A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

CHAPTER – 1
INTRODUCTION

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A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

CHAPTER – 1
INTRODUCTION

1.1 INTRODUCTION
Process costing is probably the most widely used method of cost
ascertainment. It is used in mass production industries producing standard production
like steel, sugar, chemical, etc. in all such industries goods produced are indicial and
all factory processes are standardized. Goods are produced without waiting for any
instruction or orders from customers and are put into warehouse for sale. Raw
materials move down the production line through a number of processes in a
particular sequence and costs are complied for each process or department by
preparing a separate account for each process.

Under a process cost system, costs are accumulated according to each

department, cost center, or process. For simplicity, this discussion of cost
accumulation will refer to departments rather than to cost centers or processes. Note,
however that there may be two or more processes performed in one department (and
therefore, more than one cost centers in a department) in such cases costs may very
significantly between cost centers, so it is desirable in practice to accumulate costs
according to cost center or process rather than by department.

The average unit cost for a day, week, or year is obtained by dividing tha
department cost by the number of units (tons, gallons, etc.) produced during he
particular period.

1.2 NEED FOR THE STUDY:

The academic session covers theoretical aspects about the “process costing” of
a company. It is essential to know about the practically the working of process costing
in company. Through project training.

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A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

1.3 SCOPE OF THE STUDY:

 The study focus on “Fortune cotton & Agro Industries Gourapur, Haveri”.
 This study is mainly done because of geographical area where the cotton
factory situated in Gourapur which is convenient of study.
 The project was conducted pertaining to the entire Department coming under
the “Fortune cotton & Agro Industries Gourapur, Haveri.”

1.4 OBJECTIVES OF THE STUDY:

 Production of large volume goods.
 Continues production of goods.
 Creating standard life cycle.

1.5 RESEARCH METHODOLOGY

The process used to collect information and data for the purpose of making
business decisions. The methodology may include publication research, interview,
surveys and other research techniques, and could include both present and historical
information.

 COLLECTION OF DATA
Primary Data:
The primary data collection involves the collecting of information for the first
time by observation and interview schedule.

The information is collected through a personal and also by staff members that
is by clerk and accountant. And the data required for the project was collected minor
through primary data. That is through interviewing & discussion with concerned
authorities in the company.
Secondary company:

Secondary Data are those with are collected from the already published sources

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A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

The major sources of data for this project was collected from annual reports,
profit and loss account, manuals & some more information collected through the
internet. The data is collected by annual reports and company manuals.

1.6 LIMITATION OF THE STUDY.

1. The study is restricted on to process costing of Fortune cotton & Agro
Industries Gourapur, Haveri,”
2. Study is based on limited information provided by the company
3. Due to the time constraint the development group process could not be
completed.
4. Some confidential information not disclosed by the company.
5. This is purely based on the information provided by the manager and not on
the primary research and any physical verification.

1.7 CHAPTER SCHEME:

CHAPTER – 1
 Introduction of the study
 Objectives of the study
 Scope of the study
 Research methodology
 Limitations of the study

CHAPTER – 2
 Company profile
 Vision, mission
 Objectives, achievements company objectives
 By-products of cotton
 Departmental study
 History of cotton in India.

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CHAPTER – 3
 Introduction of process
 Meaning of process costing
 Definition of process costing
 Application of process costing
 Characteristics of process costing
 Advantages and disadvantages of process costing
 Process costing procedure
 The importance of process costing
 When process costing is applied
 Reasons for use.

CHAPTER – 4
 Analysis and interpretation of the data in the form of tables and graphs.

CHAPTER – 5
 Findings
 Suggestions
 Conclusion
 Bibliography

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CHAPTER - II
CONCEPTUAL FRAMEWORK

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CHAPTER - II
CONCEPTUAL FRAMEWORK

2.1 INTRODUCTION:
When the raw materials are fed into machinery as an input, we get output. In
order to convert the raw material into finished products it has pass move through
different stages. Each stage is known as process.

Generally in large scale concerns each stage or process records are maintained
expenditure incurred in each stage. All the end of year. Accounts are prepared process
wise to know the profit or loss of each process. When records are maintained each
process for ascertaining cost, it is known as process costing. Process costing is
method of costing applied to industries where the material has to pass through two or
more process for being converted into a finished product.

2.2 PROCESS COSTING MEANING

DEFINITION:
Lunt and reply observe, “Process costing is used to ascertain the cost of each
stage of manufacture where material is passed through various operations to obtain a
final product to result with products in many cases at different stage.

