Cost Analysis of Shahabad Co-Op Sugar Mills LTD

COST ANALYSIS OF THE SHAHABAD CO-OP.
SUGAR MILLS LTD,
EXECUTIVE SUMMARY
The Shahabad Coop. Sugar Mills Ltd., Shahabad (M) has been established in 1984
with the working capacity of 1250 TCD and expanded to 3500 TCD in the year 1994. The
Shahabad Coop. Sugar Mills Ltd., Shahabad (M) is old established sugar house,
producing white crystal sugar adopting double sulphitation process in vacuum boiling
system.
.
Cost accounting is an old as the human being itself. Since the financial accounting
has some limitation. Cost accounting has its own importance being an important category
of accounting system.
The cost accounting system is very helpful to sugar industry. After adopting cost
accounting every business must analyze it cost accounting system very care fully
Material, labour, over heads are the main elements of the Shahabad Sugars Ltd.
These elements play very important role in the organization. The company giving more
importance to this on the other hand well trained labour force working towards the
company objectives.
Various records are maintained by The Shahabad co-op.Sugar mills Ltd and each
department has its own cost records. During my project there is improper maintains of
cost records by company.
COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,
The study of Cost Analysis of sugar industry with special reference to

The Shahabad co-op. Sugar mills Ltd:
Introduction of cost accounting
We have entered into an area of liberalization the development process has opened
the doors of economy and in globalised economic environment it is necessary to protect
the interest of consumers, investor, company and the country as a hole. In a liberalized
economy, there is no role of traditional management in corporate world now only the
professional management is required to control of the costs of the present day origination
Modern area is called the industrial area. Every where there is vast developing in
the field of industry. On account of the development of the industries, the modern
industries require minimum cost of production and such as maximization of profits. For
this purpose, they depend on the financial statements such as trading profits and loss
account and balance sheet but these financial statements give information as whole. It
means the entire industry is treated as one unit. It is difficult task to locate the errors.
Cost account is recent development. It is the branch of financial accounting. It
maintains the records unit wise, process wise, job wise, department wise. At the end, we
can easily control are help in reduction of costs by preparation of the statements unit wise
or job wise. So cost accounting is developed basically to remove the limitation of
financial accounting
OBJECTIVE OF THE STUDY

The following are the objective of study
1. To study the cost of production.
2. To identify the cost unit and cost centre.
3. To identify the difficulties of installation of cost accounting system.
4. To study the operating efficiency and cost control technique.
Sources of data
1. primary data
2. secondary data
Primary data:
Is collecting through interview of financial departmental heads
Secondary data:
Is collecting from company data of accounts.
INDUSTRY PROFILE
3
The Historical Background of the Indian Sugar Industry:

The sugar industry is proud to be an industry, which spreads the taste of sweetness
to the mankind. The history of origin of this industry is as old as the history of main him
self. Sugar is generally made from sugarcane and beet. In India, sugar is produced mainly
from sugarcane. India had introduced sugarcane all over the worlds and is a leading
country in the making sugar from sugarcane.
The sugars industry occupies potion in the organization industries of India. It
ranks second next to cotton, textile industries in importance. The Sugars industrial
established in 1830. It provides Employment to nearly 5 lakhs of people directly. There
were more then 467 factories in the country in 1994-95 with an annual production of 150
to 200 lakhs tones. The sugars industries contributed revenue of the Central and State
Government a sum or Rs 350 corores in the form of taxes.
The sugarcane is being grown in about 2.5 lakhs acres. This can be grown in all
types of soil but higher yields can be obtained in a rich weet drained and medium
despoils.
National Scenario Of Sugar Industry:

4

The first sugar mill in the country was set up in 1903 in the United Provinces.
There are 566 installed sugar mills, of which 453 were in operation in the year 2002-03
and utilized 194.4 million ton of sugarcane (69% of total cane production) to produce
20.14 million tons of sugar. About 5 Lakh workmen are directly employed in the sugar.
About 5 Lakh workmen are directly employed in the sugar industry besides many in
industries, which utilize by-products of sugar industry as raw material.
India is the largest consumer and second largest producer of sugar in the world.
The Indian sugar industry is the second largest agro-industry located in the rural India.
Indian sugar industry has been a focal point for socio-economic development in the rural
areas. About 50 million sugarcane farmers and a large number of agricultural laborers are
involved in sugarcane cultivation and ancillary activities, constituting 7.5% of the rural
population. Besides, the industry provides employment to about 2 million skilled/semi
skilled workers and others mostly from the rural areas. The industry not only generates
power for its own requirement but surplus power for export to the grid based on byproductBagasse. It also produces ethyl alcohol, which is used for industrial and potable
uses, and can be used to the manufacture Ethanol, an ecology friendly and renewable fuel
for blending with petrol.
The sugar industry in the country uses only sugarcane as input; hence sugar
companies have been established in large sugarcane growing states like Uttar Pradesh,
Maharashtra, Karnataka, Punjab, Tamil Nadu, and Haryana. In sugar year 2003-04, these
six states contribute more than 85%of total sugar production in the country; Uttar
Pradesh, Maharashtra, and Karnataka together contribute more than 65%of total
production.
The government of India licensed new units with an initial capacity of 1250 TCD
up to the 1980s and with the revision in minimum economic size to 2500 TCD, the
Government issued licenses for setting up of 2500 TCD plants thereafter. The
government de-licensed sugar sector in the year of 11.September.1988.
The entrepreneurs have been allowed to set up sugar factories of expand the
existing sugar factories as per the techno-economic feasibility of the project. However,
they are required to maintain a radial distance of 15 Kms from the existing sugar factory.
After de-licensing, a number of new sugar plants of varying capacities have been set up
and the existing plants have substantially increased their capacity.
There are 566 installed sugar mills in the country as on March 31st 2005, with a
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Production capacity of 180 lacks Mts of sugar, of which only 453 are working. These
mills are located in 18 states of the country.
The sector wise break ups as follows:

Table no#1
Sl. No.
Sector
1.
Private
189
2.
Public
62
3.
Co-operative
315
Total
No of factories
566
International Sugar Industry:

Demand- Supply:
Brazil and India are the largest sugar producing countries followed by China,
USA, Thailand, Australia, Mexico, Pakistan, France and Germany. Global sugar
production increased from approximately 125.88 MMT in 1995-1996 to 149.4 MMT in
2002-2003 and then declined to 143.7 MMT in 2003-2004, whereas consumption
increased steadily from 118.1 MMT in 1995-1996 to 142.8 MMT in 2003-2004 as shown
in below given chart. The word consumption is projected to grow to 160.7 MMT by 2010
and 176.1 MMT by 2015.
The worlds largest consumers of sugar are India, China, Brazil, USA, Russia,
Mexico, Pakistan, Indonesia, Germany and Egypt. According to USDA Foreign
Agriculture Service, the consumption of sugar in Asian countries has increased at a faster
rate, as a direct result of increasing population, increasing per capita income and
increased availability.
Diagram no#1
Contribution of Sugar Industry to Indian Economy:

Sugar industry contributes about Rs.1650 Crores to the Central Exchequer as
excise duty and other taxes annually. In addition, about Rs.600 Crores is realized by the
State Governments annually through purchase tax and cess on cane. At the prevailing
sugarcane price, the total sugar cane produced in the country value at about Rs.24000
Crores per year
World Sugar Trade:

Word trade in raw sugar is typically around 22 MMT and white sugar around 16
MMT. Brazil is the largest importer, followed by EU, Thailand, Australia and Cuba. The
largest importers are Russia, Indonesia, UK, South Korea, Japan, Malaysia, the Middle
East, and North Africa.
Sugar Prices:
World sugar prices fell steadily from 1994-1995 till 1998-1999 and have been
almost stable at those levels. The trend seems to have now reversed and refined sugar
prices have increased by 30% in the last 5 quarters from 9.16 cents per pound in
January, 2004 to 12.02 cents in March,2005
(Source: USDA Foreign Agriculture
Services).
Sugarcane Availability:
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Table showing sugar cane availability in cultivated area:

