C O S T I N G O F W I N D M I L L S T E E L T O WE R
Procedure
ó
Costing for manufacturing process of Windmill Tower of Steel contains following Steps and procedures: -
Direct Raw Material Consumed.
Apportionment of Other Costs: -
a. Power and Fuel
b. Labour Cost- Contractor and Departmental
c. Other Processing Charges: - e.g. Galvanizing, Machining, Radiography, Fabrication of internals etc.
d. Overheads: - Indirect Expenses attributable to manufacturing of Tower like shop overheads, repair and maintenance cost, depreciation, finance charges, administrative overheads, etc.
Consumption of Raw Material – Calculation of Costing.
Following Raw Materials are used to manufacture Windmill Steel Tower: -
Steel: - Main Raw Material- about 65% of total cost.
Bought out and Subcontract items.
Fasteners
Paint and
Consumables: - Electrodes, SAW Wire and Flex, Grinding Wheel, Gases, Chemicals etc.
Steel Plates of different sizes, length and thickness are used based on use, specification and drawing.
In fact about, 5 % of total issued Steel becomes Scrap and 2 % of total Steel issued faces Burning Loss during cutting process.
Basis of valuation: - Cost is assessed on Weighted Average Costing method.
While scrap is returned back to Stores, which is disposed off in due course.
Cost of other raw materials and consumables are valued on actual cost basis and Weighted Average Method used.
Other Processing Charges
Other Processing Charges includes, galvanizing, radiography, machining of stub shell and fabrication of internals.
Above jobs are mostly done by outside parties and are treated on actual cost basis. To some extent machining of stub shell, radiography test and fabrication of internals are done at the shop floor itself and respective costs are included in raw material costs, labour cost, power charges and overhead costs.
Apportionment of Other Costs: -
Power and Fuel: - Best method of apportionment of electricity is on the basis of HP of machinery used for production of tower.
At present energy meters are not attached with the machinery and also it is very expensive to install separate energy meter with each machine.
Cost of electricity is apportioned on the basis of actual tonnage of production during the month and actual bill of electricity.
Consumption of power and fuel for each tower is calculated on finished weight of tower.
Shop Overheads: - Shop Overhead includes consumption of materials, which cannot be directly related, with the production of particular tower.
Quantum of such overheads is to be assessed per annum and some percentage may be fixed on the basis of production for the month.
It is possible to calculate actual shop overhead per month and this can be apportioned to production during the month, but percentage is better option.
Fixed overhead: - Fixed overhead includes administrative charges, repair and maintenance costs, salary and wages of staff and other departmental workers etc.
Quantum of these costs may be assessed annually and a percentage based on monthly production should be ascertained.
Depreciation should be calculated annually and it should be allocated on the basis of monthly production.
Estimated financial charges based on working capital requirement for the year and planned capital expenses should be allocated on the basis of percentage of production for the month.
At present above costs are allocated to the particular job on the basis of percentage of manufacturing cost of each unit.
Direct Labour (Contractor and Departmental) is allocated on per month production basis.
Valuation of Semi Finished Stock: - Tower Number wise cost sheet to the extent of completion of work should be prepared and it should be carried forward till the completion of Tower.
Once the tower is completed and dispatched cost of particular tower should be removed from semi-finished stock.
Costing Profit and Loss Account: - Monthly-Costing Profit and Loss Account are to be prepared and it is to be reconciled with Monthly Financial Profit and Loss Account. For preparation of costing profit and loss account consolidated cost sheet is required.
Other Reports: - In addition to cost of each tower under mentioned reports are also to be generated from the costing system: -
Machining cost of each unit of in house machining is done.
Idle time of each machine installed with reason.
Idle time cost to reduce the idle time.
System for comparison of actual consumption with norms for the purpose of cost control.
Cost center wise expenditure.
Contractor wise expenditure.
Costing system must be linked to our existing system (MAARSMAN) and data for generating above reports should be extracted from existing system to avoid repetition of work.
