7 co 01(product costing)

Cost Object Controlling


Document Control

Document Reference: Business Blueprint Strategy

Version Number: 1.0

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Date: 21/05/2003

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Issue Date Author Comments1.0 21/05/2003

File Name: document.doc Last printed Version: Page 2 of 74


Business Blueprint Format

Business Scenario Code / Name

Product Costing

Business Process Code / Name

Product Costing

Process OwnersProcess Team MembersApplication ConsultantsModules Influenced



YARN PROCESSING

OBJECTIVES OF THE COSTING SYSTEM

The main objectives of the costing system are as follows:-

1. To determine the costs incurred for raw material and in respect of each process of production and the value addition (in terms of change in the nature of product) by each process.

2. To determine the costs of products, at the end of each process.

3. To analyze the costs incurred in respect of the various productions and non-production (utility and administration) cost centers.

4. To establish standards for cost comparison and cost control.

5. To provide the management with information for decision making.

6. To maintain a database of physical norms (relating to consumption, yield etc.), standard rates and costs incurred over a period of time.

7. To comply with the statutory requirements under section 209 (1)(d) of the companies act 1956,maintaining the prescribed costing records.

Features of Current Cost Accounting System

One of the special features of Textile Processing is that there is some wastage of material as it passes from process to process to process. For the conversion of cotton into yarn it has to pass through several stages, viz. Blow room, carding, combing, frames and ring frames. As cotton passes through these different stages more or less wastage occurs at each stage. It is therefore, imperative to account properly for this process.

Another important feature is that all the products do not have the same sequence of processes. Some counts of yarn are carded while some counts of yarn are combed. In view of this the variations in the sequence of processes have to be kept in mind while calculating product costs.In the case of spinning department the total manufacturing cost for converting cotton into yarn is ascertained by adding the cost per unit in raw material i.e. cotton is stripped off several varieties of waste at each stage of manufacture, waste multipliers have to be ascertained on the basis of the percentage of waste at each stage of manufacture. These percentages are developed for different mixing on the basis of technical estimates. The total spinning cost for each count of yarn is thus arrived at by



aggregating the cost per Kg. at each process after applying thereto respective waste multipliers.

`Waste multiplier’ is a means to determine the output required to be produced at a particular process to get one unit of finished output at the final stage. For example, assuming that for mixing `A’ the waste percentage (based on the input of the first cost center viz mixing and blow room) in respect of different cost centers of the spinning department are as shown in column 2 below, the waste multipliers for the respective cost centers would be worked out as shown in the last column here below :-

MIXING `A’

Cost centers

(1)

Waste % (2)

Input(Kg) (3)

WasteKg (4)

OutputKg (5)

Waste multiplier (6)

Mixing & blow room

6.00 100.00 6.00 94.00 94.0072.00 = 1.306

Carding 4.00 94.00 4.00 90.00 90.0072.00 = 1.250

Pre-comb drawing

0.30 90.00 0.30 89.00 89.7072.00 = 1.246

Combing 14.00 89.70 14.00 75.70 75.0072.00 = 1.051

Post comb drawing

0.30 75.70 0.30 75.40 75.4072.00 = 1.047

Can-fed Inter 0.80 75.40 0.80 74.60 74.6072.00 = 1.036

Ring Frame 2.6028.00

74.60 2.60 72.00

5.3 W-I-P & FINISHED GOODS

It is valued at cost of production, stage wise, for the year and is same in the preceding period.

5.4 STORES ACCOUNTING SYSTEM

All stores and spares are procured by stores and purchase deptt. against indent duly authorized by proper authority. When the material is received in factory, it is physically verified and M.R.R is made M.R.R. is sent to indenter of the material . After the approval from the indenter, the material receipt is entered in price store ledger maintained by store deptt..

The issue is made by the store deptt. against issue slip which is duly signed by authorized person. Issue slips are allotted code of item according to respective account head and then entered into price store ledger. The consumption is charged to various heads on monthly weighted average. Monthly consumption summary cost center wise is prepared by the store deptt. and on the same basis as in the preceding period. Perpetual inventory taking system is followed by the company.



5.5 WASTE

Daily quality and deptt. wise waste generated is collected by the Commercial deptt and packed in the standard bags after weight . Then it is transferred to the godown. The records of waste generation are also maintained by the commercial deptt. on daily basis.

5.6 WAGES AND SALARY

Attendance card and attendance register is maintained by HRM Deptt. from wherein the monthly wages and salaries are prepared deptt. wise. with complete detail of wages and salary.

5.7 POWER AND FUEL

Power purchased from PSEB is taken as per the bill from electricity board and for own generation the record of units generated from D.G. is maintained on daily basis along with the diesel consumed from wherein the cost of own power generation is worked out in a separate cost sheet. Power and Fuel expenses are distributed to various cost centers as per the usage load of the respective cost centers.

5.8. DEPRECIATION

The company is following the method of charging depreciation conforming to section 205 (2) (b) of company act,1956. The rates stipulated in schedule XIV of that act are adopted and the assets are written down on straight line method. The assets costing Rs. 5000/- or less, acquired during the year are depreciated at 100%.

5.9 MILL OVERHEADS

All indirect expenses in factory premises are taken in mill overheads which are allocated in different production cost centers on the basis of wages and salary of respective deptt.

5.10 ADMINISTRATIVE OVERHEADS

Administrative expenses of Head Office, Chandigarh Office and Delhi Office are treated as administrative overheads which are allocated in different production cost centers on the basis of wages & salary of respective deptt.

5.11 SELLING AND DISTRIBUTION OVERHEADS

Direct selling & distribution expenses like commission, freight, discount & rebates are directly identified & charged to each product sold in domestic, as well as in exports. Whereas, indirect expenses relating to marketing in H.O. Chandigarh Office, Delhi Office and in Barnala are charged to products on equitable basis.

5.12. Cost statements are prepared at the year end on the basis of records of expenses, production statistics and consumption records maintained by Accounts, Costing and Production



deptts. of the Company. A reconciliation of the working results as per cost accounting records and as per Financial Accounts is drawn up

The expenses figures are collected annually from the ledgers and are analyzed for the purpose of costing, for this analysis, the following cost centers are established.

(A) PRODUCTION COST CENTRES

(i) Mixing and Blow Room(ii) Carding.(iii) Combing(iv) Draw Frame.(v) Speed Frame.(vi) Ring Frame.(vii) Winding.(viii) Packing.

(B) UTILITIES

(i) Mixing and Blow Room.(ii) Water.(iii) Humidification.(iv) Power.(v) Compressor.

(C) OVERHEADS

(i) Mixing and blow room.(ii) Mill Oye heads.(iii) Administrative overheads.(iv) Selling and distribution overheads.

(D) SERVICE CENTRES (i) Mechanical workshop.

(ii) Electrical.(iii) R&D.

E NON COST

BUSINESS MODEL - YARN



PROCESS FLOW CHART

Process Description


Prepared Cotton

Blow Room

Carding

Draw Frame / Pre Comber Draw Frame ( Breaker)

Packing

Conditioning

Comber

Unilap

Winding

Ring frame

Speed Frame (Simplex)

Draw Frame ( Finisher)

Output - Sliver

Output - Roving

Output – Yarn on Bobbins

Output – Yarn at Cone

Output – Packed Yarn


Yarn Production will be taken at two stages namely:

1. Raw Material till Simplex : Where output material will be Roving 2. Ring Frame till Packing : Where output material will be Yarn on Bobbins

Daily Production Orders

Daily production orders will be created for all running productions. Production will be entered in three shifts on these orders and closed for 24 hours of production. Month End adjustment On Orders for Physical Stock reconciliation

Physical Inventory is taken at the end of every month. Substantial difference (exceeding physical vs Actual inventory difference norms) between system stock and Physical stock will be entered in the last day’s open Order for respective material. This will result in :

1. Reconciliation of Physical Inventory with System Inventory (both in FI and MM)2. Summation of Production orders for the month will give correct Input-Output yield

information,

Production Diversions

Production Diversion :Where the required production specifications are not achieved against Production order.

Credit will be given to the Prime Material on production Order for Diverted material at its realizable value and this will be taken to stock. Diverted material could be later sold against separate sales order.

PP Process Description:



Sap Process for Mixing to Simplex order Shop Floor Control.

Step1:

The production orders will be created daily by the PPC and will be followed accordingly by the production department. The requirement information of the Ring frame will be passed on to the Mixing-to-Simplex Section so that they satisfy the same.

The material being produced here is Roving, which will hence be passed on to the Ring-Frame.

Step 2:

Confirmations will be done shift wise for all the work centers. The work centers here are all the machines in the section

Step 3:

The raw material “Raw Cotton” will be consumed by back flushing automatically according to the BOM quantity.

Step 4:

The material being produced here is Roving. This Roving is put in to unrestricted stock, which the Ring frame will then consume.

Step 5:

The Production order for the Roving is given a status TECO-Technically complete at the end of the last Shift.

3.1.2.B. SAP Process for Ring-Frame To Packing order, Shop Floor Control.

Step1:

The Production order is created when the PPC gets an instruction through a Sales order or a PIR. The sale order or the PIR will be converted in to a Planned order in an MRP Run.

The material being produced here is the final product Yarn.

Step 2:



Confirmations will be done order wise for all the work centers. The work centers here are all the machines in the section

Step 3:

The raw material “Roving” will be consumed through a movement type 261 for the production order according to the BOM quantity and required quantity (Which are likely to be the same in most of the cases). Any deviations against the BOM quantity can also be posted. This will directly show variations in planned against material consumption costs

Step 4:

The material being produced here is Yarn. This Yarn is put in to unrestricted FGSL stock.

Step 5:

The Production order for the Yarn is given a status TECO-Technically complete at the end of the last Shift.

Step 6:

The Production order is then settled, which is a part of the SAP-CO module.