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2.3 APPLICATION OF PROCESS COSTING:

Process costing is employed in the following type of industries:

 Soap making
 Drugs and medicine
 Milk dairy
 Producing industries
 Chemical works
 Rubber industries
 Flour mill
 Cement manufacturing
 Fertilizer industries
 Paint manufacturing
 Glass industries
 Sugar industries
 Food manufacturing
 Box making industries

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2.4 CHARACTERISTICS OF PROCESS COSTING

1. The products are standardized.
2. The production of goods is continuous
3. The finished product is the result of the two more process.
4. The output of one process becomes input of next process and that of last
process is transferred to the finished stock.
5. Cost per unit is the average cost.
6. Each process is distinct is pre-determined.
7. The continuous nature of production in many process means that there will
usually be closing work in progress which must be valued. In process costing
it is not possible to build up a cost record incurred on individual units of
outputs because production in progress is an indistinguishable homogeneous
mass.
8. The output of one process becomes the input of the nest, unless it is the final
process, culminating in the finish products.
9. Losses often occur during the process due to spoilage, wastage, evaporation
and so on.
10. Output from production may be a single product, but depending on the
industry there may also be by – products and joint products.
11. Process account is used to accumulate the cost incurred during a process. The
following four step approach is used to complete the process accounts,
minimizing the chances of error.

2.5 ADVANTAGES OF PROCESS COSTING

1. Easy to use
2. Flexible
3. It helps for calculation of cost in short period
4. It helps for calculation of cost of each process as well as finished product
5. It involves less clerical works and expenses.
6. It helps for control overproduction and cost.

Many companies use some type of system to determine the minimum value of
produced products. Process costing is an allocation system companies use to allocate

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cost for homogeneous items produced by a company. Homogeneous products

represent items that are very similar or indistinguishable from each other.

Lumber, soda pop and chemical products are a few examples of homogeneous
products. Process costing provides companies with a few advantages and
disadvantages.

 EASY TO USE:
Process costing is an easier system to use when costing homogeneous products
compared to other cost allocation methods, business owners allocate business cost
according to the number of processes each good travels through in the production
system. Each process applies direct materials, labor and manufacturing overhead to
the production cost total. Management accountants take the total number of goods
leaving the process and divided the total process cost by this number. This creates a
simple average cost for each item produced.

 FLEXIBLE:
Business owners use process costing because it creates a flexible production
process. Companies needing to refine their process can simply add or remove a
process as necessary. This also allows companies to lower their production cost for
each good. Business owners typically look for ways to refine a production process to
increase cost savings eliminating redundant processes often achieves this goal adding
process allows companies to produce slightly different goods or improve product
quality. Management accounts may review the amount of materials and labor used in
each process to determine if any costing savings is available in the productions
system. This flexibility ensures companies can produce at the most competitive cost
in the economics marketplace.

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 DISADVANTAGES OF PROCESS COSTING

1. Cost errors
2. Equivalent units
3. Average cost is not accurate cost
4. Costs are historical

 COST ERRORS
Process costing can create cost errors in the production system. Production
cost errors often represent significant disadvantages for cost accounting systems.
Process costing does not use direct allocation to apply business costs to individual
goods. Direct allocation costing applies a specific amount of raw materials production
labor and manufacturing overhead to goods or service.

Process costing may allow non-production costs to be included in the total

process cost. Including non-production cost will arbitrary increase each item’s cost;
this also increases the consumer product price. Management accountants may also
leave out production costs and create under-casted products. Under-casted products
usually result in lower business profits because goods are actually more expensive
than actually reported.

 EQUIVALENT UNITS:
Management accounts must calculate equivalent units in the process costing
system. Equivalent units represent the amount of unfinished goods left in a process at
the end of an according period. This calculation may only be a best guess or an
estimate by management accounts. This information is reported as the work-in-
process on a company’s balance sheet. Inaccurate work-in-process accounts may also
result in distorted good totals. This creates a difficult process for managing inventory
and determining how totals. This creates a difficult process for managing inventory
and determining how many products the company has to sell in the open marketplace.

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2.6 PROCESS COSTING PROCEDURE

1. The factory is divided into a number of processes.
2. Each process account is debited with all direct cost and overheads allocated or
apportioned to the process.
3. The output of process is transferred to the nest process in a sequence.
4. The finished output of the last process is transferred to the finished goods
account.
5. While other of costing start with a sales order, a sales order is not needed for
process costing as it is a continuous process.
6. The work-in-process accounts are divided by department and are named as
such-for example; work-in-process- Department Name
7. As the products move from department of department, entries are made to
each work-in- process department account.
8. Direct labour costs are recorded; no contra-account is needed because there is
no over or under-applied overhead due to the actual cost being applied.
9. Direct labour costs are recorded by period.
10. Actual overhead cost are record; no contra-account is needed because there is
no over or under-applied overhead due to the actual cost being applied.
11. Indirect costs are applied to the overhead account in actual amounts.

