Documente Academic
Documente Profesional
Documente Cultură
PATIALA (Punjab)
Submitted to Punjab Technical University, Jalandhar in partial fulfillment of the requirements for the degree of
ACKNOWLEDGEMENT
I hereby want to thank Federal Mougal Goetz India Ltd. and its members for their help given to me during my training. I was thrilled to find that people here were very cooperative and helped me in all ways possible. They were very eager in solving my queries and were ready to help all the time. Moreover, I want to take this opportunity to thank Ms. SHUBKAMNA Despite being one of the busiest people in the bank he took out time to attend to my questions. So for this, I want to thank him for his co-operation and knowledge that he has imparted to me.
SAHIL KUMAR
DECLARATION
I, SAHIL KUMAR hereby declare that the project entitled PRODUCT COSTING assigned to me by FEDERAL MOGUL GOETZE (INDIA) LTD, during my 8 weeks training for the partial fulfillment of MBA is the original work done by me and the information provided in the study is authentic to the best of my knowledge. This study has not been submitted to any other institution or university for the award of any other degree.
SAHIL KUMAR
TABLE OF CONTENTS
SR. NO. PAGE NO. 02 03 04
INTRODUCTION
Company Profile [Goetze (India) Ltd. Company profile [federal mogul
07 08 12
02
Federal Mogul Goetze (India) Ltd. SCOPE & OBJECTIVE OF STUDY Research Methodology Limitations
32 33
03
04
CONCLUSION
SWOT Analysis Findings & Suggestions
70 72 76
05
BIBLIOGRAPHY
Chapter 1
INTRODUCTION
COMPANY PROFILE
It is good to have goodwill It is good to have enthusiasm But it is essential to have training Pt. J.L.Nehru
The above quoted lines by the great soul Pt.J.L.Nehru rightly tell us that training is a very necessary part in ones life of one wants to achieve success &have proper knowledge about a particular aspect.
Federal Mogul Goetze (India) Limited was established in 1954 as a joint venture with Goetze-Werke of Germany. Goetze-Werke of Germany is now owned by Federal-Mogul Corporation of USA, a 6.3 billion company and one of the largest manufacturers of automotive components in the world. Federal Mogul Goetze (India) Limited is the largest manufacturer of PISTONS & PISTON RINGS in India.
The present product range covers Piston Rings which constitute the Ring Activity and Pistons, Piston-Pins and Circlips in Piston Activity. The company is the largest manufacture of Piston Rings and Pistons in the country. Over a period of time, keeping in view the nature of demand, additional capacities were created besides upgrading technology to growing trends by virtue of stream ling quality culture, adaptation of latest technology & equipment. Technology leadership matched with innovated thinking has made GOETZE products to enjoy a high degree of customer confidence and is the first choice of every discerning customer for applications ranging from Bi-wheelers to Battle Tanks.
Our History 1899 1940: Founded on Innovation 1941 1956: Diversifying for Success 1957 1974: Going Global 1975 2005: A Bright Future
Federal-Mogul Corporation is an innovative and diversified $6.3 billion global supplier of quality products, trusted brands and creative solutions to the automotive, light commercial, heavy-duty truck, off-highway, agricultural, marine, rail and industrial markets. The 45,000 people of Federal-Mogul located in 35 countries drive excellence in all they do. Companys globally networked engineering and technical centers in the U.S., Europe and Asia enable to bring customers breakthroughs in advanced technology and innovation. Federal Mogul is a premier supplier of products, services and solutions to original equipment manufacturers that use quality components in their vehicles and automotive systems, and to aftermarket customers who sell companys world renowned brand-name replacement parts through repair shops and retail outlets. As partner with a global network of suppliers whose commitment to excellence and on-time deliver is crucial to company success. For more than a century, Federal Mogul has developed the innovative products which customers need to produce in the next generation of vehicles. FederalMogul has been creating value through innovation and leading technology for more than 100 years. Today, the company is a key player in the global marketplace, serving industries that range from automotive and commercial
9
vehicles to railroad and aerospace. Customers know they can rely on FederalMoguls quality excellence in products, trusted brands and creative solutions. This company started with a bold idea and over time grew into a FORTUNE 500 companies with a global workforce thousands strong. The Federal-Mogul team has celebrated countless victories and worked hard to overcome the inevitable challenges. Federal-Mogul is a global supplier of automotive components, modules and systems serving the world's original equipment manufacturers and the aftermarket industry. The company utilizes its engineering and materials expertise, proprietary technology, manufacturing skill, distribution flexibility and marketing power to deliver quality products and services, and leading brands. Federal-Mogul is focused on driving global profitable growth and creating value to satisfy customer, employee and stakeholder expectations. Headquartered in Southfield, Michigan, the Company, which reported sales of $6.3 billion in 2005, employs 42,000 people worldwide. Federal-Mogul was founded in Detroit in 1899. The Companys principal customers include many of the worlds foremost original equipment manufacturers of automotive, light commercial, heavy-duty truck, agricultural, marine, rail and industrial vehicles and equipment as well as the worldwide aftermarket. Federal-Moguls products are sold under a variety of power brands, including but not limited to, AE engine products, ANCO wipers, Champion spark plugs and wipers, Fel-Pro gaskets, Ferodo brake pads, Glyco bearings, Goetze piston rings, Moog chassis products, National wheel-end components, Nral pistons, Payen gaskets, Sealed Power engine products and Wagner lighting and brake products
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BRAND
11
PROFILE
Federal mogul Goetze (India) Limited was established in 1954 as a joint venture with Goetze-Werke of Germany. Goetze-Werke of Germany is now owned by Federal-Mogul Corporation, a $6.3 billion global company and one of the leading manufacturers of automotive components in the world. Federal-Mogul Goetze (India) Limited is the largest manufacturer of pistons and piston rings in India.