STAGE 1 : RAW MATERIAL TILL ROVER



Production Process Description in SAP R/3

Production Orders (separate order per mix) will be created for Raw Material Mixing, Blow-room and Carding Section with these three as Operation. Raw Material (Cotton / man made fiber) will be issued to this Production Order.

Production Order is confirmed Operation wise. At each Operation, Activity Types will also be confirmed. This Production Order will get Credit for Finished Production Output (Sliver) and wastages/scrap generated.

MM Procurement

Cost collection at CostCenter

PP Production Order

1.00 RAW MATERIAL


GROSS UP TOTAL RM COST FOR UNUSABLE WASTE TO BE GENERATED SPECIFIC TO THAT LOT (LESS CREDIT FOR REALISATIONS OF WASTE GENERATED)

COMPUTE WEIGHTED AVERAGE COST OF RM INPUT PER UNIT OF OUTPUT (WEIGHTS BEING THE MIXING RATIO)

Activity Cost 1RM Procurement cost

Activity Cost 2RM Carrying Cost (Cost collected at RM Procurement Cost Center )

Activity Cost 3RM Preparation (processed at Mixing and Blow room & Carding)


Cotton is the major raw material for the production of cotton yarn. Raw material coming in the factory premises is weighted on factory weigh bridge. The material is unloaded in godown under the supervision of security staff. The raw material inward register is maintained by commercial deptt. quality wise/ station wise. Posting are made in the cotton stock registered stating opening stock, receipt, issue and closing stock. Issues are made on the basis of issue slips and simultaneously entered in cotton stock register. Valuation records are maintained by the accounts deptt. At present the company follows the yearly average method for valuing the consumption. Thereby closing stocks are valued at the yearly average of the cost of raw material

Since RM cost forms a major proportion of the total cost (as per present costing estimates it is nearly 60% without including RM procurement, carrying and preparation costs), it is critical and requires close monitoring in terms of its constitution to enable effective control and decision making.

Raw Material Stock valuation:

1.01 RAW MATERIAL COST

The costs relating to RM include the following :-

a) Basic cost and direct costs incurred till the factory gate (i.e. freight inward octroi, transit insurance etc.)

b) RM Procurement cost.

c) RM carrying cost.

d) RM preparation cost.

1.01(a) Basic Cost and Direct Costs

Raw Material Valuation: Raw material will be issued to order at MAP. Order can be issued with Mix of Raw Materials at their MAP.

1.01(b) RM Procurement Overhead

RM procurement costs include the following :-

1. Personnel costs of employees involved in ordering RM.2. Cost of information (Such as cost of journals, subscription etc).3. Communication cost (Such as telephone, fax etc.).4. Printing and stationary.5. Quality control cost.



1. RM Procurement Cost Center :

This would include employees from the RM purchase and accounts function. (However, the cost of the employees of the accounts department involved in purchase accounting is not considered here since the cost is not material).

Personnel cost

Personnel cost of employees of RM purchase department and other expenses on procurement shall be identified to the RM purchase Cost Center at the time of incurring such expenditure through cost center codes.

RM Carrying Cost

It includes the following :-

1. Financial interest incurred on stocks of RM held by the company.2. Stacking cost of RM.3. Personnel costs of employees of stores (RM).4. Other expenses of stores (RM) such as for printing and stationery, rent etc.

Financial interest incurred on carrying RM shall be computed at the bank rate of interest for working capital loan. It shall be charged from the date of RMIN to the date of issue of RM (Identified separately for each lot) less average credit period availed by the company on the PSL issue rate of RM per kg of that lot. Such financial interest shall be aggregated and deducted from financial expenses, which form part of administration overheads.

Stacking cost of RM at RM godown is done by contractual labour at per-determined contract rates. This rate(Per Kg) would be added on to the MR carrying cost.

Personnel costs and other direct expenses of stores (RM) shall be captured through cost center code. This cost would be computed per Kg by spreading the aggregate of the cost over average stock of RM for the month of stores (RM).

The aggregate of the above expenses shall give the RM carrying cost per Kg. This rate would be used for monthly costing and be a standard for the following month.

2. RM Quality Control Cost Center:

QC costs will be collected at QC cost Center and will be allocated to RM procurement cost based on a factor of number of inspections and time spent on inspection for RM.

Total procurement cost consisting of the sum of the above costs shall be collated for the month and spread over the total quantity of RM procured to determine the per Kg. rate of procurement cost. This rate would be used for monthly costing and be a standard for the following month for the purpose of daily costing.



1.01(c) RM Preparation Cost

(at Mixing & Blow Room work center)

This cost includes :-

1. Cost of moving RM from stores(RM) to the shop floor.2. Cost of manual sorting of cotton.3. Laying of mixing i.e. different verities in specified preparation.

All the above activities are carried out by contractual labor at pre-determined contract rates. These rates (Per Kg) shall be aggregated to give the RM preparation cost per Kg. This rate would be used for monthly costing and be a standard for the following month.

Mixing of varieties of cotton would entail computation of weighted average of the RM cost per kg of output for the various varieties of cotton. The mixing ratio between varieties of RM would be the weights for this computation.

Hard pressed cotton bales are received and different varieties of fibers mixing is done before feeding into the blow room line. Blow room machinery performs the function of cleaning and opening. Trash and foreign matters are extracted and the material is delivered to the next process automatically.

Utilities :

1. Humidification2. Power3. Compressed Air

Waste generated at Mixing Process

There is RM wastage both visible and invisible, at all stages of the production process. The visible waste is both usable and unusable.

The usable waste is referred to the blow room. This is an on going continuous process. The unusable waste generated at each process is weighted and transferred to the waste godown for being sold.

Types of waste :

Unusable Waste :1. Dropping - 2.00 %2. Rotor filter - 0.75 %



3. Dust - 1.65 %

TTD – PROCESSING


Grey Yarn IssueManual



Grey

Doubled yarn cone

Twiste

Dried

Dyed

Package on spring/ meriplast

C

Dried

Dye

Mercer

H

Gas

Warper /Weaver Beam

Dyed/

Wea

To

Towel lotsPacked

Sheared/

ToFolded

Labeled

Tow

Packed

Tow

TowCo

Package DyeingPackage Dyeing m/c

Hydro ExtractionHydro Extractor

DryingR.F. Drier

MercerizingMercerizing m/c

Hank DyeingHank Dyeing m/c

WarpingDirect/Sectional W m/c

SizingSizing m/c

Inspection/MendingInspection/Mding m/c

DespatchStorage

Cheese WindingCheese winding m/c

Soft WindingSoft winding m/c

Singeing/GassingSingeing m/c

Reeling Reeling m/c

WindingPTC/HTC m/c

WeavingDobby/Jacquard

Fabric Dyeing/WashingDyeing m/c

Carton

GODOWN

POST SPINNING

WINDING

PROCESS HOUSE

PREPARATORY

WEAVING

GODOWN

FINISHING

Yarn TwistingTFO

Twisted yarn cone

Dried Dyed package

Dried package

Dried package

Cone

Weaver

Towel doffs



Length cuttingLength cutting m/c

Length HemmingLength Hemming m/c

Cross cuttingCross cutting m/c

Cross HemmingCross Hemming m/c

DryingALEA/Tumbler

Hydro extractionHydro extractor

Size MatchingStainter

Inspection/MendingManual

FoldingManual

FINISHING M/c LINE

GREY FOLDING

PROCESS HOUSE

Fabric Dyeing/WashingDyeing m/c

Dyed/Washed Towel ropes

Dried Towel ropes

Dried Towel ropes

Towel ropes

Sheared/

Towel ropes

Towel ropes

Towel Pieces

Labeled Towel Pieces

Shearing/PolishingShearing m/c

Folded Towel pieces

Towel pieces


PROCESS FLOW

GODOWN


PackingManual

Carton PackingManual

InspectionManual

FINISHING PACKING

Towel cartons

ContainerDispatch

StorageGODOWN

Packed Towel pieces

Packed Towel pieces

Towel cartons


1. Raw Material Godown

Our Basic Raw Material is Grey Yarn and this arrives in the Raw Material Godown. The material arrives here from our vendors and is against a particular PO#. The material is then inspected for set quality parameters and if conforms to the same is accepted or else rejected. The material from the Godown is against a particular S/O to the user department on raising an issue slip. The material is transferred manually on trolleys.

POST SPINNING

2. Cheese Winding

This is also called as parallel winder wherein two strands of yarn from two packages which are twisted together on the TFO are wound paralleled. The Input material is Single Grey yarn. The output is in the form of a CHEESE and forms the INPUT for the TFOs.

3. Yarn Twisting TFO

TFO(Two for One Twisters) as they are known are used for producing doubled yarn. The INPUT is parallel winded yarn from the Cheese winding machines which is then twisted on this machine. The Output from this process can go to various process as specified in the detailed flow chart.

4. Soft Winding

Soft winding is basically used for producing SOFT PACKAGES which are then used for Package dyeing. The basis purpose is to produce low density packages (On Springs or Perforated packages) though which the dyeing liquor can penetrate easily and give an even dyeing.

Singing or Gassing

Singing or Gassing as the process is known is basically a process wherein the protruding fibers from the surface of the yarn are burnt out while its passage through the machine. The input for this process comes from the TFO if in case it is a doubled yarn and from R.M if in case it is Single yarn.

Reeling process

Reeling process is for the preparation of HANKS which then form an input for the Mercerizing process. The INPUT in most of the cases come from the Gassing Machines but it can be from the TFO or from the Raw material godown also in some cases depending upon the product.

PROCESS HOUSE

5. Package Dyeing



Package dyeing as the name is the dyeing process in which the yarn is dyed in the form of a package. The basic input comes from the SOFT WINDING machines.

6. Hydro Extraction

Hydro extraction is basically used to extract water from the dyed/wet packages through Centrifugal action. The input comes from the Package dyeing machines and the out put from this process goes to RF dryer.