 PROCESS LOSSES:
While converting raw material into finished goods, certain wastages may arise
at various stages of production. Such waste or loss may arise due to evaporation,
inefficiently etc. such wastages are known as process losses.

Process losses may be classified into two groups. They are.

1) Normal loss
2) Abnormal loss

Normal Process Loss (Normal Loss)

Any loss arising due to normal factors like evaporation, withdrawals for test,
shrinkage or sampling, unavoidable spoiled quantities etc. constitute normal loss
theses losses cannot be avoided.

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Treatment: Normal loss born by the good units, when there is a normal los usually
cost of remaining goods units is increased. Normal loss should be credited to process
account. In other words cost of normal loss unit is spread for good units.

Abnormal Process Loss (Abnormal Loss)

Any losses arising due to abnormal factors are known as abnormal loss. Such
loss is over and above normal loss.

Example: loss due to carelessness of employees, machine breakdown, accidents, use

of defective materials etc…

Treatment: Abnormal loss is transferred to costing profit and loss account to find
out abnormal loss, the following procedure may be adopted.

1. Allow for normal loss

2. Apportion the balance between good units on those cost for abnormal reasons
in proportion to their respective quantities.
3. The value and quantity of abnormal loss should be credited to the process
account.

Abnormal Gain:
If the actual loses greater than normal loss, it is known as abnormal loss. But if
the actual loss is less than normal loss again, is obtained which is called as abnormal
gain or effectiveness.

Treatment: the value is calculated as if it goods units. It is debited to the process

account and credited to abnormal gain account.

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2.7 THE IMPORTANCE OF PROCESS COSTING:

Costing is an important process that many companies engage into keep track
of where their money is being spent in the production and distribution processes.
Understanding theses costs is the first step in being able to control them, it is very
important that a company chooses the appropriate type of costing system for their
product type and industry. One type of costing (such as job costing) in some ways. In
process costing unit costs are more like averages, the process-costing system requires
less bookkeeping than does a job-order costing system. So, a lot of companies prefer
to use process-costing system.

When Process Costing is Applied

Process costing is appropriate for companies that produce a continuous mass
of like units through series of operations or process. Also, when one order does not
affect the production process and a standardization of process and product exists,
However, if there are significant differences among the cost of various products, a
process costing system would not provide adequate product-cost information costing
is generally used in such industries such as petroleum, coal mining chemicals, textiles,
paper, plastic, glasses and food.

Reasons for Use:

Companies need to allocate total product costs to units of products for the
following reasons.
 A company may manufacture thousands or millions of units of product in a
given period of time.
 Products are manufactured in large quantities, but products may be sold in
small quantities, sometimes one at a time (automobiles, loaves of bread) a
dozen or two at a time (eggs, cookies), etc.
 Product costs must be transferred from Finished Goods to cost of goods sold
as sales are made. This requires a correct and accurate accounting of product
costs per unit, to have a proper matching of product costs against related sales
revenue.
 Managers need to maintain cost control over the manufacturing process.
Process costing provides managers with feedback that can be used to compare

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similar product costs from one month to the next, keeping costs in line with
projected manufacturing budgets.
 A fraction-of-cent cost change can represent a large dollar change in overall
profitability, when selling millions of units of product a month. A mangers
must carefully watch per unit costs on a daily through the production process,
while at the same time dealing with materials and output in huge quantities.
 Materials apart way through a process (e.g. chemicals) might need to be given
a value, process costing allows for this. By determining what cost the part
processed material has incurred such as labor overhead an “equivalent unit”
relative to the value of a finished process can be calculated.

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CHAPTER – III
COMPANY PROFILE

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CHAPTER – III
COMPANY PROFILE

3.1 INTRODUCTION:
Fortune cotton & Agro Industries Gourapur, Haveri, is an integrated
manufacturing company with strategic focus on cotton and its allied products in
cotton seeds. The company’s registered office is in Haveri Karnataka. The company is
working on other acquisitions, expansions and lease opportunities to strengthen its
existing strong fundamentals and growth prospectus.

The project activity is being undertaken by Fortune cotton & Agro Industries
Gourapur, Haveri.” At its 100 tons of cotton per day.

