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aadishwar_management accouting

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Introduction

Aadishwar Apparels Industry Chosen: Manufacturing Industry Overview: The garment industry of India is principally in the small-scale sector (SSI). Almost 80 per cent of the industry belongs to this sector. As per definition of an industry in SSI, investment in plant and machinery has to below Rs 5 crore. The knitted garment sector has made rapid strides since 1998 and overtaken the woven garment sector in terms of the volume of production. This sector too has the potential to increase forex earnings of the country. The garment industry in India is a $23 billion industry (at the current rate of exchange of Rs 44 = $). Like its textile counterpart, this industry also comprises the organized and unorganized sector. The unorganized sector largely consists of job workers who carry out jobs given by their principals, under their supervision. The organized sector generally consists of units having a minimum of 10 sewing machines under one roof. This sector also covers large brands having in the vicinity with overseas partners. The organized sector is, by and large, update with modern technology, has economies of scale, is cost-competitive and is in a position to execute orders on time. The garment industry produces over 100 varieties of garments for different end-uses. Additionally, a section of the industry concentrates on manufacture of ethnic garments, or what are traditionally called "India Items". Company Chosen: Aadishwar apparels, Indore Company Overview: Aadishwar apparels is a prime manufacturing unit specializing garments for Kids of the age group 6 to 16 years. ...read more.

Middle

Direct Labor Direct labor consists of workers directly involved in the production part of the garments. These are the workers who carry out various parts of the process depending on the job allocated to them. Since each of them carries out a specific process hence their cost can be attributed directly to the final products. Direct Materials These are the direct materials which are used in the production process and their cost is directly attributable to the final products. Overheads While allocating cost to final products, the main problem is the righteous allocation of overheads. Overheads consist of expenses ranging from housekeeping, rent, electricity, power to depreciation etc. These overhead costs are required for the functioning of the firm but their allocation to a single product is quite cumbersome. The company as of now allocated the overheads on the basis of no. of units produced. Now different products have different manufacturing processes thus the allocation of cost on basis of no. of units may not represent a true allocation. Glossary: P1 : Plain (non-embroidered) and Non-Dyed P2 : Plain (non-embroidered) and Dyed D1 : Designer (embroidered) and Non-Dyed D2 : Designer (embroidered) and Dyed Exhibit 1: Based on our interaction with personals at the accounting department, we gathered information regarding the inventory position for the last month. Inventory position of Finished Goods as on 31.10.2008 Product Type P1 P2 D1 D2 Total Beginning Inventory 428 227 561 583 1799 Fresh incoming Inventory 2212 1820 2481 3505 10018 Outgoing 2390 1785 2412 3471 10058 Closing Inventory 250 262 630 617 1759 EXHIBIT 1 These were the position regarding four different product designs viz. ...read more.

Conclusion

We observe from Exhibit 4 that a total of Rs. 15,36,000 is being paid out as yearly wages. Exhibit 5: It lists down all these costs of overheads. These costs, except for maintenance cost, were estimated based on last year's figures. The maintenance cost is estimated based on the cost for the month of October of the present year. Activities Monthly Expenses Yearly Expenses Designing 8000 96000 Sewing m/c depreciation 500 6000 Dyeing m/c depreciation 400 4800 General Expense 3000 36218 Electricity 9000 109018 Rent 40000 480000 Administration Expense 25000 300000 Storage 20000 240000 House Keeping 4000 48000 Maintenance 800 96000 Exhibit 5: Manufacturing Overheads It would be impossible to complete a job without incurring indirect costs such as Administration costs, House Keeping etc. We tried our best to find out all the sources of manufacturing overheads and the same are listed here. * Designing: Designing costs are incurred on the coloured or dyed garments which have embroidery on them and not on the plain ones. * Sewing m/c depreciation*: The sewing m/c is subjected to depreciation. We were able to find out when it was purchased and estimated an year-on-year depreciation. * Dyeing machine depreciation: Similar to sewing m/c depreciation. * General Expense: The different heads under general expenses are mentioned below. * Electricity * Rent * Administration expense: Includes the salary given to 1 Accountant and 2 Managers. * Storage: A separate warehouse has been rented for storage purposes. * House Keeping * Maintenance * Note that embroidery part is outsourced and hence there is no depreciation on the machinery used for the purpose. In a few cases where the complete costing information wasn't available, we've used rough estimates. ...read more.

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