REPORT ON COST ACCOUNTING

METHODS BEING IMPLEMENTED

BY DALMIA CEMENT.

PROJECT ON COST
MANAGEMENT
AND CONTROL
MANAGEMENT ACCOUNTING PROJECT

SUBMITTED BY SECTION A |GROUP 3:

REETAM SINHA(9), AKSHAR PATEL(67),
MANI GOYAL(71), SURENDIRA SIVA (75),
SARYU BHALLA(129), SANJAY AGARWAL (159)
 PROJECT ON COST MANAGEMENT AND CONTROL

INDEX
Sr. No. Title Page
1 Brief Profile Of The Company 2
2 Products Manufactured 3
3 Method of cost accounting implemented 4
4 The Cost Management System 5

REETAM SINHA(9), AKSHAR PATEL(67), MANI GOYAL(71), SURENDIRA SIVA (75), SARYU BHALLA(129), SANJAY AGARWAL (159) Page 1
 PROJECT ON COST MANAGEMENT AND CONTROL

BRIEF PROFILE OF THE COMPANY

DALMIA CEMENT

Since its inception in 1935 Dalmia Cement (Bharat) Ltd. – DCBL has been paving
the way for excellence over a period of 7 decades. Blending the enthusiasm of
the young with the experience of the old it has been our people and our
management that has been the driving force behind our growth story. We
believe in providing a friendly and open door culture as well as the steady
opportunity to work in the best areas as well as explore our employees
individual capacity which keeps them motivated and increases their efficiency.

VALUES

We at DCBL believe in ‘value creation’ for all stakeholders. Values for us are the
means to our ends. We believe they are the core and the essence of doing
things our way, the right way - the Dalmia way. These values, for us, not only
hold the threads of the present and keep us grounded, but are also the key to
the future where the possibilities are endless. Keeping this in perspective we
have defined our four core values and three exemplary behaviors for each
value. Our four values are:
1.Learning
2.Team Work
3.Speed
4.Excellence
We have also coined an acronym to remember them easily by picking letters
from each value –LET’s EXCEL.

REETAM SINHA(9), AKSHAR PATEL(67), MANI GOYAL(71), SURENDIRA SIVA (75), SARYU BHALLA(129), SANJAY AGARWAL (159) Page 2
 PROJECT ON COST MANAGEMENT AND CONTROL

PRODUCTS PRODUCED AND MANUFACTURED BY THE COMPANY

 Ordinary Portland Cement

o OPC is one of the most commonly and widely used type of cement in the
world. This type of cement is an ideal building material for almost all structural
work including all kinds of concrete construction.
o Dalmia OPC, besides its Exceptional strength, is specially designed for:
 Ideal Setting Time
 Low Heat of Hydration
 Darker Colour
 Sulphate Resistant Cement
o SRC is used where sulfate salts are present on the soil or in saline water. This
cement has potential to resist the destructive attack of sulfates, especially in
the foundations or the areas mostly subjected to sulfate attack.
o SRC is designed to overcome the problem of sulfate attack by reducing its C3A
content.
o SRC must be used in:
 All structures in or near the sea.
 All underground structures where soils are rich in sulfate salts, especially
in water logged and saline areas.
 Dalmia SRC is highly effective for the purpose it is used because its C3A
content is even less than 2.0 against max. permissible limit of 3.5 in
British and Pakistan Standards.
 That’s why, it is of no surprise when Dalmia SRC is demanded and used
on Major Projects of National interest like Thal Greater Canal.