Figure 1
Board of Directors and Management:

Sl. No Name of the Director Nature of Directorship

1 Mrs. Basavaraj Sajjan Executive Chairperson

2 Mr. Anil.c Managing Director

3 Dr. Sumith Independent Director

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3.2 COMPANY HISTORY

The company was incorporated as Fortune cotton & Agro industries Gourapur,
Haveri.” Vide certificate of Incorporation no-10-1605 in the year 2009-10 with
Register of companies, Karnataka at Bangalore and Received the certificate for
commencement of business on February 10

The cotton industry is proud to be an industry, which cover the human body.
The history of origin of this industry is as old as the history of main himself. Clothes
are generally made from cotton and silk. India had introduced cotton and over the
worlds and is a leading country in the making clothes from cotton and silk

3.3ORGANIZATIONAL PROFILE:
Name of the company “Fortune cotton & Agro Industry Gourapur, Haveri
Register year 2009-2010
Activity undertaken Ginning of raw cotton and Bifurcation of Seeds from

raw cotton
Type of Unit Medium Scale Agriculture Based Industry
Main Raw Material Cotton
Location Gourapur
Crushing Capacity 5000 Tonnes
First Crushing Season 2010-11
Names of concerned banker Haveri co-operation Bank union bank of Halladakatti

Urban Bank Akki alur

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3.4 VISION AND MISSION

 VISION:
Our corporate vision is to be the most efficient processor of cotton and largest
producer of cotton threads and seeds in the Karnataka,

 Achieve greater war material security.

 Increase its focus of corporate and high value consumers.
 To become the most efficient and market driven integrated processor of cotton
goods in Karnataka
 While enabling the team to grow in a learning and motivating atmosphere,
participating in the all round development of community.

 MISSION:
 To become a provider of world-class cotton products to the state.
 To fulfill state and social obligations as a responsible corporate citizen.
 To create an environment, intellectually satisfying and professionally
rewarding to the employees.

3.5 OBJECTIVES OF “FORTUNE COTTON & AGRO

INDUSTRIES:
1. To expand its installed capacity, achieve end-to-end integration for all its
plants to improve margins and reduce cyclically of business.
2. Bringing overall productivity and efficiency throughout the organization,
especially by value edition of it’s by products in cotton effluent waste etc.
3. Producing the best quality cotton to satisfy the state corporate customers.
4. Maximum utilization of manpower and raw materials.
5. To manufacture good quality cotton and its by product cotton raw material.
6. To provide comparative market rate to the farmers.

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3.6 MEANING OF BY PRODUCT:

Output other than the principal product of an industrial process such as
sawdust wood chips generated in processing lumber. Unlike joint products, by
products have low value in comparison with the principal products and may be
discarded or sold either in their original value or after further processing.

By-Products of Cotton:
The cotton mill produces single by products along with main product, i.e.
cotton. Typical cotton comprising of 1 ton capacity can produce 320Kg pure cotton,
620Kg cotton seeds and 60Kg will be wastages.

3.7DEPARTMENTAL CHART

Managing Director

Purchase Storage Production Accounting Sales Marketing

Department Department Department Department Department Department

Purchase
Department

Purchase
Department

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3.8PURCHASE DEPARTMENT:

Purchase section is one of the important sections of the administration

department and is responsible to purchase all types of materials on behalf of the
factory. Mr. Raghavendra Yadav is in charge of purchase department. The company
purchase raw cotton directly from farmers and also from some agents.

 FUNCTIONS PURCHASE DEPARTMENT:

 Receiving and sending materials requisition letter from different departments.
 Which includes all the necessary description regarding the materials to be
purchase?
 Receiving quotation from the seller to whom enquiry letter where sent.
 Preparing co-operative statement on the bases of the prices quoted by different
seller presenting the same in the meeting of purchasing committee.
 Purchasing the materials according to the resolution passed in the meeting of
purchasing committee.

 SALES DEPARTMENT:

The duty of the sell section is to look after the sale transaction of cotton
threads cotton seeds. The factory has to sell the cotton according to the demand of
various textile manufacturing industries in Karnataka and also out of the state. Mr.
Jagadeesh Patil, is in charge of sales department.

 FUNCTIONS OF SALES DEPARTMENT:

 Getting orders from parties
 Arranging for delivery to parties
 Maintaining records of sales
 Sending reports to head office
 Sales records maintaining through the system
 Company having the temporary ware houses

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 STORE DEPARTMENT:

Keeping the stock of all types of materials, which are purchased for smooth
running factory, is the main function of the section. 12 person are working in this
section according to sift wise as under. This shift changes every 8 hours.