Table no#2
Year
Cultivated area (%)
MMT
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2.7
4.3
3.9
3.7
154
241
296
300
236
Sugarcane occupies about 2.7% of the total cultivated area and it is one of the
most important cash crops in the country. The area under sugarcane gradually increased
from 2.7 million hectares in 2010-11 to 4.3 million hectares in 2013-14, mainly because
of much larger diversion of land from other crops to sugarcane by the farmers for
economic reasons.
The sugarcane area, however, declined in the year 2014-15 to 3.9 million hectares
and to
3.7 million hectares in 2015-16, mainly due to drought and pest attacks. From a
level of 154 MMT in 2010-11, the sugarcane production increased to 241 MMT in 201112 and further to 296 MMT in 2012-13. Since then, it has been hovering around 300
MMT until last year. In the season 2015-16, however, sugarcane production declined to
236 MMT mainly due to drought and pest attacks. Not only sugarcane acreage and
sugarcane production has been increasing, even drawl of sugarcane by the sugar industry
has also been increasing over the years. In India, sugarcane is utilized by sugar mills as
well as by traditional sweeteners like guru and khandsari producers. However, the
diversion of sugarcane to guru and khandsari is lower in states of Maharashtra and
Karnataka, as compared to Northern states like UP.
SUGARCANE UTILIZATION
Table no#3
Year
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
% Sugarcane utilization for

White Sugar
Guru and Khandsari
Seed, feed and chewing
33.4
50.7
59.7
57.4
68.9
56.1
54.8
37.4
28.8
31.5
20.1
32.5
11.8
11.8
11.5
11.1
11.1
11.4
Sugar Production:
Most of the sugar in India is manufactured and sold as White Crystal
Sugar which is produced by Double Suspiration Process, while the norm in developd
and emerging nations is refined sugar, which is produced by the Phosphoflotation
Process.
Most of the mills in India are not equipped to make refined sugar Mills which are
designed to produce refined sugar can manufacture sugar not only from sugarcane but
also from raw sugar which can be imported. Therefore, such mills can run their
production all the year round, as opposed to single state mills, which are dependent upon
the seasonal supply of sugarcane.
Conclusion
India is a largest consumer of sugar in the world and second largest manufacturer
of sugar followed by China, USA, Thailand, Germany, and Pakistan. In the sugar industry
the top position is Brazil as it is a world largest manufacturer of sugar. As seeing the
consumption of sugar the India is having a big market for sugar industry. As it is a largescale industry it provides large profit for the country and it can also be helpful for
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development of industrial infrastructure. India is a worlds largest consumer and second
largest manufacturing of sugar so the sugar must be cheaper. It can be provide by our
sugar industry.
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COMPANY PROFILE
Name of the company
Register Office
The Shahabad Coop. Sugar

Mills Ltd., Shahaad (M)
Distt. Kurukshetra
M/s The Shahabad Coop. Sugar
Mills Ltd. Shahabad (M)
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LIST
Branch Office
At: Shahabad
Managing Director
Sh. Hawa Singh HCS
Constitution of the firm
:
Registered under Haryana
Cooperative
OF OFFICERS AT THE SHAHABAD COOPERATIVE

SUGAR MILLS LIMITED SHAHABAD MARKANDA
MANAGING DIRECTOR
SH. HAWA SINGH HCS
CHIEF ENGINEER
SUBHASH CHANDER
CHIEF CHEMIST
SUSHIL KUMAR
CANE MANAGER
J. S. DINDSA
12
CHIEF ACCOUNTS OFFICER
DEEPAK KHATOR
DEPUTY CHIEF CHEMIST
D. K. GOEL
WORKSHOP ENGINEER
ASTT. ENGINEERS (Mechanical)
:
:
VINOD KANOJIA
MUNISH AGGARWAL
RIPUDAMAN SINGH RANA
NAVEEN SHARMA
RIPUDAMAN SINGH
INSTRUMENT ENGINEER
SAUNAK GHOSH
ELECTRICAL ENGINEER
SATVEER SINGH
CIVIL ENGINEER
VIJAY SHARMA
MANUFACTURING CHEMISTS
M K GARG
V K THUKRAL
RAMESH KUMAR
RAJBIR SINGH
LABORATORY INCHARGE
KARAN SINGH
STORE OFFICER
GURCHARAN SINGH
SUGAR SALES MANAGER
B. S. SAINI
PURCHASE OFFICER
G. S. SAINI
JR. PROGRAMMER
SIMANT VERMA
HISTORY OF THE SHAHABAD COOP.

SUGAR MILLS LTD.
The Shahabad Coop. Sugar Mills Ltd., Shahabad (M) has been established in 1984
with the working capacity of 1250 TCD and expanded to 3500 TCD in the year 1994. The
Shahabad Coop. Sugar Mills Ltd., Shahabad (M) is old established sugar house,
13

producing white crystal sugar adopting double sulphitation process in vacuum boiling
system. Sugar industry is rural agro based industry and self-dependant for energy. Now a
days with better available advance technology every sugar factory can produce extra
electrical energy with available raw material i.e. sugarcane. This extra electrical power
can be supplied to the grid as every developing country is facing shortage of power now a
day. Haryana State, which is totally agro-based state, have no sufficient source of river
water or coal for generating power. Haryana Government has decided to produce extra
power in The Shahabad Coop. Sugar Mills Ltd., by adopting 24 MW Cogeneration
Project. This is first project in Haryana Sugar industry and can be adopted in all
Cooperative Sugar Mills of the Haryana in future. At present, sugar factory has total
steam generating capacity of 110 Ton/hr. and power generating capacity of 4.5 MW with
2 nos. boiler of 35 Ton/hr capacity, 45 kg./cm2 working pressure and 2 nos. boilers of 20
Ton/hr. capacity of 21 kg./cm2 working pressure.
In this project all 4 boiler has been abandoned along with the existing power
turbine in the 24 MW Cogeneration project. A boiler of 125 Ton/Hr. capacity at working
pressure of 87 Kg/cm2 along with ESP is being installed with the 24 MW power turbines.
In 24 MW power generations 6 MW will be used for captive consumption and 18 MW
will be exported to the Haryana Grid. This Boiler and turbine are modern and fuelefficient.
This project is under CDMA scheme in which carbon load has been drastically
reduced to the atmosphere and it could not be adversely affected to the atmosphere and
surrounding of the factory.
The One major redeeming factor sugar plant bagasse based cogeneration is that
dust or the green house gases released into the atmosphere are no more than what would
have been produced by alternative methods of bagasses disposal practiced presently in the
sugar plant also the cogeneration plant feeding surplus power to the grid ,indirectly
prevents a prorate quantum of pollutant being let into the atmosphere from the utility
plant from where otherwise the equal quantum of power would have been generated . the
co generating plants thus being indirectly environmental friendly deserve encouragement
also it is a fact that bagasse being a bio-mass renewable fuel. Does not add any net carbon
dioxide to the atmosphere, because of the carbon recycling during the growth of cane.
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The Haryana State Federation of Co-operative sugar mills Ltd Panchkula have
decided the development through consultant a Clean development Mechanism for
cogeneration project of the M/s The Shahabad Co-op sugar mills ltd Shahabad Haryana
and their Registration with Executive Board of UNFCCC and subsequent process there of
for obtaining Certified Emission rating.
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OBJECTIVES OF THE SHAHABAD COOP. SUGAR MILLS LTD.

1.
Maximum utilization of man power production capacity and

raw material for food recovery.
2.
Proper co-ordination and co-operating among its members.
3.
To manufacture good quality sugars and its by products with

the help of the members who supply sugarcane raw material.
4.
To provide comparative market rate to the farmers.
5.
To inculcate modern techniques and methods of cultivation and

To Supply seeds machines for the farmers.
6.
To maintain proper of transport for the formers during season.
7.
Utilization of raw material to the maximum level to get by

