Product Cost Sheet released pending test report

Please ensure the materials availability for execute your costing scenario which in listed in the attached file.Thanks for releasing Cost Sheet so soon. There are a few observations in first trial, please go:


In BP :
1. Input UOM should be Pcs instead of Kg
2. If Input UOM is Kg/Lit:input and output upto 2 decimals->Pack Size should be in Kg
3. Cost Centers should be arranged according to Production Flow in BP, CO,PS,EXP etc.
4. Cost Component description should be GPO instead of General Production Overhead in BP, CO,PS,EXP etc.
5. In LEO Description Dept. Code should be Cost Center Code in BP, CO,PS,EXP etc.
6. Landed Cost is not a cost component class thus should be adjusted with PO price in all cases
7. In actual cost summary Total Batch Cost is not representative phrase in BP, CO,PS,EXP etc. (total costs to make the entire batch into CO,PS,EXP etc. would be the total batch cost)


In CO, PS, EXP:


1. Input UOM should be Pcs instead of IFC and output UOM in IFC whithout any fraction->Pack Size should be in agreement with Item description


In General/Common Rules:
1. Cost Centers Assessment Rates found inconsistent in different items accrued from the same batch
2. Active and Raw materials rate per unit is inconsistent with BP and total cost is not proportionate)
3. Total cost & Qty of active/raw in various items originated from the same batch can not be more than what consumed in BP


We might take 1 week (approx) to test the entire sheet with all actual transactions and bases.

Reply on Submission of Conversion Cost to a Toll Manufacturing Company

Thanks for sharing the operating costs/COC (Cost of conversion). It would have been better if bases line assumptions and costs sheets were there along with this, however to optimize the time I am putting some assumptions / queries behind this indicative costs , please help me to revalidate my understanding.


01. USD 0.75/sachet of 5 g is a COC including your company’s margin etc and it is a delivered price at Factory gate

02. The price includes all kind of taxes and to be deductable as per applicable laws

03. Understanding the site’s different facilities to be shared for GENO along with other products, hence costs is also proportionate and there would be improvement in costs also

04. We have shared 5 Years volume , technical details, equipment requirements( certain equipments are our company Specific), process flows with project team and assuming all have been taken into consideration while crafting the costs

05. Any CAPEX requirement and related to that any costs are not in scope of this costs

06. Clarity on Payment term – we prefer 60 days credit term. Trust this offer covers this.

In our earlier discussion I have cleared the costs model is P2P (Procure to Pay) - that means your company will procure all materials, maintain inventory and will sale FG (Finished Goods) as per purchase order. In short “ RM and PM costs + COC/Operating costs = P2P Costs at Factory gate”.

I am sure you have the volume, however as reference sharing the projected volume with you might help as reference.

Yr 1 -36 MT ,

Yr2 -57 MT,

Yr 3-62MT,

Yr 4-95MT and

Yr 5-111MT

Kindly revert if I am in the same page or any difference or any queries you have.

Business wise earning statement-Segment Reporting

Q.1. Consignment wise contribution on Export Sales - Others Expenses column - Which are the other expenses?

A. Other Expense- Free Goods.

Q.2. Daily Cash and Bank Position Report - Main cash refers to cash receipts?

A. Main Cash- Cash amount from Sales Proceed.(Depot)

Q.3. Business wise earning statement - Same format for other businesses and Export?. Since the formats are different, they would be considered as two reports

A. Same format for other businesses and Export- Yes

Q.4. LP3 status Report - Enter a column for LP3 amount, can you please populate some data and provide the report. It is not clear as to how we are tracking the fund utilized from the LP3.

A. PFA the New Report Format along with Data.

Q.5. MDR Report - Please provide explanation for the fields and some sample data.

A. PFA. Please find two format in the different name- One sheet containing Product wise, Business wise, Qty, Rate in detail -name-"MDR data file" and another is MDR Report. Please find in excel there has some requirement . Like- Location wise, Business wise, Month wise, Etc.

Q.6. Pending Format clarity on Agent Security Deposit and Agent Commission Reports

A. I discussed with Agro counterpart, he informed me after having the consent of his boss that they do not need that two reports. 

Cost Sheet  format- The existing format is for standard Cost sheet, hence some of the fields are not relevant, please send the format required as per Actual Cost sheet

What is Risk propensity?

40. In the bounded rationality model, an individual or team stops searching for alternatives as soon as an acceptable (“good enough”) goal or solution is discovered.  This is referred to as:

a.	limited search
b.	settling
c.	availability phenomena
d.	None of these

ANS:  A                  

   41.   _____ is a process of continuing or increasing the allocation of resources to a course of action even though a substantial amount of feedback indicates that the choice made is wrong.

a.	Limited search
b.	Escalating commitment
c.	Availability phenomena
d.	None of these

ANS:  B                   

   42.   When individuals and teams stop looking for possible goals or solutions to a problem after finding one that seems adequate, they have engaged in ____.

a.	limited search
b.	risk propensity
c.	escalating commitment
d.	emotional block

ANS:  A                   

   43.   _____is the tendency of an individual or team to make or avoid decisions in which the anticipated outcomes are unknown. 

a.	Risk propensity
b.	Balancing interests
c.	Risk commitment
d.	Balancing effects

ANS:    A

What are the 6 steps under a process costing system?

Six steps must be taken when deriving and assigning product cost under a process costing system:

1. Compute the total number of physical units to account for.

2. Compute the physical units accounted for by tracing the physical flow of units.

3. Determine the number of equivalent units of production, either on the weighted average or FIFO basis, for each cost component. The cost components include transferred-in (if multidepartmental), direct material, direct labor, and overhead. In cases of multiple materials having different degrees of completion, each material is considered a separate cost component. If overhead is applied on a direct labor basis or is incurred at the same rate as direct labor, labor and overhead can be combined as one cost component and referred to as “conversion.”

4. Determine the total cost to account for, which is the sum of beginning inventory costs and all production costs incurred for the current period.

5. Compute the cost per equivalent unit of production for each cost component.

6. Assign the costs to the units transferred and the units in ending work in process inventory. The method of cost assignment depends on whether weighted average or FIFO costing is used. The total of the costs assigned to units transferred and to units in ending work in process inventory must equal the total cost to account for.

How Equivalent units of production is measured?

The physical flow of production units through a department and the manufacturing effort expended in a department during a period normally occur in the following order:

• units started in the previous period and finished in the present period,
• units started in the present period and finished in the present period, and
• units started in the present period and not finished in the present period.

Because of these mixed manufacturing efforts, production cannot be measured by counting whole units. Accountants use a concept known as equivalent units of production to measure the quantity of production achieved during a period. 

Equivalent units of production (EUP) are an approximation of the number of whole units (deem as fully completed units) of output that could have been produced during a period from the actual effort expended during that period. 

 

EUPs are calculated by multiplying the number of actual but incomplete units produced by the respective percentage degree of completion. The following simple example indicates how equivalent units are calculated.
 

Assume the cooking department of a company had no beginning inventory in November. During November, the department worked on 220,000 units: 200,000 units were completed and 20,000 units were 40 percent complete at the end of the period. The EUP for the period are 208,000 [(200,000 100%) (20,000 40%)].