Production Capacity:
54.96 Million 13.57 Million INR 67253.44 Lacks INR (689.23) Lacks
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MILESTONES
1954 Incorporated as a JV with Goetze Werke 1957 Ring & liner production 1958 Piston production as escorts
Patiala Patiala
1960 1968 1977 1982 1985 1989 1990 1992 1994 1996 1997 2001 2003 2004
(Automotive Division) (Collaboration:Mahle) Cast iron / Forged piston Patiala production started Pins / ring carrier production Patiala started Piston / ring production started Bangalore Steel rings / Large bore Bangalore locomotive piston Light alloy products Patiala Auto thermic pistons production Bangalore Moly coated / IKA / chrome oil Patiala rings Large bore rings / pistons for Bangalore battle tanks Composite pistons / new ring Bangalore foundry Escorts (Automotive Division) hived off into joint venture with M/S Mahle, Germany Goetze TP (India) Ltd. - Manufacturer of steel rings Merger of Federal-Mogul sintered products Ltd. with Goetze (India) Ltd. Merger of Escorts pistons activities with Goetze (India) Ltd. Introduction of chrome-ceramic rings
13
2004 Technical collaboration for pistons with Federal-Mogul Corporation 2006 Majority stakeholding acquisition by Federal-Mogul Corporation 2006
14
Federal Mugal
24.5
24.5
EXPORT DESTINATION
Dubai Bangladesh Singapore Egypt Mauritius U.S.A Germany
15
COLLABORATIONS
A. GERMANY
Faun Class
B. JAPAN
16
HUGHES
E. FRANCE
Bosch
Dynapal
PRODUCT RANGE
17
Piston Rings L manufactures a wide range of Piston Rings for Bi-wheelers, Tractors and Passenger Cars & Jeeps, Commercial Vehicles, Locomotive Engines & Stationery Engines. Each Piston Ring is manufactured from raw material whose composition hardness & microstructure are thoroughly tested to ensure the highest standard of quality.
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FEDERAL MOGUL GOETZE (INDIA) LTD. BAHADURGARH, PATIALA Goetze (I) Ltd., Bahadurgarh, Patiala was set up in 1954 with the collaboration of M/s. Goetze Werke, Germany which started its production of Piston Rings for automobile industry in 1957. The plant is situated at Bahadurgarh, about 10 kms. From Patiala on the Patiala-Rajpura Road. Considering the need of complete Piston assembly, Escorts Ltd. ventured into manufacturing of Pistons in 1958 with the collaboration of M/s. Mahle GmbH, Germany, which delivered the Indian automobile industry its Pistons in 1960. Escorts entered in collaboration with M/s. SUKO GmbH, Germany for Piston Rings in 1967 and manufacturing started in 1968. To meet the increasing demand of market, in 1977, a parallel unit for manufacturing Pistons and Piston Pins was set up in Bangalore. From 1 October 1996, Escorts Ltd. entered into joint venture with M/s. Mahle GmbH, Germany with the formation of the new company Escorts Mahle Ltd. in 1998, Goetze also became a part of Federal Mougal, a well-known group of USA. In June 2000, both Escorts Mahle Ltd. and Goetze have become QS-9000 certified companies. The present capacity of the company is 549.60 lacs nos. Piston Rings and 135.68 lac nos. Pistons (on 302 working days). The total capital employed as on 31 Dec 2009 is 168.84 crores in Ring Activity and Piston Activity. The workforce including managers and supervisors is 830 nos. in Ring Activity and
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1420 in Piston Activity as on 31 Dec 2009. The turnover of the Patiala Plants 280.39 crores excluding Excise (combined in Ring Activity and Piston Activity) as on 31 Dec 2009.