Mercerizing

Mercerizing is a chemical process wherein we improve the luster and dye uptake of the yarn. The Input for the process comes from Reeling.

Hank dyeing

Hank dyeing as the name suggests is the process wherein the materialist dyed in the form of HANKS. The input in most of the cases comes from Mercerzing and but it can be coming directly from Reeling if in case it is not Mercerize Hank dyed yarn.

7. Drying (R.F. Driver)

R .F Dryer is the Radi frequency dryer used to dry the dyed packages and to bring them to the required moisture level. The out put goes to WINDING AND the input can come from Package dyeing/Hank dyeing and Mercerzing. The material is inspected by R & D for all the quality parameters before it moves forward.

WINDING

8. Winding

The material from the Package dyeing goes to PTC(Package to Cone) winding and from Hank dyeing goes to(HTC) after a passage through RF dryer. The Output from the PTC goes to Weaving Prep/Weaving/Yarn Packing and from HTC goes to Yarn packing OR Weaving.

PREPARATORY

9. Warping

The Input for Warping can come from RM godown , TFO, Package depending upon the yarn to be used. The basis purpose is WARP Preparation I.e. preparation of WARP BEAMS which then form and input for weaving. Two types of machines are there (Direct Warping and Sectional Warping)

10. Sizing



Sizing is basically used to make the yarn pliable so that it can withstand the stresses and strains during the course of weaving. It is primarily a coating of certain chemicals. The output from this process goes to weaving.

11. Weaving

Weaving as the name implies is the process where actually the yarn is converted into towel. Three series of yarn are used which are given as under; Pile, Ground, Weft, Pile and Ground are coming from the WARP BEAMS. The output from this process goes to Grey Inspection.

12. Gray Folding

The material coming from weaving in the form of Doffs is inspected here for all the weaving defects and given grades. The feedback is also given to the Weaving department so that they can take corrective action on specified machine. This is also the most important storage are where the material is stored and issued to various sections in terms of Batches as per the plan provided by PPC.

Process House

13. Fabric Dyeing

Fabric dyeing process is basically the towel dyeing process. This is used either for Towel dyeing or Washing. The input comes from Grey Folding. The material from dyeing then goes for Hydro extraction.

14. Hydro Extraction

Same as explained previously.

15. Drying

There are two kinds of dryers available one is ALEA and the other is Tumbler. This is used for drying the wet towel which is coming from the Hydro extractor.

16. Size Matching

Stenter is basically used as an Heat setting process so as adjust the size as per the requirements and can also be used as dried in comination. The input comes from ALEA or TUMBLER. The output then is subjected to R & D inspection.

FINISHING MACHINE LINE

17. Length Cutting



Length cutting is basically the machine which cuts the towel sheet coming from the looms in the length direction giving individual lengths of towel. The output from here then goes for Length wise hemming.

18. Length hemming

Length Hemming as the name suggests is the process wherein we are doing the Length wise stitching of the individual towel lengths which are coming from the length cutting process.

19. Cross Cutting

The material for Cross cutting comes from Length hemming and it is here that the towels are cut in width wise direction and we have individual towel pieces. The Output from here can go directly to the packing area or to the Cross hemming machine depending upon its compatibility with the machine.

20. Cross HemmingCross hemming machines are meant for width wise stitching of the towel pieces coming from Cross cutting.

Shearing

Shearing is the process where the terry pile is sheared to give a velour finish to the towel. The input comes from the Grey Folding department and the output can be in different sections depending upon the kind of product.

FINISHING PACKING

21. Inspection / Mending

The material from the Cross cutting or the Cross hemming machine comes for the Checking or inspection wherein each and every towel piece is inspected and graded as per the set quality norms. The material thereafter moves for folding and onward packing.

22. Folding

The material after Checking comes for folding where the towel pieces are folded as per the requirement from the customer.

23. Packing

The material after Checking and Folding is then packed in the poly-bags as per the packing assortment.



24. Inspection

The material is then inspected on random basis by R&D and if OK then proceeds for Carton Packing.

25.Carton Packing

The material is then packed into cartons as per the assortment and is then transferred into the godown.

26. Godown

The finished cartons are then transferred into the Godown.

This is the finished good ware house and the material comes here after packing from Finishing. The finished are then dispatched on receipt of DO from Marketing. Like we have Towels finished goods warehouse similarly we have a godown for storing processed yarn where the material comes from Yarn packing.

INPUT OUT DETAILS:

Yarn :

Product :



1. Grey Double Yarn2. Package Dyed Yarn

A. Single Package Dyed YarnB. Double Package Dyed Yarn

3. Hank Dyed Yarn

1.Grey Double Yarn :

A. Raw Material Input – Grey YarnOutput- Grey YarnWaste % - Nil

B. Cheese WindingInput – Grey YarnOutput- Cheese YarnWaste % - Hard Waste – 0.05%

Utilities :

PowerHumidification

C. TFOInput – Cheese YarnOutput- Doubled YarnWaste % - Hard Waste – 0.05%

Utilities :

PowerHumidification

D. Packing for sale OR Transfer to Weaving

For Market : Carton Packing ( WT.) 45.36 Kg. Bag Packing (WT.) 50.00 Kg.

For Internal Transfer :In loose form using plastic cones/Paper cones through trollies

2. Single Package Dyed Yarn :A. Raw Material



Input – Grey YarnOutput- Grey YarnWaste % - Nil

B. Soft WindingInput – Grey YarnOutput- Grey Yarn in Package ( Spring or Meriplast)Waste % - Hard Waste – 0.05%

Utilities :

PowerHumidification

C. Package DyingInput – Grey Yarn in Package ( Spring or Meriplast)Output- Dyed Yarn in PackageWaste % - Weight Loss-3%

Utilities :

PowerHumidificationSteamWater

D. Hydro ExtractorInput – Dyed Yarn in PackageOutput- Dyed Yarn in PackageWaste % - Nil

Utilities :

PowerHumidificationSteam

E. R.F.DryerInput – Dyed Yarn in PackageOutput- Dyed Yarn in PackageWaste % - NilUtilities :

Power



HumidificationSteam

F. Package to ConeInput – Dyed Yarn in PackageOutput- Dyed Yarn on ConeWaste % - Dyed Hard Waste – 0.025 %

Utilities :PowerHumidification

G. Packing for sale OR Transfer to WeavingFor Market : 100% Carton Packing ( 36 Cones Having Wt. Of 950 grams approx)For internal purpose : 70 % approx. in the form of Bag ( Only HDPE sheet) and 30 % approx in the form of loose through trollies.

3. Double Package Dyed Yarn :A. Raw Material



B. Cheese windingInput – Grey YarnOutput- Cheese Yarn

Waste % - Hard Waste – 0.05%


C. TFOInput – Cheese YarnOutput- Doubled Yarn ( Cone or Meriplast ( 10 %to 15% Only)Waste % - Hard Waste – 0.05%




D. Soft Winding ( This process is not required in case of doubled yarn on meriplast )Input – GreyDouble YarnOutput- Grey DoubleYarn in Package ( Spring only)Waste % - Hard Waste – 0.05%


E. Package DyingInput – Grey Double Yarn in Package (Spring or Meriplast)Output- Double Double Yarn in Package (Spring or Meriplast)Waste % - Weight Loss – 3%

Utilities :PowerHumidificationSteamWater

F. Hydro ExtractorInput – Double Dyed Yarn in PackageOutput- Double Dyed Yarn in PackageWaste % - Nil

Utilities :PowerHumidificationSteam

G. R.F.DryerInput – Double Dyed Yarn in Package Output- Double Dyed Yarn in Package Waste % - Nil


H. Package to ConeInput – Double Dyed Yarn in PackageOutput- Double Dyed Yarn in Package



Waste % - Dyed Hard Waste-0.025%Utilities :PowerHumidification

I. Packing for sale OR Transfer to WeavingFor Market : 100% Carton Packing ( 36 Cones Having Wt. Of 950 grams approx)For internal purpose : 70 % approx. in the form of Bag ( Only HDPE sheet) and 30 % approx in the form of loose through trollies.

4. Hank Dyed Yarn:A. Raw Material


B. Cheese windingInput – Grey YarnOutput- Cheese Yarn

Waste % - Hard Waste – 0.05%


C. TFOInput – Cheese YarnOutput- Doubled YarnWaste % - Hard Waste – 0.05%


Note : Normally Raw material procured in twisted form therefore the process of cheese winding & TFO is not required.

D. GassingInput – Doubled YarnOutput- Gassed Double Grey YarnWaste % - Fibre Loss – 5 %




E. ReelingInput – Gassed Double Grey Yarn Output- Gassed Double Grey Yarn in Hank formWaste % - 0.05%


F. MercerizingInput – Gassed Double Grey Yarn in Hank formOutput- Gassed Mercerizing Double Grey Yarn in Hank form Waste % - Weight Loss – 1.86%Utilities :PowerHumidificationSteamWaterChiller

G. Hank DyeingInput – Gassed Mercerizing Double Grey Yarn in Hank form Output- Gassed Mercerizing Double Dyed Yarn in Hank form Waste % - Weight Loss – 1.86%Utilities :PowerHumidificationSteamWater

J. Hydro ExtractorInput – Gassed Mercerizing Double Grey Yarn in Hank form Output- Gassed Mercerizing Double Dyed Yarn in Hank formWaste % - NilUtilities :PowerHumidificationSteam

K. R.F.DryerInput – Gassed Mercerizing Double Grey Yarn in Hank form Output- Gassed Mercerizing Double Dyed Yarn in Hank formWaste % - Nil




H. Hank to ConeInput – Gassed Mercerizing Double Dyed Yarn in Hank formOutput- Gassed Mercerizing Double Dyed Yarn in Cone formWaste % - Dyed Hard Waste -0.07%Utilities :PowerHumidification

I. Packing for sale OR Transfer to Weaving

For Market : 100% Carton Packing ( 31 kg packing i.e 500gms*62cones and 45cone of 750 gms each)For internal purpose : 100 % in the form of loose through trollies

Note : All the Yarn made for market ,route through Conditioning deptt. having commander to regain moisture in the Yarn before packing.

