TERM
PROJECT
COST AND MANAGERIAL ACCOUNTING
HIGHLAND COMPANY pvt ltd.
NEXUS JEANS
PRODUCT ANALYSIS
Introduction:
We have
recently launched our textile company with the name “HIGHLAND”, we have
established our manufacturing unit at Site Area in Karachi. We are presenting
our product jeans with the brand name of NEXUS. We are entering the market with
the aim to capture the market by providing the best quality product to the
customers.
Product:
We are
using the best quality of raw material in our product. We have imported the
plant and machinery and we have employed 64 labors in our manufacturing unit.
Our finished product is carefully inspected for defects. Each
defect is rated on a government-defined scale ranging from one point for very
small flaws to four points for major defects. We
are conscious about quality of the product committed to give the best quality
to our customers and our product shows that excellence due to which ISO-9001
Processing
The whole manufacturing of jeans involve
following departments
Ø Cutting
department
Ø Sewing
department
Ø Washing
Department
Ø Finishing Department
Cutting Department
In cutting department we put the jeans
fabric into the machine, which cut the fabric in the desired shape. We are
using three laser cutting machines, which are operated by 12 labors. After
cutting jeans fabric we transfer it to sewing department.
Sewing Department
In sewing department we sew fabric
according to the design required by the market. Here we use 40 machines which
are operated by 40 workers. 40 workers have been divided into four groups to
1-
Assemble pocket, waist band and
belt loops
2-
Attach pockets to the leg seams
3-
Sew leg seams together
4-
Attach buttons, rivets, zips and
maker’s label.
Washing Department
Some jeans are prewashed and/or stone-washed to alter the
appearance or texture of the finished jeans. Prewashing involves washing the
jeans in industrial detergent for a short time to soften the denim.
Stone-washing also means washing the jeans, but pumice is added to the load,
resulting in a faded appearance.
They are placed into a large pressing machine that steam irons the entire garment at once in about a minute.
Once the process is completed then it is transferred to the finishing department.
They are placed into a large pressing machine that steam irons the entire garment at once in about a minute.
Once the process is completed then it is transferred to the finishing department.
Finishing
Department
In the finishing department, size tag is punched into the material
and the jeans are folded, stacked, and placed in boxes according to style and
size before being sent to the warehouse for storage.
Raw Materials
Direct
Raw Materials used in the process of
making jeans are
Shell denim twill fabric 2.3mt 130/mt
Shell denim twill fabric 2.3mt 130/mt
Pocket cotton 0.3mt 35/mt
Waistband interlining polycotton 0.05mt 45/mt
Indirect raw materials used in the process are
Button copper metal button 1 0.90
Rivets Copper rivets 6 0.30
Size label Black. Below waistband 1 0.20
Brand label sticker Black side, right. Leather 1 2
Zipper metal sliding zipper 1 10
Thread yellow color, 3 ply 2
bobbins 5
Labor
Direct Labor
Rate/hr Labor Hours Month Wages/Labor
Cutting 12 35 240 8400
Sewing 40 35 240 8400
Washing 4 35 240 8400
Finishing 8 35 240 8400
Indirect Labor
Supervisors
Department no. of person salary
Cutting 1 20000
Sewing 1 20000
Washing & finishing 1 20000
Other
Indirect Labor
Mechanic 2 20000
Sweeper 4 24000
Office boy 2 16000
Quality Checker 2 32000
NEXUS
SCHEDULE
OF COST OF GOODS MANUFACTURED
|
Schedule of Cost of Goods Manufactured
|
||||
|
Direct materials:
|
|
|
|
|
|
Purchases
of raw materials..................
|
1700000
|
|
|
|
|
Less:
ending raw materials
|
(141250)
|
|
|
|
|
Raw
materials used in production.........
|
|
1558750
|
DM
|
|
|
Direct
labor..........................................
|
|
537600
|
DL
|
|
|
Manufacturing
overhead:
|
|
|
|
|
|
Indirect
materials...............................
|
123500
|
|
|
|
|
Indirect
labor.....................................
|
152000
|
|
|
|
|
Electricity
Charges, factory..................
|
176,000
|
|
|
|
|
Factory rent
………………………………………
|
80,000
|
|
|
|
|
Insurance,
factory..............................
|
30,000
|
|
|
|
|
Depreciation,
machine.........................
|
411700
|
|
|
|
|
Total
overhead costs.............................
|
|
973200
|
MOH
|
|
|
Total
manufacturing costs......................
|
|
3069550
|
TMC
|
|
|
|
|
|
|
|
|
Less:
Ending work in process inventory...
|
|
60,000
|
|
|
|
Cost
of goods manufactured..................
|
|
Rs 3009550
|
|
|
COST
PER UNIT
Cost of
Goods Manufactured 3009550
Divide by
number of units manufactured 5000
Rs 602
SELLING PRICE
PER JEANS
We are
setting price for our product at cost + 16% of cost
i.e. 700/jeans
Breakeven Point by Equation Method
Break
even point in terms of units
S-vc-fc=p
700Q-419.27Q-697700=0
280.73Q=697700
Q=697700/280.73
Q=2485 Jeans
After selling 2485 number of jeans then
our company is at its break even point where no profit no loss occur
Break
even point in terms of rupees
S-vc-fc=p
X-0.598X-697700=0
0.401X=697700
X=Rs 1739900
This is
our break even point in terms of rupees
Breakeven Point by Contribution Margin Method
In terms of Units = Fixed Expenses/
Contribution Margin per Unit
697700/280.73
2485 Jeans
In terms
of sales = Fixed Expenses/ Contribution Margin Ratio
697700/0.401
1739900
Now
we are assuming that we have sold 4000
jeans at the end of this month
So profit
after selling 4000 jeans
Profit = unit selling price * number
of jeans sold
P=700*4000
P=Rs 2800000
PROJECTED COST
OF GOODS SOLD
Cost of
goods manufactured
3009550
Less:
ending finished goods inventory (1000 units) 601910
Cost of
goods sold Rs2407640
Summary:
We have established our company named HIGHLAND and
presenting our product jeans with the brand name NEXUS. In this report we have
summarized the whole cost of production which occurred in making jeans and we
have also present the break even point, where our company is neither in profit
nor in loss.
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