20
d) COMMERCIAL VEHICLES (LCVs & MCVs) Telco e) DEFENCE Vehicles Factory, Jabalpur f) COMPRESSORS Telco g) STATIONERY ENGINES Kirloskar Oil Engines Ltd. Greaves Ltd. Birla
22
Federal Mogul
11 8 30
26 25
Others
23
24
ORGANISATION GOALS
The company has laid down for itself goal of improving the value to the customers through:
LEADERSHIP: to maintain leadership in following categories
Market share: to maintain its status as brand leaders in the country for
Product Development: to develop Piston and Piston Pins for all new
applications as identified.
Products are manufactured as per specifications based on DIN / JIS / IS / MAHLE NORMS / SUKO NORMS as also against customers specific requirements.
QUALITY: To improve quality consistently through quality assurance and process control. DELIVERY:
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ORGANISATION STRUCTURE
CHAIRMAN
EXECUTIVE DIRECT OR
VICE PRESIDENT
CHIEF (Manufacturing)
CHIEF (Finance)
CHIEF (Stores)
CHIEF (Personnel)
MANAGERS
STAFF
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ORGANISATION SET UP
The organizational set up of the following departments is studied in detail:
1. Finance Department 2. Personnel Department 3. Purchase and Store Department 4. Production Department
FINANCE DEPARTMENT
D.G.M. (Finance), Patiala who is directly responsible to Plant Head (Finance and Accounts), one of the most reputed Functional Department in GOETZE (INDIA) LTD. C.G.M. manage the Department and under him there are two managers, one is Finance Manager and other is Costing Manager. The Finance Manager is assisted by two supervisors one of these is responsible for cash and bank balances and other is responsible for bills payable. Each supervisor is given two or three assistants to work under him. The amount of investment to be put in current assets like cash in hand, bank balance, loans and advances, inventories, accrued expenses; dividends payable etc. all are decided by Finance Department. The realization of cash for the purpose of raw materials components and spares to pay wages and salaries to incur day to day expenses and overhead costs, to meet
27
selling costs to provide credit facilities to customers and to maintain inventories is also the function of this department. The formulation of policies with regard to profitability risk and liquidity, decisions about comparison and level of current assets and liabilities, formulation of production policy to keep the production steady by accumulating inventories, formulation and execution of credit policy is also the function of Finance Department. This Department is responsible for handling transaction relating to purchase of raw material as well as accounts relating to sales. It is also concerned with payment of all expenses incurred by the company like purchase of raw material, electricity bills, repairs etc. It is also concerned with valuation of various costs relating to inventories. It deals with determination of monthly wages, salaries of employees, fringe benefits of retirement, provident funds deduction, incentives, bonus and all the rewards, which the employees get for rendering their services to the company
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Costing:
The costing is being done for all the products manufactured at the plant. These relate to Piston, Ring, Cylinder Liners and Light Alloy Products. The Historical base is being followed for costing purposes.
Consumption:
Every item being received in the plant for consumption. Input is being accounted for at the plant. The ledgers are maintained for every receipt and issue.
Operating budget: The budget is being prepared at the start of every year. The sales plan is received from marketing (H.O.) and according to this sale plan the budget is prepared highlighting the projections followed
Costing, Fixed assets & CWIP Mr. S P Singh Chopra Mr. Inderjit Singh
MIS Reporting
Mr. O P Ghai
30
31
RESEARCH METHODOLOGY
The methodology used for the collection of data has been divided into two groups: Primary Data This data is based upon personal discussion with managers, officers and other employees working in various sections of Finance Department, Piston Ring Foundry Shop and Piston Ring Machine Shop. Secondary Data It is mainly based upon office records, Cost-sheets and other published documents of Federal Mogul Goetz (India) Ltd., Bahadurgarh, and Patiala.
OBJECTIVES
The major objectives of present study are as follows: Major Objectives: To study the manufacturing process of pistons. To calculate cost per piston. Minor Objectives: To study whether the firm is able to cover its cost of production. To study whether the firm is utilizing its productive capacity efficiently.
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33
Chapter-4
PRODUCT COSTING
34
COSTING
It is essential to calculate the amount of expenditure (actual or notional) incurred on or attributable to, a given thing so that the profit objective of producing it can be determined. Costing is the process of ascertaining the cost of activities, processes, products or services. Cost accounting is the classifying, recording and appropriate allocation of expenditure for the determination of cost of products or services and for the presentation of suitably arranged data for purposes of control and guidance of management. It includes the ascertainment of the cost of every order, job, contract, processes, services or unit as may be appropriate. It deals with the cost of production, selling and distribution. It is thus the provision of such analysis and classification of expenditure as will enable the total cost of any particular unit of production or services to be ascertained with reasonable degree of accuracy and at the same time to disclose exactly how much total cost is constituted (i.e. value of material used, amount of labour and other expenses incurred) so as to control and reduce its cost. Thus, cost accounting relates to the collection, classification, ascertainment of cost and control relating to the various elements of cost. It establishes budgets and standard costs and actual cost of operations, processes and departments.