 ACCOUNTS DEPARTMENT:

This department maintains all the record of transactions and makes the entries
according this section is only meant to deal with monitory transactions and maintain
profit and loss account, balance sheet and such other two persons are assistants in
accounts department.

 PRODUCTION DEPARTMENT

Production management refers to the application of management principles ot

the production function in a factory. In other words production management involves
application of planning, organizing directing and controlling the production process.

A well-organized production function can offer competitive advantages to

firm in the following areas.

 Higher quality
 More inventory turns
 Better customer satisfaction
 Reduced wastage

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 PERSONNEL DEPARTMENT

Staffing is filling and keeping filled positions in an organization structure.

This includes identifying work force requirements, recruiting selection, training, and
development, performance appraisal for both candidates and current job holders to
anomalism their task effectively.

 Recruitment and selection

 Placing advertisement
 Employment exchanges
 acquiring labour for specific task only
 Consultancy services
 Assigning the work to contractors.
 Providing work for LAN d losers.
 Compassionate appointment
 Deputation / absorption
 Special drives etc

 AGRICULTURE DEPARTMENT

This department is headed by chief agriculture officer. Under him there comes
assistant agri. Officer, field man, ship boy. Here the supervisors give suggestion
regarding crop, plot registration from plot owners, giving contracts to transporter to
harvest the registered pot.

Brief Introduction:

Cotton is one of the principal crops of India and is the major raw material for
domestic textile industry. The Indian cotton industry provides sustenance to millions
of farmers as also the workers involved right from processing to trading of cotton.
The Indian textile industry consumes a diverse range of fibers and yarn, but is
predominantly cotton based. The ratio of cotton to manmade fibers and filament
yearns by the domestic industry is about 56:46.

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Indian cotton industry has an overwhelming presence in the economic life of

the country. Apart from providing one of the basic necessities of life, the cotton
industry also plays a pivotal role through its contribution to industrial output,
employment generation and the export earnings of the country. It contributes about
14% to the industrial production, 4% to the GDP and 14.42% to the country’s export
earnings. India is the only country which grows all four species of cultivated cotton
starting from Grossypium arboretum and herbaceous (Asian cotton), G Barbadians
(Egyptian cotton) and G. Hirsutum (American Upland cotton). Gossypium hirsutum
represents 90% of the hybrid Indian cotton production and all the current BT cotton
hybrids are G. Hirsutuim. India produces large number of cotton varieties and hybrids
though the number of varieties in cultivation exceeds 75, 98% of the production is
contributed by about 25 varieties only.

India cotton is produced in country in three zones vix.., Northern zone com
Haryana and Rajasthan & Central zone comprising the states of Maharashtra, Madi
Southern zone comprising the states of Andhra Pradesh, Karnataka and Tamil Nadu
Momentum in the eastern state of Odisha besides these there are nine states also
cotton season the country once again harvested higher cotton production for the
million metric tons (equivalent to 29.0 million bales of 170 kgs each). In the last two
cotton has gone up from 7.35 million bales in 1983-84 to 16.3 million bales of
170Kg/b

 EMPLOYMENT OPPORTUNITIES

Cotton industry has numerous opportunities for entrepreneurs. Textile

companies, fabric manufacturing companies that consume cotton raw material and
supply various verities of finished products and value added products are benefitted.
Through various job agencies, there are various employment opportunities prevalent
in India.

The India cotton industry provides livelihood to farmers, and workers engages
in ginning, spinning, weaving, dyeing, designing and packaging not leaving sewing
and tailoring.

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3.9LATEST DEVELOPMENTS:
 In the year 2008-09 the yield gap between the world and India was narrowed
down as Indian yield was 5.5% to 591Kg per hectare, climbing from around
300Kg per hectare as recently as 2002/03. Though the national yield level still
compares poorly with the global average of 785Kg per hectare, world average
yield grew by just 38% between 2000/01 and 2007/08/ conversely. India’s
average yield posted a whopping growth of 102% during the same period.
 Today cotton crop contributes about 14-16% to the total agricultural-crop in
India.
 India has the largest are under cotton with 9 million hectares in the world
constituting 26% of total world cotton area.
 India presently produces 4.59 million tonners of cotton with 27 million bales
of 170kgs each which constitutes 18% of the world cotton production.
 60 million people including 4.5 million farmers in India depend on cotton
production to earn their livelihood.
 India cotton industry may boost the average to at least 10.5 million hectares.
Formers planted the crop across 10.4 million hectares and up 9% from a year
earlier, according to the farm ministry in the year 2009.

