Chapter-1: 1.1 Introduction To Cost Accounting

A STUDY ON IMPACT OF COST STRUCTURE ON THE PROFITABILITY AT
ADITYA AUTO PRODUCTS AND ENGINEERING PVT. LTD, AT

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CHAPTER- 1
INTRODUCTION
1.1 INTRODUCTION TO COST ACCOUNTING
Costing was previously described as a methodology and method for determining the value of
a particular item. Value accounting was redefined in the 1960’s to refer to the application of
costing and cost accounting concepts, methodologies, and strategies to the sciences, the art,
and practice of cost management, as well as the determination of the profitability of goods and
services. It also covers the presentation of data that was obtained with managerial decision-
making in mind. It really emphasizes the value of cost accounting as attained during the course
of the term by applying pricing standards in seven additional areas and assisting management
in making the best possible business decisions. The scope of price accounting has expanded to
the point where it now encompasses all types of information that helps executives to achieve
organizational objectives. Since managers are the main consumers of accounting data and
increasingly use the information offered by accounts to set goals and manage corporate
operations, modern price accounting is sometimes referred to as management accounting.
1.2 HISTORY OF COST ACCOUNTING
The field of accounting has a long history. The use of financial accounting should have existed
in early culture. As counting and math were introduced, the barter system was altered by the
introduction of money, and some form of economic accounting emerged. Cost accounting, on
the other hand, may be traced to the latter part of the seventeenth century. Robert Loader's Farm
Money Owed 1610–20 has the earliest mention of value accounting. However, the 18th-century
industrial revolution brought about a significant mechanization of production equipment,
which led to large-scale production.
There have been occasional attempts to implement factory value systems in the UK and the
USA going back to 1805.
NAGARJUNA DEGREE COLLEGE Page 1

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But the idea of top price was once used around 1875 with the aid of some industrialists.
Between 1885 and 1901, a range of publications from London and New York explained the
value of manufacture, the distribution of establishment’s charges, the business organization of
the factories, factory money owed –their standards and practices, and ultimately entire text
book on value accounting principle and practice was once published by using J.L. Nicholson
from New York in 1913. The fee accounting ideas advanced similarly with the opening of the
1st world war. The ‘cost-plus’ thought used to be delivered at some stage in the fighting time
in order to keep away from prolong in executing pressing supplies.
The contract s has been entered on the basis that the dealer would be reimbursed the ‘cost-plus’
a constant proportion to cover administration and other overhead costs and profit. Immediately,
two things happened. One, a demand for qualified persons to calculate value and two,
deliberation of value accountancy obtained a boost-up. More and greater human beings
obtained interested in the profession. In 1919, the institute of fee and works accountants used
to be set up in U.K, which is recognized as the chartered institute of administration accountants
(CIMA) at London. Simultaneously, in USA the countrywide association of value accountants,
which is now known as the countrywide association of accountants, was once also hooked up
at New York? Under the leadership of these two institutes, the occupation and the ideas of cost
accounting developed significantly. Before the 2ND world hostilities, the mechanism of
preferred fee accounting, budgetary control, bendy budgeting and direct costing grew to
become recognized in USA AND UK. Before intendancy, there were a few price accountants
in India, and they were mostly qualified by ICWA (CIMA) London. The need to establish a
career in the United States became apparent during the Second World War, and some Calcutta-
based defaces services employees took the initiative to establish an Indian institute.
Career costing is still in its infancy at that point. The institute of value and works accountants
of India, however, was established in Calcutta after the fee and works accountants of India act
was passed in 1959.
The career counts on in addition significance hotel 1968, when the government of India
introduced selective fee audit beneath part 233-B of the Indian companies act 1956 and framed
cost. For this, we'll use the 1968 Accounting Record Rules.

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Price audit is no longer required, but it is still selected for a few nominated industries. Despite
this, the profession has greatly profited, and more people are now interested in entering the
field.
Due to the widespread usage of fee accounting techniques today, new concepts in information
technology, operational management, and performance measurement have emerged. Modern
value management is defined by concepts like ABC, strategic manipulate system, flexible
product ion machine, etc.
1.3 INTRODUCTION TO COST STRUCTURE
The term "cost shape" refers to the distribution of prices associated with the production of
goods or services across time. While some people mistakenly believe that a cost structure only
refers to the price range used in the manufacturing process, a true value shape will also take
into account the utilization of all types of resources along the route. This can include costs like
labor and utility bills as well as additional one-time costs like revenue and advertising costs.
When attempting to create a sensible photo of the price structure associated with the production
of any kind of excellent or service, the first step is to recognize each person step that occurs.
This begins with the development of the notion for the product, the acquisition of raw materials,
and the introduction of production amenities that are used to create the end product. At the
same time, a fee shape will tackle all labor expenses related with every step.
This will consist of solely the cost of wages and salaries, but also ancillary benefits provided
to employees, such variation, retirement, and health benefits. Essentially any rate that is
incurred to make sure all the imperative aspects for manufacturing is in vicinity will be section
of the fee structure. But once the top or supplier is created, the components of a great cost form
do not end. Nevertheless, there are the issues of storage, promotion, marketing, and sales, as
well as the delivery of the product to the customer.
This means that the price structure must also include any storage fees incurred while the
product is being prepared for sale, any costs associated with advertising and promoting the

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product, and any transportation and transaction costs incurred when delivering the product to
a customer.
Analyzing all these elements as section of finding out the current value structure yield two
important advantages for the producer first, the modern-day circumstance of the cost structure
aids in assisting to decide the unit charge for every product produced obviously, the unit cost
have to exceed the genuine fee of producing the product, or the organization will soon be out
of business. second, evaluating the prices that make up the value structure can often help
perceive points alongside the method that can be subtle for larger efficiency or at least a more
responsible use of the sources on hand. This aspect can additionally have an impact on the last
unit cost, and possibly help to expand the earnings margin on each unit produced.
1.4 MEANING OF COST STRUCTURE
The costs that a business should consider when producing a good or providing a service.
Transaction costs, sunk costs, marginal expenses, and fixed costs are examples of charge
structure types. The ratio of fixed assets to variable costs determines the firm's price structure.
The types and quantities of fixed and variable expenses that a company incurs are referred to
as its cost structure. Smaller components of the idea, such as a product, service, product line,
client, division, or geographic area, can be detailed. If you are using a cost-based pricing
approach, cost shape is used as a tool to determine prices as well as to highlight areas in which
prices may perhaps be reduced or at least subjected to better management. The cost structure
idea is a management accounting concept, not a financial accounting concept.
1.5 DEFINITION OF COST STRUCTURE
There are differences between every business. Just consider it. You would need a lot of
ingredients to bake the cupcakes and a lot of containers to package them if you owned a cupcake
shop. However, if you had a pet store, you would need a lot of meals to feed all your animals.
Additionally, you would have to buy your animals while they were young, and you'd want a
lot of cleaning supplies to keep your shop tidy.

