Costing for Tata Motors

7/26/2019 Costing for Tata Motors

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COSTING FOR TATA MOTORS

The Passenger Car division was born out of a vision to offer the Indian customer all

the comfort of a big car, at the price of a small car. The Indica was formally launched

in 1998 & has rewritten the rules of the Indian car industry ever since then. The

latest addition to the Tata Motors family after the launch of Indigo which is designed

to deliver never-before levels in luxury, safety, power and comfort on Indian roads isthe New Indica V2. Refreshingly different, with a sporty new look, stylish interiors,

and more. The Indigo Marina story started two years back with the launch of the

luxury sedan from Tata Motors, the Tata Indigo. There were however, a select group

of people who wanted everything that came with the Indigo plus a little more space.

So, we developed the Indigo Marina. A car that has the luxury of a sedan and the

utility and convenience of a multi-utility vehicle. A car that does not compromise on

power, safety and luxury. A car that has enough space to carry everyone and

everything you've ever loved, right by your side, on every drive.

Established in Established in

COST SHEET

Cost Sheet for Tata Motors for the year 2003-2004

Rs./ Crores

Direct Materials

(a) Spare parts & accessories for sale 253.55

(b) Bodies & trailers for mounting on chassis 214.43 467.98

Direct Labour 323.00

Direct Expense 2270.30

Prime Cost 3061.28

Factory OverheadsConsumption of Raw Materials 7873.41

Processing Charges 388.59

Stores, spare parts & tools consumed 236.73

Freight, transportation, port charges 185.47

Repairs to plant, machinery 25.62

Power & Fuel 214.52

Insurance 21.44

Lease Rentals in respect of Plant & Machinery 8.84

Depreciation 382.60

Work Cost(Gross) 9337.22

Opening WIP 793.91Less: Closing WIP 651.93 141.98

Works Cost(Net) 9479.20 12540.48

Administrative Overheads

Salaries 323.99

Repairs to building 20.37

Rent 9.37

Rates & Taxes 22.16



Total Cost 375.89 12916.37

Add: Opening Finished Goods

Add: Purchase of Finished Goods

Less: Finished Goods

Cost of production of Saleable units 12916.37

Selling and Distribution ExpensesPublicity 123.60

Incentive/Commission to dealers 120.57

Commission & Brokerage on sales 25.92

Cost of Sales 270.09 13186.46

Profit 2022.28

Sales 15208.74

Assumptions:1. The salaries & wages are divided in the ratio of 1:1 such that 323 crores is

allocated to the factory direct labour & 323.99 crores is allocated to the office

administration.

2. Freight & stores consumed are factory expenses

3. Repairs to building are an administrative expense as the building is used for the

office.

4. Rent, Rates & Taxes are administration expenses.

Following items are excluded from the cost sheet

• Product development cost is a capital expenditure hence not considered.

• Interest being a financial expense is not considered. • Extraordinary items like write back of provision for contingencies, provision for

diminution in vale of investment & employee separation cost not considered.

• Provision for tax, investment allowance & the other appropriations in profits are not

considered in arriving at cost.

• Superannuation, gratuity & contribution to provident fund.

• Workmen & staff welfare expenses, which includes provisions for employee benefit

schemes, is not considered.

• Provision for Wealth Tax.

• Excess debits/ short credits in respect of previous years.

• Loss on assets sold/scrapped/written off.

• Provision for doubtful sundry debts, bad debts written off, warranty expenses &securitisation expenses for hire purchase contracts.

COSTING OF HINDUSTAN PETROLEUM (HPCL)

Hindustan Petroleum Corporation Limited (HPCL) is the result of a successful

convergence of four established companies. Today the second largest integrated oil



refining and marketing company in India, HPCL was born of the merger of ESSO,

Lube India Ltd, Caltex Oil Refining India Ltd and Kosan Gas Company Ltd.

The Company was first incorporated as Standard Vacuum Refining Company of India

Limited, on July 5, 1952, and later named ESSO India Limited, on March 31, 1962.

On July 12, 1974, when Esso and Lube India were nationalised, the Company wasrenamed Hindustan Petroleum Corporation Limited with effect from July 15, 1974.