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CHAPTER – IV
ANALYSIS AND
INTERPRETATION

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CHAPTER – IV
ANALYSIS AND INTERPRETATION

4.1 PROBLEM
“Fortune cotton & Agro industries Gourapur, Haveri” Undergoes two process
A and B, in process ‘A’ a by-product is also produced which is then transferred to
process B, where it is completed for the year 2017-18 the actual data included.

Process

A B

Raw materials (in Quintals) 500 25

Rate per Quintal (Rs) 5000 18000

Normal loss (in %) 6 2

Scrap value (per Quintal) 600 900

Actual output (in quintals) 300 305

By products (in quintals) (40% of Raw materials) 200 -

Rate of by products (per quintal) 1600 -

Direct wages (in Rs) 500000 600000

Direct expenses 600000 250000

Production overhead 760000 540000

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 27

 A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

Statement Showing Process Account For the Year 2017-18

Process – A

Particulars Quintals Rs. Total Particulars Quintal Rs Total

To, Input 500 5000 2500000 By Normal 30 600 18000

Loss

To Direct -- -- 600000
Expenses
By sales of by 200 1600 320000
product

To production -- -- 760000 By Output 300 1489

OH Transfer to
Next Process 6.30
(B)
4468890

To, Direct -- -- 500000

wages

To, Abnormal 30 1489 446890

Gain
6.30

Total 530 -- 4806890 Total 530 -- 4806890

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 28

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

WORKING NOTE:

1. Calculation of normal loss:

Input in quintals 500
Less: normal loss @ 6% 30
470

Less: by products (in Qtls) 200

Normal Output (In Qtls) 270
Less: Actual Output 300
Abnormal Gain (in Qtls) 30

2. Calculation of Cost Per Unit:

Total Expenses – Normal Loss – Scrap Value

CPU =
Normal Output

= 43600000 – 18000 – 320000

270

= 14896.30 per quintal

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 29

 A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

Statement Showing Process Account For the Year 2017-18

Process – B

Particulars Quintals Rs. Total Particulars Quintal Rs Total

To, Input 300 1489 2500000 By Normal 6.5 900 5850

from Process Loss
A 6.30

To Additional 25 1800 450000

Materials 0
By Normal 13.5 1978
Loss
9.76 267162
To Direct
Expenses -- 250000
--

To production -- -- 540000 By Finished 305 1978

OH Stock
9.76

6035878

To, Direct -- -- 600000

wages

Total 325 -- 6308890 Total 325 -- 6308890

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 30

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

WORKING NOTE:

3. Calculation of Normal Loss:

Input in quintals 325.0
Less: normal loss @ 6% 6.5
Normal Output (in Qtls) 318.5

Less: Actual Output 305.0

Abnormal Gain (in Qtls) 13.5

4. Calculation of Cost Per Unit:

Total Expenses – Normal Loss – Scrap Value

CPU =
Normal Output

= 6308890 – 5850 – 0
318.5

= 19789.76 per quintal

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 31

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

4.2 PROBLEM
“Fortune cotton & Agro industries Gourapur, Haveri” Undergoes two process
A and B, in process ‘A’ a by-product is also produced which is then transferred to
process B, where it is completed for the year 2018-19 the actual data included.

Process

A B

Raw materials (in Quintals) 600 30

Rate per Quintal (Rs) 5500 18000

Normal loss (in %) 6 2

Scrap value (per Quintal) 800 1200

Actual output (in quintals) 360 350

By products (in quintals) (40% of Raw materials) 240 --

Rate of by products (per quintal) 1700 --

Direct wages (in Rs) 575000 620000

Direct expenses 625000 300000

Production overhead 790000 600000

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 32

 A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

Statement Showing Process Account For the Year 2018-19

Process – A

Particulars Quintals Rs. Total Particulars Quintal Rs Total

To, Input 600 5500 330000 By Normal 36 800 28800

0 Loss

To Direct -- -- 625000
Expenses
By sales of 240 1700 408000
by product

To -- -- 790000 By Output 360 14979

production Transfer to
OH Next Process
(B)
5392440

To, Direct -- -- 575000

wages

To, 36 114979 539240

Abnormal
Gain

Total 636 -- 582924 Total 636 -- 5829240

0

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 33

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

WORKING NOTE:

5. Calculation of Normal Loss:

Input in quintals 600
Less: normal loss @ 6% 36
564

Less: by products (in Qtls) 240

Normal Output (In Qtls) 324
Less: Actual Output 360
Abnormal Gain (in Qtls) 36

6. Calculation of cost per unit:

Total Expenses – Normal Loss – Scrap Value

CPU =
Normal Output

= 5290000 – 28800 – 408000

324

= 14979 per quintal

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 34

 A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

Statement Showing Process Account For the Year 2018-19

Process – B

Particulars Quintals Rs. Total Particulars Quintal Rs Total

To, Input 360 1497 539244 By Normal 7.8 1200 9360

from Process 9 0 Loss
A
6.30

To Additional 30 1800 540000

Materials
By Normal 32.2 11947
Loss
4.30 627063
To Direct
Expenses -- -- 300000

To production -- -- 600000 By Finished 350 1947

OH Stock
4.30

6815900

To, Direct -- -- 620000

wages

Total 290 -- 748244 Total 325 -- 7482440

0

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 35

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

WORKING NOTE:

7. Calculation of Normal Loss:

Input in quintals 390.0
Less: normal loss @ 6% 7.8
Normal Output (in Qtls) 382.2

Less: Actual Output 350.0

Abnormal Gain (in Qtls) 32.2

8. Calculation of Cost Per Unit:

Total Expenses – Normal Loss – Scrap Value

CPU =
Normal Output

=7452440 – 9360 – 0
382.2

= 19474.30 per quintal

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 36

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

4.3 PROBLEM
“Fortune cotton & Agro industries Gourapur, Haveri” Undergoes two process
A and B, in process ‘A’ a by-product is also produced which is then transferred to
process B, where it is completed for the year 2019-120 the actual data included.

Process

A B

Raw materials (in Quintals) 750 50

Rate per Quintal (Rs) 7500 19000

Normal loss (in %) 6 2

Scrap value (per Quintal) 1100 14000

Actual output (in quintals) 450 500

By products (in quintals) (40% of Raw materials) 300 --

Rate of by products (per quintal) 1800 --

Direct wages (in Rs) 650000 670000

Direct expenses 725000 400000

Production overhead 860000 685000

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 37

 A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

Statement Showing Process Account For the Year 2019-20

Process – A

Particular Quintal Rs. Total Particular Quinta Rs Total

s s s l

To, Input 750 7500 562500 By Normal 45 110 49500

0 Loss

To Direct -- -- 725000
Expenses
By sales of 300 1800 540000
by product

To -- -- 860000 By Output 450 17951.85

production Transfer to 1
OH Next
Process (B)
807833
3

To, Direct -- -- 650000

wages

To, 45 17951.85 807833

Abnormal 1
Gain

Total 795 -- 866783 Total 795 -- 866783

3 3

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 38

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

WORKING NOTE:

9. Calculation of Normal Loss:

Input in quintals 750
Less: normal loss @ 6% 45
705

Less: by products (in Qtls) 300

Normal Output (In Qtls) 405
Less: Actual Output 450
Abnormal Gain (in Qtls) 45

10.Calculation of Cost Per Unit:

Total Expenses – Normal Loss – Scrap Value

CPU =
Normal Output

= 5290000 – 28800 – 408000

324

= 14979 per quintal

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 39

 A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

Statement Showing Process Account For the Year 2019-20

Process – B

Particular Quintal Rs. Total Particular Quinta Rs Total

s s s l

To, Input 450 17951.85 8078333 By Normal 10 1400 14000

from 1 Loss
Process A

To 50 19000 950000
Additional
Materials By 500 21978.23
Finished 0
Stock 1098911
5
To Direct -- -- 400000
Expenses

To -- -- 685000
production
OH

To, Direct -- -- 670000

wages

To
Abnormal 10 21978.23 219782
Gain 0

Total 510 -- 1100311 Total 510 -- 1100311

5 5

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 40

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

Working note:
11. Calculation of normal loss:
Input in quintals 500
Less: normal loss @ 6% 10
Normal Output (in Qtls) 490

Less: Actual Output 500

Abnormal Gain (in Qtls) 10

12.Calculation of cost per unit:

Total Expenses – Normal Loss – Scrap Value

CPU =
Normal Output

=10783333 – 14000 – 0
490

= 21978.230 per quintal

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 41

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

THIS TABLE SHOWING FINISHED GOODS

Years Finished goods
2017-18 305
2018-19 350
2019-20 500

FINISHED GOODS

500

305 350

2017-18 2018-19 2019-20

Interpretation
In the 2017-18 finished goods were 305 quintals and it is valued at Rs.
6035878 and in the year 2018-19 finished goods were 350 quintals and it is valued at
Rs. 6815900 and in the year 2019-20 finished goods were 500 quintals and it is
valued at Rs 10989115

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 42

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

TABLE SHOWING INPUT IN QUINTALS INPUTS IN QUINTALS

Years Finished goods

2017-18 500

2018-19 600

2019-20 750

FINISHED GOODS

750
600
500

2017-18 2018-19 2019-20

Interpretation:
In the year 2017-18 input raw cotton was 50 quintals. And in the year 2018-19
input of raw cotton was 600 quintals and in the year 2019-20 due to good harvest
input of raw cotton was increased to 750 tones

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 43

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

INTERPRETATION AND ANALYSIS

4.2 PROCESS : A
1. Abnormal gain is Rs 3.3 crores and it is reduced to 1.65 crores and it is
reduced to 1.65 crores in 2012 and in the year 2017 abnormal again increased
to Rs 606 crores.

