SYSTEM OF COST ACCOUNTING IN 30.10.

2018
ORDNANCE FACTORIES
COST ACCOUNTING
estimate – prepared by Fy. Management
Review & Pricing by the concerned sec of Br. AO.
WARRANT
Based on estimate every warrant is to be checked by
estimate group of costing sec
Opening of cost card & PL card
COST CARD POSTING
Primary document are
Labour abstract, material abstract, component abstract,
TV abstract
Every expenditure incurred on the warrant to be recorded in the corresponding Cost
card.
REVIW AND CLOSING OF COST CARD

Variance analysis is the primary duty of costing section

and intimate to Fy. Management
...CONTD
Material Abstract
 Expdr. is shown work order and warrant
wise listing all demand and return notes.
 Transfer voucher Abstract
 Adjustment voucher Abstract
Material drawn in “01” and “02” work orders – indirect
material
OVERHEAD ACCOUNTING
PR/IX/42/Genl/Order/II dated 18th July 2016.
Pre-determination of OHs - SBC & CBC based on 9 months
actual OH – to be implementable from 1st April of the next
financial year.
Derive the budgeted expenditure Section wise
Labour Abstract, Material Abstract
SFC & SVC
Power Cost statements, Allocation sheets, Pay Bills
PSA, CCO2, Block register, RDR Compilation
Principal ledger, Annual Accounts
 ...CONTD
Cost Centre/ Section/Shop – allocation based on Service /
Production
Step Ladder
 All budgeted expenditure of service sections is allocated to the production
sections
- The format for the Step ladder is as below:

S1 S2 S3 S4 P1 P2 P3 P4
25000 23000 36000 36000 84000 103000 112000 119000
25308 2301 3068 3834 4602 5368 6135
40993 5466 6832 8198 9565 10932
47611 6802 10202 13603 17004
TOTAL 105314 130232 145153 157301
SMH 20000 30000 40000 50000
Hrly Rate 5.26 4.34 3.63 3.15
STEP LADDER
Productive section Total Basis of
Non Production section distribution
Electric store A B C X Y Z

Dr.100 Dr.50 Dr.150 Dr.250 Dr.750 Dr.900 Dr.600 Dr.700 Dr.2500 Actual or estimated
fixed charge

Total Dr.5 Dr.25 Dr.15 Dr.5 Dr.10 Dr.15 Dr.25 On the basis of
Cr.100 consumption of
electricity
Total Dr. 5 Dr.15 Dr.5 Dr.10 Dr.15 Dr. 5 On the basis of
Cr.55 consumption of
material
Total Dr.15 Dr.50 Dr.25 Dr.40 Dr. 50 On the basis of
Cr.180 number of worker

Total Dr.95 Dr.50 Dr.100 Dr. 50 Percentage fixed by

Cr.295 Management

Total Dr.700 Dr.100 Dr. 105 Total direct labour

Cr.905
Total Total Total Dr.2500
Dr.1695 Dr.870 Dr.935
Direct Labour 1000 500 400

Percentage 169.5% 174% 233.75%

...CONTD
Budgeted SMH (Target + Semi +Contract Lab Hrs) –
Shop/section wise
FOH & VOH so derived per section will be divided by the
budgeted SMH for that section – OH Hrly rate
Actual – SVC & SFC after the first quarter
Variance analysis - +-5% Budgeted OHs will be changed as
per actuals
PR/II/19B dated 18th July 2016
CLOSING OF COST CARD
Completed/closed copies of ‘Manufacture’ and ‘Material
warrants’
Warrants of previous year - value of closing semi and quantity
issued should be priced and added to the total expenditure
element-wise to determine the CoP.
Rejections – Beyond UAR% - KoP.
OH expenditure
Semi calculation if the warrant remains open through to next FY
PR/II/1366/CONM/SRB/WIP dated 18th July 2016.
SEMI STATEMENTS - PRICING
 Material - Quantity drawn (against unfinished units) X Rate at
which Demand Note was priced.
 Labour - (i) Quantum of PW SMH (shop-wise which pertains
to un-finished units) X Labour (PW) Rate per SMH of the shop for
the concerned month.
(ii) Quantum of DW MH (shop-wise which pertains to un-finished
units) X Labour (DW) Rate per MH of the shop for the concerned
month.
(iii) Quantum of SMH discharged by contractors Labour towards
unfinished units X Rate adopted for allocation for that month.
SEMI STATEMENTS - PRICING
Direct Expenses –
Electricity & Water - Units consumed against unfinished
quantity X Rate adopted for pricing of allocation sheet.
VOH and FOH are to be priced multiplying the Labour
Hours booked by rate of VOH/FOH per hour.
Warrants – No issues no detailed semi pricing
Value of the semi manufacture under each work order –
Summary: WIP cost work order wise
COSTING USED IN OFS

