Management accounting II COST MANAGEMENT: A CASE STUDY OF PRESTIGE

Submitted To:
Mr. N.K Puri

Submitted By:
Arjun Arya(71) Sazal Madan(87)

Subject:
Managerial Accounting II

Date of Submission:
November 24th, 2012

November 24, 2012

[TTK

Prestige Limited.]

About the Company Over the past five decades TTK Prestige Limited, has emerged as Indias largest kitchen appliances company catering to the needs of home makers in the country. Every Prestige brand product is built on the pillars of safety, innovation, durability and trust, making the brand the first choice in millions of homes.

We always begin by understanding the needs and requirements of our customer and then we design and deliver innovative products. TTK Prestige Limited is one of the worlds largest manufacturers of Pressure Cookers and it has been forefront in introducing several innovations like Gasket Release System (GRS), Gasket Offset Device (GOD) and Double Locking System, all firsts in India. Prestige has been responsible for changing the cooking habits of millions in India; it has demonstrated how one could cook meals in minutes, the healthy way.

TTK Prestige Limited has come a long way. Today, TTK Prestige Limited has the widest product portfolio covering all aspects of the Kitchen making it the only brand to offer TOTAL KITCHEN SOLUTIONS to the customer. The product range includes Pressure Cookers, NonStick Cookware, Rice Cookers, OTGs, Kitchen Hoods (Chimneys), Hobs, LP Gas Stoves, Coffee Makers, Kettles, Sandwich Toasters and many other small electrical appliances. TTK Prestige Limited also offers Modular Kitchen solutions with the widest range of options in terms of design, choice of materials, accessories and hardware.

TTK Prestige Limited exports its products to USA, Europe, South Africa, Kenya, Australia, Singapore, Middle East, Sri Lanka and many other countries. Products manufactured by TTK Prestige Limited meets every relevant global standard such as CE, GS, and UL etc.

Today, Prestige has matured from a traditional pressure cooker brand to complete kitchen solution provider and we are working to improve and change the lifestyle of every Indian household.

November 24, 2012

[TTK

Prestige Limited.]

Products:

Barbeques Coffee Makers Cookware Electric Kettles Gas Stoves Gift Certificates Satilon Frying Pan Hand Blenders Hybrid Combi Cook Tops Idli Plates Induction Cook-Tops Irons Juicers Kitchen Hoods & Hobs Kitchen Tools Mixer Grinders Non-Stick Cookware Oven Toaster Griller Pop-Up Toasters Pressure Cooker Pressure Handis Prestige Microchef Rice Cookers Sandwich Toasters Separators Wet Grinders

November 24, 2012

[TTK

Prestige Limited.]

STRATEGIC PLANNING Mission We have one overarching goal: to win over customers, to truly please them by delivering products and service beyond their expectations, to earn their friendship and build relationships that will endure. We offer products that are needed, well-designed, well-made and reasonably priced. We continually strive to improve our products and customer service. Pleasing customers is our livelihood and our vocation. It is the best way we have of fulfilling the expectations of shareholders, employees, vendors and other associates. Our single-minded determination to please customers drives the kind of people we employ and promote, the investments we make and the results we produce. Pleasing customers is a matter of who we are, of being true to our roots. Reporting of Financial Information Reporting of the financial information is done periodically and the various details are given below: Weekly These are the internal financial results which are kept by the internal sources of the units for their own perusal for checking whether the objectives have been fulfilled when compared with the budgeted figures. Monthly These reports are sent to the headquarters located in Mumbai and are used by the Mumbai office for the evaluation of the three production units. Quarterly These are the consolidated reports prepared by the top management to check the overall performance of the company so as to help in future planning and control. Annual These reports are mainly financial accounting reports and are made for the external agencies and stakeholders. Production and Purchase Decisions Purchase Decisions
3

November 24, 2012

[TTK

Prestige Limited.]

The purchase decisions are centralized and are taken at the head office at Mahim in Mumbai. The procedure followed is the

Meeting planned every month Orders are verified and calculated Estimation of raw material required Inventory checking done Orders placed with a margin for special orders

Production Decisions The production decisions are taken every month in the monthly meetings held at the head office. The criteria on which the production decision are based are as follows Sales position Stock position Sales forecasting The sales are forecasted taking the average of previous five years and considering an increment of 10% increase in demand. Sometimes during the festive seasons there is an increased demand for the utensils. So keeping the past trend in mind, the company produces the material according to the festive seasons. During this time extra presses are put into duty and extra contractual workers are hired.

