COST ACCOUNTING PROJECT

PROCESS COSTING
















NAME: RUPEN CHALWA
MCOM- PART-1




Process costing is used when there is mass production of similar products,
where the costs associated with individual units of output cannot be
differentiated from each other. In other words, the cost of each product
produced is assumed to be the same as the cost of every other product.
Under this concept, costs are accumulated over a fixed period of time,
summarized, and then allocated to all of the units produced during that
period of time on a consistent basis. When products are instead being
manufactured on an individual basis, job costing is used to accumulate costs
and assign the costs to products. When a production process contains some
mass manufacturing and some customized elements, then a hybrid costing
system is used.
Examples of the industries where this type of production occurs include oil
refining, food production, and chemical processing. For example, how would
you determine the precise cost required to create one gallon of aviation
fuel, when thousands of gallons of the same fuel are gushing out of a
refinery every hour? The cost accounting methodology used for this scenario
is process costing.
Process costing is the only reasonable approach to determining product
costs in many industries. It uses most of the same journal entries found in
a job costing environment, so there is no need to restructure the chart of
accounts to any significant degree. This makes it easy to switch over to a
job costing system from a process costing one if the need arises, or to adopt
a hybrid approach that uses portions of both systems.
Example of Process Cost Accounting
As a process costing example, ABC International produces purple widgets,
which require processing through multiple production departments. The
first department in the process is the casting department, where the
widgets are initially created. During the month of March, the casting
department incurs $50,000 of direct material costs and $120,000 of
conversion costs (comprised of direct labor and factory overhead). The
department processes 10,000 widgets during March, so this means that the
per unit cost of the widgets passing through the casting department during
that time period is $5.00 for direct materials and $12.00 for conversion
costs. The widgets then move to the trimming department for further work,
and these per-unit costs will be carried along with the widgets into that
department, where additional costs will be added.
Types of Process Costing
There are three types of process costing, which are:
1. Weighted average costs. This version assumes that all costs, whether
from a preceding period or the current one, are lumped together and
assigned to produced units. It is the simplest version to calculate.
2. Standard costs. This version is based on standard costs. Its
calculation is similar to weighted average costing, but standard costs
are assigned to production units, rather than actual costs; after total
costs are accumulated based on standard costs, these totals are
compared to actual accumulated costs, and the difference is charged
to a variance account.
3. First-in first-out costing (FIFO). FIFO is a more complex calculation
that creates layers of costs, one for any units of production that were
started in the previous production period but not completed, and
another layer for any production that is started in the current period.
There is no last in, first out (LIFO) costing method used in process costing,
since the underlying assumption of process costing is that the first unit
produced is, in fact, the first unit used, which is the FIFO concept.
Why have three different cost calculation methods for process costing, and
why use one version instead of another? The different calculations are
required for different cost accounting needs. The weighted average method
is used in situations where there is no standard costing system, or where the
fluctuations in costs from period to period are so slight that the
management team has no need for the slight improvement in costing
accuracy that can be obtained with the FIFO costing method. Alternatively,
process costing that is based on standard costs is required for costing
systems that use standard costs. It is also useful in situations where
companies manufacture such a broad mix of products that they have
difficulty accurately assigning actual costs to each type of product; under
the other process costing methodologies, which both use actual costs, there
is a strong chance that costs for different products will become mixed
together. Finally, FIFO costing is used when there are ongoing and
significant changes in product costs from period to period to such an
extent that the management team needs to know the new costing levels so
that it can re-price products appropriately, determine if there are internal
costing problems requiring resolution, or perhaps to change manager
performance-based compensation. In general, the simplest costing
approach is the weighted average method, with FIFO costing being the most
difficult.
INTRODUCTION

Process costing is an accounting methodology that traces and
accumulates direct costs, and allocates indirect costs of a manufacturing
process. Costs are assigned to products, usually in a large batch, which
might include an entire month's production. Eventually, costs have to be
allocated to individual units of product. It assigns average costs to each
unit, and is the opposite extreme of Job costing which attempts to measure
individual costs of production of each unit.
it is a method of assigning costs to units of production in companies
producing large quantities of homogeneous products.

Process costing is a type of operation costing which is used to ascertain
the cost of a product at each process or stage of manufacture. CIMA defines
process costing as "The costing method applicable where goods or services
result from a sequence of continuous or repetitive operations or processes.