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In order for you to be successful at your business, you may need to know just what kinds of
charges you may have so you can hold song of them. This list of the types of costs your
enterprise will have, or has, is called your & Nbsp; cost structure. In this lesson, you'll study
how a price shape is set up and how you can create one of your own.
1.6 IMPORTANCE OF COST STRUCTURE
The cost structure of a business refers to the composition and distribution of costs incurred in
its operations. Analysing and understanding the cost structure is important for several reasons
 Cost shape evaluation gives for the suited classification of cost.
 It helps in subdivision of costs; manage of materials and suppliers, wages, and different
overhead cost.
 Cost shape evaluation helps to comprehend the institution of requirements for measuring
efficiency; budgeting; accumulation of statistics as a resource to fee determination,
curtailment of losses due to seasonal conditions.
 It additionally helps in willpower of growth and contraction policies.
 Cost structure analysis is essential for assessing the profitability of a business.
 Cost shape evaluation also exhibit the pin point of all manufacturing of every character
products in the organization.
 Cost structure evaluation indicates the actual and honest view all activities associated in
the organization.
1.7 CHARACTERISTICS OF COST STRUCTURE

1. Fixed Costs:
These costs do not increase or decrease when the volume of production changes; rather, they
remain constant in total amount over a wide variety of activities for a given length of time. As

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an illustration, consider construction rent, manager pay, building insurance, and municipal
taxes.
2. Variable Cost:
Total variable cost likewise falls as production volume drops, and full variable value increases
as output volume declines. Cost varies disproportionately to the quantity of goods or services.
For instance, direct materials, direct salaries, authority, royalties, salesman commissions, etc.
3. Economies of Scope:
Costs per unit output fails as output expands. Mining and manufacturing companies belong to
this category- typically to a positive level, when growing scales carry their personal
technological problems.
1.8 MEANING OF COST
The dictionary meaning of cost is a of value is a “loss or sacrifice” or “an amount paid or
required in payment for a buy or for the manufacturing or maintenance of something. Regularly
measured in terms of effort two or time expended”.
1.8 DEFINITION OF COST

The quantity of expenditure (real or hypothetical) incurred on or attributed to a certain product
is how the ICMA London defines pricing.
1.10 MEANING OF COSTING
Costing is an approach and process of ascertaining costs. this method consists of ideas and
regulations which govern the procedure of ascertaining the value of merchandise or services.
The system of costing consists of routines of ascertaining costs by means of historical or
traditional costing, fashionable costing or marginal costing.

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1.11DEFINITION OF COSTING
ICMA London defines costing as “The technique of ascertaining the value of a given thing”
1.12 COST MANAGEMENT
The term cost management is widely, used in business today. Unfortunately, there is no uniform
definition. we use value management to describe the methods and things to do of managers
short-run and long-run planning and control selections that will increase fee for customers and
to decrease expenses of product and services. Value management has an extensive focus. it is
not practiced in isolation. It’s an essential phase of accepted administration techniques and their
implementation.
1.13 COST ACCOUNTING
The information provided by contemporary cost accounting gives managers the data they need
to make decisions. It also provides an understanding of what managers and accountants do
within an organization.
For management accounting and financial accounting, price accounting offers records. Cost
accounting encompasses those aspects of management accounting and financial accounting in
which price facts are collected or analyzed. It monitors and examines economic and non-
financial information pertaining to the cost of purchasing or utilizing resources in the
organization.
1.14 SCOPE OF COST ACCOUNTING
The scope of cost accounting is very vast and consists of the following.

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Cost Ascertainment:
This offers with the collection and evaluation of expenses, dimension of the manufacturing of
different merchandise at different degrees of manufacture and the linking up of production with
expenses. It deals with the different device of estimated costs, trendy prices etc. again the
various techniques for the size of manufacturing have resulted in different method of costing
(such as particular order costing operation costing etc.)
Cost Accounting:
It is the system of accounting for fee which begins with recording of expenditure and ends with
the coaching of statistical data. It is formal mechanism by way of means of which costs or
products or services are ascertained and controlled. Cost can be ascertained through both by
the following the historical or predetermined gadget of costing.
Cost Control:
Cost control is the guidance and legislation by way of government action of the costs of
operating an undertaking. The costs can be controlled can with the aid of standard costing,
budgetary control, applicable presentation and reporting of fee statistics and fee audit.
Cost Reduction
It is a deliberate advantageous approach to reduce expenditure. It is a corrective feature by way

of non-stop manner of analysis of costs, features etc. for similarly economic system in software
of factor of production.
Cost Audit:
Cost Audit is the verification of the correctness of value accountants and a test on the adherence
to the cost accounting plan. Its purpose is now not solely to make sure that value accountants
and different data are arithmetically correct however additionally to see that the ideas and
guidelines have been utilized correctly.

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1.15 THEORETICAL FRAMEWORK FOR COST ACCOUNTING
OBJECTIVES OF COST ACCOUNTING
 To confirm the price per unit of the different merchandise manufactured through a
commercial enterprise concern.
 To study the profit maximization by reducing profit.
 To divulge sources of wastage whether of material, time or rate or in the use of machinery,
equipment and equipment and to put together such reports which may also be indispensable
to control such wastage.
 To disclose sources of economic system by putting in and enforcing a gadget of value

manage for materials, labor and overheads.
 To supply beneficial facts to management for taking a number of financial choices such as
introduction of new products, replacement of labor via computer etc.
ADVANTAGES OF COST ACCOUNTING
 The primary benefits of price accounting are as follows, it helps in most effective utilization
of men, fabric and machines.
 It helps in fee manipulate and decision making.
 It helps management in formula of policies.
 It guides future production policies and helps in growing profit.
 It offers tailored answer for the problems.
 It helps administration in making short-term decisions via use of techniques like marginal
costing etc.
 The cost of idle capability can be easily worked out, when a difficulty is not working to full
capacity.

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DISADVANTAGES OF COST ACCOUNTING
 Cost accounting is an exact science and includes inherent factor of judgments.
 Most of the cost accounting techniques are primarily based on some pre-assumed notions.
 Cost varies with purpose; therefore, cost amassed for one reason will not be appropriate for
some other purpose.
 There a giant range of conventions, estimates and bendy elements due to which it becomes
hard to genuine costs.
 Cost accounting lacks uniform procedure. Itis perchance that two equally equipped
accountants may arrive at one of kind conclusions from the equal data.
 The contribution of value accounting for handling futuristic situations has now not been a
whole lot for e.g. it has now not developed so far, for coping with inflationary situations.
1.16 IMPORTANCE OF COST ACCOUNTING INFORMATION TO

BUSINESS CONCERN
When assisting management, the cost accountant should promote a reasonable charge structure
that generates data useful in managing the operations of the enterprise enterprises. The
optimum analysis, interpretation, and presentation of the data obtained utilizing value
approaches, along with supporting policy recommendations, is a task that is equally important.
Value accounting is a management tool that enables appropriate cost classification and sub-
division, control of materials and supplies, labor costs, and overhead costs. It also enables
budgeting, the collection of statistics that can be used to determine prices, the prevention of
losses brought on by seasonal fluctuations, and the determination of expansion and contraction
strategies.

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Control of substances cost:
A machine for receiving, handling, and issuing substances and supplies is a crucial aspect of
control since all types of price accountant, materials, and materials should be accounted for in
terms of departments, processes, and devices of production or services. Materials in the
stockroom are controlled using the perpetual inventory method.
Control of labor cost:
cost accounting activities encourage accounting for labor with the aid of jobs and through
operations. In many manufacturing concerns every day summary reports are prepared to exhibit
the range of hours and minutes labored and the wage price for each employee per job or
operation. Elaborate structures of incentives, such as piece prices or bonus plans, are in use as
a section of manufacturing fee accounting for that labor which can be recognized with
particular jobs operations. Cost accounting is benefit to the employer by using establishing
requirements to measure efficiency of labor, to help in the assignment of work to personnel
excellent fitted for it and to determine the unit price of labor springing up from every activity.
Control of overheads:
Costs are all very a good deal alike to the general or monetary accountant. He compares charges
of one length with those of another, but he seldom classifies them as to controllable and
uncontrollable items. The fee accountant first separates prices into direct and indirect items.
Direct prices consist of cloth and labor that can be in reality recognized with manufacturing
whilst oblique costs, generally termed as “overhead”.
Measuring efficiency:
For measuring efficiency, Cost Accounting department need to grant data about requirements
and authentic overall performance of the involved activity.
Budgeting:
Now-a-days detailed estimates in phrases of quantities and quantities at drawn up earlier than
The begin of each activity. This is performed to make certain that a attainable course of motion
can be chalked out and the actual overall performance corresponds with the estimated or

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budgeted performance. The instruction of the price range is the function of Costing
Department.
Price determination:
Cost money owed need to grant information, which enables the management to fix
remunerative promoting expenditures for various gadgets of products and offerings in distinct
circumstances.
Curtailment of loss at some point of the off-season:
Cost Accounting can additionally provide information, which may enable discount of
overhead, by using making use of idle ability at some stage in the off-season or by lengthening
the season.
Expansion:
Cost Accounts may provide estimates of manufacturing of more than a few degrees on the
foundation of which the administration may additionally be in a position to formulate its
strategy to expansion.
Arriving at decisions:
Most of the decisions in a commercial enterprise assignment contain correct statements of the
likely effect on profits. Cost Accounts are of integral assist in this respect. In fact, barring
acceptable fee accounting, decision would be like taking a soar in the dark, such as when
production of a product is stopped.
1.17 ESSENTIALS OF GOOD COST ACCOUNTING SYSTEM
The essential features of, good Costing System will consist of the following characteristics
 The costing system used by a given organization must be appropriate for its size, industry,
and information requirements.
 The organization must be able to afford the costing system, and it should provide benefits
that outweigh the cost of setup and maintenance.