November 24, 2012

[TTK

Prestige Limited.]

Job order control system Software called Deposoft is used for the communication process. The software Deposoft is distributed to all the customers and they use it for order generation from their own sites. Whenever an order is placed it is directly communicated to the head office at Mahim, Mumbai. Now, the top management allocates the job order according to the capacity available with each of the three production units and the work is allocated accordingly. For e.g., if an order of 1000 units is placed then according to the idle capacity of the units, the order is distributed as 400, 300, 300. If some special job orders are to be placed by new customers they can directly do so by approaching the respective units which communicates the details to the head office at Mahim where the top management sends permission to do the job. Order execution is usually done on FCFS (first come first serve) basis provided the whole payments are received or else priority is given to the orders which have made larger share of their outstanding payments.

Responsibility Accounting at Prestige There are no specific Responsibility Centers in Prestige, but based on the concept of the responsibility centers accounting we have tried to classify the departments and divisions as responsibility centers. There are three levels of centres at PRESTIGE; 1) Jaunpur(UP) 2) Hoshiarpur(Punjab) 3) Thane(Maharashtra).

November 24, 2012

[TTK

Prestige Limited.]

There are individual departments in these three production units as given below: Manufacturing Quality Stores Maintenance and Electrical Accounts and Finance Purchase Excise

These three centres act as profit centres for the company and are individually involved in all manufacturing and selling operations. These three centres sell their products to external customers as well as transfer the products internally too. These centres can be further subdivided into divisions which can be considered as responsibility centers as given below: Revenue Centers Sales departments of the three production units Expense Centers There are no specific expense centres Profit Centers All the three units act as profit centres. Investment Centers - Central Division Mumbai, Maharashtra. Transfer pricing Transfer price refers to the amount used in accounting for transfer of goods or services from one responsibility center to another or from one company to another which belongs to the same group. Transfer pricing is a mechanism for distributing revenue between different divisions which jointly develop, manufacture and market products and services. Transfer pricing systems are designed to accomplish the following objectives: to provide each division with relevant information required to make optimal decisions for the organization as a whole; to promote goal congruence that is, actions by divisional managers to optimize

November 24, 2012

[TTK

Prestige Limited.]

divisional performance should automatically optimize the firm's performance; and to facilitate measuring divisional performances. The fundamental principle is that the transfer price should be similar to the price that would be charged if the product were sold to outside customers or purchased from outside vendors. Transfer prices are significant for both taxpayers and tax administrations because they determine in large part the income and expenses, and therefore taxable profits, of associated enterprises in different tax jurisdictions. Transfer pricing rules in most countries are based on what is referred to as the arms length principle that is to establish transfer prices based on analysis of pricing in comparable transactions between two or more unrelated parties dealing at arms length. At Prestige too, transfer pricing has been employed between departments of the three production units. The transfer pricing methods used in India have been listed below:(a) Comparable Uncontrolled Price Method ('CUPM') - In this method, price charged in an

uncontrolled deal between comparable entities is recognized and evaluate with the verified entity price to determine the Arms Length Price.
(b) Resale Price Method ("RPM') - RPM method is related to CPM. This method is used

where the vendor adds similarly little value to goods owned from associate enterprises. Here, Arms Length Price is determined by reducing the relevant gross profit mark -up from the sale price charged to free entity.
(c) Cost plus method ('CPM') - In this method, the total price of intangible incurred by the

tested parties in transferring products and services to Associated Enterprises is measured and the sum of gross profit spot used by similar enterprises in comparable transactions with self-determining associated enterprises is determined. The sum of gross spot arrived at is used to take into account functional and other variation to determine ALP. The extra similarities in the functions, risks and property, the extra likely it is that the cost plus

November 24, 2012

[TTK

Prestige Limited.]