The undertakings after nationalisation were then vested in HPCL. The Government of

India also nationalised the Caltex undertakings in the year 1976, which were

subsequently merged with HPCL in 1978. In the following year, the undertakings of

Kosan Gas Company Ltd, the concessionaires of HPCL in the domestic LPG market,

were merged with HPCL. Thus, the various amalgamations, at different points in

time, have given rise to HPCL that has ever since been growing from strength to

strength.

HPCL had a humble beginning in 1974 with one refinery at Mumbai that had a

refining capacity of 3.5 million metric tonnes per annum (MMTPA). The Lube oilrefinery at Mumbai stood around 165000 Tonnes per annum. The sales turnover in

that year was only Rs. 3.67 billion, and the net profit Rs. 58 million. But over the

years, the Corporation has made judicious use of its assets to achieve tremendous

growth. Dedicated and well - experienced manpower, strategically located refineries

at Mumbai and Visakh and a widespread marketing network have enabled the

company to carve a niche in the Indian oil industry today.

Vision

"To be a leading world class company in hydrocarbons and energy related sectors

with a global presence.

Mission

HPCL, along with its joint ventures, will be a fully integrated company in the

hydrocarbons sector of exploration and production, refining and marketing;

focussing on enhancement of productivity, quality and profitability; caring for

customers and employees; caring for environment protection and cultural heritage.

It will also attain scale dimensions by diversifying into other energy related fields and

by taking up transnational operations."

COST SHEET



Cost Sheet for Hindustan Petroleum Corporation Ltd for the year 2003-2004

Rs./ Crores

R.M Consumed 15,017.04

Direct Labour (See Assumption 1) 280.055

Direct Expense-Excise Duties 5993.47

Prime Cost 21290.565

Factory Overheads

Packages Consumed 79.15

Transshipping Expenses 1228.97

Duties Applicable to Products 317.61

Repairs and maintenance to Plant 165.68

Rent (See Assumption 3) 28.65

Repair and maintenance to other assets (See Assumption 2) 1.633

Electricity and Water 94.93Power and Fuel 9.17

Rates and Taxes 21.20

Equipment Hire Charges 0.30

Consumption of stores, spares and chemicals 71.08

Depreciation:

-Transport Equipment (See Assumption 4) 2.335

-Roads and Culverts 7.16

-Leasehold Property 2.45

-Railway siding and Rolling stock 12.42

-Plant and Machinery 536.24 560.605 2578.978

Work Cost (Gross) 23869.543

Opening WIP 212.67

Less: Closing WIP 197.68 14.99

Works Cost (Net) 23884.533

Administrative Overheads

Security Charges 16.67

Depreciation

- Building 17.25

-Furniture, fixtures and equipments 26.39 43.68

Office appliances--- Printing & Stationary 7.69Rent (See Assumption 3) 28.65

Repair and maintenance to building 11.7


Insurance 40.08

Consultancy and Technical charges 37.26

Sundry Expenses and Charges 163.04

Office Salaries (See Assumption 1) 280.055 630.459



Total Cost 24514.989

Add: Opening Finished Goods 3777.2

Add: Purchase of Finished Goods 30583.9 34361.1

Less: Finished Goods -4149.69

Cost of production of Saleable units 54726.399

Selling and Distribution Expenses

Traveling and Conveyance 55.97


Depreciation on transport equipment (See Assumption 4) 2.335

Advertising & Publicity 81.45 141.388

Cost of Sales 54867.787

Profit 2643.343

Sales 57511.13

Assumptions

1 A bifurcation between factory wages and office salaries has not been given.However the annual report says that HPCL has 11088 employees of which 3594 are

management employees and 7494 are non-management employees. Let us assume

this to be the distribution of office and factory staff. However, the management

employees have higher salaries. Thus, I have divided Wages, Salaries and Bonus

equally between Direct Labour and Administrative overheads.

2 Repairs and Maintenance to other assets has been equally divided between Factory

overheads, Administrative overheads and Selling and Distribution overheads since

the assets have not been mentioned.

3 Rent is equally distributed as Factory rent and Office rent.

4 We assume that Transport equipment is used for both Factory and Selling and

Distribution purposes. Thus depreciation on transport equipment is equally dividedbetween Factory overheads and Selling and Distribution overheads.

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Costing for Tata Motors