitted To:
Mohammad Salahuddin Chowdhury, ACA
Lecturer
Department of Finance
University of Dhaka
Submitted By:
Group Members
Name ID
Mohammad Junaid Shawon 16-017
Md. Zahidul Islam 16-051
Md. Rashed Karim 16-125
Rashid Muntasir 16-165
Md. Zahirul Islam Khan 16-171
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Letter of Transmittal
June 7, 2012
Mohammad Salahuddin Chowdhury, ACA
Lecturer
Department of Finance
University of Dhaka
Subject: Submission of report titled Cost Accumulation and Reporting Procedure
of a Manufacturing Firm.
Sir
It gives us immense pleasure to submit our report on Cost Accumulation and
Reporting Procedure of a Manufacturing Firm. This report was assigned to us as
a partial requirement of the Cost and Management Accounting (F-302) course in 3rd
year 1st
semester.
While making the report, we came across many hurdles and pleasant experiences. But
the valuable experiences we have gained during the period will undoubtedly benefit usin the years ahead. This report gave us an opportunity to apply our theoretical
expertise, sharpen our views, ideas, and communication skills, and bridge them with
the real world of practical experience, which will be a good head start for our future
professional career.
We have tried sincerely to comprehend and translate our knowledge in writing this
report. We enjoyed this project work and gladly attend any of your calls to clarify on
our point, if necessary. We hope you would find the report in appropriate manner.
Sincerely yours
______________________Rashid Muntasir
On behalf of the Group
Section- A
16th
Batch
Department of Finance
University of Dhaka
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Acknowledgement
We are thankful and grateful to almighty Allah who has given us the strength
and ability to complete the report on Cost Accumulation and Reporting Procedure
of a Manufacturing Firm. We are also grateful to our Course Instructor
Mohammad Salahuddin Chowdhury to prepare this very important report. He has
given all sorts of help required to complete this. We are again grateful to those whohave given us necessary information and documents.
We also do sincerely declare that this report has been submitted, in partial
fulfillment of the requirement for the Cost and Management Accounting (F-302)
course. This report is written in our own language. Though we studied and followed
some books of cost and management accounting, no part of this report consists of
materials, copied or plagiarized from published or unpublished work of other writers
and that all materials borrowed and reproduced from other published or unpublished
sources have either been put under quotation or duly acknowledged with full reference
in appropriate places. Data used in this report is collected by visiting the Dhaka office
of Meghna Cement Mills Ltd. and browsing the companys website. As costing data is
sensitive and related to companys overall strategy, it is not available to the general.
As a result, we have used hypothetical data to form a case. We understand that the
report may be cancelled if subsequently it is discovered that this report is not our
primeval work that it consists of materials copied or plagiarized or borrowed without
proper acknowledgement.
We, at last, express special thanks from the bottom of our heart to all who help us
directly & indirectly to complete this report.
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Classification of costs
Manufacturing costs:
Manufacturing costs consist of:
Direct materials
Direct labor
Manufacturing overhead
Direct materials:
Direct materials are those materials that become an integral part of the finished product andwhose costs can be easily traced to the finished product.
Direct labor:
Direct labor consists of labor costs that can be easily traced to individual units of product. It
can also be called as touch labor since the direct labor workers typically touch the product
while it is being made.
Manufacturing overhead:
It consists of all the manufacturing costs in the factory except direct labor and directmaterials. So manufacturing overhead consists of the followings:
- Indirect materials- Indirect labor- Maintenance and repair of production equipment- Heat and light- Property taxes, depreciation and insurance on manufacturing facilities.
Nonmanufacturing costs:
Selling costs:
Selling costs consist of the followings:
- Advertising- Shipping-
Sales travel- Sales commissions
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- -Sales salaries- Cost of finished goods warehouse
Administrative costs:
Administrative costs consist of the followings:
- Executive compensation- General accounting- Public relations
Product costs versus period costs:
Product costs are the costs that are recognized as expenses on the income statement in the
period that benefits from the cost.
Product costs= Direct materials+ Direct labor + Manufacturing overhead
Period costs are the costs that are reported in the income statement as expenses in the period
when they are occurred.