REETAM SINHA(9), AKSHAR PATEL(67), MANI GOYAL(71), SURENDIRA SIVA (75), SARYU BHALLA(129), SANJAY AGARWAL (159) Page 3
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METHOD OF COST ACCOUNTING IMPLEMENTED BY THE COMPANY

 Manufacturing of cement is a continuous process; therefore, the company uses

process cost accounting system as prescribed by ICWAI as per Cement Industry (Cost
Accounting Records) Order, 1994.
 The company has classified whole manufacturing process into six major stages /
departments for the purpose of maintaining cost accounting records.
 The company is maintaining raw material records using perpetual inventory system.
Per unit cost for issue of material is determined using average cost basis.
 Stores are valued at lower of moving average cost and net realizable value, except for
furnace oil and coal, which are valued at average cost. Items in transit are valued at
cost comprising invoice value plus other charges incurred thereon.
 Depreciation is calculated on straight line method except plant and machinery and
coal firing system on which depreciation is charged on the basis of units of production
method. Depreciation on additions is charged from the month in which the asset is
available for use and on disposals up to the month of disposal.
 The company is operating EXCEL based in house software, which generates cost
statements relating to six stages / departments and allocates cost thereon.

REETAM SINHA(9), AKSHAR PATEL(67), MANI GOYAL(71), SURENDIRA SIVA (75), SARYU BHALLA(129), SANJAY AGARWAL (159) Page 4
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THE COST MANAGEMENT SYSTEM

In management accounting, cost accounting establishes budget and actual cost of

operations, processes, departments or product and the analysis of variances, profitability or
social use of funds. Managers use cost accounting to support decision-making to cut a
company's costs and improve profitability. As a form of management accounting, cost
accounting need not to follow standards such as GAAP, because its primary use is for
internal managers, rather than outside users, and what to compute is instead decided
pragmatically.

Costs are measured in units of nominal currency by convention. Cost accounting can be
viewed as translating the supply chain (the series of events in the production process that,
in concert, result in a product) into financial values.

There are various managerial accounting approaches:

 standardized or standard cost accounting

 lean accounting

 activity-based costing

 resource consumption accounting

 throughput accounting

 marginal costing/cost-volume-profit analysis

Classical cost elements are:

1. raw materials

2. labor

3. indirect expenses/overhead

Below are the cost accounting tables which are used by Dalmia Cements for such purposes:

REETAM SINHA(9), AKSHAR PATEL(67), MANI GOYAL(71), SURENDIRA SIVA (75), SARYU BHALLA(129), SANJAY AGARWAL (159) Page 5
 PROJECT ON COST MANAGEMENT AND CONTROL

PRODUCTION
Production
Increase/Decrease
Years
2009 2008 Tonne %
Clinker
Line 1
Ordinary Portland 493,426 622,012 128,586 21%
Sulphate Resistance 493,426 625,846 132,420 21%
Line 2
Ordinary Portland 651,668 1,014,246 362,578 36%
1,145,094 1,640,092 494,998 30%

Cement
Ordinary Portland 1,033,587 1,486,656 453,069 30%
Sulphate Resistance - 5697 5697 100%
1,033,587 1,492,353 458,766 31%

MAJOR RAW MATERIALS CONSUMED

2009 2008 2007

Quantity Value Rate Per Quantity Value Rate Per Quantity Value Rate Per
(Tonne) Rs. In ‘000 Tonne (Tonne) Rs. In ‘000 Tonne (Tonne) Rs. In ‘000 Tonne
Limestone 1,498,106 140,507 94 2,122,977 188,396 89 1,572,270 142,326 91
Clay 192,121 11,133 58 291,022 16,401 56 209,902 12,162 58
Laterite 66207 35,879 542 121,933 62,485 512 64,657 34,628 536
Bauxite 11,472 6,670 581 23,068 10,422 452 32,755 17,240 526
Gypsum 42,657 15,573 365 89,032 35,747 402 73,034 28,777 394
Fly Ash 809 307 380 - - - - - -
Direct Raw
210070 313451 235133
Material Cost

