Cost Accounting
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Letter of Transmittal
Audit & EDP Accounting Institute of Business Management Karachi Dear Sir, As per your instructions, I am hereby submitting my first report on the required topic. The report shall continue containing all the essential elements and required information which were listed briefly by you in the class. Although the task was relatively easier for me as the chosen company had its Branch Manager, a very close relative to me. I have put our whole efforts in making this report, and I am fully satisfied with it. I hope you would be happy to see my performance because I did worked a lot for it. Incase of any assistance or interpretation in this regard, you can always contact me anytime. I would be glad to be of any help. Regards, Contents Page History 5 Management Flow Chart Error! Bookmark not defined. Cost Accounting Flow Chart Error! Bookmark not defined. Process Costing: Error! Bookmark not defined. Accounting System Flow Chart Error! Bookmark not defined. Berger † Departments Error! Bookmark not defined. Types of Products Manufactured By the Company Error! Bookmark not defined. Recording Procedures Error! Bookmark not defined. Recording The Purchases & Return Of Raw Materials: Error! Bookmark not defined. Direct Labour Cost: Error! Bookmark not defined. Manufacturing Overhead Cost: Error! Bookmark not defined. Budgets Error! Bookmark not defined. Sales Budget: Error! Bookmark not defined. Production Budget: Error! Bookmark not defined. Purchases Budget: Error! Bookmark not defined. Direct Labor Budget: Error! Bookmark not defined. Factory Overhead Budget: Error! Bookmark not defined. Acknowledgement First of all I would like to thank Allah Almighty for granting me the capability and courage to work on this report with my best efforts, and for the patience and perseverance endowed by Him. I would also like to thank Mr. Darrel Pereira for giving me the chance to work on this report and for his guidance, advice and examples during regular sessions which made this report possible. I would also like to extend my gratitude to the senior students who gave guidance and helped me in this report. I genuinely hope that this report meets the designated standards and you have a pleasant time going through it. The History Student Product Total Inventory Budget Inventory management for the branch is monitored by the branch manager under the supervision of the heads. They had a store in the back where all the essential ingredients and material is stored. 
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All these items are being purchased in bulk and these ingredients are then issued to the kitchen department, on a daily basis, depending on the number of maximum estimated/calculated consumption. As purchase is done in huge quantities (contract between students and supplier), they get a considerable amount of discount on purchase of materials which ultimately reduces their inventory budget.
Registers are used in recording how much inventory was given out to the department on one particular day and how the inventory is managed. Inventory is being purchased for use of months that is why it is purchased in large quantities. Apart from these, items such as chicken, beefs, vegetables and fruits are purchased on a daily basis because such commodities can not be stored for a longer period of time. They are being excluded from the inventory budget and there budget is recorded on a different register daily. Following is the (exemplary) inventory budget for a month |THE CRESENT ROLL CORNER & BAR-B-QUE | |Inventory budget | |Commodity |Quantity (Kg/Litre) |Price (Rs.) |Usage Tpye |Dis. Price |Net Cost (Rs.) | |Chicken |400 |Rs. 70/kg |Daily |55 |22000 | |Mayo and Sauces |100 |Rs. 25/kg |Daily |22 |2200 | |Oil |250 |Rs. 375/5 litre |Daily |320 |80000 | |Flour |100 |Rs. 90/Kg |Daily |81 |8100 | |Onion |150 |Rs. 35/kg |Daily |30 |4500 | |Yougurt |30 |Rs. 80/Kg |Daily |64 |1920 | |Coals |100 |Rs. 50/Kg |Monthly |45 |4500 | |Beef |200 |Rs. 95/bottle |Daily |80 |16000 | |Wrapers |50 |Rs. 25/Kg |Daily |23 |1150 | |Straws |10 |Rs. 30/Kg |Monthly |27 |270 | |Spices |70 |Rs.22/packet |Monthly |20 |1400 | |Creams |50 |Rs. 25/packet |Monthly |23 |1150 | |Salad |100 |Rs. 20/packet |Daily |15 |1500 | | | | | | | | |Drinks | | | | | | |Pepsi |250 |Rs. 15/Bottle |Monthly |12 |3000 | |7-up |200 |Rs. 15/Bottle |Monthly |12 |2400 | |Miranda |200 |Rs. 15/Bottle |Monthly |12 |2400 | |Dew |150 |Rs. 15/Bottle |Monthly |12 |1800 | |Aqua-Fina |100 |Rs. 15/bottle |Monthly |13 |1300 | | | | | | | | |Total Inventory | | | | |155590 | Cash Budget Cash budget serves the purpose of indicating the effects on the cash position of events like seasonal requirements, inventories, receipts and speed in dealing with receivables and payables. At students, like general trends of fast food restaurants, cash transactions are the most basic and occurring ones, that is why there cash flow is a simple difference of their receipts and payments) Following is the example of Cash budget used. |THE CRESENT ROLL CORNER & BAR-B-QUE | |Cash Budget (Exemplary) | |FOR THE MONTH XXX | |Receipts (Sales) | | |xxxx | | | | | | | | |Less: Payments | | | | | |Inventory | |xxxx | | | |Labor | |xxxx | | | |Overhead | |xxxx |xxxxx | | |Cash at end | | |xxxx | | Sales Budget This budget displays the sales in units daily and then multiplied by the sales price and then by 360 to determine the expected sales revenue for the year 2008. Sales are recorded on the basis of the number of units served everyday. Average number of rolls is recorded on a per day basis through which expected annual sales revenue is calculated. Not being very automatic, they do the calculations manually and use the statistics manually enough have a fairly accurate estimate of their sales but for our purpose, we are estimating on an average basis. Following is the example sales budget | |THE CRESENT ROLL CORNER & BAR-B-QUE | | | |Sales Budget (Exemplary) | | | | |ITEM |Units per day |Unit price |Total | | | | | | | |Rolls | | | | | |Chicken Roll |50 |30 |1500 |540000 | |Chicken Kebab Roll |100 |20 |2000 |720000 | |Chicken Garlic Roll |200 |40 |8000 |2880000 | |Chicken Spicy Roll |250 |40 |10000 |3600000 | |Chicken Cheese Roll |125 |45 |5625 |2025000 | |Chicken Tikka Roll |50 |85 |4250 |1530000 | |Beef Roll |50 |30 |1500 |540000 | |Beef Behari Roll |100 |50 |5000 |1800000 | | Beef Garlic Roll |100 |60 |6000 |2160000 | |Beef Spicy Roll |100 |60 |6000 |2160000 | |Beef Cheese Roll |150 |60 |9000 |3240000 | |Kebab Roll |70 |50 |3500 |1260000 | |Kebab Garlic Roll |150 |45 |6750 |2430000 | |Kebab Spicy Roll |100 |50 |5000 |1800000 | |Kebab Double Roll |50 |65 |3250 |1170000 | | | | | | | |Others | | | | | |Chicken Tikka |50 |50 |2500 |900000 | |Behari Tikka |50 |45 |2250 |810000 | |Chicken Boti | 30 |45 |2100 |756000 | |Seikh Kebab | 25 |50 |1250 |450000 | |Gola kebab |50 |50 |2500 |900000 | |Behari Boti |60 |60 |3600 |1296000 | |Parhatay |10 |12 |120 |43200 | |Mineral Water |50 |15 |750 |270000 | |Cold Drinks |150 |12 |1800 |648000 | | | | | | | |Total (projected) Sales per day | | |94,245 | | |Total (projected) Sales for the year | | | |33,928,200 | Production Budget: Like any fast food firm, they operate on the timings of delivery orders they get, they can’t simply have any production budget. Instead they work on On-Minute basis to provide customer there services/product made fresh at the moment. So, it doesn’t follow the formal pattern, of having an opening inventory then current production and an ending inventory etc. It has a production budget of raw material inventory