Period costs= Selling expenses + Administrative expenses
Prime cost and conversion cost:
Prime cost= Direct materials+ Direct labor
Conversion cost= Direct labor + Manufacturing overhead
Variable cost versus fixed cost:
A variable cost is a cost that varies in direct proportion to change in the level of activity. Per
unit variable cost is constant and total costs change in proportion to the number of units
produced.
Fixed cost is a cost that remains constant within the relevant range regardless of the change in
the activity or output units.
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Cost accumulation procedures
Job order costing:
Costs are accumulated by job or specific order. This method assumes the possibility of
physically identifying the jobs produced and of charging each job with its own cost. Job order
costing provides opportunities for controlling costs as the jobs are specific.
Process costing:
Process costing accumulates the costs by production process or by departments. This method
is used when units are not separately distinguishable from one another during one or more
manufacturing processes. The following conditions may exist in case of process costing:
- The product of one process becomes the material f the next process.- Different products or even by-products are produced by the same process.
By-products and joint products
By-products are the product of relatively small value produced simultaneously with a product
of relatively greater total value. Normal products are produced in greater quantities than the
by-products. The manufacturer has only a limited control over the quantity of by- productthat comes into existence.
Joint products are produced simultaneously by a common process or series of processes, with
each product possessing as more than nominal value in the form in which they are produced.
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King BrandCement
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About Meghna Cement Mills Ltd.
Meghna Cement Mills Ltd. (MCML), the first manufacturing enterprise of
Bashundhara Group, is one of the largest Cement manufacturing industries in
Bangladesh. This organization was established in 1992 on the bank of Pashur River
and in the industrial zone of Mongla Port on 9.83 acres of land to produce Portland
cement. MCML has an excellent communication facility connecting all parts of the
country through river and roads.
MCML has started its commercial operation on 15th January 1996. Following a
successful public offerings, the company was listed with Dhaka Stock Exchange and
Chittagong Stock Exchange, the two bourses of the country in 1995 and 1996
respectively. The Company markets its products under the registered trade markKING BRAND. The manpower of Meghna Cement Mills Ltd. is 420 persons out of
which there are 80 Officers and 340 staff/workers.
The industry enjoys a unique facility in cargo handling both in receiving raw materials
and in dispatching finished product through its own 02 nos. of jetties suitable for
berthing sea going vessels.
At present the production capacity of MCML is approx. 1.0 million MT/annum.
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Plant, Factory & Other Infrastructure
Production Technology:
There are 4 nos. of grinding mill in MCML having production capacity of 3000 MT/day and these mills are equipped with high efficiency separator to segregate fine
particle from the coarse one. The dimension of each of the 02 (two) mills is 3m
diameter x 9m length (production capacity 30 TPH) while the each of the rest 02 is 3m
diameter x 11m length (production capacity 40 TPH).
Quality Assurance (Q.A.):
To ensure the product quality, the Quality Assurance (Q.A.) department collects
samples from different areas of mill house every after 1hrs. To evaluate quality of the
crushed product and thus feed back to the production department. Based on the quality
report determined by Q.A department, Production department acts accordingly.
Production and Packaging:
There are 4 nos. of cement silo for cement storing purpose in MCML, where the
capacity of each of the first 02 silo is 3500 MT while the capacity of each of the rest
02 is 5000 MT. Cement is extracted from the cement silo through extraction systemwhich consists of roots blower, inlet box, pneumatic shut off valve, flow control valve
etc. which are controlled from the control room of the pack house. There are 2 nos. of
roto packer having packing capacity of 100 MT / Hr. and 110 MT / Hr. respectively.
These packers are the equipments of modern technology where weighing system of
the delivered cement sack is fully electronic based to ensure proper weight of every
sack of cement.
Mainly paper made cement sacks are preferred for filling purpose although small
percentage of poly sack are also used based on the consumers demand. It may bementioned here that, the paper sacks are manufactured by the Sack plant of BG.
Environment Protection:
To assist the production process i.e. to enhance the mill output as well as for securing
dust free working environment there are several nos. of dust collectors with modern
deducting system in the mill house area. Moreover there are several nos. of dust
collector having larger capacity of modern deducting system to secure almost dust free
working environment.
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Delivery Control System:
There exists 02 modes of cement delivery system i.e. road delivery and vessel delivery
available in this plant. To prevent bag bursting while loading in vessel one spiral chute
has been designed with the barge loader.To ensure smooth delivery of cement sacks 19 nos. ten wheeler and 16 nos. six
wheeler company delivery trucks are being used.