35
PLANNING
In planning, the management is concerned with laying down of objectives and determining the courses of actions to be followed out of the several alternatives available to achieve those objectives. Planning is thinking in advance, thus costing provides the management tools to set targets and determining the course of actions.
DECISION MAKING
Management has to take multiple types of decisions. All rational decisions are based on accounting information. Costing helps the management to take different types of decisions like Fixation of prices Whether or not price should be reduced for increasing level of sales Whether the change in production is followed Determination of most profitable levels of production Whether the product should be exported or not
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CONTROLLING
Controlling is that par of management activity where by managers compare actual performance against the planned performance, find out the deviations and take remedial steps to remove the deviations to make an improvement in performance because promptness is the essence of an effective control. Other ways by which costing helps the management are classification and subdivision of costs control of materials, labour and overhead costs business policies budgeting standards for measuring efficiency best use of limited resources instrument of management control cost audit social factors price determination expansion
37
To advice management on future expansion policies and proposed capital projects. To help in the preparation of budgets and implementation of budgetary control. To guide management in the formulation and implementation of incentive bonus plans based on productivity and cost saving. To organize cost reduction programs with the help of different departmental managers. Broadly speaking, the above objectives can be re-grouped under the following three heads: (1) Ascertainment and analysis of cost and income by product, function and responsibility. (2) Accumulation and utilization of cost data for control purposes to have the minimum possible cost consistency with maintenance of quality. The objective is achieved through fixation of targets, analysis of reasons of deviations between actual and targets and reporting deviations to the management for taking corrective action. (3) Providing useful data to the management for taking decisions.
39
established for each item of cost. Each item of cost should be related to its cause as minutely as possible and the effect of the same on the various departments should be ascertained. This cost should be shared only by those units, which pass through the departments for which such cost has been incurred.
Charge of cost only after its incurrence : Unit cost should include only
those costs, which have been actually incurred. For example, unit cost should not be charged with selling cost while it is still in factory.
Cost accounting should ignore the convention of prudence : Cost
accounting statements should give the factual picture of profitability of the project. If some contingencies need to be made, it should be shown distinctly and separately.
Past cost should not form part of future costs : Past cost (which could not
be recovered in past) should not be recovered from future cost as it will not
40
only affect the true results of future periods but will also distort other statements.
because of abnormal reasons (like theft, negligence) should not be taken into consideration while computing the unit cost. If done so, it will distort the cost figures and mislead the management resulting in wrong decisions.
Principle of double entry should be followed preferably : To lessen the
chances of any mistake or error, cost ledgers and cost control accounts, as far as possible should be maintained on double entry principles. This will ensure the correctness of cost sheets and cost statements which are prepared for cost ascertainment and cost control.
41
The data to be used by the Cost Accounting System should be accurate; otherwise it may distort the output of the system. Necessary co-operation and participation of executives from various departments of the concern is essential for developing a good system of Cost Accounting. The cost of installing and operating the system should justify the results. The system of costing should not sacrifice the utility by introducing meticulous and unnecessary details. A carefully phased programme should be prepared by using network analysis for the introduction of the system. Management should have a faith in the Costing System and should also provide a helping hand for its development and success.
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CONTRACT COSTING
It is form of specific order costing where construction work is undertaken on customer specifications. It is of longer duration, and project in nature.
BATCH COSTING
It is that form of specific order costing, which applies where similar articles are manufactured in batches either for sale or used within the undertaking.
PROCESS COSTING
It is that form of costing where standardized products are produced on a continuous basis. Modern industries are conducting in highly competitive conditions. In these days, it is absolutely necessary that a business concern should conduct its activities with maximum efficiency. The manufacturer should always try to introduce his products
43
in the market at competitive rates. This object can be achieved by installing the effective costing system. There is no readymade costing system applicable to all industries; the costing system should be modified in such a way as to suit the special requirements of an industry
44
Cost Sheet
Cost sheet is a statement designed to show the output of a particular accounting period along with breakup of costs. The data incorporated in cost sheet is collected from various statement of accounts, which have been written in cost accounts, either day to day or regular records. There is no fixed form for preparation of cost sheet but in order to make the cost sheet more useful it is generally presented in columnar form. The columns are for the total cost of current period and cost per unit. The information to be incorporated in cost sheet would depend upon the requirement of management for the purpose of control. Cost sheet is a memorandum statement. Therefore, it does not form part of double entry cost accounting records. In spite of this, the relationship between cost sheet and financial accounts, which are maintained on double entry system, is very important as cost sheet derives its data from financial accounting. In case, predetermined rates are not used, the entire data required for preparation of cost sheet is derived from financial accounting. Therefore, periodically it becomes necessary to reconcile the information obtained from cost accounting and financial accounting separately.
