Submitted by: Kapeel Kumar

COST ACCOUNTING

FINAL PROJECT

SUBMITTED TO:

AMIR FEROZ SHAMSI Submission Date: Feb, 21-2010

TABLE OF CONTENTS

1) Acknowledement ………………………………………………...3

2) Letter of transimittal..…………………………….........................4

3) Introduction………………………………………………………5

4) Type Of Product…………………………………………………6

5) Raw Material……………………………………………………..6

6) Direct and Indirect Labour……………………………………….7

7) Factory Overhead………………………………………………...7

8) Processes………………………………………….....................8, 9

9) Costing Sheets……………………………………..…………10,11

10) References……………………………………..…………….…12

Acknowledgement

By the grace of Almighty God, we have successfully completed our project on the

“Process Costing”.

The main aim of this project is to understand the working and manufacturing costing

activities. We chose TOWEL as it has the different processes and has a vast learning of

manufacturing activities. The project is competently under the guidance and according to

the teachings of our respectable teacher Mr. Amir Feroz Shamsi. We are grateful to him

for providing us an opportunity to learn the sensible issues involved in the manufacturing

a Product.

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Letter of Transmittal

Mr. Amir Feroz Shamsi.

Instructor- Cost and Management Accounting

Iqra University,

Karachi.

Dear Sir,

During the course, we were required to prepare a report on the Product Costing.

By the grace of God, we have completed this project successfully and as per your

instructions the same is being submitted to you. We hope that this report will give some

essential benefits and guidelines to those people who want to explore the field of

TEXTILES INDUSTRY specially in towel range.

Genuinely,

Kapeel kumar.

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INTRODUCTION

ABOUT DZEE TEXTILES LLC

DZEE TEXTILES has incorporated its operation since last 3 years and engages in many manufacturing product lines, but we have selected one of its demanding product Bath Towel (Legend Plus) 24 x 48 size. Its factory is situated in the Site Area Karachi but they sell their product in the US market.

MANUFACTURING

At D-Zee Textiles each product is manufactured from finest quality of materials on state of the art weaving looms. Our linens are processed on modern continuous bleaching machines on strict hospitality standards and each product is carefully engineered to withstand institutional laundering.

For years the hospitality industry has relied on D-Zee Textiles to provide an exceptional collection of Towels, Bedding, Pool Towels, and Table Linen & Room Amenities for Hotels, Motels, Resorts, Cruise Lines, Health Clubs, Salons and Spas.

D-Zee Textiles manufactures what we sell. Our products are manufactured in our state of the art manufacturing facilities from finest materials under strict quality control systems. This enables us to deliver superior quality products directly to end customers at highly competitive prices. So when you buy from D-Zee Textiles you are able to reduce your annual linen purchasing budget significantly.

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TYPE OF PRODUCT : “TOWEL“

Detail:Towel (Legend Plus) made with premium long staple Egyptian cotton yarn this is one of the finest and softest towel for upscale institutional use. The ultimate in luxury. 86% Cotton 14% Polyester Made from fine long staple yarn, Legend Plus towels are engineered for high absorbency softness and durability. Each towel has a classic dobby for a luxurious look.

Specification:

Woven on high tech Swiss machines. Lush, soft & absorbent.Classic double dobby on hem & borders.Optical brighteners for ultra whiteness.Classic Cobby border.Optical white finish.High performance stitchingEngineered for institutional laundering. Carton packed

RAW MATERIAL:

D-ZEE Textiles Purchases 600 dozens Bath Towel in Gray form from its Local Suppliers in a month and 7,200 dozens in a year.

The Company purchases the following material for use into further process and considers all the material as direct material:

Thread:The company purchases thread as per its yearly requirement. Thread is used of Rs.1 per dozen. 1 X 600 X 12 = 7,200 in a year.

Label:The company purchases Label as per its units of production. 1 label is required for 1 piece of towel. Company purchases 8,640 labels in a year. (12X600X12)

Insert (Description Paper):1 insert is used in 1 dozen. Company purchased 7200 insert in a year.

Poly bag (Plastic shaper):1Polybag is used for 1 dozen of towel. Company yearly requirement is 7,200 polybag.

Carton:1 carton is used in 4 dozen of towel. Company purchases 1800 carton in a year.

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LABOUR:

Direct Labour Direct Labour is involved in cutting and stitching the towel one by one through

Machines and scissors @ Rs.18.96 per dozen and Rs.1.58 per towel. Direct Labour in the Bleaching department is paid @ Rs.20 per dozen. Direct Labour involved in Packing is paid @ Rs.3 per dozen

Indirect Labour Loaders are involved in carrying the goods from one department to another

department. And these workers are hired on daily wages. Supervisors are involved in the checking and supervise the work and get fixed

monthly salary.

FACTORY OVERHEAD:

Company has estimated to apply 10% Factory Overhead of the Prime cost in all departments for all different sizes of Towels. Any change in Factory Overhead will increase/decrease the margin of the company.

Company allocates 2% wastage in the Cutting department.

Factory Overhead Includes:

Rent Utilities Bills Indirect Labour: Supervisor Salary Loaders Charges Wastage (Cuting Loss 2%) Machine Repair and maintanance Depriciation Insurance

SELLING PRICE:

Company has set the market Based competitive price and it earns 29% margin on its total cost.

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PROCESS:

Company first purchases the Towel in Gray Colour and then further processes it into the following three processes.

1. Bleaching2. Cutting and stitching3. Packing and Insepection

PROCESS -1: BLEACHING

This process is carried out to remove the gray colour towel which could not be removed by scouring. In bleaching process company use sodium hypochlorite, sodium cholorite and mainly hydrogen peroxide. Although bleaching of cotton towel are commonly carried out in alkaline surrounding.Bleaching gave better resistance to piling and dimensional stability, better mechincal properties than those scoured by alkaline.

Machinery used in Bleaching Process

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PROCESS -2: CUTTING AND STITCHING

In this process towel pass through following four steps.

Longitude cutting Longitude Hemming Cross cutting Cross Hemming

These processes are achieved by using scissor and standard sewing machines by worker or by machines specialized in towel cutting or sewing or even by automatic machines which can be carried out some or all process mentioned above.Length wise cutting machines are used for the 1st step of this process. Longitudinal cutting of towel which has been produced on the weaving loom as several panels joined side by side. In these machines there are several cutters which cut lengthwise between adjacent towel panels in order to separate them. The cutting process carried out by means of a pressing blade on a motorized role in the lengthwise cutter.

Following Materials are used in stitching process: Thread Label

PROCESS-3: PACKING AND INSPECTION

After cutting and stitching, all the towels are inspected for the quality and after inspection, towels are sent for packing.

Following Materials are required for packing process:

Insert: One Insert is used for One dozen of towel.Polybag: One polybag is used for one dozen.Carton: One Carton is used in one dozen.

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REFERENCES

COMPANY NAME: D-ZEE TEXTILES LLC. , ACME MILLS

CONTACT PERSON: WAQAS QASMANI

DESIGNATION: COST ACCOUNTANT

CONTACT NUMBER: 0345 - 2486416

EMAIL ADDRESS: WAQAS.QASMANI@DZEETEXTILES.COM

WEB ADDRESS: WWW.DZEETEXTILES.COM

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