STANDARDS

1. Standards have been set in respect of machine, productivity, and waste generation etc in respect of each process of production.

COST CENTRES

2. Different cost centres have been identified and classified under the main heads of production, production support, services, administration and marketing for the purpose of cost collection, absorption and cost control at each cost centre.

DAILY COSTING

1. A daily cost sheet is prepared to calculate product wise cost on daily basis.



2. Quantity variances shall be analyzed on a daily basis (standard rates shall be taken for daily costing) to monitor the consumption of resources vis-à-vis standards.

PRODUCT GROUP CATEGORIES

YARNS

Twisted gray yarns

Twisted gray gassed yarns

Twisted gray gassed mercerized yarns

Twisted dyed yarns

Twisted gassed mercerized dyed yarns

Griddle yarns

Single dyed yarns

TOWELS AND FABRICS

Single pile yarn dyed dobby

Single pile yarn dyed jacquard

Double pile yarn dyed dobby

Double pile yarn dyed jacquard

Single pile piece dyed dobby

Single pile piece dyed jacquard

Double pile piece dyed dobby

Double pile piece dyed jacquard

Sheared towels

Bath robes

Fabrics

COST DATA COLLECTION

DIRECT MATERIAL: - Raw material includes gray cotton yarn, acrylic, viscose and polyester cotton yarn. Raw material consumption is captured from the raw material report, which includes section wise issue of raw material both in quantity as well as cost.

DYES AND CHEMICALS: - Dyes and chemicals consumption is recorded as per dyes and chemicals consumption reports on daily basis. Prices are taken from the purchase order raised or the invoices.



UTILITIES: - Utilities include power, steam, water and propane gas etc. used in the production process at each production center.

DIRECT LABOUR:-It includes the labor (own and contractual) cost associated with the production process.

MACHINE COSTS: -Machine costs include cost associated with plant and machinery employed in the production process e.g. depreciation stores and spares etc.

MANUFACTURING OVERHEADS: - These heads includes costs relating to the factory cost centers e.g. electrical, mechanical engg., quality control, ISD, PPC, designing etc.

ADMINISTRATION OVERHEADS: - It includes costs relating to administration departments such as HRM, accounts, costing, head office etc.

SELLING AND DISTRIBUTION OVERHEADS: -This includes costs associated with sales and marketing deptt such as marketing salaries, sales promotion, advertisement expenses.

STANDARD COSTING SYSTEM

A standard costing system for various products has been devised. Standards shall be reviewed at regular intervals in the light of actual data.

The established standards shall be used for comparison of actual costs with standard costs and also provide a basis for absorption of various cost elements in the daily costing.

For estimating the standard cost of production for each product the following norms have been specified.

TOWELRAW MATERIAL

To arrive at raw material cost of towels following procedures is followed: -

Composition of counts used in ground pile their respective weight in a towel is obtained from the ‘cost particular’

Waste % of ground yarn, weft yarn, pile yarn and salvage is added on to the gray weight to arrive at the gross input required of each count for weaving.

In case of dyed yarn towels remnant yarn is also added to the gray weight at certain % to arrive at the gross input.

From gross inputs deduction is made of size pick up, where sized yarn is used, to calculate net raw material input for a towel.



Respective quantities of ground yarn, pile yarn & weft yarn as arrived above are multiplied by their respective rates. This gives the gross value of raw material used in the towel.

Raw material rates are landed cost minus excise duty their excise duty is deducted, as MODVAT credit is available on yarn inputs to towels. In case of exports where duty draw back is to be availed, raw material raw material rate would be the landed cost inclusive of excise duty.

Rate for the purpose of costing is taken from raw material consumption reports where the running weighted average rates. In certain cases rates are taken from raw material invoice itself.

From the gross raw material value credit is given at standard rate for the following categories of waste

a. Ground pile, weft and false salvage waste

b. Remnant yarn

c. Shearing waste

Per piece raw material cost is converted into per kg. cost with following formula

Cost per piece x 1000

Finished weight per towel (in GMS)

In case of manifold twisted yarns (grey/dyed) used in towels conversion costs as well as dyes and chemicals cost up to previous process is also considered in raw material cost. Hence in case of towels manufactured with twisted yarn, raw material cost would be

(landed cost of raw material + conversion cost + dyes and chemicals)

YARNS Gross raw material requirement is worked out to manufacture 1 kg of finished yarn. It

is worked out with following formula.

100 Input for 1 kg output

(100- waste %)

Gross raw material requirement varies from product to product as process involved varies and accordingly waste generation also varies for e.g. waste for double grey yarn will be different than waste for double dyed yarn.

Gross raw material requirement for 1 kg is multiplied by the rate to get gross raw material cost.

From gross raw material cost credit is given for visible waste at budgeted rate. Following formula is used to calculate waste recovery

100 x waste % x rate/kg



100 – waste %

Raw material rates are taken in the same way as in case of towels but the rate is inclusive of excise duty.

DYES AND CHEMICALS

Dyes and chemicals are used for dyeing of yarn & fabric; chemicals are also used for mercerizing of yarn, sizing of yarn and washing of yarn & fabric in certain cases. Procedure adopted for costing of dyes & chemicals is enumerated below.

Lot wise & shade wise consumption of dyes & chemicals is collected daily.

Depth of shade is worked out and according to depth category is determined i.e. light, medium, dark, extra dark, heavy dark and super heavy dark etc.

Lot wise quantities of dyes & chemicals are multiplied by individual rates of dyes & chemicals. This gives total cost of dyes & chemicals for the lot. Dividing the total cost by lot size gives per kg dyes & chemicals cost.

Rates of dyes & chemicals are taken from the suppliers price list, which are compared with actual landed rates on time to time.

PRODUCTION PROCESS CONVERSION COST

These include:-

Labour costs

Stores consumption & repair & maintenance.

Cost of utilities i.e. power, steam, water etc

Manufacturing overheads .i.e. cost of manufacturing services such as engineering, humidification, compressor, PPC etc

For costing of production process conversion cost following procedure have been adopted:-

LABOUR COST

Category wise manpower engagement is taken for all the departments /cost centres

Manpower is classified in direct & indirect. Manpower which is directly engaged on machines is considered as direct.

Wages / salaries of each categories of employees are taken from the HRM records which is basically monthly salaries / wages sheets.

Indirect employees costs have been allocated & apportioned on certain basis (allocation & apportionment chart)



UTILITIES

COSTING OF POWER

The company has the following sources of power :

(1) PSEB power

(2) DG set power

The cost of power shall be calculated on :

(1) Annual basis (to work out the standard cost of power per unit)

(2) Monthly basis (to workout the actual cost of power per unit)

Cost of power for product costing shall be taken at standards for daily costing and at actual for monthly costing. If the utilisation of power from different sources can be identified to different cost centres the actual power consumption of each source with their rates shall be taken. Otherwise a common weighted average rate of power per unit (both standard and actual) shall be calculated for power consumption by various cost centres.

Cost center wise-connected loads have been collected.

Power consumption has been calculated by taking into consideration load factors and running hours. It is calculated by this formula =connected load(kW) x load factor(%) x running hours

Load factor has been taken as given by electrical deptt.

Ratio of purchased & generated power has been taken as ratio as per industry norm.

Weighted average rate of purchased & generated power has been worked out as per current rates & given ratio.

Department /cost centre wise power cost has been worked out by multiplying KWH with weighted rate

Power cost of non-production areas has been apportioned on technical basis.

COST COMPONENTS FOR DIFFERENT SOURCES OF POWER

PSEB POWER DG SET POWER

Variable

- Power bill

Variable

- Diesel



Fixed

Cost of sub-station

- Salaries & wages

- Depreciation

- Repairs & maintenance

- Stores & spares

- Oil & lubricants

Fixed

- Salaries & wages

- Depreciation of DG set


- Stores & spares

COST COMPONENTS OF PSEB POWER AND

THEIR BASIS FOR STANDARD/ACTUAL COSTING

COST COMPONENTS STANDARD COSTING ACTUAL COSTING

QTY. RATE QTY. RATE.

Variable cost

- Power bill

Budgeted power consumption

Budgeted unit rate

Actual consumption power

Actual rates

Fixed cost

Cost of sub-station

- Salaries & wages

- Depreciation


- Stores & spares

Budgeted consumption of power

Budgeted rate per unit

Actual consumption of power

Actual rate per unit

COST COMPONENTS FOR DIESEL GENERATION POWER AND

THEIR BASIS FOR STANDARD AND ACTUAL COSTING



Variable cost



- Diesel

- Oil & lubricant

Budgeted consumption

per unit of power generation

Budgeted consumption per unit of power generation

Budgeted rate

Budgeted rate

Actual consumption per unit of power generation

Actual

consumption per unit of power generation

Actual rates

Actual rate

Fixed cost

- Salaries & wages

- Depreciation


- Stores & spares

Budgeted generation of power


Actual generation of power


COSTING OF STEAM

Norms of steam consumption has been compiled for each type of machine & cost centre where steam is consumed. These norms have been provided by the concerned departments on the basis machines operating manuals

Steam cost has been worked out by multiplying steam quantity with the steam rate.

Steam rate is purchase price of steam plus manufacturing overheads as worked out for steam distribution system and includes following costs:-

Manpower cost involved in steam distribution

Interest cost of steam distribution

Depreciation cost of steam distribution

Stores , spares ,repairs & maintenance

COSTING OF WATER



Costing of water shall involve the following:

(1) Cost of raw water

(2) Cost of soft water.