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 The system should be more flexible enough to take care of changing business situations and
information needs of the organization.
 The system must to be simple to use and comprehend. Users of costing data need to be
persuaded that the costing system used to generate the data is reliable.
 The Costing System should be devised with the coordinated efforts of all the concerned
departments and their staff. This will reduce the difficulty in implementation of Cost
System.
 The Costing System should ensure proper accounting for materials, labor and overheads and
proper classification of transactions should be done at the level of recording.
 Adoption of Activity Based Costing System will increase the accuracy in allocation,
apportionment and absorption of overheads, which leads to correct ascertainment of cost per
unit of product or service.
 Integration of Financial Accounting and Cost Accounting Systems will avoid duplication of
work. The financial and cost accounts should be interlocked together and should be
reconciled periodically.
 The Costing System should clearly mention the details of records to be maintained and the
degree of accuracy of data required.
1.18 CONCEPTS OF AN INSTALLATION OF A COSTING SYSTEM
The purpose of a costing device is to achieve a specific goal at the lowest possible cost. It
consists of a system of procedures, rules, fee records, etc. It lays the groundwork for upcoming
operations. One single system cannot handle all problems. Depending on the circumstances,
each situation may also design and set up a unique device. Additionally, it can organize the
process for creating charge records and the workout.
A study of the costs and benefits should be used to support the need for installing a costing
device. The costs of building and operating the system are more than offset by the advantages
projected by the costing machine two.

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When a preference to installation a system is taken, it has to be so designed as to serve the

reason of the specific concern. It be really helpful in accordance with the dreams of costing and
be flexible enough to adapt itself to altering conditions.
1.19 BASIC CONSIDERATION OR REQUISITES OF A GOOD

COSTING SYSTEM
 The costing system should be simple and easy to operate. It must suit to the requirements of
the concern.
 The system's advantages must outweigh the costs associated with its installation and
operation in the organization. In essence, the system ought to be very cost-effective.
 The system should facilitate closer coordination among the various divisions in the
organization.
 The system should not disturb the existing organizational set up and if necessary, it should
be introduced gradually.
 The employees concerned should be able to understand the system without much difficulty.
The purpose of costing records and reports should be clear to all.
 There should be promptness and regularity in the preparation and presentation of cost
reports.
1.20 STEPS INVOLVED IN THE INSTALLATION

Before installing a costing device, extreme caution must be exercised to learn about and
examine all relevant factors because if not, the machine will be an improper fit and its full
benefits may no longer be realized. Information on the various parts of the organization should
be gathered with particular care.
It is important to carefully consider the size of the company, the type of business, the nature,
process, and levels of production, the variety of product types and volumes, and various

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technological elements. It is necessary to analyze the systems for paying workers and for
materials.
Forms and original entry archives must be created with the least amount of clerical work and
expense possible. It should be possible to control the machine appropriately and implement an
effective reporting system. It is important to keep in mind the administrative requirements and
the policy that has been developed in response to fee manipulation.
To operate the system more successfully, formal actions such codification, classification, the
creation of charge centers, guidelines for the allocation of indirect costs, the introduction of
formats and monthly reports, and post-installation evaluation of the costing device must also
be implemented.
1.21 PRACTICAL DIFFICULTIES IN INSTALLING A COSTING

SYSTEM
Practical difficulties, aside from technical costing problems which a price accountant has to
face in installing a costing system, are:
Lack of Support from Top Management:
The cost accounting machine is typically introduced in all practical areas without the help of
the top management. Such a method is frequently introduced by even the managing director or
chairman without consulting the department heads.
The departmental managers view it as an intrusion on their time and effort by men and women
involved in a costing system. As a result, it raises questions in the minds of departmental
managers who deal with the gadget as a tool to test their operations.
Resistance from the Existing Accounting Staff:
Whenever a new machine is introduced resistance is natural, as the current body of workers
may sense that they would lose their importance and may additionally be not sure of their role
in the organization.

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Non-Cooperation at Other Levels of Organization:
The foremen, supervisors, and other employees might also object to the additional paperwork
that the costing device may bring about. They might also refuse to work with other departments
to present the information that is unquestionably necessary for the effective and efficient
operation of any accounting system.
Shortage of Trained Staff:
There may additionally be scarcity of value accountants to cope with the work of price analysis,
value manage and cost reduction. The work of costing branch cannot be treated without the
availability of educated staff.
Heavy Cost of Operating the System:
The cost of operating a device could likewise be high unless the costing system is excellently
created to meet the unique requirements of each scenario. Additionally, the system might be
able to give information that is needed by all management levels. It might also require
additional paperwork. As a result, the equipment will be expensive to operate.
1.22 STEPS TO OVERCOME PRACTICAL DIFFICULTIES
To overcome the above difficulties, following steps are suggested:
Support from the Top Management:
Before the installation or operation of a costing system, there must be association dedication to
the machine on the phase of the top management. This will create fee consciousness and
activity in cost improvement amongst technical, production and pinnacle management.
Utility of System to Existing Staff:
The current accounting group of workers must be impressed about the need to supplement the
existing economic accounting system.
It will broaden the job of an accountant and will create new possibilities for the accounting
staff.

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Workers’ Confidence for Cooperation:
The more than a few employees have to be properly skilled involving the advantages which
can be acquired from such a system. Workers’ self-assurance be gained in the gadget to get
their co-operation earlier than steps are taken to put the system in practice.
Training of Existing Accounting Staff:
The present group of workers working in the money owed branch has to be proper, educated
in costing techniques and methods with the help of the Institute of Cost and Works Accountants
of India, Calcutta.
Cost System According to Specific Requirements of the Concern:
The device ought to be installed and operated in accordance to the requirements of a unique
case, so that it may additionally no longer entail heavy value on the concern. It needs to avoid
additional needless work as far as possible. The system, when established and operated, will
provide many advantages to the challenge as in contrast to the price and prove really useful to
the concern.
Proper Supervision:
There ought to be suited supervision after set up and non-stop efforts on the part of the fee
accountant to make the device successful and to acquire the desired purpose of value
ascertainment, cost presentation and fee control.
1.23 Concept of Cost
Cost is a fundamental concept in economics and is the cost incurred by businesses when
manufacturing goods and services, obtaining resources, promoting, or hiring personnel.
To put it another way, cost is the financial expense incurred by a corporate company for a
particular task or activity.
Fee signifies "measurement in economic phrases of the quantity of resources used for the
purpose of producing goods or rendering services," according to Institute of Cost and Work

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Accountants (ICWA). Charges, as used in manufacturing terminology, relate to the entire cost
of the resources utilized to produce or manufacture a good. These resources may consist of raw
materials, labor, and land.
1.24 ELEMENTS OF COST
Material:
Helps in producing or manufacturing goods. Material implies a substance from which a product
is made for example, a company requires materials, such as bricks and cement for establishing
a building.
Labor:
Acts as an important section of production. An organization requires labor to convert uncooked

materials into completed goods. Labor cost is the most important aspect of cost.
Expenses:
Refer to prices that are incurred in the production of finished goods different than material
prices and labor costs.
1.25 CLASSIFICATION OF COSTS
There are different costs for different purposes and no single cost concept is relevant in all
Situations.
1. Classification based on financial nature of costs:
Financial Cost;
This is financial sacrifices that do not involve cash outlays at the time when the cost is
recognized.

