Money doesn't create man but it is the man who created money.

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• Money doesn't create man but it is the man who
  created money.
• -Warren Buffet

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WELCOME TO ALL OF YOU

• RAHUL JAIN
• (Striving for excellence)
• BCOM (H), MBA, ACS

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Cost

• Any expense incurred during the operations for
  providing the good or service to get the output
  into the hands of the customer
• The customer could be the public (the final
  consumer) or another business
• Controlling costs is essential to business
  success

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Costing and Management Accounting

• A field of accounting that provides economic and
  financial information for managers and other
  internal users.

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Need of Costing

• Computing the cost of providing a service or
  manufacturing a product
• Determining the behavior of costs and expenses as
  activity levels change
• Analyzing cost-volume profit relationships within
  a company
• Assisting management in profit planning and
  budgeting
• Providing a basis for controlling costs and
  expenses by comparing actual results with
  planned objectives and standard cost
• Accumulating and presenting relevant data for
  management decision making

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Apparel Products Value
ChainBy Lyn Fernando
-Lack of Direct contacts/ Access to Retailer.
-Long lead time - Cost of Agents
Need to develop strong networks lobby groups.
Free Trade Agreements, concessionary tariffs
Buyer (Retailer)
100
Selling Distribution (Agents)

• High Cost Structure ( Labour, Utility)
  Wastage use of CAD/CAM
• Labor Laws, Invest in Human Resources
• Lack of Skilled Management
• Low productivity,
• Proximity to Suppliers
• High energy cost

Proximity to market, regular sailings -sea Air.
Electronic Data Interchange for documentation
Outbound logistics
Manufacturing (cut, sew finishing)FOB 10-25 of
Retail
Lack of Advanced Manufacturing Technology
Dependency on imported raw material, long lead
times,delays at customs, documentation, EDI
Raw materials /Accessories 40-70 of FOB
Lack of Specialty fabrics Accessories
Sourcing
Product Development
Non availability of advanced product development
facilities
Lack of design capabilities
Design
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Basic elements of Cost

• Material
• Labor
• Expense

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Key terms

• Tangible costs or benefits are those costs or
  benefits that an organization can easily measure
  in dollars.
• Intangible costs or benefits are costs or
  benefits that are difficult to measure in
  monetary terms.
• Direct costs are costs that can be directly
  related to producing the products and services .
• Indirect costs are costs that are not directly
  related to the products or services , but are
  indirectly related to them.

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Key terms

• Opportunity cost
• What you give up for certain in exchange for a
  chance at something better.
• Interest
• The cost of borrowed money

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Costs

• Fixed are not influenced by the amount
  produced but can change in the long run e.g.,
  insurance costs, administration, rent, some types
  of labour costs (salaries), some types of energy
  costs, equipment and machinery, buildings,
  advertising and promotion costs
• Variable vary directly with the amount produced,
  e.g., raw material costs, some direct labour
  costs, some direct energy costs
• Semi-fixed where costs not directly
  attributable to either of the above, for example,
  some types of energy and labour costs

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COST SHEET
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Prime Cost

• Direct Material Consumed
• Direct Labor
• Direct Expense

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MANUFACTURING COSTS DIRECT MATERIALS

• Raw materials
• The basic materials and parts that are used in
  the manufacturing process
• Raw materials physically and directly associated
  with the finished product are called direct
  materials

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INDIRECT MATERIALS

• Indirect Materials are raw materials which cannot
  be easily associated with the finished product.
• Not physically part of the finished product
• Cannot be traced because their physical
  association with the finished product is too
  small in terms of cost
• Accounted for as part of Manufacturing Overhead

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LABOR and Expenses

• Direct Labor The work of factory employees
  which is physically and directly associated with
  converting raw materials into finished goods.
• Indirect Labor Efforts which have no physical
  association with the finished product or its
  impractical to trace the costs.
• Direct Expenses directly associated with cost
  center
• Indirect Expenses
• Classified as Manufacturing
• Overhead

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Prime cost -Example
CONTENT AVG. CONSUMPTION/ SHIRT AVG.PRICE/UNIT (Rs.) TOTAL COST(Rs.)
Fabric 2.10mts. 56 117
Thread 200mts. 9/spool 4.5
Button 11pcs. 0.25 2.75
Label 3pcs 0.20 0.60
Polybag 1pcs 2.10 2.10
Collar band card board 1pcs 0.10 0.10
Card board 1pcs 0.80 0.80
Clips 4 pcs 0.10 0.40
Pin 8 pcs. 0.05 0.40
Butterfly 1 pcs. 0.35 0.35
collarbone 2 pcs. 0.25 0.50
fusing 25 cm 30/mt 7.50
Direct Labor cost 35.66 35.66
Direct expenses 11 11
Prime cost 219.21
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MANAGERIAL COST CONCEPTS

• Manufacturing Activities and processes that
  convert raw materials into finished goods.
• Manufacturing Costs include
• Direct materials
• Direct labor
• Direct Expense
• Manufacturing overhead

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MANUFACTURING OVERHEAD

• Consists of costs that are indirectly associated
  with manufacturing the finished product.
• Includes
• Indirect materials
• Indirect labor
• Indirect expenses such as
• Depreciation on factory buildings and
  machines
• Insurance, taxes, maintenance on
  
  factory facilities

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• FACTORY OVERHEADS- Examples
• Salary paid to merchandiser
• Salary paid to production manager
• Floor incharge salary
• Q.A. Q.C.
• Plotting boy
• CAD operator
• Salary paid to fabric head
• Salary paid for line supervisor
• Salary paid to machinery maintenance
• House keeping
• Guard
• Medical care taker
• Fuel
• Electricity
• Water consumption
• Oil and Consumables

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OFFICE AND ADMINISTRATION OVERHEADS Examples

• Salary paid to
• chairman
• MD
• GM
• Receptionists
• HR persons
• Accountants
• Purchases Dept. Persons
• Office Boys
• Telephone Expenses
• Stationary Expenses
• Electricity Expenses of office
• Rent/Depreciation on Office Assets

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SELLING AND DISTRIBUTION OVERHEADS- Examples

• Salary paid to selling and marketing staff
• Advertisement cost
• Sample distribution
• Export documentation
• Testing expense
• Buying agent commission
• Conveyance
• Trade Fair and other Promotional expenses
• Website and ecommerce expenses