Raw material unloading & Storing:
There exists a modern equipped jetty facility in this organization where the sea going
vessel can berth easily. There exists 02 nos. of hydraulic crane of modern technology
of German origin having unloading capacity of 250 MT/Hr each of which contribute a
lot to faster unloading.
Here it needs to mention that there exists a clinker shed having storing capacity of
35000 MT and for easy and faster conveying there exists a substantial numbers of
belt conveyors which has been designed technically and which lengths about 02
kilometers. Besides the two nos. of hydraulic crane there also exists 02 nos. of
mechanically driven crane namely Fransiab Crane which are mainly engaged for
limestone unloading.
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Raw Materials
& Other Inputs
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Cement is typically made from limestone and clay or shale. These raw materials are
extracted from the quarry crushed to a very fine powder and then blended in the
correct proportions.
This blended raw material is called the 'raw feed' or 'kiln feed' and is heated in a rotarykiln where it reaches a temperature of about 1400 C to 1500 C. In its simplest form,
the rotary kiln is a tube up to 200 meters long and perhaps 6 meters in diameter, with a
long flame at one end. The raw feed enters the kiln at the cool end and gradually
passes down to the hot end, then falls out of the kiln and cools down.
The material formed in the kiln is described as 'clinker' and is typically composed of
rounded nodules between 1mm and 25mm across.
After cooling, the clinker may be stored temporarily in a clinker store, or it may pass
directly to the cement mill.
The cement mill grinds the clinker to a fine powder. A small amount of gypsum - a
form of calcium sulfate - is normally ground up with the clinker. The gypsum controls
the setting properties of the cement when water is added.
Table showing the materials used for the Raw Mix for cement production and the
constituents of each raw material is provided on the next page:
Figure 1: The basic components of the cement production process
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Production
Process
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Portland cement is a fine, typically gray powder comprised of dicalcium silicate,
tricalcium silicate, tricalcium aluminate, and tetracalcium aluminoferrite, with the
addition of forms of calcium sulfate. Different types of Portland cements are created
based on the use and chemical and physical properties desired.
Portland cement types I - V are the most common. Portland cement plants can operatecontinuously for long time periods (i.e., 6 months) with minimal shut down time for
maintenance.
The stages of cement production at a Portland cement plant:
1. Procurement of raw materials2. Raw Milling - preparation of raw materials for the pyroprocessing system3. Pyroprocessing - pyroprocessing raw materials to form Portland cement clinker4. Cooling of Portland cement clinker5. Storage of Portland cement clinker6. Finish Milling7. Packing and loading
1. Raw Material AcquisitionMost of the raw materials used are extracted from the earth through mining and
quarrying and can be divided into the following groups: lime (calcareous), silica
(siliceous), alumina (argillaceous) and iron (ferriferous). Since a form of calciumcarbonate, usually limestone, is the predominant raw material, most plants are situated
near a limestone quarry or receive this material from a source via inexpensive
transportation. The plant must minimize the transportation cost since one third of the
limestone is converted to CO2 during the pyroprocessing and is subsequently lost.
Quarry operations consist of drilling, blasting, excavating, handling, loading, hauling,
crushing, screening, stockpiling, and storing.
2. Raw MillingRaw milling involves mixing the extracted raw materials to obtain the correct
chemical configuration, and grinding them to achieve the proper particle-size to
ensure optimal fuel efficiency in the cement kiln and strength in the final concrete
product. Three types of processes may be used: the dry process, the wet process, or the
semidry process. If the dry process is used, the raw materials are dried using impact
dryers, drum dryers, paddle-equipped rapid dryers, air separators, or autogenous mills,
before grinding, or in the grinding process itself. In the wet process, water is added
during grinding. In the semidry process the materials are formed into pellets with the
addition of water in a pelletizing device.
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3. PyroprocessingIn pyroprocessing, the raw mix is heated to produce Portland cement clinkers.
