MANAGEMENT ACCOUNTING

GROUP MEMBERS:
• WARISHA FARHAT
• SAHIL SHIRAZ
• AMMAD ILYAS
TOWELLERS LIMITED.

• Towellers is a fully integrated textile manufacturer

• Established in 1973
• Exports its products to over 20 countries
• One of the leading terry exporters in Pakistan
• The total exports of Towellers Limited amount to approximately $40 million.
PRODUCTS

• The four core products of the company are:

• Towel
• Apparel
• Knit Sheets
• Baby products
OUR INTERVIEW:

• We interviewed the Head of Audit Department of, Mr. S.M. Khalid.

• He briefed us about their costing, manufacturing, exporting strategies.
• He helped us understand the dynamics of the textile industry in Pakistan.
QUESTION/ANSWER SESSION:
MATERIALS:

• Question: What are the different types of raw materials used in the production?

• The company is involved in two types of activities to acquire profits; trading and
manufacturing.
• It acquires goods from one entity and exports the same goods internationally, thus
making a subsequent amount of profit from it.
• Towellers limited mostly uses yarn as its raw material to convert into finished goods.
Yarn is weaved in the production of towels, and is knitted to manufacture apparels and
garments.
• Question: How do you value your cost of goods sold and closing inventory?
• The cost of goods sold is valued at the market value of the raw materials, and the other
different processes involved in the conversion of raw materials into finished goods.
• The cost of each process is added to the total level by level, and the total cost is obtained
reflected when the manufacturing of the product is finished.
• Question: How do you place a purchase order and how do you determine the
order quantity?
• The purchase order is processed by the merchandising department of the company.
• The purchase orders are forwarded to the purchase department of the company for further
processing, where the head of the purchase department finalizes the procedure of ordering
goods.
• Question: How do you record the damaged goods?
• The top-quality products are referred to as A-grade products, which are exported.
Whereas, the damaged goods are referred to as B-grade products.
• These damaged goods are either sold in the local market, or are recycled and re-
processed to produce finished goods.
• Thus, the company does not require any means to record the damaged goods.
• Question: How do you record the purchases in your books?
• Purchases are recorded in the books once the goods have been received by the company
form their suppliers, thus books are maintained on the basis of physical count on
inventory.
LABOR:
• Question: What are the different types of labors used? (skilled/unskilled)
What is the total number of workers? (estimate)
• Both skilled and unskilled labor are used in the manufacturing of goods.
• The company mainly focuses on hiring unskilled labors, and training them to be skilled labors.
• As of now, the company is facilitating 1300-1400 workers (estimated count).

• Question: How do you determine the wages of labors?

• The wages of every individual labor are determined by their skills, and according to the laws
of the company.
• The market rate of wages is also considered while deciding on the wages of labors, and they
increase as labors spend more years in the company.
• Question: How do you record labor hours?
• Labor are required to work 8 hours a day as per the labor law
• Compensation is provided for workers providing overtime.
• The labor hours are checked via fingerprint scanners, and sign-in/sign-out sheets that are
used to maintain the attendance of the labors.
OVERHEADS:

• Question: Which expenses are classified as overheads?

• Salaries, wagers, utilities, insurance, depreciation, and any other costs not directly linked
to the production are considered as overheads.

• Question: Which of the above expenses are fixed or variable?

• Almost all of the above costs are treated as variable costs by the company.
• Only the rent expenses and utilities expenses are fixed for the company, all the rest of
the expenses are mostly fixed.
FINISHED GOODS:

• Question: How do you record the movement of finished goods from the
production floor to the finished goods inventory?
• Production and the inventory department is responsible for the tracking of goods from
the raw material stage to the finished goods stage.
• Proper segregation of duties is used in this stage to ensure the proper recording of WIP
goods from the production floor to the finished goods floor.
• Question: How do you determine the selling price of your product.
• The selling price of products is decided by the top management of the company.
• Includes the production costs plus the exporting costs, any financial expense, factory
expense, taxes and etc.
• The hierarchy then decides on a final selling price after considering all these costs.