STANDARD COSTING

 JOB COSTING

 PROCESS COSTING

 FOUNDRY COSTING

 EXCEPT SYSTEM (Also PPL)

JOB COSTING
Orders placed on production shops for convenient batch or quantity
Standard Estimates - labour and drawal of materials
Expenditure incurred under the elements of cost viz. Labour, Materials,
Direct Expense, Variable Overheads and Fixed Overheads are
ascertained warrant/WO-wise
Actual cost is compared with the estimated cost
Mid-term course correction
Widely followed in OFs
PROCESS COSTING
For each process, separate accounts are maintained known as
process accounts.
Labour: Section wise for each process is obtained from Labour Abstract.
Materials: Every Process Section furnishes the quantity of material
demanded and material expended. It includes the departmental material
also. Materials common to two or more work orders at the first instance
demanded by the Section under one Work Order and then transferred to
other Work Orders by a Transfer Voucher.
Direct expenses: Directly allocated to the work.
OH to be charged shop-wise on the basis of DL
 …CONTD
Departmental materials are also used in the manufacture of certain process material.
They are valued at the previous month’s rate and are compiled under charges incurred in
manufacture.
Waste acids recovered are again utilized after necessary purification. At the beginning
of FY – rates are pre-determined
Monthly process issue statements - process materials produced & quantities issued.
Determination of monthly rate – value of the opening balance is determined on previous
month’s rate + Value of production of the month and then averaged out to determine the
rate
TV - Debiting the process work order and crediting the next process material work order.
Used in Chemical OFs
FOUNDRY COSTING
Form II (Foundry Work record)
 Labour employed for the Foundry job – SMH x Hrly Rate
 SMH utilized will be verified against the total weights of castings issued
Foundry Form III
 metal statement and process statement
 Details of issue to outturn Work order and value of material consumed
Foundry Cost Statement Form I
 Posted from Form II and Form III
 Variable and Fixed Charges are calculated on the basis of rate per SMH.
(detailed instructions for different processes are available)
…CONTD
From Form I – Cost Derivation - Unit rate/Kg of castings produced.
 The total expenditure divided by net total weight of castings produced gives the rate
per unit weight.
 The moulding rates of the casting vary according to the type of casting produced.
Percentage of loss to the total quantity manufactured. An abstract is
prepared by debiting the out-turn order by giving credit to the relevant
Foundry work Order.
Final Outturn work order takes the unit cost from Form I (Foundry
Statement) as Material at the derived rate
Used in Metallurgical Factories
EXCEPT SYSTEM
In case of items comprising many components, - Each kind of component is
produced independently and finally assembled.
The orders for manufacture of components are called ‘Except orders’ and
the components are known as ‘except components.
Instead of taking the finished component to stock as complete and
subsequent drawal to assembly work order, the components are kept on
production charge.
The work orders for components are in 40 series
Element wise Cost is taken to the Final Outturn Work Order
EXCEPT SYSTEM
The finished components - to a component stores but not to the main store
A separate production card is maintained for each of the component – receipts posted from
the Inspection Notes
Drawal and return of components to and from the assembly work orders - RED
DEMAND/RETURN NOTES
‘Component Abstract’ is prepared
Component semi statement generated
Components not used - semi manufacture at the end of the year are to be charged against the
assembly work order on which they were supposed to be drawn.
LINKING of components with the final outturn is important
 PPL SYSTEM
It is a kind of except system for Material and component manufacturing
These are retained under production charge on priced production ledger –
considered as a departmental store
Work order series 41 is operated
Material is Drawn on coloured DN/RN
No element-wise cost is depicted unlike the except system
No linkage with final outturn workorder can be established
THANK YOU