The cost of water shall be calculated on :

(1) Annual basis (to work out the standard cost of water per unit)

(2) Monthly basis (to work out the actual cost of water per unit).

Cost of raw water raised

Raw water is raised from underground with the help of a tube well. The various cost components and their basis for standard and actual costing are given in Exhibit 7.01.

Cost of soft water

Raw water is converted into soft water in the water-softening unit.

The cost of soft water shall mainly consist of raw water and the expenses related to water softening unit.

The cost components associated with the softening of water and their basis of allocation/apportionment to the soft water for standard and actual costing are given in Exhibit 7.02.

RAW WATER

COST COMPONENTS AND THEIR BASIS OF ALLOCATION / APPORTIONMENT FOR STANDARD AND ACTUAL COSTING



Variable cost

- Water royalty/cess Budgeted quantity of water to be raised

Standard rate

per unit

Actual quantity of water raised




Fixed cost

Cost associated with tube well

- Salaries & wages

- Power


- Stores & spares

- Depreciation

Budgeted quantity of water to be raised


Actual quantity of water raised

Actual rate per unit of water raised



SOFT WATER

COST COMPONENTS AND THEIR BASIS OF ALLOCATION / APPORTIONMENT FOR STANDARD AND ACTUAL COSTING



Variable cost

- Raw water Budgeted quantity of raw water to be consumed

Standard rate

per unit of raw material

Actual quantity of raw material consumed

Actual rate per unit of raw water

Fixed cost

Water softening unit costs

- Salaries & wages

- Stores & spares


- Depreciation

Budgeted quantity of soft water


Actual quantity of soft water




MANUFACTURING OVERHEADS

Expenses of production service department have been taken as manufacturing overheads. Following departments / cost centers have been covered under this categories :-

Engineering (elect, mech, civil etc)

Workshop

H plants

Compressor

Fire fighting

Production planning and control

Quality control

Designing

Ware housing

Costs of above departments have been compiled as per procedure explained earlier

Department wise costs have been further allocated/ apportioned to production cost centers as per feasible basis. Before allocation/apportionment a prioritization chart (i.e. expenses of departments providing services to production/service departments but not receiving services from any other service departments mentioned above have been taken first for apportionment purpose) have been prepared.

ADMINISTRAION OVERHEADS

These include expenses of departments providing administrative services in the company. Following departments /cost centers have been covered under this category. --

Accounts & finance

Costing

HRM

Security

Transport

Secretariat

Unit head office

Purchase

Branches



Commercial etc

Total administrative overheads include expenses of administrative cost centers as well as apportioned expenses of services cost centres.

Total administrative overheads have been worked out as % of total production process conversion cost.

FINANCIAL EXPENSES

It includes (i) interest on term loans (ii) Interest on working capital

Procedure adopted for working out cost centre wise interest on term loan.

Cost centre wise investment has been taken as basis to account for long-term financial expenses.

Total interest on rupee loans and foreign currency loans have been calculated as per specified interest rates and distributed to cost centres on the basis of investment in cost centres.

Interest on working capital is being charged to product at given % to their sales value.

DEPRECIATION

Depreciation has been calculated out as per rate specified for each category of assets in companies Act 1956 on SLM basis.

STORES, SPARES, REPAIR & MAINTENANCE EXPENSES

In the absence of cost centre wise budget for above expenses they have been budgeted as a % to investment in cost centre.

CHARGING OF CONVERSION COSTS TO PRODUCTS

Element wise conversion cost is now available for each production cost centre.

Installments of machinery in each cost centre have been compiled

Broad categories of products and their process flow have been ascertained

Production and productivity parameters of each product in each of the process has been finalized with technical assistance



Element wise conversion cost per machine in each process has been ascertained by dividing conversion cost of a process by no of machines installed.

Per machine conversion cost has been further divided by product wise production per machine to calculate per kg cost of a process. In this way process wise cost pr kg for each product has been worked out.

To arrive at the total conversion cost of a product, conversion cost of each process involved has been accumulated.

PACKING MATERIAL COST

Packing material consumption standards have been compiled for each type of yarn & towel packing. Where as detail of packing material items, their specifications & quantities required for a particular type of packing is available.

Rates of packing material items are taken from purchase deptt. Which are either from invoices or from purchase orders.

Packing material quantity of each item is multiplied by its rate, which gives its value. The value of all the items is added to arrive at total cost of a package. This is further divided by the quantity packed to give per kg cost of packing material.

Since packing material in case of towels is not standardized. Average cost is being considered for costing purpose.

OTHER COSTS CONSIDERED IN PRODUCT COSTING

Sampling cost: - in case of towel samples form the basis for any contract negotiations. Samples are manufactured and are generally given free of cost to party. Hence the cost of sample is considered in production cost. This has been taken as a % as per other industry experience provided by technical persons.



Business ModelPROCESS DESCRIPTION IN SAP - TTD

BEAM PREPARATION TO LENGTH HEMMING

(for Terry and Non-Terry Towel Yarn Dyed Towel) Production Order Creation:

The Production order created will be scheduled, costed and released. The input material being the Yarn in Kgs and the output will be from the Length hemming section in the form of Kgs., which will be stocked and then issued further on to the Packing section. This Production order will be created by conversion of Planned order to Production order.

Confirmation on Production Order:

Confirmations will be done for all the work centers. The confirmations can be partial confirmations or final confirmation.

The work centers that are to be confirmed in case of Yarn dyed Towel will be

Beam Preparation Sizing Weaving Grey Folding Inspection Shearing Washing Length cutting Length Hemming

Beam Preparation

The Output in the Beam preparation will be in terms of Kgs and Mts, so the production is carried out for Kgs and Mts. Thus the confirmations are done for Kgs and Mts. The confirmations will be carried out for an order for a particular towel.

The confirmations will be done Beam wise and the Time Ticket number will be printed and attached to the beam. In case there are 4 beams, 4 the time ticket confirmations will be taken and attached to the beam. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.



Sizing

The confirmation will be carried in Kgs. In sizing, if the same beams from Beam Preparation are converted to 2 beams (from 4 beams in Beam preparation) then the confirmation time tickets will be taken 2 times. And thus the print of which will be attached to the beam. The sizing operation is confirmed in Kgs and meters, provided there is a certain conversion factor between the two. The confirmations will be carried out for an order for a particular towel. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.

Weaving

The confirmation will be carried in Kgs. The same beams are used on the loom for weaving and the confirmation time tickets will be taken Doff wise and the print of the time tickets will be attached to the Doff to identify the Doff. The confirmations will be carried out for an order for a particular towel. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.

Grey folding inspection and Mending

The confirmation will be carried in Kgs. The grey folding inspection activities will be carried out and the confirmations will the created. The storage is not considered as discussed with Mr. Ravi tandon; only the quantity in WIP is required. The confirmations will be carried out for an order for a particular towel. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.

Shearing

The confirmation will be carried in Kgs. The shearing operation will be done against the confirmation time ticket of the previous operation. And the confirmations in the shearing section will be done and a confirmation time ticket will be created for the quantity confirmed in the Shearing section. The Time tickets prints will be send ahead with the quantity confirmed in the shearing section. The confirmations will be carried out for an order for a particular towel. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.Washing

The confirmation will be carried in Kgs. The washing operation will receive the quantity to be processed at their section, and similarly the confirmations will be created in the system. The time ticket prints for the confirmed and send ahead quantity will accompany the in process goods to the next operation. The confirmations will be carried out for an order for a particular towel.

Length cutting



The confirmation will be carried in Kgs. The time ticket prints for the confirmed and send ahead quantity will accompany the in- process goods to the next operation. The confirmations will be carried out for an order for a particular towel.

Length hemming


Material Input:

The raw material input is dyed yarn for this order and will be consumed by issue of the quantity required to the order, according to the BOM quantity or the actual quantity required. The input will be in terms of Kgs.

Other raw materials, which are required for this order, are sizing chemicals, which can be back flushed to the order while confirmation.

Goods Receipt

The Goods receipt of the produced order will have to be created to and the same will be issued to the next order i.e. the packing order.

The Production order is given a status TECO-Technically complete at the production of the finished towel

FINISHING & PACKING

Prodcution Order

The production order converted from the planned order in the MRP Run will have to be processed here.

The material being produced here is the final product-Towel.

Order Confirmation:

Confirmations will be done order wise for all the work centers. The work centers here is

The work centers in Route will be

Cross Cutting Cross Hemming Packing



Cross Cutting

The confirmation will be carried in Pcs. The time ticket prints for the confirmed and send ahead quantity will accompany the in- process goods to the next operation. The confirmations will be carried out for an order for a particular towel.

Cross Hemming


Packing


Material Input

The raw materials like Put ups, Labels, Poly-bags, Hangers will be consumed automatically against the production order according to the BOM quantity, by Back flush during production order confirmation. Any deviations against the BOM quantity can also be posted. This will directly show variations in planned against material consumption costs.

Authorization of: The material consumption will be an authority of the Production department.

Production declaration

The material being produced here is Towel. The Produced Towel will be put in to Towel FGSL stock. The Goods receipt of the produced quantity will update the stock of the material in the storage location and will be consumed for the sales order.

The Production order for the Packing Towel will be given a status TECO-Technically complete at the end of the Production.

BEAM PREPARATION TO SHERING – FABRIC DYING

Production Order creation:

The Production created will be scheduled, costed and released. The input material being the Yarn in Kgs and the output will be from the Length hemming section in the form of



Kgs., which will be stocked and then issued further on to the Packing section. This Production order will be created by conversion of Planned order to Production order.Order Confirmation:

Confirmations will be done for all the work centers. The confirmations can be partial confirmations or final confirmation.