method will create a suitable estimation of an arm's length result. This method is generally used where semi-finished products are transferred.
(d) Profit Split Method ('PSM') - This method is used when associate enterprise transactions

are included such that it becomes very hard to conduct a transfer pricing analysis on a transactional base. The combined net profit acquiring to connected entities from a transaction is then decided. After that combined net profit is allotted in between connected entities with mention to market income gained by free enterprises in comparable transactions.
(e) Transactional Net Margin Method ('TNMM') - Relatively the net profit margin of a

entities take position from a non-arm's length deal with the net profit margins understand by arm's length associate parties from comparable transactions; and Observe the net profit margin relation to suitable base such as price, sales or properties. For a reasonable, fair and equitable profits and tax in India in the case of multinational enterprises, the Finance Act, 2001 introduced law of transfer pricing in India through sections 92A to 92F of the Indian Income tax Act, 1961 which guides computation of the transfer price and suggests detailed documentation procedures. Transfer Pricing Regulations ("TPR") are applicable to the all enterprises that enter into an 'International Transaction' with an 'Associated Enterprise'. Therefore, generally it applies to all cross border transactions entered into between associated enterprises. It even applies to transactions involving a mere book entry having no apparent financial impact. The aim is to arrive at the comparable price as available to any unrelated party in open market conditions and is known as the Arm's Length Price ('ALP'). Prestige follows the transfer pricing strategy. Basically the responsibility centers act as profit centers for the company ,thus as in the case of profit centers the centers sell their finished products to other companies and there is also internal transfer of products from one center to other . The two type of pricing done in these two cases are as follows-

November 24, 2012

[TTK

Prestige Limited.]

Pricing while selling to external customers Prestige follows cost based pricing to sell its finished products to external customers. Selling Price = (MRP-FREIGHT) Where MRP is given by 25% of actual cost + actual cost i.e. they have a margin of 25 %. Internal transfer pricing For internal transfer pricing, the procedure followed is actual cost based pricing and there is a markup of 10 % on actual cost. Selling Price = Actual Cost + 10% of Actual Cost Thus each center acts as a profit center of the organization earning profit for the organization through external selling and also internal transfer of products. Taxation in transfer pricing No tax is given for the transfer of products within the organization. For transfer of products to the external customers, a FormF is used which is issued by the customer which states that the sales tax will be borne by the customer itself. For e.g., whenever the material is to be supplied from Jaunpur to Cochin, a FormF is issued which removes all the tax complications.

COSTING Costing Costing for Raw Materials They follow a FIFO method for inventory management and costing, i.e. the material which had been procured earlier at prices existing at that time are used first for production and the costs are also the original costs at which they are procured. The basic raw materials used are
9

November 24, 2012

[TTK

Prestige Limited.]

Aluminum Steel Brass

The costing for these raw materials is done using the method of weighted average costing method. Benefit-Cost Analysis Costbenefit analysis (CBA), sometimes called benefitcost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of a project for two purposes: (1) to determine if it is a sound investment (justification/feasibility), (2) to see how it compares with alternate projects (ranking/priority assignment). It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much. Since the prices of Aluminum and Steel are determined at the exchange, hence the prices are volatile. Thus the company cannot follow a fixed MRP for a relatively longer period. Hence the MRP is reduced or increased according to the market scenario thus making the pricing decisions very frequent. Cost Breakups Fixed Costs Plant and machinery Deprecation on Building and Equipments Publicity, Business Advertisement Promotion Variable Costs Raw material Consumables and Packaging component & electricity for extra units

Employees Salary at corporate and regional office Coating chemical cost Labour (manufacturing) cost Insurance Expenses Utilities Polythene covers

10

November 24, 2012

[TTK

Prestige Limited.]
Indirect Cost

Direct Cost Direct Labour Wages to employees Wages to employees manufacturing Raw material, Electricity contractual Coating chemicals Direct Material

Overheads Office maintenance Supervisory salaries and Clerical

Disinfestations chemical and equipments Packaging materials Polythene covers Office supplies

Advertising salaries Taxes and licenses Security Expenses and Travelling

11

November 24, 2012

[TTK

Prestige Limited.]

Costing Techniques Following in Prestige: Given below is Cost Sheet & Breakup of the cost at each stage of one their Product i.e. Satilon Frying Pan. Cost Summary S. No. 1. 2. 3. 4. 5. 6. Cost as on 04.12.10 99.14 33.19 23.50 15.38 3.67 7.78 Revised Cost as on 01.01.11 124.56 33.80 26.58 15.45 3.84 7.78

Cost Head Raw Material Components & Packaging Outhouse Labour Inhouse Labour Rework / Rejection Consumables

Remarks Annexure 1 Annexure 2 Annexure 3 Annexure 4 Annexure 5 Annexure 6 Annexure 7

7.