Clinkers are hard, gray, spherical nodules with diameters ranging from 0.32 - 5.0 cm
(1/8 - 2") created from the chemical reactions between the raw materials. Thepyroprocessing system involves three steps: drying or preheating, calcining (a heating
process in which calcium oxide is formed), and burning (sintering). The
pyroprocessing takes place in the burning/kiln department. The raw mix is supplied to
the system as a slurry (wet process), a powder (dry process), or as moist pellets
(semidry process). All systems use a rotary kiln and contain the burning stage and all
or part of the calcining stage. For the wet and dry processes, all pyroprocessing
operations take place in the rotary kiln, while drying and preheating and some of the
calcination is performed outside the kiln on moving grates supplied with hot kiln
gases.
4. Clinker CoolingThe clinker cooling operation recovers up to 30% of kiln system heat, preserves the
ideal product qualities, and enables the cooled clinker to be maneuvered by conveyors.
The most common types of clinker coolers are reciprocating grate, planetary, and
rotary. Air sent through the clinker to cool it is directed to the rotary kiln where it
nourishes fuel combustion. The fairly coarse dust collected from clinker coolers iscomprised of cement minerals and is restored to the operation. Based on the cooling
efficiency and desired cooled temperature, the amount of air used in this cooling
process is approximately 1-2 kg/kg of clinker. The amount of gas to be cleaned
following the cooling process is decreased when a portion of the gas is used for other
processes such as coal drying.
5. Clinker StorageAlthough clinker storage capacity is based on the state of the market, a plant cannormally store 5 - 25% of its annual clinker production capacity. Equipment such as
conveyors and bucket elevators is used to transfer the clinkers from coolers to storage
areas and to the finish mill. Gravity drops and transfer points typically are vented to
dust collectors.
6. Finish MillingDuring the final stage of Portland cement production known as finish milling, the
clinker is ground with other materials (which impart special characteristics to the
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finished product) into a fine powder. Up to 5% gypsum and/or natural anhydrite are
added to regulate the setting time of the cement. Other chemicals, such as those which
regulate flowability or air entrainment, may also be added. Many plants use a roll
crusher to achieve a preliminary size reduction of the clinker and gypsum. These
materials are then sent through ball or tube mills (rotating, horizontal steel cylinderscontaining steel alloy balls) which perform the remaining grinding. The grinding
process occurs in a closed system with an air separator that divides the cement
particles according to size. Material that has not been completely ground is sent
through the system again.
7. Packing and LoadingOnce the production of Portland cement is complete, the finished product is
transferred using bucket elevators and conveyors to large, storage silos in the shipping
department. Most of the Portland cement is transported in bulk by railway, truck, or
barge, or in 43 kg (94 pound) multiwall paper bags. Bags are used primarily to
package masonry cement. Once the cement leaves the plant, distribution terminals are
sometimes used as an intermediary holding location prior to customer distribution.
The same types of conveyor systems used at the plant are used to load cement at
distribution terminals.
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The following quantitative and cost data has been collected from King Brand cement
office:
Production Data Grinding Pyro-
processing
Cooling Finish
Milling
Packaging
Started in to process 50000 45000 40000 38000 37000
Transferred to the next
department45000 40000 38000 37000 37000
Units still in process 4000 3000 1000 500 -------
Units lost in process 1000 2000 1000 500 -------
Cost from preceding department ------- 6192000 9312000 9617800 10733700
Cost added by department 6547200 3608800 558250 1263750 1139600
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King Brand Cement
Grinding Department
Cost of Production Report
For April, 2012
Quantity Schedule
Units started in process 50000
Units transferred to the next department 45000
Units still in process 4000
Units lost in process 1000
Total 50000
Cost Charged to the Department Total Cost Unit Cost
Cost added by the department:Materials 3960000 77.55
Labor 331200 12
Factory overhead 2256000 48.05
Total cost to be accounted for 6547200 137.6
Cost Accounted for as Follows
Transferred to next department 6192000
Work in processEnding Inventory:
Materials 160000
Labor 99200
Factory overhead 96000
Total 355200
Total cost accounted for 6547200