The importance of process costing[edit]
Costing is an important process that many companies engage in to keep
track of where their money is being spent in the production and distribution
processes. Understanding these costs is the first step in being able to
control them. It is very important that a company chooses the appropriate
type of costing system for their product type and industry. One type of
costing system that is used in certain industries is process costing that
varies from other types of costing (such as job costing) in some ways. In
process costing unit costs are more like averages, the process-costing
system requires less bookkeeping than does a job-order costing system.
Thus, some companies often prefer to use the process-costing system.




















tudy of vehicle manufacturing processes from raw materialto finish vehicles.

Study of Vehicle Tracking System (VTS) & equipment interface.

Auto closing system (Concept, design &fabrication)of floor service pit to
improve safety of human.


SUBMITTED BY-------------------4
TH
YEAR ELECTRICAL ENGINEERINGYMCA INSTITUTE OF ENGINEERINGFARIDABAD


tudy of vehicle manufacturing processes from raw materialto finish vehicles.

Study of Vehicle Tracking System (VTS) & equipment interface.

Auto closing system (Concept, design &fabrication)of floor service pit to
improve safety of human.

SUBMITTED BY-------------------4
TH
YEAR ELECTRICAL ENGINEERINGYMCA INSTITUTE OF ENGINEERINGFARIDABAD

COMPANY PROFILE

MARUTI SUZUKI INDIA LIMITED

Maruti Suzuki is one of India's leading automobile manufacturers and the
market leader in the car segment, both in terms of volume of vehicles sold
and revenue earned. Untilrecently, 18.28% of the company was owned by
theIndian government, and 54.2% bySuzukiof Japan. The Indian
government held aninitial public offeringof 25% of t hecompany in
June 2003. As of May 10, 2007, Govt. of India sold its complete
share toI ndi an f i nanci al i nst i t ut i ons . Wi t h t hi s, Govt . of
I ndi a no l onger has st ake i n
Mar ut i Udyog.Mar ut i Udyog Li mi t ed ( MUL) was es t abl i shed i n F
ebr uar y 1981, t hough t he act ual production commenced in 1983
with the Maruti 800, based on theSuzuki Alto kei car which at the
time was the only modern car available in India, its' only
competitors- theHindustan Ambassador andPremierPadminiwere both
around 25 years out of date atthat point. Through 2004, Maruti has
produced over 5 Million vehicles.
Maruti
are sold inIndia and various several other countries, depending upon export
orders. Cars similar toMaruti (but not manufactured by MarutiUdyog) are
sold by Suzuki and manufactured inPakistanand other South
Asian countries.The company annual l y expor t s mor e t han
50, 000 car s and has an ext r emel y l ar gedomestic market in India
selling over 730,000 cars annually.Maruti 800, till 2004, wasthe India's
largest selling compact car ever since it was launched in 1983. More than
amillion units of this car have been sold worldwide so far.
Currently,MarutiAltotopsthesales charts and Maruti Swift is the largest
selling in A2 segment.Due to the large number of Maruti 800s sold in
the Indian market, the term "Maruti" iscommonly used to refer to
this compact car model. Till recently the term "Maruti", inpopular
Indian culture, was associated to the Maruti 800 model.


MARUTI SUZUKI INDIA LIMITED

Maruti Suzuki India Limited, a subsidiary of Suzuki Motor
Corporation of Japan, hasbeen the leader of the Indian car market for
over two decades.Its manufacturing facilities are located at two facilities
Gurgaon and Manesar south of New Del hi . Mar ut i s Gur gaon
f aci l i t y has an i nst al l ed capaci t y of 350, 000 uni t s per annum.
The Manesar facilities, launched in February 2007 comprise a vehicle
assemblyplant with a capacity of 100,000 units per year and a Diesel Engine
plant with an annualcapacity of 100,000 engines and transmissions. Manesar
and Gurgaon facilities have acombined capability to produce over 700,000
units annually.More than half the cars sold in India are Maruti cars.
The company is a subsidiary of Suzuki Motor Corporation, Japan, which
owns 54.2 per cent of Maruti. The rest is ownedby the public and
financial institutions. It is listed on the Bombay Stock Exchange
andNational Stock Exchange in India.During 2007-08,Maruti Suzuki sold
764,842 cars, of which 53,024 were exported. In all,over si x mi l l i on
Mar ut i car s ar e on I ndi an r oads si nce t he f i r st car was
r ol l ed out onDecember 14,1983.Maruti Suzuki offers 12 models,
Maruti 800, Omni, Alto, Versa, Gypsy, A Star, WagonR, Zen Estilo,
Swift, Swift Dzire, SX4, Grand Vitara. Swift, Swift dzire, A star and
SX4are maufactured in Manesar, Grand Vitara is imported from Japan as a
completely builtunit (CBU), remaining all models are manufactured in
Maruti Suzuki's Gurgaon Plant.Suzuki Motor Corporation, the parent
company, is a global leader in mini and compactcars for three decades.
Suzukis technical superiority lies in its ability to pack power
andperformance into a compact, lightweight engine that is clean and fuel
efficient.