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Non - Financial costs;
These are those costs that are not directly traceable through a company's cash flow,
2. Element wise classification of cost
Direct Costs:
These are those which can be identified easily and indisputably with a unit of operation or
costing unit or cost center,
Indirect Cost:
Indirect cost cannot be allocated but which can be identified easily and indisputably with a unit
of operation or costing unit or cost center.
3. Functional Classification of costs:
Production cost:
It refers to costs concerned with manufacturing activity which starts with supply of material
and ends with primary of the product.
Administration Cost:
It is incurred for carrying the administrative function of the organization. Selling and
Distribution cost:
The cost of activities relating to create and simulate demand for company's products and to
secure orders.
Research and Development cost:
This cost is searching for new manufacturing process, improvement of existing products,
process or equipment. And the Development cost is the cost of putting research result on
commercial basis.

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1.26 TECHNIQUES OF COSTING
Uniform costing:
It is the use of same costing principles by several undertakings for common control or
comparison of costs.
Marginal costing:
It is the ascertainment of marginal cost by differentiating between fixed & variable cost. It is
used to ascertain the effect of changes in volume or type of output on profit.
Standard costing;
A comparison is made of the actual cost with a pre - arranged standard cost and the cost of any
deviation is analyzed by causes.
Historical costing:
It is ascertainment of costs after they have been incurred. It aims at ascertaining costs actually
incurred on work done in the past.
Absorption Costing:
It is the practice of charging all costs, both variable and fixed to operations, processes or
products. This differs from marginal costing where fixed costs are excluded.
Direct Costing:
It is the practice of changing all direct costs, variable and some fixed costs relating to
operations, processes or products leaving all other costs to be written off against profits in
which they arise.
1.27 COST CONCEPT

The concept of cost is central to business decision making. To make effective business
decisions, the business manager needs to be aware of a number of cost concepts and their
respective uses.

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 Actual cost- Actual cost means the actual expenditure incurred on producing goods and
services. Value of raw material, wages, rent, salaries paid and interest of borrowed capital
etc. are some of the example of actual cost. Actual cost is also known as absolute cost or
out lay cost or money cost.
 Opportunity Cost- The opportunity cost is measured in terms of the forgone benefits from
the next best alternative use of a given resource. For example, the inputs which are used to
manufacture a car may also be used in the productions of military equipment.
Main points of opportunity cost are:

1. The opportunity cost of any commodity is only the next best alternative forgone
2. The next best alternative commodity that could be produced with the same value of
the factors, which are more or less the same.
3. It helps in determining relative prices of factor inputs at different places.
4. It helps in determining the remuneration to services
5. It helps the manager to decide what he should produce in the factory.
 Explicit cost- An explicit cost is a cost that is directly incurred by the firm, company or
organization during the production. The explicit cost is kept on record by the accountant of
the firm. Salaries, wages, rent, raw material are few example of the explicit cost. The
explicit cost is also known as out- pocket cost. This cost is handy in calculating both
accounting and economic profit.
 Implicit cost- The implicit cost is directly opposite to it, as it is the cost that is not directly
incurred by the firm or company. In implicit cost outflow of cash doesn’t take place. It is
not in the record and is heard to be traced back.
The interest on owner’s capital or the salary of the owner are the prominent example of the
implicit cost. The implicit cost is also known as imputed cost. Through implicit cost, only
the economic profit is calculated.

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 Incremental cost- Incremental costs are the added costs of a change in the level of
production or the nature of activity. It may be adding a new product or changing distribution
channel, or adding new machinery, etc. It appears to be similar to marginal cost, but it is
not managerial cost. Marginal cost refers to the cost on added unit of output.
 Sunk Cost- Sunk costs are costs which cannot be altered in any way. Sunk costs are costs
which have already been uncured. For example, cost incurred in constructing a factory.
When the factory building is constructed cost have already been incurred. The building has
to be used for which originally envisaged. It cannot be altered when operation are increased
or decreased. Investment of machinery is an example of sunk cost.
 Abandonment cost- Abandonment cost are those cost which are incurred for the complete
removal of the fixed asset from use. These may occur due to obsolesce or due to
improvisation of the firm. Abandonment costs thus involve problem of disposal of the asset.
 Book cost – Book cost are those business cost which don’t involve any cash payment is
made but a provision is made in the books of accounts in order to include them in the profit
and loss account and take tax advantage.
 Out of pocket cost- Out of pocket cost are those costs or expenses which are current
payments to the outsiders of the firm. All the explicit costs fall into the category of out of
pocket costs.
 Direct Cost-Direct costs are related to a specific process or product. They are also called
traceable costs as we can directly trace them to a particular activity, product or process.
They can vary with changes in the activity or product. Examples of direct costs include
manufacturing costs relating to production, customer acquisition costs pertaining to sales,
etc.

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 Indirect costs- Indirect costs, or untraceable costs, are those which do not directly relate to
a specific activity or component of the business. For example, an increase in charges of
electricity or taxes payable on income. Although we cannot trace indirect costs, they are
important because they affect overall profitability.
1.28 MEANING OF COST SHEET
A cost sheet is a statement that shows the various components of total cost for a product
and shows previous data for comparison. You can deduce the ideal selling price of a product
based on the cost sheet.
Importance and objectives of cost sheet
Cost sheets help with a number of essential business processes
1. Determining cost: The main objective of the cost sheet is to obtain an accurate product
cost. It gives you both the total cost and cost per unit of a product.
2. Fixing selling price: In order to fix the selling price of a product, you need to create a cost
sheet so you can see the details of its production cost.
3. Cost comparison: It helps the management compare the current cost of a product with a
previous per unit cost for the same product. Comparing the costs helps management take
corrective measures if costs have increased.
4. Cost control: The cost sheet is an important document for a manufacturing unit, as it helps
in controlling production costs. Using an estimated cost sheet aids in monitoring labour,
material and overhead costs at each step of production.

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5. Decision-making: Some of the most important decisions management makes are based on
the cost sheet. Whenever a business needs to produce or buy a component, or quote
prices for its goods on a tender, managers refer to the cost sheet.
1.29 USERS OF COST AND MANAGEMENT ACCOUNTING
Internal Users
Internal users, which use the cost and management accounting information may include the
followings:
(a) Managers- The managers use the information
(i) To know the cost of a cost object and cost center.
(ii) To price for the product or service.
(iii) To measure and evaluate performance of responsibility centers.
(iv) To the know the profitability- product-wise, department-wise, customer-wise etc.
(v) To evaluate the strategic options and to make decisions.
(b) Operational level staffs- The operational level staffs like supervisors, foreman, team
leaders are requiring information
(i) To know the objectives and performance goals for them.
(ii) To know product and service specifications like volume, quality and process etc.
(iii) To know the performance parameters against which their performance is measured and
evaluated.
(iv) To know divisional (responsibility Centre) profitability etc.