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King Brand Cement
Pyroprocessing Department
Cost of Production Report
For April, 2012
Quantity Schedule
Units received from preceding department 45000
Units transferred to the next department 40000
Units still in process 3000
Units lost in process 2000
Total 45000
Cost Charged to the Department Total Cost Unit Cost
Cost from preceding department:Transferred in during the month 6192000 137.6
Cost added by the department:
Labor 984800 24.8
Factory overhead 2624000 64
Total cost added 3608800 88.8
Adjustment for lost units 6.4
Total cost to be accounted for 9800800 232.8
Cost Accounted for as Follows
Transferred to next department 9312000
Work in processEnding Inventory:
Adjusted cost from preceding department 432000
Labor 26000
Factory overhead 30800
Total 488800
Total cost accounted for 9800800
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King Brand Cement
Cooling Department
Cost of Production Report
For April, 2012
Quantity Schedule
Units received from preceding department 40000
Units transferred to the next department 38000
Units still in process 1000
Units lost in process 1000
Total 40000
Cost Charged to the Department Total Cost Unit Cost
Cost from preceding department:Transferred in during the month 9312000 232.8
Cost added by the department:
Factory overhead 558250 14.5
Adjustment for lost units 5.8
Total cost to be accounted for 9870250 253.1
Cost Accounted for as Follows
Transferred to next department 9617800
Work in processEnding Inventory:
Adjusted cost from preceding department 238600
Factory overhead 13850
Total 252450
Total cost accounted for 9800800
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King Brand Cement
Finish Milling Department
Cost of Production Report
For April, 2012
Quantity Schedule
Units received from preceding department 38000
Units transferred to the next department 37000
Units still in process 500
Units lost in process 500
Total 38000
Cost Charged to the Department Total Cost Unit Cost
Cost from preceding department:Transferred in during the month 9617800 253.1
Cost added by the department:
Labor 513750 13.7
Factory overhead 750000 20
Total cost added 1263750 33.7
Adjustment for lost units 3.3
Total cost to be accounted for 10881550 290.1
Cost Accounted for as Follows
Transferred to next department 10733700
Work in processEnding Inventory:
Adjusted cost from preceding department 128200
Labor 7650
Factory overhead 12000
Total 147850
Total cost accounted for 10881550
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King Brand Cement
Final Processing Department
Cost of Production Report
For April, 2012
Quantity Schedule
Units received from preceding department 37000
Units transferred to finished goods 37000
Cost Charged to the Department Total Cost Unit Cost
Cost from preceding department:
Transferred in during the month 10733700 290.1
Cost added by the department:
Materials 370000 10Labor 288600 7.8
Factory overhead 481000 13
Total cost added 1139600 30.8
Total cost to be accounted for 11873300 320.9
Cost Accounted for as Follows
Transferred to finished goods 11873300
Total cost accounted for 11873300
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Entries for material purchase and requisition
Stage 1
Material Purchase
Stage 2
Material UsedJournal Entry:
Materials.6128700
Cash.6128700
Journal entries:
Work in process;
Grinding Department3960000
Final Processing Department..370000
Materials4330000
Factory Overhead control
(indirect Materials) 1798700
Materials.1799980
General Ledger:
Material
General Ledger:Material
Dr. Cr.
6128700 4330000
1798700
Work in Process:
Dr. Cr.
3960000
370000
Factory Overhead Control
Dr. Cr.
1798700
Dr.
6128700
Cr.
Subsidiary record
Material Ledger Card
Received Issued Balance
6128700 6128700
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Stage 2
Payroll Distribution
Journal Entries
Work in Process3922050
Factory Overhead control(Indirect Labor)........1803700
Payroll.5725750
General Ledger:
Work in Process
Dr. Cr.3922050
Factory Overhead Control
Dr. Cr.1803700
Subsidiary Record
Job order cost Sheets
Direct Labor Section
Date Hours Amount
31/05/2012 5000 3922050
Factory overhead Analysis Sheet
Date Payroll Taxes Indirect
Labor
Indirect
Material31/05/2012 0 1803700 1798700
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Flow of Factory Overhead
Stage 1
Actual factory overhead incurred
Stage 2
Estimated Factoryoverhead applied
General ledger
Material
DR. CR.
IndirectMaterials.1798700
Payroll
DR. CR.
IndirectLabor1803700
Others
DR. CR.Other costs related to
production..901850
Factory Overhead Analysis Sheet
Date Indirect
Labor
Indirect
Materials
Other
Factory
overheads31/05/12 1803700 1798700 901850
General Ledger:
Work in process
DR. CR.
4504250
Applied Factory Overhead
DR. CR.
4504250 4504250