Overheads

5.99

6.95

(incl. Rs.0.70 turnover tax)

8. 9.

Profit Transportation

12.00 2.00 200.85

14.00 2.00 234.96 Annexure 8

10.

F.P. Lid

63.55

72.05

(incl Rs.0.20 turnover tax)

264.45

307.01

12

November 24, 2012

[TTK

Prestige Limited.]

Raw Material Costing (Annexure 1) Raw Material Cost- Satilon Frying Pan

Particulars Basic Packing Central excise 20% CST 4% Insurance BGFC Transport Service charge Bhiwandi loading/ unloading Transport to Saphale Unloading at Daphale Weight per circle (kgs) Cost (Rs per circle) Less: Scrap Stainless steel handle Landed cost Gross weight per handle Cost per blank Add: Scrapping at 3% Less: Product and jali scrap 92.14 1.20 93.34 18.66 112.00 4.48 0.34 116.82 1.87 0.025 0.13 0.80 0.05 119.695 0.770 92.16 2.30 89.86 158.00 0.2192 34.63 1.04 35.67 0.97 34.70

Rupees

Total material cost: Rs. (89.86 + 34.70) = Rs. 124.56

13

November 24, 2012

[TTK

Prestige Limited.]

S.No.

Item

Cost

Cost surcharge

with Rejection

Cost

incl. rejection

and transportation % 2.5 2.0 2.0 2.0 2.0 Rs 6.76 9.42 9.35 0.16 3.19

Rs 1 2 3 4 5 6 7 HMHD Bag 0.42 Printed sheet Corrugation Cookbook Handle sticker Spatula 6.32 8.54 9.17 0.15 3.00

Rs 6.60 8.949 9.17 0.156 3.13

0.44

2.0

0.45

Components & Packing Material (Annexure 2)

14

November 24, 2012

[TTK 0.64 2.50 0.25 0.74 0.50 0.19

Prestige Limited.]
0.67 2.50 0.26 0.77 0.50 0.19 5.0 2.0 0.70 1.25 0.266 0.77 0.50 0.19 33.796

8 9 10 11 12 13

Rivets Cloth for wrapping Cello tape Caution label Bondex adhesive Tape BDPP

15

November 24, 2012

[TTK

Prestige Limited.]

Inhouse Labour Cost (Annexure 4) Inhouse Labour Cost Satilon Frying Pan Due to new labour agreements from 1.1.95 the labour per day will be Rs.120.61/manday. CB represents contract basis. Labour Output/shift Rs./unit Remarks

Sl.No. Operation 1.0 Frying Pan Body 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 Pressing Trimming and Radiusing Hole Punching Stamping Inside emery Outside tool polish Dullum emery 40 pcs. Inside sunray Buffing Bottom sunray White nopping

1250 -

0.24 1.20 0.24 0.35 0.60 0.55 0.12 0.13 1.20 0.70 0.25 6.60 Rs./unit 0.55 0.27 0.26 0.25 1.00 3.00 5.33 Rs./unit Remarks Remarks

CB 3 3 CB CB CB CB CB CB

1250 850 -

Sl.No. 2.0 2.1 2.2 2.3 2.4 2.5 2.6

Operation S.S. Handle Gap closing in 2 Spot welding stage Cropping Deburring Piece cutting and bending Buffing

Labour CB 2 2 CB 1 CB

Output/shift 750 750 100 -

Sl.No. Operation Assembly and Packing 3.0 Cleaning before 3.1 assembly 3.2 Rivetting 3.3 Assembly and Packing

Labour

Output/shift

0.12 0.86 2.80 36 Nos/man incl. of master carton pkg. additional work of
16

November 24, 2012

[TTK

Prestige Limited.]
logo stickers on body 3.52

Total labour cost :1 + 2 + 3 = 15.45 Rework and Rejection (Annexure 5) Rework and Rejection Cost 1. Anodising rejection at 10% of Rs. 23/2. Scrapping at 0.75% * 89.86 0.67 Less product scrap 0.70 * 0.0075 * 55 3. Labour at 10% of Rs. 4.57 0.46 4. Consumables 5. Stripping cost 6. Wrapping cloth Rs. 2.30