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Costing of pistons
PRODUCT (PISTONS)
Piston is a component produced by the company and it is a very important spare part of all the automobiles.
FUNCTIONS OF A PISTON:
1. To convert chemical energy of fuel into mechanical energy. 2. It develops power, which is converted from reciprocating motion to rotary motion. 3. It acts as a carrier of piston rings i.e. It forms a movable gas tight plug, which in turn is required to seal the gases escaping from piston crown down to the crankcase. 4. It transmits the force of explosion to the connecting rods. 5. It forms a guide and bearing to the small end of the connecting rod and takes the side trust due to obliquity of the rod.
MANUFACTURING PROCESS:
DEPARTMENTS Goetze (I) Limited (Piston division) has the following sections:
The first step in the manufacturing of piston is the casting of piston . This operation is carried out in piston foundry shop.
PIN PLANT :In this section, piston pins for all types of pistons are made with the state of the art machinery.
FORGE PLANT :In this section, forged pistons are manufactured as per the specific requirements of Telco.
CENTRAL TOOL ROOM :The tool room facility has the following functions: It supports tooling requirement of various plants. It manufactures new machines in its machine vuilding section. It renovates the worn out machines and its components.
47
As a world leader in the piston manufacturing, Goetze (India) Limited has adopted aluminium as a base metal for manufacturing pistons because of its many advantages over cast iron chief being light weight high thermal conductivity and corrosion resistance. Although aluminium costs much more than steel because of its light weight, yet it is cheaper per unit volume. Other metals comprising the alloy are silicon, nickel, copper and magnesium. Piston foundry is the shop where aluminium alloys are prepared and casted into rough blanks which are machined and surface treated to form final product piston in the machine shop ready to be fitted in the engine block. Machining and other processes are carried out in different shops. Piston foundry comprises of following main sections:
MELTING:Aluminium alloys 124, 138, 244, AC8A and AC9A are prepared here by melting the charge consisting of virgin metal, converted alloy, scrap and other alloying consisting of silica, nickel, copper and magnesium in the induction furnace. To shorten the metal preparation time, scrap and shop returns are simultaneously melted in the oil-fired furnace.
CASTING:-
48
This section comprises of five lines having workstations consisting of holding furnaces and casting machines. The holding furnaces as the name suggests is for holding the alloy at the particular temperature, degassing and grain refinement (in some cases) before casting. Every workstation also has die casting machines. The type of the machines depends upon the piston diameter and number of dies used at a time. Like the machine MG-9C is used for producing bigger diameter pistons (80 to 116mm) with a single die whereas machine MG-17 is used for smaller pistons with diameter 60mm and uses two dies. Similarly MG-11 and MG-7 are used for medium pistons and use one or two dies.
FETTLING:In this section runners and risers and gating systems are removed with the help of the cutters. These cutters are mounted on top of the machines. Even semi-skilled workers can operate these machines. Sharp edges and burns are filed at the table area.
HEAT TREATMENT:This section consists of solutionizing which is the process of dipping some of the selected pistons in the solution to get the required hardness. These solutions are kept in the furnaces which are now being operated or controlled by thrusters. This has resulted in better temperature control, thereby saving power consumption substantially. SPECTROMETER is used to check the chemical composition of the sample submitted at various stages of production in the laboratory. It also provides service to incoming inspection on request.
INSPECTION:49
In this section important parameters are checked for each piston like diameter, size, grooves and especially hardness.
PRODUCT LINES:There are around ten lines arranged in the product layout i.e. blanks are fed into the first machine and finished pistons are obtained at the end of the line. Planning and manufacturing is done batch wise. The machine set up and inspection gauges are carried out lot wise or batch wise for each machine. First line is used for pistons upto 100mm diameter. For the pistons above 100mm of diameter next line is used. Third line is exclusively for TATA pistons. Next two lines are of bi-wheelers and next two lines are exclusively for MARUTI. Rest lines can be used for other piston types. In each line similar type of machines are arranged, more or less in the same sequence as the basis process is same across all the lines.
COATING:There are mainly three types of surface treatment (coating) carried out i.e. Tin coating, Anodizing and Graphic coating based on customer requirements. Latter two are mostly done for TATA pistons. Anodizing is carried out on the crown surface to provide a resistance surface at high temperature generated in the combustion chamber. Tin and graphic coating is carried out for initial run lubrication. In tin coating, sodium stannate solution liberates tin, which form metallic bonds on the piston surface. In graphite coating, graphite particles are sprayed onto a heated
50
piston surface and further baked to form a layer of graphite. In anodizing, electrolysis is done with aluminium anode, graphite cathodes and sulphuric acid acting as electrolyte.
FINE MEASURING ROOM:This section consists of measuring and calibration areas. Measuring is mostly achieved by two instruments i.e. perthometer and macrograph. Former is used for assessing roughness, waviness and peak profiles while latter is used for determining serration profiles, groove form, polar profile, groove blank squareness and other related features. Calibration of gauges and other instruments are taken up according to planned periodicity and records are kept or ready reference.