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(c) Employees- Employees are concerned with the information related with time and
attendance, incentives for work, performance standards etc. External Users External users,
which use the cost and management accounting information may include the followings:
i. Regulatory Authorities- Regulatory Authorities are concerned with cost accounting

data and information for different purpose which includes tariff determination,
providing subsidies, rate fixation etc. To do this the regulatory bodies require
information on the basis of some standards and format in this regard.
ii. Auditors- The auditors while conducting audit of financial accounts or for some other
special purpose audit like cost audit etc. requires information related with costing and
reports reviewed by management etc.
iii. Shareholders- Shareholders are concerned with information that effect their
investment in the entity. Management communicate the shareholders through periodic
communiqué, annual reports etc. regarding new orders received, product expansion,
market share for products etc.
iv. Creditors and Lenders- Creditor and lenders are concerned with data and information
which affects an entity’s ability to serve lenders or creditors. For example, any financial
institutions which provides loan to an entity against book debts and stocks are more
concerned with regular reporting on net debt position and stock balances.
1.30 COST REDUCTION STRATEGIES

Kaizen Costing: Kaizen costing is the procedure of constant cost lessening that happens when
a product is in the production stage. It is a process of continuous improvement that empowers
steady decreases in cost by fixing the standard.
It is a procedure for decreasing cost which centers around the creation procedure and
accomplishes cost reduction by essentially expanding the productivity of the generation
procedure. Kaizen is authored from two words: KAI which signifies "change" and ZEN which
signifies "for better". Kaizen is a Japanese expression for making upgrades to a procedure in
little incremental sums instead of through substantial developments.

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Value Analysis: Value analysis is one of the major cost reduction techniques. It is an organized
method of identifying and eliminating unnecessary costs associated with product or service by
conducting an analysis of function of each component of the product.
It is an almost universal method used for analyzing existing products and services offered by
production companies with basic principle of offering value for the lowest or optimal
production costs. It is an approach to improving that focuses on improving the value of an item
or process by understanding its constituent’s components and their associated costs.
Budgetary control: The process by which future spending plans are compared with the actual
performance to find out variances is termed budgetary control. It alludes to how managers
effectively utilize budgets to screen and control costs within a given timeframe Budgetary
control guarantees that the targets of the budgetary plans are achieved.
Budgetary control systems cover all phases of business activity, sales, production,
administration and finance and serves as a yardstick for comparison. It is a strategy for reducing
cost that disengages issues by concentrating on those variances which serve as warning signals
to managers.
1.31 STRATEGIES FOR INCREASING THE PROFITABILITY
 FACILITATE TEAM CONTRIBUTION:
One of the first strategies to help in increasing profitability is to meet with members of
your team to establish common goals related to increasing profits.
If team members are all aware of the goals of the organization, it can help them make
decisions that assist in the completion of those goals and motivate them to increase their
productivity.
 CONDUCT MARKET RESEARCH:
Conducting market research can help you identify target audiences and understand their
motivations to purchase your product or services.

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 ANALYZE FINANCIAL STATEMENTS:
Financial statements provide quantitative data on revenue and expenses that you can
analyze to determine which processes you may adjust to increase profitability.
 CREATE BUDGETS:
Developing budgets can help set strict limits on the amount that a business can spend on
certain areas, decreasing the overall expenses of the business.

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CHAPTER - 2
RESEARCH DESIGN
2.1 TITLE OF THE STUDY

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2.2 REVIEW OF LITERATURE

A literature review is a body of writing with the goal of reviewing the important points of
current knowledge, which includes substantive results as well as theoretical and
methodological contributions to a certain field. Because they are mostly based on secondary
sources, literature publications do not report any fresh or unique experimental work. A
literature review can also be understood as an evaluation of an abstract achievement.
The current chapter's objective is to give a survey of literature relevant to cement businesses'
cost analysis or research done on cost, cost management, and cost control approaches. Cost is
a vital component in the proper operation of business units; nevertheless, it has not piqued the
interest of academics in inventing innovative cost management and reduction approaches.
Whatever research have been undertaken, they have mostly focused on the knowledge of cost,
its components, and cost-control measures. A substantial number of studies with pioneering
work in this field have been undertaken abroad; in addition, Indian researchers have conducted
research studies on various elements of cost analysis. There is a wide variety of literature
written on cost analysis, cost control & cost-reduction some of these are listed below:

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Pandu, et al., 2022

Pandu et al., 2022 states that a product's pricing is a reflection of the exchange rate used to
purchase it in the form of money or goods. A corporation must take prudence while calculating
the pricing of a product, service, or good in order to accomplish the intended business goal and
profit. Pricing must consider a number of criteria, as well as the optimal method. The
established price can stimulate customer curiosity and impact consumer purchasing power in
this way. The goal of this study is to discover how the company's price influences consumers'
purchasing power or purchasing interest. In the subject of marketing management, this study
used a qualitative technique in the form of literature reviews. The utilization of qualitative
approaches, as well as literature studies or library research, is required while writing scientific
publications. Because the price of a company's product or service influences customer
purchasing interest, it is strongly tied to consumer purchasing power. The increased purchasing
power of consumers at corporate-set pricing has an influence on accomplishing company goals
and raising profits. [1]
Teddy Chandra (2021):

This paper looked into the effect of capital structure, profitability, and corporate growth
prospects on the Indonesian stock exchange. They've selected 144 manufacturing firms with
whom they'll collaborate for the next six years. The inferential statistics method used to analyze
the study results was generalized structural variable analysis (GSCA). Profitability and capital
structure have a Chapter 3 Research Methodology 65 IIS (Deemed to be University) two-way
causality relationship, meaning they influence each other, and capital structure and growth
opportunities have a negative reciprocal relationship, according to the report. [2]
Sana Amin (2020):

In their research paper entitled “Effect of capital structure on Firms’ profitability: A case study
of Samsung Company limited” descriptive statistics and multiple regression analysis were
examined to analyzed the result.
Various profitability ratios were calculated. The study found negative relation with debt ratio
and positive relation with growth, size of firms’ profitability.

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Author suggested leverage of the firm increases its get tax advantage and firm can repay its
debt in time. [3]
Chong-Chuo Chang (2019):

Wrote a research paper to analysis the Relationship between capital structure and profitability
of evidence from four Asian Tigers. The objective of this study build a desirable capital
structure for shareholders and decrease financial risk and expand profitability. The data were
collected from compustat Global vantage database and applied correlation and regression
analysis for 2003-2016 for the firms in four Asian Tigers Economies. It has been observed
significant negative relationship between profitability and leverage. Therefore, higher the
profitability, lower the leverage of the firm becomes. The author suggested Asian tiger
economies appear to be the engine of growth; they certainly attract investors of the world. [4]
Ashvin Dave (2019):

In their research, they looked at the impact of capital structure on the profitability of the Indian
steel industry. The study looked at the relationship between long-term debt to equity, interest
coverage, long-term debt to total assets, and fixed assets to total assets and company
profitability. Profitability has a clear and optimistic association with fixed assets to total assets.
Furthermore, it has been discovered that steel sector companies in both developing and
advanced countries can be used to gain a better understanding of capital structure. [5]
Dr. Kavita Chavali (2019):

The aim of this study is to examine the capital structure of the Indian hotel industry and its
effect on profitability. The study looked at the financial details of 22 firms in the hotel industry.
The research was carried out using descriptive statistics and correlation analysis. Correlation
analysis revealed a positive relationship between the debt variable and benefit, but a slightly
negative relationship among the other variables. [6]

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Ayman Saleh Mustafaq Harz (2019):

Evaluates impact of profitability and financial performance on improving productive efficiency
in Jordanian Industrial companies. To achieve the aim, the researcher created a questionnaire.
Some research tools, such as Cronbach alpha, multiple linear regression analysis, and Sample
t-Test analysis, were used to analyze the collected data. It was discovered that capital structure
has a statistically important effect on financial efficiency. To improve productive efficiency,
the author suggested growing interest and financial results, as well as raising awareness among
operators and management about the effect of profitability and financial performance on
improving productive efficiency, in order to avoid weaknesses and concentrate on the firm's
strengths. [7]
Mahima Bagga(2019):
The aim to determine the effect of capital structure on profitability an empirical panel data.
This paper scrutinizes the consequence of capital structure on execution of 50 companies of
National Stock Exchange of India from 2008-2017. The data was analyzed using descriptive
statistics, correlation, and multiple panel data regression models. Four different regression
models were used to analyze the relationship between capital structure and profitability. All
four versions were evaluated using a combination of pooled OLS, fixed effects, and random
effects. It was Chapter 3 Research Methodology 63 IIS (Deemed to be University) concluded
that a firm's capital structure has a significant positive impact on its profitability. [8]
Keng (2018):
Keng (An Exploration of Cost Overrun in Building Construction Projects, 2018) stated that
cost overrun in construction projects happen because of changes in design and delay of project.
In order to avoid the cost, overrun they should ensure the design of the project. It should not
be changing often. And they should acquire in depth knowledge about the key project parts.
And there should also a scheduled planning. The planning should be done according to the
important and scope of each work.
And it will avoid the chance for pre mature delivery of material to the project location. By
taking care of these thing we can control the cost overrun in the building construction projects.
[9]