The work centers that are to be confirmed in case of Yarn dyed Towel will be

Beam Preparation Sizing Weaving Grey Folding Inspection and mending Length cutting Length hemming Shearing

Beam Preparation:

The Output in the Beam preparation will be in terms of Kgs and Mts, so the production is carried out for Kgs and Mts. Thus the confirmations are done for Kgs and Mts. The confirmations will be carried out for an order for a particular towel.

The confirmations will be done Beam wise and the Time Ticket number will be printed and attached to the beam. In case there are 4 beams, 4 the time ticket confirmations will be taken and attached to the beam. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.

Sizing:

The confirmation will be carried in Kgs. In sizing, if the same beams from Beam Preparation are converted to 2 beams (from 4 beams in Beam preparation) then the confirmation time tickets will be taken 2 times. And thus the print of which will be attached to the beam. The sizing operation is confirmed in Kgs and meters, provided there is a certain conversion factor between the two. The confirmations will be carried out for an order for a particular towel. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.

Weaving

The confirmation will be carried in Kgs. The same beams are used on the loom for weaving and the confirmation time tickets will be taken Doff wise and the print of the time tickets will be attached to the Doff to identify the Doff. The confirmations will be carried out for an order for a particular towel. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.

Grey folding inspection and Mending



The confirmation will be carried in Kgs. The grey folding inspection activities will be carried out and the confirmations will the created. The storage is not considered as discussed with Mr. Ravi tandon; only the quantity in WIP is required. The confirmations will be carried out for an order for a particular towel. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.

Shearing

The confirmation will be carried in Kgs. The shearing operation will be done against the confirmation time ticket of the previous operation. And the confirmations in the shearing section will be done and a confirmation time ticket will be created for the quantity confirmed in the Shearing section. The Time tickets prints will be send ahead with the quantity confirmed in the shearing section. The confirmations will be carried out for an order for a particular towel. The time ticket prints for the confirmed and send ahead quantity will accompany the in-process goods to the next operation.

Length cutting


Length hemming


Step 3:

The raw material input is dyed yarn for this order and will be consumed by issue of the quantity required to the order, according to the BOM quantity or the actual quantity required. The input will be in terms of Kgs.

Other raw materials, which are required for this order, are sizing chemicals, which can be back flushed to the order while confirmation.

Step 4:

The Goods receipt of the produced order will have to be created to and the same will be issued to the next order i.e. the packing order.

Step 5:

The Production order is given a status TECO-Technically complete at the production of the finished towel



FABRIC DYING

PACKING ORDER - Fabric dyed Towel

Step1:

The production order converted from the planned order in the MRP Run will have to be processed here.

The material being produced here is the final product-Towel.

Authorization of: The conversion of planned order in to production order is an activity of Production department.

Step 2:

Confirmations will be done order wise for all the work centers. The work centers here is

The work centers in Route will be

Length Cutting Length Hemming Cross Cutting Cross Hemming Packing

Length cutting


Length hemming


Cross Cutting




Cross Hemming


Packing


Step 3:

The raw materials like Put ups, Labels, Poly-bags, Hangers will be consumed automatically against the production order according to the BOM quantity, by Back flush during production order confirmation. Any deviations against the BOM quantity can also be posted. This will directly show variations in planned against material consumption costs.

Step 4:

The material being produced here is Towel. The Produced Towel will be put in to Towel FGSL stock. The Goods receipt of the produced quantity will update the stock of the material in the storage location and will be consumed for the sales order.

Step 5:

The recording of delivery related assorted packing, would be handled by the SAP-SD module.

Step 6:

The Production order for the Packing Towel will be given a status TECO-Technically complete at the end of the Production.

YARN PROCESSING

Step1:

The Yarn Processing is to be combined for same counts or same material codes.

The requirements will be combined on daily basis together for the same count. Though the way in which the requirement will be actually satisfied is yet to be confirmed from satyams side.



Authorization of: This is an activity of PPC department.

Step2:

The raw material required is issued for an order from the Raw Yarn Storage Location in the form of Kgs.

Authorization of: The raw material issue to the production order is an activity of Production department.

Step3:

The processed yarn will be put in to Yarn storage location, through Production order quantity Goods receipt.

Authorization of: The GR of production order is an activity of Production department.

SAP PROCESS FOR YARN DYEING

Step1:

The Yarn Processing is to be combined for same shade or material codes.

The requirements will be combined on daily basis together for the same count. Though the way in which the requirement will be actually satisfied is yet to be confirmed from satyams side.

Step2:

The raw material required is issued for an order from the Processed Yarn Storage Location in the form of Kgs.

Step3:

The processed yarn will be put in to Yarn storage location, through Production order quantity Goods receipt.

PROCESS DESCRIPTION



Paper Process Flow:

Order Stage

Process Description Stage

Process Stage Cost /Work Center / SLOC

Input Output(Finished / Waste etc)Identify – Rework stage

Storage of RM RM Yard CC-RMPulp Preparation

Removal of Sand 1 Depither RM, Power, stores & spares

Loss: 1.2% fiber losses (that go with dust). Scrap: Dust is used internally (about 14% including moisture), pith – 25%(used in boiler feed)

Removal of Sand and Foreign particles

Wet Washing RM, Water (Nil value), Power, stores & spares

Loss: fiber losses, 0.75%Scrap: Contractor disposes off Sand with cost

Stalks of Sarkanda are cut

Cutter RM, Power, stores & spares

Cooking of Straws to separate lignin from Straw fibers

Digester WC RM from Cutter/wet washing, + Cooking chemicals +Power, Steam, Stores & Sp

Unbleached Short fiber Pulp (before screening and cleaning)

Washing Fresh Water, power, S&Sp,

Unbleached Short fiber Pulp (after screening and cleaning)

Loss1: 1.2% of pulp rejection

Loss of pulp: 60-65kg /hr

Bleaching

Bleach Liquor from Hypo Plant

2 Bleaching Bleaching Bleaching chemicals, Power, S&Sps, Steam, Bleach

Bleached Short fiber pulp

Loss of pulp: 25-30kg /hr

Shrinkage Loss –



Liquor ( from Hypo Plant)

14%

Long Fiber Pulp Bleached Pulp BleachingStock Preparation

3 Stock Preparation

Short/Long fiber pulp + all chemicals+ power, S&sp

Mixed Pulp

Paper Machine

4 Paper Machine Mixed pulp + fillers + chemicals + power + steam + s&sps

Paper,

Loss: Rejects

Finishing House

5 Finishing House Paper, Packing Material, power, s&sprs

Packed paper

Stage 1. Production Order Stage - Pulp Order

The core user team has formulated ways to calculate the Pulp requirement in the pulp mill, taking these list of assumptions the SAP_PP module would be in a position to put the pulp production order quantity. Similar calculations of the losses are also available. Any failure in calculating on the basis of assumptions will not allow the SAP_PP module to create the production order or estimate the losses.

SAP PROCESS FOR STRAW / WOOD PULP

Production Order Creation:

The production order will be created and released at the end of the shift for the quantity loaded in the Digester. This production order quantity will be increased subsequently for every shifts production.

Order Confirmation:

The Operations will be partially confirmed one by one for the shift.

Material Input Confirmation:

The input raw material consumption will be back flushed automatically on the basis of, which Digester is loaded and the way it has been loaded by, that is whether it has been loaded through Depither, wet-washing or from yard or from Depither and wet-washing, or from cutter etc.



The other chemicals will also be back flushed for the confirmation quantity.

Material Output :

The finished pulp will be put in to Pulp FGSL.

SAP Process for Broke (Rework of Waste Paper)

This comes during paper breakage at the pope reel, where the paper is wound on a shell, or from the finishing house, where the side trims are slushed in a pulper and recycled back


The production order will be created for rework of paper from the paper machine and the Finishing house.

Order Confirmation:

The Operation of Broke order will be partially confirmed for the shift.

The Work center here is: Broke Work center

Material Input Confirmation:

The input raw materials for Broke order is rejected paper from the paper machine and paper from the finishing house, which will be consumed manually in the system through raw material consumption movement type.

Material Output :

The production order will be created for the type of pulp prepared, if the pulp being prepared is super deluxe then the production order will be prepared for super deluxe stock preparation at the end of the shift for the quantity of Stock prepared for that quality.

Stage 2- Stock Preparation

Production Order:

The production order will be created for the type of pulp prepared, if the pulp being prepared is super deluxe then the production order will be prepared for super deluxe stock preparation at the end of the shift for the quantity of Stock prepared for that quality.

Order Confirmation:

The Operation of Stock preparation will be partially confirmed for the shift.



The Work center here is: Stock Preparation

Material Input :

The input raw materials for stock preparation (Wood Pulp and Pulp and Broke pulp) will be consumed manually in the system through raw material consumption movement type.

The other chemicals required will also be back flushed for the confirmation quantity.

Material Output:

The finished Stock prepared pulp will be put in to Stock Preparation FGSL in batches according to the existing nomenclature.

Stage 3 - Paper and Finishing house

The Paper and Finishing house order is one order on the basis of the fact that the Paper Parent rolls are shifted to the finishing house for finishing as soon as they are produced. This production orders are also kept as common in both Paper and Finishing house in a view of tracking the parent roll from the paper house to the finishing house and packing.


The production orders created by the PPC department will be followed daily according to the schedule in Paper and Finishing house. Paper Machine will combine all the orders of the same quality and GSM; they are supposed to produce according to the schedule in the Standard SAP report.

Order Confirmation:

Paper will confirm the quantities produced against an order, and thereby confirm for all the orders scheduled in their work load screen for a day, which in turn means that they have confirmed for all the Parent Paper rolls produced, order wise.

This order will have Work centers

Paper Machine Re-winder Simplex Packing

Input Confirmation:

The raw material “Stock-Prepared pulp will be consumed by back flushing automatically according to the BOM quantity.



The Packing Materials will be back flushed automatically during confirmations, according to the BOM quantity.