GROOVE-CUTTER SECTION:This section carries out two main activities: Making groove cutting tools including re-sharpening of tools. Profile grinding of came. For groove cutting tools, carbide bits are brazed on shanks and grinded for various clearance and relief angles. While in came profile grinding, required ovality and taper are grinded twice the value then that required on the piston because error transmitted from came to the piston through tool by the tracer is only half. This results from tracer operating in one extreme of a lever, while tool operating at half the distance of the same level arms.
TOOL STORE:-
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This section is responsible for issue, collection and storage of all tools jigs and fixtures necessary for the production activity on each machine.
INSPECTION:In this section, important parameters are checked. Especially hardness test is carried out for the 100% lot. The setting of the tools to the required angle on the tool post and packet formation is also undertaken by the inspection department. It also keeps stock of machine spares to be used in the breakdown cases. It also interacts with the stores and the purchase department to ensure the availability of the required material in sufficient quantity for the production.
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Gross weight with R/R = Blank weight with R/R / {(100-Fdy scrap)/100*(100- M/c scrap)/100} = .185/{(100-6.5/100*(100-8)/100} = .215 Kgs
Scrap
Cutting loss Cost = Cutting Loss wt(kg) / {(100-m/c scrap)/100} = .004 /.92 = .0043 kgs per blank Recovery = scrap * rate (104.85 *87% Recovery of Converted Alloy) = .0043 * 91.20 = Rs. 0.39
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Aluminium scrap
Recovery
= scrap * rate(104.85 *87% Recovery of Converted Alloy) = .043 * 91.20 = Rs. 3.92
= 13.52% = Rs. 15.44 = NAR * slag ash % * rate = .144* 13.52% * 15.44 = Rs. 0.30
Total Scrap
NET RAW MATERIAL = Cost of raw material scrap = 15.12 4.61 = Rs. 10.51
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=Total cost of stores/ total gross weight of RR (KG) = 2811442/553136.68 =Rs. 5.083 = rate* gross weight RR =5.083 * .215 = Rs. 1.092
2.Diesel
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=total cost of diesel/total groos weight of RR = 2243954/553136.68 =Rs. .406 = rate * gross weight =.406* .215 =Rs. 0.873
3.Oil
Rate per kg Oil per piston = Total cost of oil/ total gross weight of RR = 175800/5513136.68 =Rs. 0.318 = rate * gross weight = 0.318* 0.215 =Rs. 0.068
4.Maintenance
Fdy Castin g weight
0-175 gms 176-350gms 351-525gms Above 526gms(NRC) Above 526gms(RC)
Energy
Kwh Kwh Kwh Kwh Kwh
Variable
6.720 5.250 5.090 3.380 4.110
Fixed
0.340 0.340 0.340 0.340 0.340
Line losses
0.221 0.221 0.221 0.221 0.221
Comp Air
0.300 0.290 0.280 0.280 0.280
Misc Cateen
0.032 0.032 0.032 0.032 0.032
Centralised services
0.034 0.034 0.034 0.034 0.034
Total
=Total maintenance cost/total power units =12604793.33/9566731 =Rs. 1.317 =6.777 units
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=unit per kg* gross m/c scrap* blank weight =6.777* .130* 1 / 0.92 =0.958 kgs Total cost of maintenance=Gross units per kg*maintenance rate =0.958* 1.317 =Rs. 1.261
5.Dies cost
= {no. of blanks per piston*cost of die}/life of a die = {1.121* 160000}/200000 =Re. 0.90
Compressor Cost:
Total cost Total transfer Transfer cost per piston Total cost per piston =Rs.2147552 =2097261 kgs =Rs.1.024 =1.024* 0.130/.92 =Re. 0.14 TOTAL POWER COST =4.50+ 0.14 =Rs. 4.64
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7.Personnel cost
Melting
Casting&
Cutting 46577434 4085569 50663003 No Of SHIFTS REQUIRED PER ANNUAM 26198.68 RATE PER SHIFT MELTING RS 1933.8
Solutionizin
(T-6) 1870144 164041 2034185
Rate
6.325
0.428
It includes payment made to workers of melting section, casting and cutting section, solution zing section and heat treatment section. It includes personnel cost relating to the service department such as finance dept., human resource dept., planning and administration dept. etc.