Products like Molasses and to market them at proper rates.
8.
To undertake such other activities are incidental and conductive

to the development of the society.
9.
Maintain continuous improvement programs in Technology.
10.
Help farmers to increase there yield through research & development.
11.
To produce good quality sugar at acceptable prices to meet the increasing

demand
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PRODUCT PROFILE
The factory produces about 184400 Tones of plantation crystal white sugar. As per
statute from Govt of India the sugar can be packed in 100 Kg net Gunny bags and 50 Kg
net Polythene bags. As per the Indian sugar standards the sugar can be graded in 3 grades
by size and color namely L, M, S (size) and 29, 30 (color). The factory envisages
producing M30 and s30 grades. The storage of sugar will be done in a warehouse built in
masonry and roofed with AC sheets. The size of the warehouse will be suitable to store
about 50% of a seasons production.
The molasses which is a by product, is a highly viscous liquid. The total production
of molasses in a season will be about 40,480 Tone. Two steel storage tanks of capacity
4000 tone each will be added. This can accommodate about 2 months production. As the
demand for molasses is high, it is proposed to sell the molasses to distilleries as raw
material to produce alcohol.
Beside the finished goods and molasses storage space is required for Bagasse, ash
and filter mud. Adequate open will be provided for these in the factory for easy and
smooth working of the factory.
Main Product- White Crystal Sugar:
The main product of the sugar manufacturing process is white crystal sugar.
This white crystal sugar is manufactured in the following 3 grades:
1) L-30 [Large size sugar]
2) M-30 [Medium size sugar]
3) S1-30 [small size sugar]
By-Products of Sugar Cane:
The sugar mill produces many by-products along with sugar. A typical sugarcane
comprising of 3000 ton capacity can produce 345 on of sugar, 6000 liters alcohol, 3 tons
of yeast, 15 tons of potash fertilizer, 25 ton of press mud fertilizer and 750 KW of power
from bagasse.
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Nature of Business Carried

Nature of Business carried NSL is involved in the activity of manufacturing white
crystal sugar products which is the main product. The process of production involve
conversion of
1) Raw sugarcane to sugar,
2) Raw sugar into refined sugar
Molasses, Bagasses are its by products.
1. MOLASSES:
Molasses is the final effluent obtained in the preparation of sugar by repeated
crystallization. Molasses is the brown colored residue after sugar has been tracted from
the juice. Molasses still contains some quantity of sugar, but this sugar cannot be
extracted by usual technology. It is the end product from a refining process carried out to
yield Sugar. Sucrose and invert sugars constitute a major portion (40 to 60%) of
Molasses. The yield of Molasses per ton of sugarcane varies in the range of 3.5% to 4.5%.
Molasses is mainly used for the manufacture of ethyl alcohol (ethanol), Yeast and
cattle feed. NSL produces alcohol from the molasses left after the extraction of sugarcane
juice, which can be used both for potable purpose as well as an industrial chemical.
Further this alcohol can be again purified to produce fuel and ethanol that can be blended
with petrol.
Ethanol is in turn used to produce portable liquor and downstream value added
chemical such as acetone, acetic acid, buttonhole, acetic anhydride, etc. Face stiff
competition from production through the petrochemical route.
The government controls the export of molasses through export licenses issued
for every quarter. Molasses and alcohol-based industries were decontrolled in 993 and are
being controlled by respective state government policies. Nearly 70% of the alcohol
produced is consumed by the potable alcohol sector.
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2. BAGASSE:
Bagasse is a fibrous residue of cane stalk that is obtained after crushing an
extraction of juice. It consists of water, Fiber an relatively small quantities of soluble
solids, the composition of bagasse varies based on the variety of sugarcane, Maturity of
cane, Method of harvesting and the efficacy of the sugar mill. The usual bagasse
composition is given below.
Table no#4
CONTENT
Moisture
Fiber
Soluble solids
RANGE %
46-52
43-52
2-6
Bagasse is usually used as a combustible in the furnaces to produce steam,

which in turn is used to generate power; it is also used as raw materials for production of
paper and as feedstock for cattle.
By making use of bagasse, sugar mills have been successful in reducing
dependence on state electric boards for power supply, for example requirement for FY98
from captive generation from steam turbines. Further this bagasse based cogeneration
plant is eligible for carbon credit compensation under the Kyoto protocol.
The residue product from distillery operation blended with chemicals is being
sold as bio-fertilizers.
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3. Power Generation Plant:
Power plant uses the fiber of the processed sugar cane (bagasse) as fuel to
generate electricity in an environmentally responsible manner. An integrated 15 M.W.
power generates and supplies electricity to the state grid produced from sugar cane waste
used to rotate turbines 5 M.W. power is utilized in the plant remaining power is supplied
to KPTCL.
Vision Mission & Goals

Vision
The main vision of the company is to develop the rural area & provide the better
infrastructure facilities to the localities & to farmers.
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Mission
The mission of the company is to pay the better returns for its shareholder in terms of
higher cane rate & to the stakeholders in terms reasonable salary & wages.
Goals of The Shahabad Coop. Sugar Mills Ltd.

To expand its installed capacity, achieve end-to-end integration for all its plants to
improve margins and reduce business cycle.
Achieve greater raw material security.
Increase its focus of corporate and high value consumers.
To become the most efficient and market driven integrated processor of sugarcane
in the world.
While enabling the team to grow in a learning and motivating atmosphere,
participating in the all round development of community.
Delivering consistently on returns to all its shareholders.
Bringing over all productivity and efficiency through out the organization,
especially by value addition of its by products in sugar effluent waste etc.
Producing the best quality sugar to satisfy the domestic and internal norms
FUNCTONAL ANALYSIS
The functional of the organization are divided in to following
Department and one divided in to sections.
1.
Production
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2.
Human Resource Development
3.
Laboratory Section
Manufacturing Section
Engineering Section
Go down Section
Administrative Section
Shares Section
Security Section
Vehicle Section
Time office section
Finance
1. Accounting Section
4.
Account Section
Marketing Section
Cane Development Section

Purchase section
Sale Section
Production Department
Production department is a most important part of the factory and it is divided into
two departments.
1.
2.
Engineering department
Manufacturing department
22
1.
Engineering department
The engineering department maintains all the work connected with plant and
machinery. Engineering department aims at enhancement of the feeding capacity
of factory. The department is assisted by workshop.
Workshop
Spares are fabricated using the lathe machine in the workshop and shaping like
square, cutting fabcrising etc, are done in the workshop 75% of work of machinery are
done in workshop. This department having following machines.
1.
2.
3.
4.
5.
Lathe machines for round job.

Shaping machine of 32 inch for right angle planning
hacksaw machine for cutting
Redial drilling machine for drilling hole
Grainding machine for tool grainding
1. Manufacturing department
Manufacturing department is divided in to 3 sections
a)
b)
c)
Laboratory department
Manufacturing Department
Go down
1. Laboratory department
Laboratory plays a significant role in sugar production. The key activity of
laboratory is checking the content of sugar in the Sugarcane and fixing the correct shape
and size of sugar. The Laboratory prepares hourly reports which advice in the addition of
other chemicals in the production.
Activities of the laboratory

1.
Determining and maintenance of temperature of boiling juice.
2.
Determining the percentage of water content in the dilution of

Juice.
3.
Determining the percentage and content of chemicals to be added doming

production.
23

4.
Finding the PH of water through universal indicator.
5.
Choice of colour and size for sugar.
6.
To manage the time and quality.
Chemicals used in production of sugar

1.
Burnt sugar
Controller.
---
Bleaching agent and PH
2.
Sulphar
---
Major bleaching agent
3.
Orthophosphoric Acid
---
Bleagent agent
4.
Mill sanitation
---
Preservative
5.
Antiscalant
---
Descaling agent
6.
Floculent
---
setting aid
7.
Viscocity reducer
---
Reduces viscocity
8.
Hydro Sulphite of soda
---
Bleaching agent
9.
Hydrogen peroxide
---
Bleaching agent
-: Functions:Bleaching agent: - Bleaches the juices and massecuites, and gives clarity.
I
Preservative: - Keeps the purity of juice constant. That means, it

Should not allow going down the purity of juice.
II
Antiselant or Descalant: - It prevents the formation of scale.
III
Setting aid: - It allows to settle down the solid partials in the

24

Juice.
Iv.
Viscosity reducer: - It decreases the viscosity of the

Massecuties and increases the rate of boiling.
2. Manufacturing Department:Sugar manufacturing involves mainly 5 stages as mentioned below.