MAJOR RAW MATERIALS CONSUMED PER UNIT OF PRODUCTION COMPARED WITH STANDARD REQUIREMENTS

Actual % Increase / Decrease

Standard
Description 2009 2008 2007 As compared to Budget Standard
Tonne
Tonne Tonne Tonne 2009 2008 2007
Limestone Clinker 1.32 1.31 1.29 1.27 1.11 2.49 4.01
Clay / Shale Clinker 0.16 0.17 0.18 0.17 5.52 13.21 6.92
Laterite / Iron Ore Clinker 0.04 0.06 0.07 0.05 52.15 84.21 31.58
Bauxite Clinker 0.01 0.01 0.01 0.03 0.18 - 200.00

Total Clinker 1.53 1.54 1.52 1.53 0.91 0.78 0.20

Gypsum Cement 0.05 0.04 0.06 0.06 17.46 16.00 20.00

REETAM SINHA(9), AKSHAR PATEL(67), MANI GOYAL(71), SURENDIRA SIVA (75), SARYU BHALLA(129), SANJAY AGARWAL (159) Page 6
 PROJECT ON COST MANAGEMENT AND CONTROL

WAGES AND SALARIES

TOTAL WAGES AND SALARIES PAID FOR ALL CATEGORIES OF EMPLOYEES

2009 20088 Increase / (Decrease)

Rs. In ‘000 Rs. In ‘000 Rs. In ‘000 %
Direct labour cost on production 137,841 117,291 20,550 18
Indirect Labour cost on production 57,219 59,006 (1,787) (3)
Total Direct & Indirect Labour Cost 195,060 176,297 18,763 11
Employees’ cost on administration 69,126 57,529 11,597 20
Employees’ cost on selling and distribution 31,425 31,895 (470) (1)
Total employees cost 295,611 265,721 29,890 11

SALARIES AND PERQUISITES OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

Chief Executive Executives

2009 2008 2009 2008
Total Number 1 1 17 15
Basic Salary 4,784 4,200 19,764 17,188
Contribution to provident fund and gratuity 1,660 928 6329 12,120
Allowances & Benefits 5,774 3,108 20,276 17,673
12,218 8,236 46,369 46,981

STORES AND SPARE PARTS

EXPENDITURE PER UNIT OF OUTPUT

2009 2008 Increase/(Decrease)%

Stores & Spares (Rs. In ‘000) 156,177 145,887 7
Production (Qty. in tonne) 1,033,587 1,492,353 (31)
Cost per tonne (Rs. / Tonne) 151 98 55

DEPRECIATION

BASIS OF ALLOCATION OF DEPRECIATION ON COMMON ASSETS TO THE DIFFERENT DEPARTMENTS

Depreciation on common assets 2009 2008

Rs. In ‘000 % age Rs. In ‘000 % age
Cost of Sales 373,493 98 427,440 98
Admin & General 3,106 1 4,434 1
Selling & Distribution 3,719 1 3,432 1

REETAM SINHA(9), AKSHAR PATEL(67), MANI GOYAL(71), SURENDIRA SIVA (75), SARYU BHALLA(129), SANJAY AGARWAL (159) Page 7
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OVERHEADS

2009 2008 2007

Rs. In ‘000 Rs. In ‘000 Rs. In ‘000
Factory 449,846 507,475 446,767
Administration 97,654 98,978 86,876
Selling & Distribution 359,975 466,047 108,405
Financial Charges 451,465 413,203 365,848

ROYALTY / TECHNICAL AID PAYMENTS

2009 2008
Production Rupees Rupees/Tonne Production Rupees Rupees/Tonne
Tonne In ‘000 Tonne In ‘000
Limestone / 1,706,702 29,610 17.35 2,414,659 39,965 16.55
Clay

Royalty and excise duty is paid to the Provincial Govt. on the quantity of lime stone / clay extracted and
transported to the mill from land at statutory rates.

REETAM SINHA(9), AKSHAR PATEL(67), MANI GOYAL(71), SURENDIRA SIVA (75), SARYU BHALLA(129), SANJAY AGARWAL (159) Page 8