Melting rate manpower cost/total weight of R/R =18288342/2891293.57 =total
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=Rs. 6.325 Blank wt. with R/R =0.215 kgs Total cost 6.325*0.215 = Re.1.36 Casting rate manpower cost of casting/no. of castings per shift = 50663003/26198.68 =Rs. 1933.80 Average casting Per day =411*80% =329 castings Shifts per piston =1.121/329 =.00341 Personnel rate =1933.80*.00341 =Rs.6.59 Heat treatment Rate =total personnel cost of heat/ total hrs. = total =
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=2008873/25818.95 =Rs.77.806 2000 pistons are given heat treatment at a time which takes 5.5 hrs. Time per piston ={5.5*1.121}/2000 =.003082 Cost per piston =77.806*0.003082 =Rs.0.24 TOTAL PERSONNEL COST = maintenance cost+ melting + casting + heat treatment =.24+1.36+6.59 =Rs. 8.43
8. Depreciation
Foundry dep. =Rs.4883914 Power units =9566731 units Dep Rate per unit dep/ power units =4883914/9566731 60 =foundry
=Re. 0.511 Power per piston units* blank wt. / {(100- m/c scrap)/100} =6.777*.130/.92 =0.958 units Depreciation cost = dep rate per unit* power per piston = 0.511*.958 = Rs.0.49 =power
Oil
=435689/89842.04 =Rs.4.85 /hr Cost per piston = (oil per hr*gross m/c time)/60 =4.85*14.13/60 =Rs.1.142
3) Maintenance
Total cost of maintenance on: Manpower =Rs. 726300 Tools Repairs Spares Total cost Total hrs =Rs. 523000 =Rs. 1651500 =Rs. 5424080 =Rs.7598580 =1043054.5 hrs
Fixed cost
=48.88% =14.245*48.88%
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=Rs 6.962 Fixed cost/ piston =6.962*14.13/60 =Rs 1.64 Variable cost =14.245-6.962 =Rs 7.28 Variable cost/piston= 7.28*14.13/60 = Rs 1.71
4)
Tools cost
5) Power
Annual machine hrs = 18 m/c *302 days*16 hrs /day = 86976 hrs th Total hrs of line 9 = 89842.04 hrs %age of production hrs to working hrs = (89842.04/86976)*100 = 103.30% Load on line 9th = 67.7545 units Total power = 67.7545 * 103.3% *43*302*16 = 145423.25 units Where 43 is the power factor Power rate = Rs.4.70 Total power cost =145423.25*4.70 =Rs. 683489.28 Cost per hr =Rs. 584601.47/89842.04hrs =Rs 6.507 Cost per piston = (6.507*14.13)/60
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=Rs 1.53
6) Personnel cost
Total no. of employees= 41 Salary PA =Rs. 230000 Total cost =41*230000 =Rs.9430000 Managers salary =12.72% of workers =12.732%* 9430000 =Rs.1199496 Total salary =Employees+ Managers salary =9430000+1199496 =Rs.10629496 Total hours =95262.69 Salary per hr =10629496/95262.69 =Rs 111.58 13.7/.92=14.89 Cost per piston = (111.58*14.89)/60 =Rs. 27.69 Total personnel cost =Cost per piston+ Maintenance fixed cost =27.69+ 1.64 =Rs. 29.33
7)
Depreciation
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EFFICIENCY BONUS:
Bonus is calculated as a percentage on the personnel cost. Personnel cost of foundry=Rs. 4.712 EB =21.43% of foundry cost =Rs. 1.01 Personnel cost of machine shop =Rs. 18.369 EB =16.52% of machine cost =RS. 3.034 Total EB =1.01+ 3.034 =RS. 4.044
INSPECTION COST:
Personnel cost of workers=Rs.9382044 Personnel cost of managers=Rs.14092025 %age of managers to workers cost =150.20%
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=4290792 pistons =150% of cost of workers of bi-wheelers =150% of 7823016 =Rs. 11750170 =Workers cost+ Overhead cost =7823016+ 11750170 =Rs. 19573186 =Total cost/Target =19573186/4290792 =Rs. 4.56
=Raw material+ Foundry cost+ M/C shop cost+ EB cost
TOTAL COST
CORPORATE COST =20% of total cost =20% of 70.008 =Rs. 14.0016 TOTAL COST PER PISTON= Total cost + Corporate cost = 70.008+ 14.0016 =Rs. 84.01
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COST SHEET
APPLICATION:- YAMAHA 5400U MODEL CUSTOMERS NAME:- M/S YAMAHA MOTORS INDIA PVT. LTD. SET NO. 137 DRAWING NO. LINE NO. 9 DIA (MM) ALLOY TYPE AC8A WT. WITH R/R ALLOY RATE 104.83 BLANK WT. ALUMINIUM SCRAP RATE 84.77 NET ALLOY REQUIRED PROCESS LOSS 7.20 % M/C SHOP SCRAP FOUNDRY SCRAP 3% M/C TIME (M/C + HO) MACHINE SHOP SCRAP 8% PRODUCTION NOS. 1
5B1-E1631-00-P 54 .185 KGS .130 KGS .137 KGS .043 KGS 13.70 MIN
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DESCRIPTION GROSS ALLOY COST LESS:- ALUMINIUM SCRAP NET RAW MATERIAL COST COST OF COMPONENTS:FOUNDRY COSTSTORES AND SPARES DIESEL FOR FOUNDRY OILS AND LUBS MAINTENANCE DIES POWER AND FUEL PERSONNEL DEPRECIATION SUB TOTAL(FOUNDRY COST) MACHINE SHOP COSTSTORES AND SPARES OILS AND LUBS MAINTENANCE TOOLS POWER AND FUEL PERSONNEL DDEPRECIATION SUB TOTAL(MACHINE SHOP COST) EFFICIENCY BONUS PRIME COST INSPECTION COST P & A COST PACKING COST(PRIMARY & SECONDARY) TOTAL COST CORPORATE AND INTEREST COST TOTAL COST PER PISTON VARIABLE 15.12 4.275 10.83
1.092 0.872 0.068 1.26 0.90 4.63 8.43 0.49 16.762 1.91 1.14 1.71 0.57 1.53 29.33 6.02 42.21 4.044 59.588 4.56 4.10 1.76 70.008 14.0016 84.01
29.33 6.02 35.35 32.429 4.56 4.10 0.73 41.819 14.0016 55.82
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Chapter-5
CONCLUSION
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WEAKNESSES
Facing some infrastructure problems, erratic power supply. Problem of timely availability of imported and indigenous raw Materials. Low return on capital employed.
