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By Aditya Rastogi

COST ACCOUNTING PROJECT Roll No. 3128


B.com(P) 2nd yr
WHAT ISCOSTACCOUNTING?
Cost accounting is the art and
science of recording, classifying,
summarizing, and analysing costs to
help management make prudent
business decisions.
PURPOSE OF COSTACCOUNTING?

• Cost control: The first function of cost accounting isto control the cost within the
budgetary constraints management has set for a particular product or service. This is
important since management allocates limited resources to particular projects or
production processes.
• Cost computation: This is the main function of cost accounting and this isthe source
of all other functions of cost accounting. In the section below, we will see how we can
calculate the cost of sales per unit for a particular product.
• Cost reduction: Cost computation helps the company reduce costs on projects
and processes. Reduction in costs means more profits since the margin will naturally
increase.
AMUL -ICECREAM

• In 1997, Amul ice creams entered Mumbai followed by Chennai


in 1998 and Kolkata and Delhi in 2002
• The portfolio consisted of impulse products like sticks, cones,
cups as well as take home packs and institutional/catering
packs.
• It achieved the No. 1 position in the country. This position was
achieved in 2001 and continued to remain at the top.
COST
SHEET
Particulars CPU Amount
Opening Stock 10 1000000
Raw Materials 3 300000
Dry Fruits 2.5 250000
Milk 3 300000
Flavours 3.5 350000
Other Ingredients 2 200000
Sugar 2.5 250000
Cup 1.5
150000
Cutlery 1
100000
Seasonal Fruits 0.5
50000
Waffle 1
Cocoa 1.5 100000
8 150000
Carriage Inward 1.845 3200000
RAW MATERIAL 184500
CONSUMED 33.845 3384500
PARTICULA
CPU Amount
RS
Direct Expenses
Direct Labour 2.2 220000
5.3 530000
PRIME COST 40.045 4134500
Factory
Overheads:
Fixed:
Depreciation 2.5 250000
Rent 1 100000
Power 1.75 175000
Insurance 1.5 150000
0.6 60000
Supervisor’s
Salary 0.7 70000
Variable: 1 100000
Electricity 9.05 905000
Running exp of
machine
WORKS COST 50.395 5039500
PARTICULA
CPU Amount
RS

Office Overheads
Employee Cost 10 1000000
Other Expenditure:
Computer 1.2 120000
Telephone 0.1 10000
Taxes 0.4 40000
Carriage Outward 0.2 20000
COST OF 62.295 6229500
PRODUCTION
2 200000
Opening Stock
-Closing Stock 64.295 6429500
COST OF GOODS SOLD
PARTICULA
CPU Amount
RS
Selling&DistExps:
Advertisement 4 400000
Delivery Vehicles
3.5 350000
1.75 175000
Petrol 0.505 50500
74.05 7405000
Packaging Rates

COST OF SALES

PROFIT 18.5 1851250

SALES 92.5625 9256250


MARGINAL COSTSHEET
SALES 9256250
Variable Cost:
Purchases 3200000
RM Consumed 3384500
CONTRIBUTION 2671750
- Fixed Cost
Factory Expenses 905000
Employee Cost 1000000
Depreciation 100000
Other Expenditure 190000
PROFIT 476750
COST SHEETANALYSIS
The company is producing 100000 units of ice
cream at Rs. 74.05 for which the total cost
incurred is Rs. 7405000 and the total sales is
Rs. 9256250 which implies that that the profit
being made is Rs. 1851250.
The company is producing a single cup of ice
cream at Rs. 92.5625 which includes the cost of
a cup ice cream at Rs. 74.05 which again
implies that the profit of Rs. 18.5125 is earned
on a single unit of Amul ice cream.
Since the company is earning some percentage
of profit above the cost, it means a slight
increase in the cost will not have too much of
an effect on the profit since there is a large
margin of safety.
Since the company is earning some amount
of profit, the business is capable to expand
and diversify over a period of time.