1.
Crushing of sugarcane
2.
Juice clarification (Double sulphitation of clarification)
3.
Crystallization
4.
Curing
5.
Grading and Bagging.
PROCUREMENT OF SUGAR
25
CANE
IMBITION WATER
MILLING
BAGASSE
RAW JUICE
EXHAUST STEAM
CONDENSATE WATER
SULPHURDIOXIDES + LIME
SULPHURED JUICE
EXHAUST STEAM
CONDENSATE WATER
CLEAR JUICE
EXHAUST STEAM
JUISE + MUD
VAPOURS
CONDENSATE WATER
SYRUP
SULPHURDIOXIDE GAS
EXHAUST STEAM, VAPOURS
VAPOURS, CONDENSATE WATER
MASSCUITE
FINAL MOLASSES
STEAM OR SUPER HEATED WASH WATER
SUGAR
1. Crushing of sugarcane
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Sugarcane is harvested in the fields. Dressed and bundled in small bundles

stocked in Lories, tractor or bullock carts supplied to factories, weighed and
crushed in set of mills.
Crushing takes place mainly in two stages. First, preparation and then
milling. The milling takes place after preparing the cane in leveler and cutter.
Milling is done by passing the prepared cane blanked through sets of mills.
Weighted water also is added in the course of crushing for better extraction of
juices. After crushing the bagasses is sent to boiler as fuel and juice sent for
processing after weighment.
2. Juice clarification (Double clarification)

The weighed juice is primarily heated in juice heated at65-70 0C. It
undergoes a process of clarification i.e. addition of lime and sulpher dioxide
simultaneously. The juice thus sulphited heated again in another set of juice
heaters at 100-1050 C and the hot juice is sent to a clarifier.
Where it settles and clear juice is decanted out from the Clarifier and sent
for evaporation in a set of multiple effect evaporator Bodies designed for steam
economy (quadruple effects of evaporation) The juice thus evaporated gets
concentrated to form thick syrup of about 58-600 C brix).
3. Crystallization
The syrup thus sulphited in syrup. Salphitor is sent to pan floor for
further crystallization in vacuum pans. The syrup collected gets in supply tanks is
taken to pans for pan boiling, where the syrup is further boiled attains super satiation
stage. In such a condition sugar grains are formal and hardened, developed to form a
mass called massecuite. The massecite is dropped in crystallizers and cooled to
complete the process of crystallization.
4. Curing
In centrifugals the massecuite is cured i.e. sugar crystals are separated
from mother ligouor in high speed centrifugal machines.The sugar crystals thus
separated are properly dried by blowing hot air and cold air. The molasses is collected
in separate tanks and Used for further boiling to recover more sugar.
5. Grading and Bagging

27
The dried sugar after passing through elevator goes to the grade for
graduation. The sugar falls into the bins with this fall sugar is packed in bags.
The graded sugar is bagged weighted for 100kg & they are stitched
numbered and stocked in the sugar go down in different lots as per grade and
color.
Godown Section:
In the production department the godown are maintained for store
the sugar.
The Organization structure of godown section as follows :

GODOWN KEEPER (1)
CLERK (1)
ATTENDER (2)
The sugar will be supplied to god owns through belts.
Numbers of God owns
Old Godown
New Godowns
Capacity
New Godowns
Old Godowns
:
:
:
3
1
2
:
:
2 lakhas Bags (100kg)

50000 Bags (100kg)
Store Section:
28
Organization structure of the store department
Store in charge (3)

Store Keeper (3)
Store Helper (3)
books
The department maintains the following books

1.
2.
3.
4.
Transport register
Bin Card
Bin Card entry
Issues Identity
Human Resource Development

The management of Human Resource is a very complex and challenging task
for those who are entrusted in the successful running of an organization to be able
to stand up to the challenges efficiently the manages theoretically gained
knowledge, but also be guide efficient in implementing their theoretically
knowledge into practice successfully .
Administrative Section:
Administrative department is the main department in the organization this
department is connected with so many sections like.
1.
2.
3.
4.
Shares Section
Security Section
Vehicle Section
Time office Section
1. Shares Section :29
Share Section is the sub section of the administrative department in the

organization. The company having 2 types of shares.
a)
Preference Shares
b)
Equity Shares
2. Security Section :The security section is operating under administrative department.

It is also working in 3 shifts as maintained under time office section
The main works of this section are as follows:1.

2.
3.
4.
5.
They are maintaining the peace & discipline within a factory.

To maintain workers attendance.
They check the incoming raw material as per vouchers.
Avoid the misuse of items.
The out going material with paper gate pass will be recorded in outwards
and they are sent outwards.
6. They submit daily report activity to the managing director.
Structure of Security Section

Security Officer
Security Supervisor
Security Head Guard
Security Guard
Weigh bridge Section:30
Total employee is 16. There are two type of Weigh Bridge in the factory
and capacity of each weigh bridge is 40 tons.
It acts as weighment of sugar cane, seeds and other factory Weighment
Vehicle Section:The organization chart of this section
Vehicle Section
Clerk
Attainder
Drivers
Time office Section:Structure of time office

Head Time keeper
Time keeper
Office clerk
The factory runs there shifts in section
Factory Shift
8 -30 am To 5-00 pm
General Shift
9-00 am To 5-00 pm
The main functions of the office department

31
1.
Arranging duty to workers.
2.
Distribution of salary according to workers attendance.
3.
Sanctioning of leavers to workers.
Attendance:Time office maintain two types of attendance method

a)
Manual attendance
b)
Bio metric attendance
a) Manual Attendance:Factory give attendance cards to employees enter the coming Time in
factory and out time in factory and signature of time office Officer. This is all
entered attendance card by the time office officer.
b) Punching Attendance:This system is based software here all the information is Already entered
in the computer regarding the employee name Department and shift time.
The employee must show the Aadhar no. to Bio metric machine and giving
the finger impression to machine automatically entered in the employees list.
32
Finance Department
1. Account Sections:Account department is divided in to two main sections, they are.
a)
a)
General Account Section
b)
Cane Account Section
General Account Section:-
This section maintains all the transactions. Income Tax Sales Tax and
commercial Tax procedures are done by this section the Varieties maintained by this
section is.
b)
a)
Advance register
b)
Bank register
c)
Contractors register
d)
Depositors register
e)
Fixed asset register
Cane Account Section:-
To ease the transaction with formers this section has been

separated. The main function of this sections has been is to maintain records of
those suppliers names who supplies the sugar cane to the factory and they
maintains register of payment
The registers maintained by this section are:
a) self harvest payment register
b) harvest bill
c) cultivator payment register
33
Marketing Department:-
a)
Cane Development Department

a)
Development Section
b)
Procurement Section
a) Development Section:The organization set up of this department is as follows
Chief Cane Development Officer

(CCDO)
Cane Development Officer
Assistant Cane Development Officer
Filed Assistant
Slip Boy
34
Objectives of CDO:1.
To get best quality of sugar cane to the factory in right time
2.
To improve the variety of cane
3.
To develop the backward area
4.
To provide all facilities like seeds, fertilizers unloading &

Loading charges.
5.
To maintain registration of cane gong and plantation
6.
To undertake seed distribution programmer
Cane development programmer

1.
Plantation of high yield verity of sugar cane
Lift irrigation schemes
3.
D G sets & Oil Engines
4.
Seed treatment
5.
Biological test control
6.
Soil analyses & Soil treatment
7.
Past harvesting & sugar loses
Types of Gangs
1.
Local gangs :It means local people groups is local gangs
2.
Lose gangs:-
All lose gongs are comes in Maharashtra company will be paid 1,60,000 in
advance one lose gangs including 8 pair and this gangs 16 to 18 tons sugar cane supply
per day.
3.
Tractor attaches gangs:-
Company will be Rs 200000 paid in advance Tractor attach gangs is

including 10 to 12 pair This gangs 22 ton sugar cane supplied per day.
35
4.
Truck attaches gangs:-
This gang use only local sugar cane not available that time import sugar
cane in long route.
Varity of Sugar cane

1.
COC671
1200/ton
2.
CO8603
1230 /ton
3.
CO8011
1230/ton
Purchase Sections:
The organization structure of the purchase section
Purchase Officer
Clerks
At tender
It is also an important section in administrative department in

performing the activities purchasing in this section there are two employees one is
purchase manager and another one is purchase assistant.
.
The purchase manager issues the purchase order from various section
of the factory. He estimates the cost of purchase and according him go for direct
purchase purchases through purchase committee.
36
Sales Department:
Functions of Sales Department
1.
Sale Sugar and Molasses.
2.
Subjection to production Department.
Objectives Sales Department

1.
Maximum Sales
2.
Maximum Earn Profit
Structure of Sales Department

1.
Sales Department heads
2.
Clerk
Years
2014-15
2015-16
Sales
82 Crors
192 Crors
Difficulties of Sales Departments:1.
Packing.
Payment from party.
3.
Quality.
4.
Quantity.
5.
Staff behavior.
This factory is producing two varieties of sugars they are S -30 & M-30 grader
the sale of the sugar occurs when gives a tender notice the sugar sold to that buyers who
quotes highest price tender are called once in a week if the rate is not satisfactory the
tender will be cancelled
The sales of sugar are done unless there is instruction from the government certain
government rules should be followed for sale of sugar according to the recent
government rules they will be given some figures of bags to sell within a month.
37
S.W.O.T. ANALYSIS OF THE SHSHABAD CO-OP. SUGAR