2. Direct material for the year 2017 was Rs 50 crore and in the year 2018 it was
reduced to half of 2017 to 2018 it was Rs 25 crore and in the year 2017 direct
material was valued at 100 crores.

3. Direct wages for the 2017 was Rs 40 crore and in the year 2018 it was reduced
to Rs 20 crores and in 2013 it increased to Rs 80 crores.

4. Direct expenses for the year 2011 was 8 crores in the year 2012 it was reduced
to Rs 4 crores and in 2013 to increased to Rs 200 crores.

5. Production overhead for this year 2011 was Rs 100 crores and in the year 2018
Rs 300 crores and in the year 2019 it was introduced to Rs 200 crores.

6. Input for the year 2011 was 6 Lakhs towards and in the year output was 3
lakhs tones and in 2013 was measures to 12 tones.

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 44

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

4.3 PROCESS : B
1. input recurred from process A was 576000 Tons in 2017 and in the 2018
quantity transformed to process to process B was 288000 tones & in 2019
quantity transferred to process C. was 1152000 Tones.

2. Direct material for the year 2011 was 9000 & in 2012 it was Rs. 45000 & in
2013 it was 18000.

3. Direct wages for the year 2011 was 60 crores & in 2012 it was Rs. 30 Crore &
in 2013 was 20 crore it was 120 crores.

4. Direct expenses for the year 2017 were 16.8 crores and in 2018 it was Rs. 8.4
crores and in 2019 it was Rs 33.6 crores.

5. Production overhead for the year 2011 was Rs 150 crores and in 2012 pt was
Rs 75 crores and 2019 it was Rs 300 crores.

6. Abnormal loss was 8400 Tons in 2017 and loss was valued C 10.08 crore and
in 2018 it was 2400 tones and loss was valued Rs 5.04 crore and in 2013 loss
was value C 16800 Tonners and loss was valued C 20.16 crores.

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 45

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

CHAPTER – V
FINDINGS, SUGGESTIONS &
CONCLUSION

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 46

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

CHAPTER – V
FINDINGS, SUGGESTIONS & CONCLUSION

5.1 FINDINGS
 “Fortune cotton & Agro Industries Gourapur, Haveri has a good reputation in
market in manufacturing quality cotton.

 In the year 2016-17 company had a abnormal gain of Rs 446890 in Process A

and a Abnormal loss of Rs 267162 in process B. in the year 2017-18 company
had a abnormal gain of Rs 539240 in process A and a Abnormal loss of Rs
627063 in Process B and in the year 2018-19 company had a Abnormal gain
of Rs 807833 in process A and a Abnormal gain of Rs 219782 in Process B.

 The company sold by product at Rs 1600 per quintal in 2010-11 and finished
goods at Rs 19789.76 per quintal and the rate of by product sale at Rs 1700
per quintal in 2011-12 and finished goods at Rs 19474 and the rate of
byproducts sale at Rs 1800 per quintal in 2012-13 and finished goods at Rs
21978.230 per quintal Since the company prospect is growing yearly.

 Company is having a stable financial condition.

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 47

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

5.2 SUGGESTIONS

Company is having only domestic market company can increase its crushing
potential.

As company crushing capacity is in quintals, it is advice for the company to

fabric cotton and other finished cotton products.
Since government is providing levy a cotton industry. It is suggested that the company
concern cotton in open markets at a market rate.

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 48

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

5.3 CONCLUSION :
The Fortune cotton &Agro industry started in the year 2010-11 since then it
has been successfully caring out its business activities. The company is known for
its systematic of this business. The process costing plays a vital role in the
organization at every aspect of work. This acts as a plus point.

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 49

A CASE STUDY ON “FORTUNE COTTON & AGRO INDUSTRIES”

BIBLIOGRAPHY

 S P Jain And K L Naranga

 www.google.Com

 www.fortunecottonagroindustry.Com

P G Dept. of Studies in Commerce, Government First Grade College, Ranebennur Page 50