Output Confirmation:

The Paper rolls will be passed on to the finishing house, where the parent Rolls will be finished on the cutters, according to the schedules in the SAP work load screen or the standard SAP report.

LIQUID BLEACH TREATMENT - (Hypo plant)


The production for the hypo plant should know the quantity of production and the quantity of inputs raw material. The concept of production order is based upon the fact that the production order quantity should be known.

Order Confirmation:

The Operation of Hypo plant will be partially confirmed for the shift.

The work center here is: Hypo plant

Input Confirmation:

The input raw materials for Hypo plant will be consumed through raw material consumption movement type.

Output Confirmation:

The finished Liquid Bleach will be put in to Liquid Bleach FGSL

ARRIVING AT COST OF PRODUCTION ORDER - PAPER



The Order Stages follows:

Level 1

Level 2

Level 3

The Production order of Pulp and wood pulp takes Place as Daily Production orders with reference to the dates provided in the Finished Paper production order of Pulp created above.

The Good receipt of Pulp from the Pulp Production order takes Place in the Pulp Storage Location.

The Good receipt of Wood pulp from wood pulp production order takes place in the Wood Pulp Storage Location.

The stock preparation is done in the stock preparation production order, which is later put in to stores in terms of batches, as it exists now. This stock will then be issued to the Paper Machine.


Paper Material Code---Used in Paper and Finishing House Production order

Chemicals required for Pulp

Raw Material required for Pulp

Stock prepared required for Paper Order

Pulp Order Material Code

Chemicals required for Pulp

Raw Material required for Pulp

Wood Pulp Order Material Code


The Production order will be created directly under an order type. The production orders will be created under a number range. The Production order quantity will be the quantity of digester loaded. The Production order for Pulp will be then

Scheduled To find out the Basic dates of the order as well as the Operations as per the standard times in the Route

Costed To find out the Planned costs of the order and operations

Released To Load the orders on the mentioned operation as per the scheduleTo allow actual Production to beginTo allow Confirmations To allow Quality inspection to be initiated

COSTING OF RAW MATERIAL INPUT

RM Procurement Overhead

RM procurement costs include the following :-

6. Personnel costs of employees involved in ordering RM.7. Cost of information (Such as cost of journals, subscription etc).8. Communication cost (Such as telephone, fax etc.).9. Printing and stationary.10. Quality control cost.

1. RM Procurement Cost Center :

This would include employees from the RM purchase and accounts function. (However, the cost of the employees of the accounts department involved in purchase accounting is not considered here since the cost is not material).

Personnel cost

Personnel cost of employees of RM purchase department and other expenses on procurement shall be identified to the RM purchase Cost Center at the time of incurring such expenditure through cost center codes.

RM Carrying Cost

It includes the following :-

5. Financial interest incurred on stocks of RM held by the company.6. Stacking cost of RM.7. Personnel costs of employees of stores (RM).



8. Other expenses of stores (RM) such as for printing and stationery, rent etc.

Financial interest incurred on carrying RM shall be computed at the bank rate of interest for working capital loan. It shall be charged from the date of RMIN to the date of issue of RM (Identified separately for each lot) less average credit period availed by the company on the PSL issue rate of RM per kg of that lot. Such financial interest shall be aggregated and deducted from financial expenses, which form part of administration overheads.

Stacking cost of RM at RM godown is done by contractual labour at per-determined contract rates. This rate(Per Kg) would be added on to the MR carrying cost.

Personnel costs and other direct expenses of stores (RM) shall be captured through cost center code. This cost would be computed per Kg by spreading the aggregate of the cost over average stock of RM for the month of stores (RM).

The aggregate of the above expenses shall give the RM carrying cost per Kg. This rate would be used for monthly costing and be a standard for the following month.2. RM Quality Control Cost Center:

QC costs will be collected at QC cost Center and will be allocated to RM procurement cost based on a factor of number of inspections and time spent on inspection for RM.

Total procurement cost consisting of the sum of the above costs shall be collated for the month and spread over the total quantity of RM procured to determine the per Kg. rate of procurement cost. This rate would be used for monthly costing and be a standard for the following month for the purpose of daily costing.

RM Preparation Cost

Raw material will be processed under a production order with following operations:

1. Depither2. Wet Washing3. Cutters

Basic Cost and Direct Costs

Raw Material Valuation: Raw material will be issued to order at MAP. Order can be issued with Mix of Raw Materials at their MAP.

Activities confirmed at each Operations will be valued at Activity rate available on Cost Centers.

Production Order is generated for this Stage.

Here the raw material is pulped to liberate the fibers (cellulose).

Utility Input - Steam



Waste Generation - Black Liquor – Credit to Order at Negligible value.

POWER GENERATION – TURBINE DIVISION



1. Requirements / Expectations

The Requirements and Expectations of the Turbine Division under the title of shop floor control are:

Accounting of the Steam consumption.

Accounting of the Electricity Production and Low Pressure Steam Production thereby.

Accounting for further consumption of the same through integration with MM and SD modules.

2. General Explanations

2.1.Activity Specifications- Turbine Power Generation

1. Activity name: Turbine: generates electrical power by superheated steam. The backpressure steam is either sent to IOL or Co-generation as per requirement.

2. Activity name: Steam distribution

SAP Process for Turbine Power and Steam Generation

Production Order:

The production orders for Turbine will be created by the PPC and will be followed accordingly by the production department.

Order Confirmation:

Confirmations will be done shift wise for all the work centers. These shift wise confirmations will be partial confirmations.

Work center :Turbine Work center

Material Input:

The raw materials, Steam, will be consumed by here in this order of turbine from the steam storage location.

Production / Output:



The material being produced here is Steam and Electrical Power as Co-Products. These are separately put in to their respective storage locations, from where they will later be picked up by the sales and distribution authorities.

The Production order for sulfuric acid is given a status TECO-Technically complete at the end of Shift.

Soda Recovery Division

1. Requirements/Expectations

The Requirements and Expectations of the Soda Recovery Division under the title of shop floor control are:

Accounting of the inputs to soda recovery section and the consumption and the output from the soda recovery section.

2. General Explanations

The Soda recovery Plant is taking inputs in the form of Black Liquor from the Pulp mill and DM Water, Steam, and Chemicals and the outputs in the form of steam and white liquor. Grits associated with lime are also generated while slaking of lime required for white liquor generation in the causticizing section, these are wastes generated in the process.

The quantity of steam produced from the Recovery boiler, the weak black liquor which is an input to the soda recovery section, the semi concentrated black liquor coming out of evaporators and the white liquor generation is metered.

3 Business Process Description

Production Order:

The production officers will create the production orders for Soda Recovery plant on a daily basis.

Order Confirmation:

Confirmations will be done shift wise for a work center. The work centers here are all the machines in the section

These shift wise confirmations will be partial confirmations.

The work center here is Soda Recovery

Material Inputs:



The raw materials are DM water, Weak black liquor and steam. They will be consumed by here in this order of Soda recovery.

Production / Output:

The material being produced here is Steam and white liquor as co-product. This white liquor is sent back to the pulp mill to be used in digester house and steam generated is sent to co-gen section to be used in turbine for the electrical power generation. These are separately put in to their respective storage locations, from where they will later be picked up by the sales and distribution authorities for sale.

The Production order is then given a status TECO-Technically complete at the end of Shift.

COGEN

TURBINE POWER AND STEAM GENERATION

Requirements/Expectations

The Requirements and Expectations of the Cogeneration Division under the title of shop floor control are:

Accounting of the Steam consumption. Accounting of the Electricity Production and Low Pressure Steam Production thereby. Accounting for further consumption of the same through integration with MM

General Explanations

The cogeneration plant is taking inputs in the form of DM water, Husk and chemicals and the outputs in the form of steam, water and ash.

Business Model

Business Process Description

SAP Process for Production Planning and Shop floor Control for Turbine Power and Steam Generation in Cogeneration

Order Creation for COGEN

The production orders for Cogeneration will be created on a daily basis.

Order Confirmation:



Confirmations will be done shift wise for a work center. The work centers here are all the machines in the section


The work center here is Boiler and Turbine

Material Input :

The raw materials, water, husk, power will be consumed by here in this order of cogeneration.

Material Output:

The material being produced here is Steam and Electrical Power as Co-Products and ash as by-product. These are separately put in to their respective storage locations, from where they will later be picked up by the sales and distribution authorities for sale.

The Production order is then given a status TECO-Technically complete at the end of Shift. The steam from here will go to the all divisions of Dhaula Plant.

SULPHURIC ACID

1. Requirements/Expectations

Production is executed on the shop floor on the basis of Production orders. Thus the status of each activity and the order as a whole becomes important with respect to final delivery dates and accommodation of incoming (fresh) orders.

Activity Specifications- SULFURIC ACID PLANT

(1) Sulfur yard- Receives Sulfur, sent to Melter pit via belt conveyor.

(2) Melter Pit-Sulfur melted down with the help of indirect steam & pumped with 2 submersible pumps to burner.

(3) Burner-Burning of Sulphur in presence of moisture free air.

(4) Waste heat recovery boiler

(5) Super heater: Super heating saturated steam for power generation in turbine.

(6) Cartridge filter- filtering of gases from super heater to converter

(7) Converter: conversion of SO2 to SO3 by Vanadium Penta- Oxide catalyst

(8) Hot heat exchanger (HHE)



(9) Cold heat exchanger (CHE)

(10) Mist eliminator (ME)

(11) Economizer – Preheats the boiler feed water to saturated stage

(12) Drying tower (DT)-removes moisture in air to provide moisture free air for combustion.

(13) Inter Pass absorption tower (IPAT) tower: Absorbs SO3 gas in H2SO4, remaining SO2 goes to 4th bed inlet, converter.

(14) Final Absorption tower (FAT)- absorbs the SO3 generated in the 4th bed of the converter.