MILLS LTD.,
(STRENGTH, WEAKNESS, OPPORTUNITIES, THREATS)
STRENGTHS:
It has own co - generation unit (62MW).
Sufficient water resources.
Good communication media.
Sufficient infrastructure.
Attendance maintained on Software bases.
WEAKNESS
Poor marketing strategies.
Poor promotional activity.
Imbalance between sugar cane available and factory crushing
capacity per day.
OPPORTUNITIES
They can establish a liquor industry by using its by products
Providing the electricity power to the KPTCL
If importing of Sugar is restricted the company cabs grab the
market as possible as.
The company is located in the rural area so labours availability is

sufficient and cheaper.
THREATS:
Free imports.
Unstable Government.
Poor agricultural policy.
Low availability of working capital.
38

Decreased in the average production rate of sugarcan
39
MEANING OF COST
Cost in simple words, means the total of all expenses. Cost is defined as the
amount of expenditure incurred on a given thing. Thus it is that which is given or
sacrificed to obtain something.
ICMA London Cost is the amount of expenditure incurred on or attributable to a
given thing.
In a business where selling and distribution expenses are quite nominal, the cost of
the article may be calculated without considering the selling and distribution overheads.
While in a business, where the nature of the product requires heavy selling and
distribution expenses calculation of cost without taking in to account selling and
distribution expenses may prove very costly to the business. Then cost may be factory
cost, office cost, cost of sales and even an item of expense is also termed as cost.
Prime cost includes expenditure on direct material, direct labor and direct
expenses. Money spent on materials is termed as cost of materials the spent on labor as
cost of labor and so on. Thus, the used of term cost without qualification is also quite
misleading. Again, different costs are found out for different purposes. To work-inprocess is valued at factory cost while stock of finished goods valued at office cost.
Numerous other examples can be given to show the term cost des not mean the same
thing under all circumstances and for all purposes. Many items of production are handled
in an optional manner, which may give different costs for the same production or job
without in any way of cost accounting.
40
ELEMENTS OF COST
Elements of cost mean the essential parts or components of goods or service or jobs. In
other words elements of cost are part of the total cost and include the main item of
expenditure incurred for production of goods, services and jobs.
Analysis and classification of cost
Cost is the amount of expenditure incurred for production of goods and services. Thus
cost is composed of three elements, viz, material, labor, and expenses.
Classification of cost
Cost classification is the process of grouping costs according to their common features or
characteristics. Classification is essential to find out the cost of production.
Objective of classification of cost
1.
It helps the management for implementing cost control and decision making.
2.
It helps for calculation of cost of production.
3.
It helps for valuation of work-in-progress.
Element wise classification

Cost classified on the basis of element wise is as follows
1.
Material cost
2.
Labor cost
3.
Expenses
Material Cost:
This is the cost of commodities supplied to an undertaking.(I.C.M.A) Materials
are further divided in to two parts (1) Direct materials (2) Indirect materials.
41

1)
Direct materials: Direct materials are those materials which can enter into and
form of the finished product.
Direct materials cost is the which can be
conveniently identified and allocated to cost units.

2)
Indirect Materials:
Indirect materials are those materials which cannot be
conveniently identified with cost units.
Labor cost:
These are costs of remuneration, such as wages salaries, commission, bonus etc.
Of the employees of an undertaking
1)
Direct wages: Wages paid to laborers who are directly engaged in converting
raw materials into finished products. It is also called Direct Labor, Productive
Labor, and Prime cost.
2)
Indirect Labor: Indirect labor is not directly engaged in the production of

goods but only to assist or help in production of goods or services.
Expenses:
The expenses means the cost of services provided to an undertaking and the
notional cost of the use of owned assets. In other-words costs other than the material and
labor are called expenses.
Direct Expenses: Direct expenses are those expenses which can be specifically incurred
in connection with a cost unit. E.g. hire of special plant for a particular job.
Indirect expenses:
Indirect expenses are those expenses which cannot be directly
identified with a particular job.
Overheads:
An overhead includes indirect material, indirect labor, and indirect expenses. In
general terms, overhead comprise all expenses incurred for in connection with the general
organization of the whole or part of the undertaking that is the cost of operation supplies
42

and services used by the undertaking and including the maintenance of capital assets. The
main groups into overheads may sub divided are as follows.
1.
Manufacturing overheads
2.
Administration overheads
3.
Selling overheads
4.
Research and development overheads
5.
Distribution overheads.
Function wise Classification:Costs classified on the basis of function wise are as follows:
Production cost or manufacturing cost or work cost
Administration cost
Selling cost
Distribution cost
1. Production cost:
This is the cost which begins with supplying of materials, labor and service
and ends with the completion of production other terms used in this connection
are factory overhead.
Examples:
1)
Indirect labor
Foremens salary
Cleaners salary and wages
Gatekeepers salary
Salary of time keeping department
Tools operators wages
Store keeping department salary

43

2)
Factory rent and rates
3)
Insurance of factory
4)
Consumable stores
5)
Indirect materials cost such as cotton waste, nuts and bolts, lubricating oil, nails
etc.
6)
Gas, fuel and water, stationery to the factory
7)
Depreciation on factory equipment, factory building, plant and machinery
8)
Repairs of factory equipment, factory building and machinery
9)
Depreciation on loose tools
10) Laboratory expenses

11)
Labor welfare expenses
12) Canteen expenses

13) Over time wages
14) Contribution to workmens compensation fund
2
Administration cost:
This consists of all expenses incurred in the direction control and administration
of an undertaking.
Examples:
1)
Salaries of office staff, accounts, MD, GM
2)
Directors fees
3)
Bank charges
4)
Postage stationery telephone
5)
Rent rates of office
6)
Insurance of office building and equipments
7)
Depreciation on office building equipment and furniture
8)
Printing charges of office
9)
Audit fees
44

10) Legal charges
Selling cost:
Other expenditures incurred for sales and stimulating demand and for securing
orders are known as selling cost.

Examples:
1. Salaries and commission of salesmen
2. Show room expenses
3. Samples, free gifts
4. Commission to agents or distributors
5. Advertising and Publicity expense
6. Marketing expenses
7. Expenses incurred for recovering the bad debts
8. Subscription to trade Journals and commercial Journals
4
Distribution cost:
It is an expenditure incurred for distributing the goods
Examples:
Packaging cost
Carriage outwards
Warehousing costs, such as repairs, depreciation lighting of warehouse
Loading charges
Dispatch expenses
Shortage of finished goods in warehouse
Finished goods damaged in transit
Classification according to Behavior:
45

Some costs are increased or decreased in production directly; some costs remain
unaffected while others change but not in direct proportion to the change in volume of
production.
These are: 1.
Variable cost
1.
Fixed costs.
2.
Semi-Variable or Semi-Fixed costs
Variable cost:
These cost an in direct proportion to the volume of output. Cost per unit will
remain the same. If output increases total variable cost also increases and if output
decreases total variable cost also decreases.
e.g.: Direct materials.
Direct wages
Power
Fixed cost:
The total fixed costs remain unaffected either with the increase or decreases in the
output. But cost per unit goes on changing.
Rent and rates of building.
Depreciation of building.
Insurance.
Interest on capital.
Municipal taxes.
Fixed cost can be further classified into

1) Committed fixed costs
2) Discretionary fixed costs
1) Committed fixed cost:
46

Consist largely of those fixed costs that arise from the possession of plant,
equipment & basic organizational structure. For example, once building is elected
and plant is installed nothing much can be done to reduce the costs such as
depreciation.
2) Discretionary cost:
Are those which are set a fixed amount for specific time period by the
management in the budgeting process. These costs directly reflect top management
policies have no particular relationship with the volume of output.
These cost
therefore be reduced or entirely eliminated, if the circumstances so require. Examples

of such costs are Research & Development costs advertising & sales promotion costs,
donation management consulting fees etc. These costs are also termed as managed of
programmed costs.
Semi-Variable cost:
These costs are partly fixed and partly variable. These costs are thus partly
affected by fluctuations in the level of activity.
Examples: Depreciation, Repair & maintenance, Telephone expenses.
Other type of costs:
Decision making costs:
Decision making costs are special purpose costs that are applicable only in the
situation in which they are complied they have no universal application. They need
not tie into routine financial accounts to the accounting rules.
Controllable and uncontrollable cost:

Controllable costs are those which can be influenced by the action of a specific
member of the understanding costs which cannot be so influenced are termed as
uncontrollable cost.
47

For example the expenditure incurred by the room is controllable by the foremen
incharge of that section but the hare of the tool room expenditure which is apportioned
to a machine shop cannot be contracted by a machine shop forces.
Differential, Incremental or Decrement cost:

These are costs which do not involve cash outlay. They are not included in cost
accounts but are important for taking into consideration while making management
decisions.
For example interest on capital is ignored in cost account through it is
considered in cost financial accounts. In case two projects require unequal outlay & cash
the management must take into consideration interest on capital to judge the relative
profitability of the projects.
According to ICMA London Costing is the techniques & process of ascertaining
costs These techniques are the rules & regulations to govern or regulate the process of
ascertaining the costs or services. Therefore these rules & regulations are carried from
unit to unit immediately to the industry & formation of policy. Thus costing is a routine
work of cost ascertainment.
Objectives of cost accounting:

a) Ascertainment of cost.
b) Determination of selling price.
c) Cost control and cost reduction.
d) Ascertaining the profit of each activity.
e) Assisting management in decision making.
Advantages of cost accounting:

a) Discloses profitability of activities.
b) It helps in cost control.
c) It helps in formulating policies.
48

d) It helps in decision making.
e) It guides in fixed selecting prices.
f) It helps for fixing the standard of efficiency of workers.
g) It facilitates the assessment of tax.
h) It helps to judge the financial position & credit worthiness of the business.
Disadvantages of cost accounting:

a) Absence of a readymade system.
b) Cost differences.
c) Cost data have no usefulness in themselves.
d) It is not true or exact cost.
Cost unit and Cost center:

Cost unit: It is a unit of product, service or time in relation to which costs may be
ascertained or expressed. We may for instance determine the cost per tone of steel, per
tone kilometer of a transport service or cost per machine hour.
Types of cost units:

Single cost:
It is a single unit cost for example per tone, per kilogram.
Composite costs:
It is a composite of two or more simple cost units. It is used where the simple
cost is not possible for ascertain cost.
Cost units are usually the units of physical measurement like number, weight, area,
volume, length, time and value.
Cost Center:
It is defined as a location, person or an item of equipment for which cost may be
ascertained and used for the purpose of cost control. Cost centers are two types.
49

Production Cost Center:
It is a cost center where raw material is handled for conversion in to finished
product. Here both direct and indirect expenses are incurred. Machine shops, Welding
shops and assembly shops are examples of production cost center.
Service Cost Center:
It is a cost center which serves as an ancillary unit to a production cost center.
Power house, gas production shop, material service centers, plant maintenance centers are
examples of service cost centers.
Mixed Cost Centers:
It is cost center, which is engaged in both the production and service. For
example, carpenter shop manufacturing as well as undertaking repair work.
Cost estimation and cost ascertainment:

Cost estimation is the process of pre-determining the costs of a certain product job
or order. Such pre-determined may be required for several purposes such as budgeting
measurement of performance efficiency, preparation of financial statements (valuation of
stock etc), make or buy decision fixation of sale price of the product etc.
Cost estimation as well as cost ascertainment both are interrelated and are of
immense use to the management in case a concern has a sound costing system, the
ascertained costs will greatly help the management in the process of estimation of rational
accurate costs which are so necessary for a variety of purpose stated above.
Cost ascertainment is the process of determining the cost on the basis of actual
data. Hence, computation of historical cost is cost ascertainment while computation of
future costs is cost estimation.
Cost allocation and cost apportionment

Cost allocation and cost apportionment are the two procedures, which describe the
identification and allotment of costs to cost centers.
Cost allocation refers to the
allotment of whole item of cost to cost centers or cost units while, cost apportionment
refers to the allotment of proportions of items of cost centers or cost units.
Thus the
50

former involves the process of charging direct expenditure top cost centers or cost units.
While the later involves the process of charging indirect expenditure to cost centers or
cost units for example the cost of labor engaged in a service department can be
charged wholly and directly to it .
Canteen expenses of the factory cannot be charged directly and wholly to it. Its
proportionate share will have to be fount out. Changing of cost in the former case will be
termed as Allocation of costs while in the later as Apportionment of costs.
Cost reduction and Cost control:

The cost control is defined as The regulation by executive action of the cost of
operating an undertaking particularly where such action is guided by cost accounting.
Cost control is exercised through setting standard or norms or targets and
comparing actual performances there within a view to ascertaining deviation form set
targets or norms or standards and taking corrective actions to ensure that future
performance conforms to the set standards or norms or targets.
Cost control techniques:

Among the techniques which have become popular for ensuring cost control are
Material control.
Labor control.
Overhead control.
Budgetary control.
Standard control
Control of capital expenditure.
Productivity and Accounting rations.
51
Cost reduction:
Cost reduction may be defined as the achievement of real and permanent
reduction in the unit cost of goods manufactured or service rendered without impairing
their suitability for the use intended or diminution in the quality of the product.
Advantages of cost reduction:

a) In so far as an individual company is concerned, cost reduction results in profit
improvement. The more the profits, the more stable the company becomes.
b) Society will be benefited by reduced prices which may be possible by savings
from cost reduction programmers.
c) Workers and staff of the industry may also be benefited through increased wages
and improved welfare amenities.
d) The country also stands to gain immensely by cost reduction programmers.
e) Internal revenue will increase through more tax revenues.
Areas of cost reduction:

Cost reduction methods may be applied in the following areas:
Product Design:
Cost reduction begins with the improvement in the design of the product. An
investigation into the possibilities of cost reduction should be made. Both when
introducing new design and when making improvement in the existing design.
Factory organization and production methods:
All efforts should be constantly made to reduce the cost by the adoption of
new methods of organization and new production methods.
Factory Layout
Administration
Marketing
Finance tools and techniques of cost reduction
52
Distinction between cost control and cost reduction:

1) Cost control aims at achieving the predetermined costs, where as cost
reduction aims at reducing costs.
2) Cost control is a runtime exercise, which is carried out for attainment of
operational efficiency, where as cost reduction aims at permanent and real
savings by continuous search.
3) The process of cost control is to lay down a target, ascertain actual
performance, compare it with the target and take corrective action. On
the other hand, cost reduction is not concerned with maintenance of
performance according to the predetermined standards.
4) Cost control seeks adherence to standards where as cost reduction is a
challenge to the standards themselves. Cost reduction assumes that there
are chances of improvements in predetermined standards.
5) The aim of cost control is to see that actual costs do not exceed the
predetermined costs so it is a preventive function. On the other hand, cost
reduction is corrective function because it challenges the predetermined
costs and seeks to improve the performance by reducing cost of increasing
production.
Practical & difficulties of cost accounting system:

1) Lack of support from top management:
Manager or MD do not supporting the cost accounting system because they are
thinking that cost accounting is an obstacle and disturbs the work.
Therefore top
management does not support whole heartedly.
53
2) Resistance from the existing accounting staff:

The existing financial accounting staff may be offer resistance to the system
because of a feeling of their being declared under the new system.
This fear can be done away with by explaining to the staff that the cost
accounting system would not replace but strengthen the existing system.
3) Non co-operation at other level:
The foremen and other supervisory staff may resent the additional paper work
and may not co-operate I providing the basic data, which is so essential for the success of
the system.
This needs re-orientation and education of employed. They have to be told of
the advantages that will accrue to them and the organization.
4) Shortage of trained staff:
Cost accounting is a specialized job in itself. In the beginning therefore
qualified staff may not be available. However, this difficulty can be overcome by giving
the existing staff requisite training and additional staff, if required.
5) Heavy costs:
Unnecessary sophistication and formalities lead to heavy cost. The cost
accounting office should serve as a useful service department.
Main consideration:
1) The product:
The nature of the product determines to a great extent the type of cost
accounting system to be adopted. For e.g. a product requiring high value of material
content requires elaborate system of material control.
2) The organization:
The existing organization should be disturbed as little as possible. It becomes
necessary top ascertainment the size and type of organization before introducing the cost
accounting system.
54
3) The objective:
The objective and information, which the management wants to achieve and
acquire, are also to be cared for.
4) Technical details:
The system should be introduced after a detailed study of the technical aspects
of the business efforts should be made to secure the sympathetic assistance and support of
the principal members of the supervisory staff and workmen.
5) Informative and simple:
The system should be informative and simple.
Presentation of total cost:

First of all are classified on the basis of nature, such as materials, labor and other
expenses. Further distinction should be made of direct and indirect costs. All the direct
costs are grouped under the headings of prime costs and indirect costs are known as
overheads. All these cost are grouped under separate heads and present the cost data to
the management in the form of statement.
Cost Sheet:
A cost sheet or a cost statement is a document which provides for the assembly
of the detailed cost of a cost center or cost unit. It is a detailed statement depicting the
sub-division of cost arranged in a logical order under different heads.
The prime cost.
The works cost.
Cost of production
The total cost.
It gives the breakup of by cost elements and sub-division
It discloses the total cost as well as cost per unit of production.
It helps for fixing selling price.