-0.29

0.34 0.11 0.25 3.84

Consumable Cost (Annexure 6) Consumable Cost

1. For Body Operations Rs. 1.1. Emery cloth for sunray 1.08 Med. Ex. fine 1.2. Fibral pad 1.3. Emery 120 and 180, lether wheel 1.4. Blade for tool polish 1.5. Staple brush 1.6. Electrobar 1.7. White mop 1.8. Powder 1.9. Hand gloves (Sunray & Inspection) 1.10. Hand gloves (Sunray & Inspection) 2. S.S.Handle 2.1. Katha brush Rs. 1.01
17

0.33 0.50 0.10 0.65 0.30 0.16 0.05 0.10 0.10 3.37

November 24, 2012

[TTK

Prestige Limited.]
0.45 0.15

2.2. Electrobar 2.3. White bar 2.4. Emery powder 0.05 2.5. White Mop 2.6. Electrode 2.7. Acid wash 3. Electricity 2.50 Total : 1 + 2 + 3

0.05 0.05 0.15 1.91

7.78

Costing Of Frying Pan Ltd S.No. Cost Head 1. Raw Material a. SS circle 11dia * 0.5 mm wt. 0.252kg b. SS pipe 8 mm dia * 1.6mm *4.5 length per unit Add: 3% rejection:1.61 Less Scrap: 0.84 2. 3. 4. 5. 6. Packaging(fitment, bag , cellotape) Labour Cost Consummables (buffing + spot welding) Tooling cost Profit Turnover Tax Rate (Rs) 186/kg 18.35 per ft Rs/Unit 46.87 6.88 53.75 0.77 54.52 1.98 7.95 2.90 1.00 3.50 71.85 0.20 72.05

Labour Cost for Frying Pan Limited For Lid S. No. 1.1 1.2 1.3 Processes Pressing I Pressing II Trimming Rs./unit 0.24 0.22 0.85
18

November 24, 2012

[TTK

Prestige Limited.]
3.5 0.13 0.6 0.6 0.25 0.50 6.89

1.4 1.5 1.6 1.7 1.8 1.9

Buffing Stamping Spot Welding Buffing again Inspection Wrapping and packaging

For Handle S.No. 1. 2. 3. 4. 5. 6. 7. Processes For Cutting to 13.5 Buffing Cutting to 4.5 Bending Flattening Cropping Buffing again Total Lid+Handle Rs./Unit 0.07 0.38 0.13 0.07 0.13 0.10 0.18 1.06 7.95

Performance Evaluation The performance evaluation is done at Prestige using the Management Appraisal System. They follow a straight ranking method i.e., only the seniors and the super-seniors give the inputs regarding the review and performance evaluation of employees. The review is done on a yearly basis but a report has to be prepared every quarter giving the details of the status of the work, performance of the employees. The four parameters on the basis of which performance evaluation is done are:1) Quality of work 2) Quantum of work 3) Key responsibility areas 4) Effectiveness of the work done
19

November 24, 2012

[TTK

Prestige Limited.]

In the review system, the employees are graded on an ordinal scale of 1-5 where 1 below average 2 average 3 good 4 very good 5 excellent The qualitative parameters on which the review is done are:o Behavioural aspects (within the department and outside the department) o Contribution to the company o Discipline with the peers, superiors and subordinates o Cost concepts (how cost effective the work of the employee had been) The promotion and appraisal policy is based on the basis of the above stated parameters and the details are as given below: For ratings 1 and 2, no increments and/or promotions are available For rating 3, no promotions are available but increments are given For rating 4 and 5, prospect of promotions and increments are higher

Budgeting and Budgetary Control During the Budget Planning procedure, a small budgeting team is formed in Prestige consisting of VP Finance, VP Marketing along with their respective teams. In every three months Budgeting Planning meeting is done in the Mumbai head office where they allocate the resources according to the capacity of manufacturing of three units. Prestige primarily follows Incremental Budgeting based on zero based review. Incremental Budgeting is a system that uses the previous period's budget (or actual performance) as a basis for the next period's budget. Incremental amounts are added to the previous period's budget for the new budget period. Zero Based Review helps in deciding on the costs that are appropriate for a program, the cost estimates are built up from scratch from zero.

20

November 24, 2012

[TTK

Prestige Limited.]