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Kavita Chavali (2018):

Relationship Between Capital Structure And Profitability: A Study of Non-Banking Finance
Companies In India non-Banking Finance Companies play a key role and are an integral part
of the financial system. From 2006 to 2016, the current study aims to investigate the capital
structure of non-banking finance companies and its effect on their profitability. Correlation is
used to analyze the data. The analysis includes 23 finance companies that are listed on the
National Stock Exchange of India. The relationship between NBFCs' capital structure and their
Net Profit, return on Capital Employed, return on Equity, Chapter 3 Research Methodology 58
IIS (Deemed to be University) Return on Assets, and Interest Coverage Ratio is investigated in
this research paper. Reviewed Research paper 1 [10]
2.3 RESEARCH DESIGN

The research design is the conceptual framework within which research is carried out. It serves
as the blueprint for data gathering, measurement, and analysis. A research design is a
fundamental blueprint that directs the project's data collecting and analysis phases. It is the
framework that specifies the type of information to be collected, the data sources, and the data
gathering technique.
A research design is the arranging of settings for data collection and analysis in a way that tries
to balance relevance to the study purpose with procedural economy.
This chapter describes the study's design, including the title, and then goes on to define the
problem, objectives, hypothesis, methodology, data collection tools, geographical area, study
time, study restrictions, and chapter structure.
2.4 INTRODUCTION
Cost accounting is the science and practice of controlling costs and determining the profitability
of goods and services. The cost structure of a firm relates to the numerous types of expenses
that it incurs, and it is often made up of fixed and variable costs. The company's cost structure
is critical to its success.

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It is critical to accomplish cost control and cost reduction. The procedure Cost systems
employed by the firm are emphasized in order to understand the company's cost structure.
The role of cost structure in cost control and cost reduction. This study focused on cost structure
analysis in order to optimize corporate profit.
2.5 STATEMENT OF THE PROBLEM

The research's problem is a study on cost structure analysis to optimize profit. The cost structure
is a critical component in achieving cost control and cost reduction for the firm. In this problem,
I will investigate how the company’s cost structure influence on maximize the profit of the
company. The role of cost structure is increasing the firm profit by decreasing the expenses
will be a studied in order to optimizing firm profit. Cost allocation for maximizing the company
profit in also included in this study.
2.6 OBJECTIVES OF THE STUDY

1. To study the costing system of Aditya Auto Products and Engineering Pvt Ltd.
2. To review the process of cost allocation in order to know the misallocation.
3. To study the factors which influence the cost structure of the product.
4. To study the influence of cost structure on the profitability of the company.
5. To give valuable suggestions, based on findings of the study.
2.7 SCOPE OF THE STUDY

Cost analysis may be applied at several levels. At its most basic, cost allocation is an excellent
strategy for budgeting and accounting practices. It will assist managers in determining the
genuine cost value of a product. It focuses on optimal cost allocation, cost effectiveness, and
cost benefit.
The study's goal is to ensure that expenses are appropriately distributed to the targeted cost
objects and that suitable cost allocation is used to avoid wasting resources on non-profitable
firm items.The study examines the structure of the growling systems in order to enhance profit.
By reviewing the three-year cost sheets and yearly reports, you may learn about the company's
cost structure processes and their importance in maximising profits.

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2.8 RESEARCH METHODOLOGY

A useful approach for solving a research problem in a methodical manner is research
methodology. It may be revived as a science of examining how the research topic was
considerably solved. A research technique is a methodical organization of circumstances for
gathering and analyzing information. The main goal of research technique is to provide a
solution to a problem. The research is concerned with or includes the process for calculating
costs and the various pricing strategies used by the firm.
 Discussion with the staffs of the company to get real information about their activities.
 Study of the annual reports and cost sheet for collecting data for 3years.
2.9 SOURCES OF THE DATA
1. Primary data
The data is collected through discussing with the company personal, and specifically cost
department of the company.
2. Secondary data
The secondary data is collected by using books magazines, company annual reports, websites
and newspapers.
2.10 TOOLS FOR COLLECTION

Tools used for data collection are
 Company website
 Company broacher
 Balance sheets
 Interaction with management and staffs
2.11 PLAN OF ANALYSIS

The data obtained from the documents of study will be analyzed to obtain the system of
comparing the cost structure.

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As a result of analysis and inputs will be recorded in the findings. The following analytical
tools will be used.
 Pie chart
 Bar chart
2.12 LIMITATIONS OF THE STUDY

1. The study is limited to Aditya Auto Products and Engineering Pvt. Ltd.
2. Analysis depends on the data provided by the company.
3. The study is limited to 2 months.
4. The findings and recommendations given in the study have based on Aditya Auto Products
and Engineering Pvt. Ltd.

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2.13 CHAPTER SCHEME
CHAPTER1: INTRODUCTION
1. Introduction of the topic.
2. Meaning, definition and concepts of the topic.
CHAPTER2: RESEARCH DESIGN

1. Statement of the problem.
2. Objectives of the study.
3. Scope of the study.
4. Research methodology.
5. Research instrument.
6. Operational definitions.
7. Limitations of the analysis.
8. Review of literature.
CHAPTER3: COMPANY PROFILE

The history, management, policies, vision, mission, and other details of the company
id mentioned in this chapter.
CHAPTER4: DATA ANALYSIS AND INTERPRETATION

This chapter gives a detailed study of the total information about the company; the
analysis is done with the help of tables, charts and graphs.
CHAPTER5: FINDINGS, SUGGESTIONS, AND CONCLUSION

This chapter deals with summary of findings through data analysis and interpretations
from the previous chapters, and gives suitable suggestions based on the study made
from this project, and this chapter contains the summary providing an overall study of
the project.

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CHAPTER – 3
COMPANY PROFILE
(SOURCE: https://adityaauto.com)
3.1 INDUSTRY PROFILE
Aditya is a specialize auto motive provider of mechatronic organization, precision

components and motors with experience extending from motors with experience
extending from conception to completion. Aditya products are found in one out of every
three vehicles manufactured in India. Auto and structure Aditya private constrained is
a privately owned and competently managed company specializing in the design,
manufacture, and supply of framework and sub systems to fulfill the needs of rapidly
growing automobile industry.
India is quickly rising as an union and redistributing goal of choice for worldwide car
over worth chain with contact assembling of auto parts establishing a tremendous and
powerful income model of Aditya auto center skills lie in the design and assembly of a
wide range of items and essential parts for driving car brands over an enormous range
of vehicles, making structure models, designing turkey arrangements other than giving

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testing and approval administrations, India’s quickly rising as a union and redistributing
goal of choice for worldwide car over the worth chain with contract the appear to be he
stretched out accomplice of choice to driving automaker with item advancement, cost
admiration, cutting, cutting-edge producing capabilities, procedure venture, and more
all client center.
The manufacturing of automobiles and machinery has been influenced by BS6

(Emission regulations) and idealistic ideas. Who now prefers OLA and UBER versus
committing to purchase of an automobile? India’s automobile industry. It starts with
the history of industrial policy, the function of bureaucracy, policy changes, and their
impact on automobile industry. The evolution of automobile industry is broken down
into four periods, with the industry of important events and legislation that shaped the
current dynamic form covered in each phase. It also prepares the way for the expected
5th phase, commonly known as the sunrise phase, to begin after 2013. CAGR and YOY
growth numbers in percent are shown with graphs and tables offer a full view of
industry structure, current configuration, and market share of auto mobile segments,
automotive clusters, production, sales, export, FDI. The chapter finishes with a
discussion of the primary roadblocks and measures/recommendations taken to
overcome these obstacles on global and segment-by-segment basis.
To understand why the automobile business is capital intensive and cyclical in nature,
as well as how the government supports the transportation industry in Indi a through
the execution of various laws, a comprehensive understanding of the industry is
required.
3.2 STAGES IN THE DEVELOPMENT OF INDIAN AUTO SEGMENT

INDUSTRY
India has achieved significant development in the vehicle manufacturing sector. It has grown
at a rate of roughly 20% per year over the last five years, making it one of the fastest growing
segments in the Indian economy. The focus of this industry has shifted away from house hold
demands and toward meeting the needs of global suppliers.