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OPPORTUNITIES
With the coming of MNCs in automobile sector like DAEWOO Volkswagen, BMW, Ford the demand for production has increased the scope of ready markets. Also scope for further expansions in production of existing products and some new products has increase as they have wide network. High export of opportunities.
THREATS
With the coming of MNCs, the demand for higher technology product is the matter of concern.
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Proportionality:
The conversion cost whether at foundry or machine shop have been
allocated based on proportionality. In case of foundry cost, the type of piston having more blank weight would be absorbing more overhead cost in stores and spares or in other categories whereas the lesser blank weight would be absorbing lesser overheads cost.
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This assumption may not be correct for the following reasons: There might be some stores and spares, which are exclusively used for manufacturing the lesser blank weight pistons, so the cost of these items should not be borne by the rings of more blank weight. Similarly, there might be the cases where large blank weight will be using standard tools of lesser cost while smaller blank weight rings might be using costlier tools. However, due to proportionately aspect the larger weight ring is unnecessarily burdened with extra cost. So, these dilemmas arising in proportionality based costing would be avoided by using the activity based costing which traces out the cost incurred for conducting various activities based on the cost drivers and periodicity of occurrence. As a result of the activity based costing, the smaller pistons would bear the cost, which arise specifically due to it rather than loading on the larger blank weight rings. Similar incidents can be traced out in cost components whether in the foundry or in machine shop.
Machining time:
In calculating the total machined hours line wise, the company considers
total number of pistons produced in that line and the time per ring produced in that line. In calculating the no. of pistons produced, it considers not only good pistons but also the scrapped ones. These scrapped rings might be generated at the initial, middle or at the end stages of the line. Therefore, the time spent on each of this scrapped pistons would be different. However the company loads the scrapped pistons with the same time. This may unnecessarily leads to a larger time per line and accordingly affects the allocation of the cost.
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Cost of production:
Cost of production must be reduced so that company can face competition in
the market and can reduce its prices. For example, in case of piston ring for Yamaha, cost of production per ring is Rs. 100.47. But, its selling price is Rs. 92 per ring. I.e., company is suffering due to price less than the cost. Thus, the company should try to reduce its cost of production.
Budgeting:
The company has adopted incremental approach for the preparation of its
budgets. Such approach carries forward previous years inefficiencies because previous years figures are taken as a base for the development of a budget. Thus incremental approach does not promote operational efficiency because it does not require managers to review their past activities. The company may use Zero Base Budgeting as a managerial tool where taking zero as a base, a budget is developed on the basis of likely activities for the future period.
defectives. These should be standardized properly by following standard costing system. The actual scrap and defectives should be compared with the
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predetermined standard scrap and defectives and the reasons for the differences, if any, should be enquired into and corrective action taken whenever actual scrap and defectives are more than what is normally allowed.
Capacity utilization:
Earlier before the year 2003, the utilized capacity for production was 92%, but for the year 2003-2004, the company has proposed to utilize 70% of installed capacity. The company should try to utilize more and more of installed capacity so as to reduce cost of production.
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BIBLIOGRAPHY
Cost Accounting by S.P. Jain, K.L. Narang, Kalayani Publishers Cost Accounting Theory and Problems by S.N. Maheshwari, S.N. Mittal, Shree Mahavir Book Depot Cost Accounting Study Material Board of Studies, The Institute of Chartered Accountants of India www.goetzeindia.com Annual Reports Of FMGL
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