This approach enables the management of Prestige to analyze the deviation of actual output from expected output and to judge their performance more precisely, Prestige prefers using Incremental Budgets. They use this system because material prices are very volatile and it helps in reducing inventory carrying cost. Budgeting process in Prestige takes place in the following order: 1. 2. 3. 4. 5. Assessment of last 5 years market demand of the product Budgeting Team studies the national growth rate in the same industry Follow the market trend GM- Finance collects the above mentioned data from all the 3 production units Based on Incremental Budgeting Prestige gives approximately 5% increase from the previous year approved budget 6. Budget Review in every 3 months (monitoring)

Prestige follows the budgeting planning cycle of 6 months. And Budget review is done in every 3 months. Handling Budgeting Issues o Budgeting price Increase- Budgets are prepared in advance. There are likely to be price increases between the time of preparation and the time when the amount is spent or received. Take this into account when you do your budgeting by estimating what the costs or value will be when the expenditure is made or the income received. Prestige handles the situation by increasing its MRP by 3-4% YOY, depending on the aluminium price and other raw material prices. o Contingency Amounts- A contingency amount is an amount that you put aside to deal with unforeseen events. While budgets should be informed guesses, there is still an element of guessing in them. The future is uncertain and organizations and projects have to survive in uncertain times. Because of this, some organizations allow for a contingency line item in the their budgets.
21

November 24, 2012

[TTK

Prestige Limited.]

As per the GM finance of Prestige, as per the industry trends the contingency amount can be set upto maximum 5%. But, they consider it to be of 3%.

OVERHEAD EXPENSES BUDGET

THANE Draft Actuals Actuals Budget Budget Controlling 200920102010-11 2011Officer 10 11 12 Rs Rs Rs Rs Lakhs Lakhs Lakhs Lakhs

EXPENSE HEAD POWER AND FUEL RENT INSURANCE REPAIRS & MAINT. TO BUILDING REPAIRS & MAINT. TO MACHINERY REPAIRS OTHERS TRAVELLING AND CONVEYANCE RATES AND TAXES TOTAL MISCELLANEOUS EXP (As detailed below) TOTAL OVERHEAD EXPENSES MISCELLANEOUS EXPENSES: PRINTING AND STATIONERY LEGAL AND PROF. CHARGES TELEPHONE CHARGES POST/TELEGRAM/COURIER R & D/TEST KITCHEN/SAMPLES CAR RUNNING EXPENSES AGM/SHARE DEPT EXPENSES EXPORT EXP/EXPORT DEVT EXP BROKERAGE ON FD/OTHERS LEASE RENTALS/HIRE CHARGES SERVICE CENTRE EXPENSES MARKET RESEARCH COMPUTER PROCESSING CHGS. INTERNAL CONFERENCE/MEETINGS BOOKS/PERIODICALS/SUBSCRIPTIONS

71.02 2.56 14.72 35.87 3.80 19.74 2.68 150.41 55.37 205.78 6.26 11.77 4.85 2.24 4.51 4.79

105.12

85.00

MM-T

16.33 36.36 5.34 22.34 2.77 188.26 61.70 249.96 6.00 9.59 3.39 2.27 9.76 4.23

15.00 35.00 4.00 20.00 3.00 162.00 67.00 229.00 7.50 12.00 5.00 2.50 11.00 5.00

M-P&FS MM-T MM-T/MP&FS SGM OC/SGMTP M-P&FS

CE-M PAM-T/MExcise M-P&FS SGM-QC CE-PD SGM-QC

3.77 2.70 0.12 0.49

7.03 3.27 0.17 0.39

4.00 3.50 0.80

SGM-QC SGM-DO M-P&FS

November 24, 2012

[TTK

Prestige Limited.]
2.58 0.06 0.17 10.85 2.34 0.18 12.93 3.00 0.20 12.50 M-P&FS PAM-T M-P&FS

SELECTION EXPENSES LAND SCAPING/GARDEN MAINT. EXP. BANK CHARGES SECURITY/SAFETY EXPENSES EXHIBITION EXPENSES VEHICLE HIRE CHGS./CARTAGE COOLIE OTHERS TOTAL MISCELLANEOUS EXP. OVERHEAD EXPENSES BUDGET