Dated: - 08-12-2007.C O S T I N G O F W I N D M I L L S T E E L T O WE R
Procedure
ó
Costing for manufacturing process of Windmill Tower of Steel contains following Steps and procedures: -
Direct Raw Material Consumed.
Apportionment of Other Costs: -
a. Power and Fuel
b. Labour Cost- Contractor and Departmental
c. Other Processing Charges: - e.g. Galvanizing, Machining, Radiography, Fabrication of internals etc.
d. Overheads: - Indirect Expenses attributable to manufacturing of Tower like shop overheads, repair and maintenance cost, depreciation, finance charges, administrative overheads, etc.
Consumption of Raw Material – Calculation of Costing.
Following Raw Materials are used to manufacture Windmill Steel Tower: -
Steel: - Main Raw Material- about 65% of total cost.
Bought out and Subcontract items.
Fasteners
Paint and
Consumables: - Electrodes, SAW Wire and Flex, Grinding Wheel, Gases, Chemicals etc.
Steel Plates of different sizes, length and thickness are used based on use, specification and drawing.
In fact about, 5 % of total issued Steel becomes Scrap and 2 % of total Steel issued faces Burning Loss during cutting process.
Basis of valuation: - Cost is assessed on Weighted Average Costing method.
While scrap is returned back to Stores, which is disposed off in due course.
Cost of other raw materials and consumables are valued on actual cost basis and Weighted Average Method used.
Other Processing Charges
Other Processing Charges includes, galvanizing, radiography, machining of stub shell and fabrication of internals.
Above jobs are mostly done by outside parties and are treated on actual cost basis. To some extent machining of stub shell, radiography test and fabrication of internals are done at the shop floor itself and respective costs are included in raw material costs, labour cost, power charges and overhead costs.
Apportionment of Other Costs: -
Power and Fuel: - Best method of apportionment of electricity is on the basis of HP of machinery used for production of tower.
At present energy meters are not attached with the machinery and also it is very expensive to install separate energy meter with each machine.
Cost of electricity is apportioned on the basis of actual tonnage of production during the month and actual bill of electricity.
Consumption of power and fuel for each tower is calculated on finished weight of tower.
Shop Overheads: - Shop Overhead includes consumption of materials, which cannot be directly related, with the production of particular tower.
Quantum of such overheads is to be assessed per annum and some percentage may be fixed on the basis of production for the month.
It is possible to calculate actual shop overhead per month and this can be apportioned to production during the month, but percentage is better option.
Fixed overhead: - Fixed overhead includes administrative charges, repair and maintenance costs, salary and wages of staff and other departmental workers etc.
Quantum of these costs may be assessed annually and a percentage based on monthly production should be ascertained.
Depreciation should be calculated annually and it should be allocated on the basis of monthly production.
Estimated financial charges based on working capital requirement for the year and planned capital expenses should be allocated on the basis of percentage of production for the month.
At present above costs are allocated to the particular job on the basis of percentage of manufacturing cost of each unit.
Direct Labour (Contractor and Departmental) is allocated on per month production basis.
Valuation of Semi Finished Stock: - Tower Number wise cost sheet to the extent of completion of work should be prepared and it should be carried forward till the completion of Tower.
Once the tower is completed and dispatched cost of particular tower should be removed from semi-finished stock.
Costing Profit and Loss Account: - Monthly-Costing Profit and Loss Account are to be prepared and it is to be reconciled with Monthly Financial Profit and Loss Account. For preparation of costing profit and loss account consolidated cost sheet is required.
Other Reports: - In addition to cost of each tower under mentioned reports are also to be generated from the costing system: -
Machining cost of each unit of in house machining is done.
Idle time of each machine installed with reason.
Idle time cost to reduce the idle time.
System for comparison of actual consumption with norms for the purpose of cost control.
Cost center wise expenditure.
Contractor wise expenditure.
Costing system must be linked to our existing system (MAARSMAN) and data for generating above reports should be extracted from existing system to avoid repetition of work.
Dated: - 08-12-2007.C O S T I N G O F W I N D M I L L S T E E L T O WE R
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