55
The main advantages of a cost sheet are as follows:

1)
It provides the total cost figure as well as cost unit of production.
2)
It helps in cost comparison.
3)
It facilitates the preparation of cost estimates required for submitting tenders.
4)
It provides sufficient help in arriving at the figure of selling price.
5)
It facilitates cost control by disclosing operational efficiency.
56
Format of cost or cost sheet
Particular
Direct material
Direct labour
Prime cost
Add : Works over head
Works cost / Factory cost
Add : administrative over head
Cost of production
Add : selling and distribution over head
Cost of sales
Total cost (Rs)

XX
XX
XXX
XX
XXX
XX
XXX
XX
XXX
Cost
per
unit
(Rs)
XX
XX
XXX
XX
XXX
XX
XXX
XX
XXX
Cost Audit:
Definition:
57

The term audit concerns the examination of books of accounts and necessary
vouchers to ascertain the accuracy of accounting transaction. According to the Institute of
Cost and management Accounts of England, Cost Audit is defined as the verification of
cost accounts and a check on the adherence to the Cost Accounting plan.
Functions of cost auditing:

1) To verify that the cost accounts are correctly kept in accordance with the
principles of costing employed in the industry.
2) To measure that the cost accounting routine lay down by the business is
properly carried out.
3) To detect errors and prevent frauds possible misappropriation.
Process Costing:Means
When the raw materials are fed in to the machinery as an input, we get output. In
order to convert the raw material into finished product i. e. input into output, it has to pass
or move through different stages. Each stage is known as a process.
Raw Materials
Input
Finished Goods
Process
O/P
Definition of Process Costing:
58

Lunt and Riply observes, Process costing is used to ascertain the cost of each stage of
manufacture where material is passed through various operations to obtain a final product
to result with products in many cases at different stages.
Application of process costing in the Industries:

The industries in which process costing system may be used are many. In fact a process
costing system can usually be devised in all industries except where Job, Batch or Unit
operation costing is necessary. In particular, the following are examples of industries
where process costing is applied.
Paper Manufacture
Paint Manufacture
Distilleries
Plastic Manufacture
Sugar Industries
Food Manufacture
Fertilizer Industry
Glass Industry
Drug and Medicines
Producing Industries
Aluminum Industry
Timber Industry
Rubber Industry
Characteristics of Process Costing System:

59

(1) It is a form of Operation Costing in which the cost of the product is ascertained at
each Stage or process of its manufacture.
(2) The output of one process becomes input of next process and that of last process is
transferred to the finished stock.
(3) The production of goods is continuous.
(4) The finished product is the result of two or more processes.
(5) The product is standardized.
(6)
Cost per the unit is the average cost.
(7)
Cost of each process is collected.
Advantages of Process Costing System:

(1) It helps for calculation of cost in short period.
(2) It helps for calculation of cost of each process as well as finished product.
(3) It involves less clerical works and expenses.
(4) It helps for control over production and costs.
(5) It is easy to allocate the expenses to processes in order to have accurate costs.
Disadvantage of Process Costing System:

(1) Average cost is not accurate cost.
(2) Costs are historical.
(3) Work-in-progress is required to be ascertained at the end of an accounting period for
calculating the cost of continuous process. Valuation of work-in-progress is generally
done on estimated basis which introduces further inaccuracies in total cost.
4) There is a wide scope of errors while calculating average costs. An error in one
average cost will be carried through all processes to the valuation of work-in-process and
finished gods.
Concepts in Process Costing System:

60

(1) Process Losses:
While converting raw material into finished goods certain wastage may arise at various
stages of production. Such loss or waste may due to evaporation, inefficiency etc., and
such wastage is known as process losses. Process losses may be classified into (a)
Normal Loss and (b) Abnormal Loss.
(a) Normal Loss:
Any loss arising due to normal factors like evaporation, withdrawals for tests, shrinkage,
sampling, unavoidable spoiled quantities etc.
Constitute normal loss.
These losses
cannot be avoided.
Total Cost
Normal Loss =
Total Units Normal Loss
(b) Abnormal Loss:
Any losses arising due to abnormal factors are known as abnormal loss. Such loss is over
and above normal loss. These losses may arise from the factors like carelessness, machine
breakdown, accident, use of defective material etc.
(2) Process Gains:
Abnormal Gain:
If the actual loss is greater than normal loss, it is known as abnormal loss. But if the
actual loss is less than normal loss a gain, is obtained which is called abnormal gain or
effectiveness.
Treatment for Abnormal Gain The value is calculated as if it good units. It is debited
to the process account and credited to abnormal gain account.
FORMAT OF PROCESS ACCOUNT

61
Particulars
Input
Cost
Total
per
Cost
Particulars
Output
Cost
Total
per
Cost
Units introduced
XX
Unit
XX
XX
Normal Loss
XX
Unit
XX
XX
Materials
XX
XX
XX
Scrap
XX
XX
XX
Labor
XX
XX
XX
Abnormal Loss
XX
XX
XX
Overheads
XX
XX
XX
Sale of by products
Abnormal Gain
XX
XX
XX
Sent to warehouse XX
XX
XX
XX
XX
XX
XXX
(if any)
for sale
Actual
output XX
transferred to next
process
Total
XXX
XXX
XXX Total
XX
62
Cost reduction and cost control techniques used in The Shahabad co-op
sugar mills Ltd.
63
1) Avoiding of excessive overtime.

2) Reduced wastage in packaging of sugar.
3) Reduction in transportation cost of sugar cane.
4) Simplification of the process of production.
5) Suitable communication system with telephone intercom.
6) Purchase computer for accounting process.
7) Keeping minimum level of inventory.
8) Effective and economical purchases of materials.
Difficulties in installation of cost accounting system in The Shahabad

co-op sugar mills Ltd.
Lack of support from top management:
In existing system there is no time for top management to check the regular
accounting process. In this case there is no additional work should be taken in the
company.
Non-co-operation of supervisors:
The sugar is the essential for day-to-day activities so the supervisors have no time
to record the different things related to costs.
Heavy costs:
For installation of cost accounting system is heavy cost to company. For the
installation of cost accounting system in The Shahabad co-op. sugar mills Ltd. the
separate department should be made.
Difficulties to calculate costs of work in progress in sugar:

64

There is a difficulty in calculation of work in progress in sugar industry.
Recommendation for installation of cost accounting system:

1) Divide the department according to the revenue producing and non revenue producing
department this helpful in determining cost centers.
2)
Simplify the working procedure in each cost center and design suitable and proper
forms and records for each of the departments.