0.16 55.37

0.15 61.70

Actuals 201011 Rs Lakhs EXPENSE HEAD POWER AND FUEL RENT INSURANCE REPAIRS & MAINT. TO BUILDING REPAIRS & MAINT. TO MACHINERY REPAIRS OTHERS TRAVELLING AND CONVEYANCE RATES AND TAXES TOTAL MISCELLANEOUS EXP (As detailed below) TOTAL OVERHEAD EXPENSES MISCELLANEOUS EXPENSES: PRINTING AND STATIONERY LEGAL AND PROF. CHARGES TELEPHONE CHARGES POST/TELEGRAM/COURIER R & D/TEST KITCHEN/SAMPLES CAR RUNNING EXPENSES AGM/SHARE DEPT EXPENSES EXPORT EXP/EXPORT DEVT EXP BROKERAGE ON FD/OTHERS LEASE RENTALS/HIRE CHARGES SERVICE CENTRE EXPENSES MARKET RESEARCH COMPUTER PROCESSING CHGS. INTERNAL CONFERENCE/MEETINGS BOOKS/PERIODICALS/SUBSCRIPTIONS SELECTION EXPENSES LAND SCAPING/GARDEN MAINT. EXP. 105.12 0 0 16.33 36.36 5.34 22.34 2.77 158.26 61.70 249.96 5 9.59 3.59 2.27 9.76 4.23

67.00 THANE Actuals April/June 2011 Rs Lakhs 31.32 0 0 4.21 9.57 1.56 10.06 1.36 58.08 13.47 71.55 1.96 1.68 1.03 0.64 1.96 0.99

Budget 2010-12 Rs Lakhs 157 0 0 16 38 6 27 3 247 69.5 316.5 7.5 8 5 2.5 13 5

7.03 3.27 0.17 0.39 2.34 0.77 0.21 0.58

7.2 3.5 0.6 3

November 24, 2012

[TTK

Prestige Limited.]
0.18 12.93 0.08 3.57 0.2 14

BANK CHARGES SECURITY/SAFETY EXPENSES EXHIBITION EXPENSES VEHICLE HIRE CHGS./CARTAGE COOLIE ISI MARKING AND TESTING CHARGES OTHERS TOTAL MISCELLANEOUS EXP.

0.15 61.7

13.47

69.5

24

November 24, 2012

[TTK

Prestige Limited.]

LEARNINGS Performance Evaluation The performance evaluation at Prestige is done using the Management Appraisal System. They follow a straight ranking method. The parameters on the basis of which performance evaluation is done are: quality of work, quantum of work, key responsibility areas & effectiveness of the work done. The employees are graded on an ordinal scale of 1-5. And the promotion and appraisal policy is based on these rankings. Budgeting Methods Since, Prestige is following incremental budgeting in their management accounting system it gives them flexibility to incorporate the changing YOY Raw material rate of aluminium and steel. And we can also infer that it is easy to understand Incremental Budgeting and the calculations required for this type of budgeting is relatively simpler and straightforward. Therefore, for such a small organization it is always apt to use the Incremental Budgeting. Moreover, the zero based review helps to do the detailed budgeting of every component and can also be used as a tool for cost reduction process.

25

November 24, 2012

[TTK

Prestige Limited.]

26

November 24, 2012

[TTK

Prestige Limited.]

Raw Material Costing (Annexure 1)

27

November 24, 2012

[TTK

Prestige Limited.]

Components & Packing Material (Annexure 2)

28

November 24, 2012

[TTK

Prestige Limited.]

Outhouse Labour Cost (Annexure 3)

29

November 24, 2012

[TTK

Prestige Limited.]

Inhouse Labour Cost (Annexure 4)

30

November 24, 2012

[TTK

Prestige Limited.]

Assembly & Packing

Rework & Rejection (Annexure 5)

31

November 24, 2012

[TTK

Prestige Limited.]

Consumable Cost (Annexure 6)

32

November 24, 2012

[TTK

Prestige Limited.]

Overheads (Annexure 7)

33

November 24, 2012

[TTK

Prestige Limited.]

Costing of Frying Pan (Annexure 8)

34

November 24, 2012

[TTK

Prestige Limited.]

Labour Cost for Frying Pan (Annexure 8A)

35

November 24, 2012

[TTK

Prestige Limited.]

36

November 24, 2012

[TTK

Prestige Limited.]

37