Maruti is clearly an employer of choice for automotive engineers and
young managersfrom across the country. Nearly 75,000 people
are employed directly by Maruti and itspartners.The company vouches
for customer satisfaction. For its sincere efforts it has been rated(by
customers)first in customer satisfaction among all car makers in India for
nine yearsin a row in annual survey by J D Power Asia Pacific.Maruti Suzuki
was born as a government company, with Suzuki as a minor partner
tomake a peopl e' s car f or mi ddl e cl as s I ndi a. Over t he
year s, t he pr oduct r ange has widened, ownership has changed hands
and the customer has evolved. What remainsunchanged, then and now, is
Marutis mission to motorize India

BACKGROUND OF THE INDIAN AUTO INDUSTRY
Al t hough t he I ndi an car i ndus t r y was est abl i shed i n t he l at e
f or t i es, t her e was l i t t l egr owt h or t echni cal pr ogr ess , as
pas senger car s wer e gi ven ver y l ow pr i or i t y i n
t hes c h e me o f C e n t r a l i z e d E c o n o mi c P l a n n i n g . I n t h e 1 9
8 0 s , t h e c a r i n d u s t r y wa s undergoing technological stagnation and
was characterized by low production volumes,high cost and low
productivity. The consumer had very little choice and the market wasselling
just around 30,000 cars per year.Ther e was a cl ear need t o pr ovi de
a cost ef f ect i ve, r el i abl e and qual i t y car t o t hecustomers.
Maruti Suzuki India Limited was incorporated in such a scenario as
a fullyowned Gover nment Company on Febr uar y 24, 1981
wi t h a r esol ve t o br i ng about expansion and technological
modernization, of the automobile sector. Thus MSIL, whenstarted was
entrusted with the task of achieving the following policy objectives:

Modernization of Indian Automobile Industry.

Pr o duc t i o n o f Vehi c l e s i n l a r g e v o l ume s , wh i c h wa s
n ec e s s a r y f o r ec o no mi c
growth.

Production of Fuel-efficient vehicles to conserve scarce
resourcesModernization of Indian Automobile Industry.

Pr o duc t i o n o f Vehi c l e s i n l a r g e v o l ume s , wh i c h wa s
n ec e s s a r y f o r ec o no mi c
growth.

Production of Fuel-efficient vehicles to conserve scarce resources.
Choice of product and collaborator

To achieve the above objectives, one of the foremost tasks before.Maruti
Suzuki
India Limited was to determine the most suitable product mix
and to select the
m o s t s u i t a b l e f o r e i g n p a r t n e r w h o w o u l d
b e w i l l i n g t o a c c e p t M S I L s
r e q u i r e me n t s i n t e r ms o f p r o d u c t mi x , t e c h n o l o g y
t r a n s f e r, a n d e q u a l i t y
participation and had the

required technological expertise and experience in producing high quality,
reliable
and fuel efficient vehicles.
A f t e r e x t e n s i v e d i s c u s s i o n w i t h s e v e r a l ma j o r
E u r o p e a n a n d J a p a n e s e c a r
manufacturers, MUL chose Suzuki Motor Corporation (SMC) further increased
its equity
holding to 50% in the year 1992, converting . Maruti Suzuki India
Limited, into a Non-
Government Company with a total Equity base of Rs. 1322.92 million.
ACKGROUND OF SMC

S UZ UKI wa s f o und ed i n 1 9 0 9 a s S u z u k i L o o m
Ma nu f a c t u r i n g Co mp a n y. I t s t a r t e d
manufacturing motorcycles in 1952 and has become a world leader in the
manufacture
of two-wheelers .SUZUKI started producing cars from 1955.Today it is
Japans largest manufacturers of small , fuel-efficient cars. At present the
companys name is SUZUKI