3)
Fix the procedure for collection of both cost and non cost data for each center.
4)
Fix the standard for incurrence of costs in cost center.
5)
Prepare forms, cards reports, and books etc for keeping cost records.
The following are the cost centers in The Shahabad Co-op sugar mills
Ltd:
1) Production Cost Center:
a) Packing.
b) Quality control.
c) Boiler section.
d) Storage section.
e) Pan section.
f) Mill section.
g) Power generation.
2) Marketing Cost Center:
a) Transportation cost center.
3) Administration Cost Centers:
a) Security and maintenance of plant.
b) Human Resource Development.
65
The following are the cost units of The Shahabad Coop. Sugar Mills
Ltd:
Name of the item
Cost unit
Sugar cane
Per Tone
Sugar
Per Quintal
Transportation
Per trip / per K.M
Water charges
Per thousand Liters
Oil & diesel
Per liters
Canteen
Per person served
Electricity
Per K.W.H.
Boiler
Per thousand kilo grams of steam
66
67
Material costing
Year
Tones
Rate per tone
Amount
2006-2007
2007-2008
2008-2009
consumed
136903.6842
202997.6470
215068
950
850
1000
130058500
172548000
215068000
The raw material consumption from the year 2006-2007 - 2008-2009. In case of 20062007 the quantity of sugar cane consumed 136903.6842 tones and it is increased to
202997.6470 and 215068 respectively in the year 2007-2008 and 2008-2009.
Human resource department

68
Departments
Total no of employees
Administration and HOD

Manufacturing and engineering
Cane department
Security office
Civil
2006
41
340
65
19
7
2007
43
345
68
20
15
2008
44
351
70
22
19
All the department the manufacturing and engineering department having more number
of employees. This increasing trend indicates is a increasing production.
Department wise salary per annum

Departments
2006
2007
2008
69

Administration and HOD
Manufacturing and engineering
Cane department
Security office
Civil
1,95,600
7,50,596
1,60,156
42,000
41,000
2,09,341
7,90,900
1,80,300
45,000
43,300
2,16,651
8,07,175
1,95,200
48,000
46,000
Over heads
Particulars
2006-2007
2007-2008
2008-2009
Factory overhead
Administration and overheads
Selling and distribution overheads
9,180,600
1,530,100
3,763,937
15,972,950
2,381,850
4,140,990
237,300,00
3,744,000
13,868,850
70

Total
14,474,637
22,495,790
41,342,850
Seeing the table the factory over heads increasing considerably it indicates growth in
production. Since the manufacturing and engineering department constitutes major part in
total number of employees and wages the factory overheads also forms major part in total
overheads.
STATEMENT OF COST SHEET OF THE SHAHABAD COOPERATIVE SUGAR

MILS LTD.
Particulars
2006-2007
2007-2008
2008-2009
Purchase of raw material
130,0585,00
172,548,000
215,068,000
Closing raw material

Raw material consumed
130,058,500
172,548,000
215,068,000
71

Freight inwards
13,005,850
18,395,725
24,032,400
143,064,350
190,943,725
239,100,400
Factory over heads
9,180,600
15,972,950
23,730,000
Depreciation on building
1,000,000
1,5000,00
2,000,00
Depreciation on machinery
1,200,000
1,7000,00
2,200,000
Depreciation on electricals
250,000
300,000
350,000
154,694,950
210,416,675
267,380,400
1,530,100
2,381,850
3,744,000
Depreciation on computer
50,000
60,000
70,000
Depreciation on office equipments
150,000
2000,00
300,000
156,485,050
213,058,525
271,494,400
Opening stock of finished goods
1,534,065
3,928,720
4,149,800
Less :closing stock of finished
4,090,840
8,839,620
17,337,000
153,928,275
208,147,625
258,307,200
3,763,937
4,140,990
13,868,850
157,692,212
212,288,615
272,176,050
Prime cost
Work cost
Office over heads
Cost of production
goods
Cost of goods sold
Selling over heads
Cost of sales
Analysis of cost sheet:

Prime cost: The prime cost in 2006-2007 143,064,350 and in 2007-2008 it was increased
to 190,943,725 and 2008-2009 it was increased to 239,100,400 .This cost is increase to
year by year .
Work cost: The work cost in 2006-2007 154,694,950 and in 2007-2008 it was increased
to 210,416,675 and 2008-2009 it was increased to 267,380,400.
72
Cost of production: The cost of production in 2006-2007 156,485,050 and in
2007-
2008 it was increased to 213,058,525 and 2008-2009 it was increased to 213,058,525.

Cost of goods sold: The cost of goods sold in 2006-2007 153,928,275 and in
2007-
2008 it was increased to 208,147,625 and 2008-2009 it was increased to 258,307,200.

Cost of sales: The cost of sales in 2006-2007 157,692,212 and in 2007-2008 it was
increased to and in 212,288,615 2008-2009 it was increased to 272,176,050.
Findings:
1. The increasing prime cost is because of is increasing material consumed by the
company.
2. The work cost is increasing by year to year because in factory over heads also
increasing.
73

3. The cost of production is to increasing because office overheads and depreciation of
office equipments.
4. The cost of goods sold is high increasing in year to year.
5. The cost of sales year by year due to increasing in sales.
Marginal income statement
Particulars
Sales
Less: variable cost
2006-2007
58063755
45818596
2007-2008
159273632
130849400
2008-2009
260120510
183355675
74
Contribution
Less: fixed cost
E.B.I.T.
Total cost
12245159
1988986
10256173
47807582
28424232
3128956
25295276
133978356
76764835
4355859
72408976
187711534
The EBIT for the year 2006-2007 was 10256173, in the year was 2007-2008 was
25295276, and in the year 2008-2009 was 72408976. It shows the increasing in EBIT
year to year
Findings of the study
Raw material consumption is increasing. The increase in sugar cane consumption

from the year 2006-07 to 2007-08 was 75.37% and that from the year 2007-08
to2008-09 was 80.22%
Over head of the firm was increasing from the year 2006-07 to 2007-08 was
57.47% and from the year 2007-08 to 2008-09 was 65.20%
75
Prime cost of the firm was increasing from the year 2006-07 to 2007-08 was
Work cost of the firm was increasing from the year 2006-07 to 2007-08 was
Cost of production of the firm was increasing from the year 2006-07 to 2007-08
was 73.44% and from the year 2007-08 to 2008-09 was 78.47%
Cost of goods sold of the firm was increasing from the year 2006-07to2007-08
was 73.95% and from the year 2007-08 to 2008-09 was 80.58%
Cost of sales of the firm was increasing from the year 2006-07 to 2007-08 was
74.28% and from the year 2007-08 to 2008-09 was 78%
Suggestion:
1. As prime cost, cost of production are increasing in the firm exercise cost
reduction and cost control techniques like material control, labor control,
over head control, capital expenditure control.
2. As the raw material cost is increasing the firm should using new
techniques to reduce it. 1) Like the firm allowed near to the sources of raw
material. 2) Reducing raw material usage in production down time.
76
Conclusion
In this study is attempt to made analyze the cost analysis of the sample unit .Since
the Nirani Sugars Ltd is facing heavy competition in an around area of the region, It is
essential to focus on the aspect of cost, profitability etc
Cost accounting is a recent development. It is the branch of financial accounting.
It maintains the records unit wise, process wise, job wise department wise, we can easily
control in reduction of costs by preparation of the statement unit wise or job wise.
77
Bibliography
G.B.Baligar cost accounting, ashok prakshan, 2004
78

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COST ANALYSIS OF THE SHAHABAD CO-OP.

SUGAR MILLS LTD,

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

The study of Cost Analysis of sugar industry with special reference to

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

OBJECTIVE OF THE STUDY

Is collecting through interview of financial departmental heads

Is collecting from company data of accounts.

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

The Historical Background of the Indian Sugar Industry:

National Scenario Of Sugar Industry:

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

The sector wise break ups as follows:

International Sugar Industry:

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

Contribution of Sugar Industry to Indian Economy:

World Sugar Trade:

(Source: USDA Foreign Agriculture

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

Table showing sugar cane availability in cultivated area:

Cultivated area (%)

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

% Sugarcane utilization for

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

The Shahabad Coop. Sugar

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

Sh. Hawa Singh HCS

Constitution of the firm

OF OFFICERS AT THE SHAHABAD COOPERATIVE

SH. HAWA SINGH HCS

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

CHIEF ACCOUNTS OFFICER

DEPUTY CHIEF CHEMIST

SUGAR SALES MANAGER

HISTORY OF THE SHAHABAD COOP.

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

OBJECTIVES OF THE SHAHABAD COOP. SUGAR MILLS LTD.

Maximum utilization of man power production capacity and

Proper co-ordination and co-operating among its members.

To manufacture good quality sugars and its by products with

To provide comparative market rate to the farmers.

To inculcate modern techniques and methods of cultivation and

To maintain proper of transport for the formers during season.

Utilization of raw material to the maximum level to get by

To undertake such other activities are incidental and conductive

Maintain continuous improvement programs in Technology.

Help farmers to increase there yield through research & development.

To produce good quality sugar at acceptable prices to meet the increasing

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

Nature of Business Carried

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

Bagasse is usually used as a combustible in the furnaces to produce steam,

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

Vision Mission & Goals

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

Goals of The Shahabad Coop. Sugar Mills Ltd.

COST ANALYSIS OF THE SHAHABAD CO-OP. SUGAR MILLS LTD,

Human Resource Development