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There is no major global vehicle manufacturer now that does not use parts obtained from India.
The auto part industry produces a wide range of segments that are needed by automobile
industry.
The phases in the evolution of the auto segment business can be summarized as follows before
1983-the Indian auto-part industry began in the late 1940s and by the mid1950s, auto-segment
organizations in the composed division had been established. In Bangalore, MICO established
its first production line for the assembly of diesel fuel infusion frameworks in1954.In1950,
Kirloskar oil motor ltd Began producing delicate walled heads. In1954Escorts opened a
cylinder ring facility, followed by a cylinder plant in 1959. In 1955, the Amalgamation group
opened a battery factory. Because there were few automobile companies and the volumes were
very small, the early pioneers in the auto-part sector had a difficult time obtaining business. Car
manufacturers imported auto sectors, and India auto-segment manufacturers believed it was
difficult to compete with imports in terms of both quality and cost. Until the late 1960s, the
concept of re-appropriation was not well known, and automobile manufacturers used to deliver
the vast majority of segments in-house. Automobile manufacturers have spent a lot of money
in the past several years to set up their own part manufacturing facilities.
3.3 MAJOR PLAYERSINTHEMARKET

 DENSO
 MAGNA
 WEBCO India limited
 Minds Industries
3.4 COMPANY PROFILE

Aditya Auto Product plus Engineering PVT. LTD, Aditya products plus engineering it will
be a privately owned corporation that is professionally managed. The business will be involved
in production, design, and delivery of systems and subsystems to satisfy the needs of the
automobile sector. The company was originally known as Autarky Auto Products when it was

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founded in 1989, and it was renamed Aditya Auto Products in 1999. It is a global tier-1 auto
supplies and a partner to the world’s largest auto makers and suppliers in India. To create,
develop, and distribute products and solutions around the world, the company collaborates
closely with its partners.
The key expertise of Aditya Auto is to design and manufacture a wide range of goods and
critical components for top vehicle brands. Automobile manufacturers from around the world
are flocking to India. People are vital ingredients for a company to provide the best service and
products by ensuring value for money and maintaining the highest quality level. Aditya Auto’s
mission is to expand development and provide the highest quality level. Aditya Auto’ emission
is to expand development and provide the highest quality leadership by increasing their own
proportion through product innovation. Manufacturing capabilities that are cutting-edge and
effective.
Aditya Auto’s major mission is to put the consume first. They want to establish themselves as
a long-term partner of choice for major automakers.
Aditya has an unblemished track record of providing global quality at cheap prices, as well as
a reputation for meeting its customer’s deadlines.
1. Cars were only imported in small numbersinthe1930s.
2. From the 1960s to the mid-1980s, the Hindustan am based or was the first car to
dominate the Indian automotive market.
3. India’s automotive industry began in 1940, with brands such as Hindustan motors
appearing in 1945.
4. The auto mobile industry a rose as a result of this.
5. In 1947, the Indian government, in collaboration with private sector companies,

launched and produced automotive components to meet the demand for
automobiles.
6. Fully built-up auto mobiles were prohibited in 1935.
7. Other countries exports were encouraged.
8. Lufthansa (1987) defines job satisfaction as an emotional reaction to a work situation.

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9. Bullock 1952 cites the results of an assessment as well as a summary of a variety

of specific interests related to the job
10. They are adamant about how health you come together or exceed expectations.
(SOURCE: https://adityaauto.com)
Aditya is specialized automotive supplier of mechatronic systems, precision components and
motors with capabilities spanning right from concept to production. Headquartered in
Bangalore, India, it employs over 1500 associates spread across 8 locations. The company’s
operations are divided into four business sectors.
 Auto motive systems
 Motor and electronics
 Precision computers and tooling
It began its operations Autarky Auto in1989 and established as Aditya Products in February
1999, headquarters in Bangalore, India. Aditya is well known as partner to leading auto makers
and global tier -auto supplier all over the world and in India. It works closely with them to
conceptualize, design and deliver its produced and solution across the globe. Aditya auto
products and engineering (India) Pvt. Ltd is a private incorporated on 5th July1996.
It is classified as non-government company and is registered at register companies, Bangalore.

Its authorized share capital is Rs. 100,000,000 and it’s paid up capital Rs. 60,285,240. It is
involved in manufacture of railway and tramway locomotives and rolling stock.

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Aditya partners with the global automotive industry to deliver design solutions and products to
about 30 automotive manufacturers and more than 40 automotive suppliers with manufacturing
footprint in all the key automotive hubs of India and logistics facilities in strategic locations
globally, Aditya is positioned to leverage the manufacturing growth expected in the region.
Aditya is focused on enhancing its end-to-end design capability, cutting edge manufacturing
technology, first-time right program management and quality focus. With an objective to be
future ready, Aditya is also working on disruptive innovation projects in areas of energy efficient
motors& electronic controllers.
Primary products include door& access systems, driver control systems, motors with
integrated electronics, wiring harness assemblies, connectors; contract manufactured
me and plastic subassemblies, precision stamped and plastic parts and tooling.
3.5 PROMOTERS
NAME DESIGATION
Jayaraman c Founder and vice chairman
J Ramachandran Chairman
Uma Jayaraman Director
Veerendrashadakshari Independent director
William byass Independent director
Mihirjayaraman Chief executive officer
Tejas Jayaraman Chief Technology officer
Suresh Sethuraman Chief financial officer

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1) JAYARAMAN C, FOUNDER AND VICE CHAIRMAN
(SOURCE: https://adityaauto.com/leadership-team)
Jayaraman is a self-made, first generation entrepreneur with a rich industrial experience of over
40 years in the Indian manufacturing industry. Under Jayaraman’s management, Aditya
evolved from a small-scale manufacturing start-up in 1996 to a respected supply chain partner
for supply of automotive components to Indian and global auto-OEMs.
Jayaraman started his career in 1965 with Rayala Corporation, one of India’s leading typewriter
manufacturing firms at the age of 16. He then joined Facit Asia Limited, a Tata Group company
in 1977 and was responsible for ancillary development within the purchasing function. In 1980,
Jayaraman was made responsible for Facit’s prestigious project of manufacturing and selling
vacuum cleaners in India in collaboration with Electrolux AB, Sweden. This was the first time
the product was introduced in India and as part of this role; Jayaraman established the
company’s green field facility in Hosur, Tamil Nadu. He launched the product ahead of
schedule making it a commercial and operational success. In 1985, he joined NTTF Industries,
one of South India’s premier tool rooms and precision stamping firm as Divisional Manager -
Operations and thereafter took over the Marketing function in the role of a General Manager.
During this period, Jayaraman’s effective steering helped NTTF significantly.
Jayaraman turned around Autarky over a span of five years by improving systems and processes
thereby gaining business traction in the product line of window regulators. This business was
then taken over by Rockwell LVS (Automotive Systems vertical which later become
ArvinMeritor) and Jayaraman continued as the Country Manager and Managing Director of the
entity’s India operations for three years. Keen to return to entrepreneurship, Jayaraman then left
ArvinMeritor to start Aditya Auto. During the period 1996 to 2015, Jayaraman piloted Aditya