(15) Alkali Scrubber - removes SO2/SO3 gases before their exit to atmosphere by reaction with alkali

(16) De-aerator: Dissolved oxygen is removed from the water to prepare the boiler feed water.

(17) Maintaining Boiler feed water quality

SAP Process for Shop floor Control for Sulphuric Acid

Production Order creation:

The production orders for sulfuric acid will be created daily by the PPC and will be followed accordingly by the production department.

Order Confirmation

Confirmations will be done shift wise for all the work centers. The work centers here are all the machines in the section


The work centers in case of sulfuric acid production route that are to be confirmed will be:

Step 3:

The raw materials, sulphur, will be consumed by back flushing automatically according to the BOM quantity.

Step 4:



The by-product is steam; this by-product has to be recorded in terms of its unit of measurement and against the production order of sulphuric acid.

Step 5:

The material being produced here is sulfuric acid. This sulfuric acid is put in to stock, which will later be picked up by the sales and distribution authorities.

Step 6:

The Production order for sulfuric acid is given a status TECO-Technically complete at the end of the last Shift.

PRODUCTION ORDER PROECESSING IN SAP



Business Process Description

The Shop floor Execution function in SAP- PP works as follows:

The Production order will have the following components attached to it while production order creation

Route

BOM

A production order defines which material is to be processed, at which location, at what time and how much work is required. It also defines which resources are to be used and how the order costs are to be settled.

The Route will specify the Sequence of operations and work centers required for creation of the product. The route has work centers attached to the operations for a certain base quantity of production.

Route is the sequence of operations required to produce the customer order which specifies the times required per operation per piece. A time required to produce a base quantity is the standard input in a route which will calculate subsequently the total operation time required by multiplying this base quantity time by the production order quantity. The following parameters are keyed in while creating the route:

The work centers at which production is to be carried out, arranged in a sequence.

The Route has work centers attached to the operations. A work centers are an organizational unit, which represents a place where operation is executed. Operations are carried out at a work center. In the R/3 System work centers are business objects that can represent the following real work centers, for example a machine or a group of machines, people or a group of people, or a production line.

A work center is also assigned to a cost center. Formulas are entered in the work center, so that the costs of an operation can be calculated.

The Work center can be a machine, Production line, a group of work centers, or a person or a group of people.

The decision to identify a work center should be based upon the following factors:

The capacity is always consumed from the capacity mentioned in the work center in time units. If a machine is a work center and its capacity is say 8 Hrs/ Day, therefore as per the allocation of the work center in the production orders, the capacity will be consumed from the available capacity of 8 Hrs/ Day. If say the section is a work center, which has 5 such machines then the available capacity will be 5 * 8 Hrs/ Day = 40 Hrs/ Day, then if



this work center is allocated to the orders, then the capacity consumption will be from available capacity of 40 Hrs/Day.

The work centers can be grouped on the basis of the similarity of the machines in a section, which will simplify the Production planning and will give flexibility to the shop floor person to load the order on any machine and therefore the executor on the shop floor is concerned about completing his daily Quota of work, which he can do it on any machine, though his aim will be to complete the work load on a given day.

If a section is nominated as a work center, then the confirmations and Planning will be based on the declaration of production, work section wise, though the work done, machine or people wise, can be captured in the system through a development, which will provide information of work done machine or people wise in that section.

Work centers, which take very little time for processing and are overlapping, can be clubbed together to form one work center for ease of recording order wise data.

Work centers, which give out By-Products and/or Co-Products, have to consider in the sequence.

Activity which is a crucial cost center from the costing point of view, has to be declared as a work center

PP PROCESS FLOW IN SAP:

Create Production Order

We create a production order with or without quantity structure.

A production order contains all the information required for producing one lot of a material. A production order determines the following:

Which materials are used and when they are used

Which operations and sub operations are performed at which work centers

The dates these operations are carried out

Which stock materials are required to carry out the operations

Which materials and activities must be procured externally for the order

The receivers (such as stock or sales orders with no valuated sales order stocks) to which the actual costs can be settled

Create Preliminary Cost Estimate

A preliminary cost estimate will be created when We create the order. This cost estimate calculates the planned costs for the order. The preliminary cost estimate can be created



when the order is saved or released. This cost estimate uses the quantity structure of the order.

In sales-order-related production, the preliminary cost estimate of the production order can be used to calculate the standard price if the sales order inventory is valuated.

We pre-cost a manufacturing order (production order or process order) for the following purposes:

1. To determine the planned costs for the material being manufactured based on the planned lot size of the order

2. To calculate the planning variances and use them to decide what production version to use

3. To be able to determine the production variances at a later time

In sales-order-related production, We can use the preliminary costing for the manufacturing order for the following purposes:

1. To calculate a standard price for individual requirements materials

2. to use the planned costs calculated in this way to determine the planned costs for the sales order item

If the cost estimate has errors, the manufacturing order receives the status CSER (Error in cost calculation) The system creates a log to collect the system messages and sorts them according to various criteria.

Enter Actual Costs for the Order

We can post actual costs on the order when it is released. Actual costs arise when materials are withdrawn for the order or when activities are performed. We can look at the results of simultaneous costing at any time.

Post goods receipt.

As soon as We enter a goods receipt, costs are passed on to stock. This goods movement is valued with a preliminary price (normally the standard price). The order is credited.

Postings in MM

Actual costs can be debited to cost objects from the following business transactions in MM (Materials Management):

Goods issues

Goods receipts for purchase orders

Invoice receipts for purchase orders



Goods movements in MM generate postings in FI automatically

Goods Issues

Goods issues are goods movements in inventory management with which materials are withdrawn to manufacture a product. The following events take place on the basis of the goods issue:

The warehouse inventory is reduced by the quantity withdrawn

The cost object is debited under a primary cost element

The value of the goods issue is determined from the quantity withdrawn and the price in the accounting view of the material master record.

The price control indicator in the material master record determines whether the costs are updated at standard price or moving price.

A line item is generated in CO.

In FI, the inventory change account is debited and the inventory account is credited.

An accounting document is generated in FI.

A material document is generated in MM.

Goods receipts record the transfer of materials manufactured in-house into the finished goods inventory.

When materials manufactured in-house are transferred into the finished goods inventory, the manufacturing order is credited. An inventory posting is made in FI.

Postings in PP

Confirmations

Selection of the routing relevant for the confirmation of activity quantities.

Where we are using production orders, the routing copied into the manufacturing order is the basis for determining the default values of the quantities used.

When activities and business processes are confirmed, the order is debited automatically by means of internal activity allocation. The price used to valuate the activities and business processes is determined by means of the valuation variant linked to the order through the costing variant for simultaneous costing.

The system uses the valuation variant that is assigned to the costing variant specified in the Costing variant actual field in the manufacturing order

Secondary costs can be caused by the following:

Internal activity allocations



Internal activity allocations reallocate costs from the cost center that generated the activity to the cost object that used the activity. The activity quantity is multiplied by the activity price and the cost object is debited under an allocation cost element.

The price used to valuate the activity is determined by means of the valuation variant linked to the order through the costing variant for simultaneous costing

General Explanations

1. The Paper Machine department works in towards satisfying the needs of the Finishing House and the Pulp Mill works towards satisfying the requirements of the Paper Machine department.

2. The Paper machine department runs the machine for a particular quality and GSM, so the Finishing department gives a clubbed requirement (of all the work orders it has) having same quality and GSM.

3. Similarly the Paper department sends an information of the type of pulp its going to produce to the Pulp Mill, so that the pulp mill satisfies the requirements of the Paper machine.

4. The Finishing house carries out the finishing of the Paper Rolls it has received from the Paper Machine.

5. The dispatch will then dispatch the finished products.

Cost Calculation for an Production Order:

Material Cost:

1. Material issues to the Production order will be carried out for the material components in the component overview screen of the production order. Such material issues will be called as “Material Issues against the order”. The quantity issued though can be more or less than the BOM quantity planned in the order.

Material issues of such kind are manual and are done when the actual quantity tends to vary from the planned quantity.

A material document and an accounting document are created to record the goods movement. The stock quantities of the material are updated. The stock values are updated in the material master record and the stock/consumption accounts are updated.

Material Cost is calculated taking BOM quantity (for Plan cost) and Actual Posted Quantity (For actual Order cost)

2. Unplanned material issues to the order other than planned BOM components can also be initiated.



A material document and an accounting document are created to record the goods movement. The stock quantities of the material are updated. The stock values are updated in the material master record and the stock/consumption accounts are updated.

Other Cost of Production:

Activity Confirmation:

Activity Rates are calculated at Cost Centers which is used in Production costing for Plan and Actual Activity Costs.

System takes the Activities planned at Routing at a Work Center and multiplies it with Activity Rate Activity rate calculated with Planned Costs, at Cost Center to arrive at Planned and Actual Activity Costs.

Receipt of Production against Production Order

The Production order is confirmed at various stages of production, the quantity, which, is confirmed at the final operation is deemed to be a finished product quantity. This quantity of finished product is then sent to the “Finished Goods storage location” (FGSL), this process of dispatching goods to the FGSL is called as Goods Receipt of Produced quantity.

Goods receipt is done against a production order. The finished product stock will get updated and valuated. This stock in the FGSL is ready for picking by the sales authorities. The Stock received against Production Order is initially valuated (and FI entry) at the rate available at the Material master.

Receipt of Wastage against Production Order

Waste / By-products generated against Production Order will be debited to Stock and credited to Production Order at Realizable value of that material.

Order Settlement: The order is debited with cost of material and Activities confirmed and credited with the cost of goods received against the order at Material master rate based on price indicator. The difference of above remains on order, which has to be settled. If material master has V indicator, the difference is debited to material master. If it has S indicator, the difference is charged to Price difference accounts.

For above, after the order is complete, we have to settle all open orders. This can be done individually or by collective settlement run.