only, that records how much inventory was there at the beginning of the day, how much was utilized by the kitchen department and how much is left at the end of the day. But, it doesn’t estimate how many plates it should manufacture because it depends on the number of order it receives. Example of Production Budget: |Beginning inventory |Xxx | |Less: issued to Kitchen Dept. |(xxx) | |Inventory left (end of the day) |xxx | Approximation of Cost for Material, Labor and Factory Overhead Incurred In The Manufacturing MATERIAL COST A budget is approximated for the direct-material which shows the number of units and the cost of material to be purchased and used during a specified period. As the items served by the Crescent Roll Corner are primarily the ROLLS, there are few basic commodities that are used in the production of almost all kinds of items. So it has generalized its material cost and given an estimate of how much material it costs to manufacture its products. |THE CRESENT ROLL CORNER & BAR-B-QUE | |DIRECT-MATERIAL BUDGET(Exemplary) | |Estimation | | | | | | | |ITEM |COMMODITY |Cost/plate |Avg. No. Of items |Total Cost | | | |Rs. |per day |per day | | | | | | | | |flour |xxx | | | | |oil |xxx | | | | |butter |xxx | | | | |mayonese |xxx | | | |Rolls |garlic |xxx |xxx |xxx | | |ginger |xxx | | | | |cheese |xxx | | | | |chicken |xxx | | | | |beef |xxx | | | | | | | | | |Total Cost / item | |xxx | | | | | | | | | | |bread |xxx | | | | |chicken |xxx | | | |Tikkay,kebab & Boti |cheese |xxx |xxx |xxx | | |mayonese |xxx | | | | |beef |xxx | | | | |Flour | | | | | |Oil | | | | | |Spices | | | | | |ketchup |xxx | | | | | | | | | |Total Cost/plate | |xxx | | | | | | | | | | |Vegetables |xxx | | | | |Yougurt |xxx | | | |Extras |Mint Flavor |xxx |xxx |xxx | | |Water |xxx | | | | | | | | | |Total Cost/plate | |xxx | | | | | | | | | LABOR BUDGET Labor refers to the staff and chefs, who have to prepare all the items on menu list and server them to the customers. They are being supervised by the owner himself. The labor budget has been divided into two components namely Fix and Variable budget. Fixed budget includes the salary of Chief Manager, Workout Manager and the receptionist. While Variable budget includes wages of chefs, peons, and waiters. Chefs are paid on the number of items they manufacture in a day and waiters are paid on an hourly basis. |THE CRESENT ROLL CORNER & BAR-B-QUE | |LABOR BUDGET (Exemplary) | |FIX BUDGET | | | | | | | | | Workers |Salary | | | | | | | | | | | | |Chief Manager |12000 | | | | | |Workout Manager |7000 | | | | | |Receptionist |4500 | | | | | | | | | | | | |Total |23500 | | | | | | | | | | | | |VARIABLE BUDGET | | | | | | | | |Workers |No. of Workers |Working hrs. |Wage rate(per Hour) |Total |Monthly | | | | | | | |Waiters |12 |12 |25 |300 |9000 | |Chefs |5 |13 |30 |390 |11700 | | | | | | | | |Total | | | | |27900 | | | | | | | | MANUFACTURING OVERHEAD Refer to costs that are apart from their main business. It includes electricity bills, in summers the amount is high whereas in winters it is low because air conditioners are not turned on, payment of laundry man (for laundry of the staff uniform), compensation of the maid, monthly payment of security system and occasional renovation expenses. |THE CRESENT ROLL CORNER & BAR-B-QUE | |Manufacturing Overhead (Exemplary) | |For Month XXX | | | | | | |Types of Expenses |Expected Expense |Other Cost (If any) |TOTAL | | | | | | |Eletricity |12000 | - |12000 | |Gas |7000 | - |7000 | |Clothes |4500 | - |4500 | |Repairs |5000 | - |5000 | |Supplies |4500 | - |4500 | |Indirect Labor(Peon) |7200 | - |7200 | |Indirect material(Salad etc) |5000 | - |5000 | |Insurance |3000 | - |3000 | |Depreciation |1500 | - |1500 | | | | | | | | | | 49700 | | | | | | | | | | | |
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