DODDABALLAPUR
from a 1 Million US$ startup to revenues in excess of 42 Million US$ supplying critical
automotive parts to over 40 clients. At the end of 2015, Jayaraman withdrew from operational
management and took on the vice-chairmanship of Aditya Auto.
2) J. RAMACHANDRAN, CHAIRMAN
Professor J. Ramachandran is Chairman of Aditya. Associated with Aditya since 2012 as an

independent director, Ramachandran is a Professor of Strategy at the Indian Institute of
Management Bangalore. His research focuses on the strategic and organizational challenges of
firms— spanning areas of genesis, growth and governance. His work has been published among
others in the Harvard Business Review, Strategic Management Journal, Journal of International
Business Studies, Global Strategy Journal, and Journal of Product Innovation and Management.
Professor Ramachandran’s research has won multiple best paper proceedings and the IMD FDC
Award from the Academy of Management, USA. His teaching cases have been recognized with
the Best Case Awards from the European Foundation for Management Development, The
Association of Management Development Institutions in South Asia, The Central and East
European Management Development Association, and The Association of Indian Management
Schools; and the Tata Steel-IIMB award. Over the years, he has won multiple best teacher
awards at IIM Bangalore.
Professor Ramachandran is the first Bain Fellow in India. A qualified Chartered and Cost
Accountant, and a Fellow of the Indian Institute of Management Ahmedabad, Professor
Ramachandran has been a Visiting Professor at INSEAD, Fontainebleau, France, the Wharton

DODDABALLAPUR
School of the University of Pennsylvania, USA; and the Carlson School of Management,
University of Minnesota, USA.
Apart from Aditya, Professor Ramachandran serves on the boards of Redington (India) Limited,
Reliance Communications Limited, Sasken Technologies Limited, Redington Gulf FZE and
MVP International, USA.
3)UMA JAYARAMAN, DIRECTOR
Mrs. Uma Jayaraman is a Director at Aditya Auto and manages the CSR initiatives of the
company.
A Master’s graduate in English and Sanskrit, Uma has a professional experience of over two
decades in the education industry as a teacher and administrator. Uma has multiple stints as a
high school teacher and Head of Department for Sanskrit at multiple institutions like National
Public School (NPS), Poorna Prajna Education Centre and National Hill View Public School.
Having a deep understanding of Indian culture and passionate about the propagation of the
Sanskrit language, Uma conducts online courses on global language platforms teaching written
and spoken Sanskrit.
At Aditya, Uma chairs the Corporate Social Responsibility Committee at Aditya Auto and
manages the deployment of the CSR funds to causes like girl child education, apprentice
skilling, mid-day meals for school children and other initiatives.

DODDABALLAPUR
4) VEERENDRA SHADAKSHARI, INDEPENDENT DIRECTOR
Veerendra Shadakshari is an independent non-executive Director at Aditya. Associated with

Aditya since 2016, Veerendra is the Managing Director of the Ramanashree Group, a reputed
Indian business house with verticals in Real Estate, Hospitality, Education and other sectors.
He is responsible for the operations, marketing and corporate planning activities of the group.
He is focused on developing the overall group strategy and identifying opportunities for growth
in new and emerging markets.
Veerendra is an Engineer in Industrial Engineering and Management, BMS College of

Engineering and has completed his Master’s in Business Administration majoring in Finance
and Marketing from the Ohio Manipal School of Business.
5) WILLIAM BYASS, INDEPENDENT DIRECTOR
William (Bill) Byass is an independent Non-Executive Director at Aditya. Bill has an

experience of over four decades in various leadership roles in the global automotive industry.
Based on Melbourne, Australia, Bill also heads Aditya’s resident office in Australia for
customer interaction and business initiatives.

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Starting his career at Caterpillar, Bill joined Rockwell International, a major American
manufacturing conglomerate as part of its automotive business division. Throughout his career
at Rockwell, Bill managed various functional and leadership roles in operations, business
development and sales. As Senior Vice President and General Manager of Rockwell Asia-
Pacific, Bill was responsible for the P&L and operations of multiple global sites and new
program rollouts for automotive OEMs like Ford, VW, GM and Mazda. Bill Byass has
developed an impressive international career in automotive supply, with a focus on
management and leadership, joint ventures and acquisitions, global sourcing, sales and
marketing, and entry to new geographic markets and customers.
Having worked extensively in Europe, Asia and the USA, Bill brings significant international
experience including roles as Managing Director of Rockwell’s automotive operations in
Australia, Director of Asia-Pacific for Rockwell Automotive and Meritor, followed by the role
of Vice President for the Door Systems Division of Meritor, based in Paris, France. Bill has a
strong understanding of the issues facing many businesses and how to plan and deliver growth
and improvements across many organizational cultures. As Vice President and General
Manager Door Systems, he strengthened product and advanced engineering and customer
service. As director Asia-Pacific, he increased sales by acquiring companies in India, Japan,
China and Korea. In addition, Bill established engineering design centers in Nagoya Japan and
Bangalore, India to serve Rockwell and Meritor globally.

DODDABALLAPUR
6) MIHIR JAYARAMAN, CHIEF EXECUTIVE OFFICER
Mihir is the Chief Executive Officer of Aditya. Mihir has over 14 years of leadership experience
in the automotive and power equipment sectors. He leads Aditya’s initiatives in business
planning, marketing, supply chain, commercial and controlling functions.
Starting his professional career at Alstom T&D (one of the world’s three largest players in
energy transmission and distribution); Mihir led the sales and operations planning function for
the company’s $120 million instrument transformer business division in India. During this
period, he was part of the core team that rolled out SAP ERP systems across multiple business
units of the company.
Joining Aditya in 2005, Mihir was part of the core team that managed the group's contract
manufacturing division that was established in the same year. This venture fueled the company's
expansion into overseas markets. After sustaining this unit through to bulk production, Mihir
went on to lead for the implementation of SAP enterprise systems at Aditya, thereby integrating
the company’s manufacturing facilities and logistics centers. He then went on to establish and
head Aditya’s manufacturing facilities in Delhi and Pune. Responsible for the P&L
management of these businesses, Mihir made a significant contribution to business
development and operational control to increase revenues thereby making these units serve as
strategic growth engines for the company.
Mihir has graduated with distinction in both his Master’s in Business Administration from
INSEAD, France and his Bachelors in Mechanical Engineering from Visveswaraiya
Technological University, Bangalore.

DODDABALLAPUR
7) TEJAS JAYARAMAN, CHIEF TECHNOLOGY OFFICER
Tejas is the Chief Technical Officer of Aditya and leads the firm’s forays into future products
and technologies. He is responsible for the R&D, engineering, tooling and program
management functions of the firm. As part of this role, Tejas manages the entire product
development cycle from contract review to production actively coordinating various cross
functional team members across the company, suppliers and customer management teams.
Tejas started his career as a graduate engineering trainee at Larsen & Toubro’s (L&T) process
valves division, Audco Valves Limited where he was one of lead engineers for the development
of Trunnion Mounted Ball Valves for Nuclear Reactor Feed Inputs.
At Aditya, Tejas has successfully rolled out programs for global auto OEMs and Tier-1 system
suppliers and in the process also established robust project management and product lifecycle
management systems, which have helped systematize the development to production cycle.
This has also helped Aditya gain traction and recognition of clients who are entrusting Aditya
with the development of products for multi-location platforms.
After graduating with a Bachelors degree in Mechanical engineering from Visveswaraiya

Technological University, Bangalore, Tejas completed his Post-Graduate degree in Tooling
Engineering from NTTF, Bangalore and a Masters degree in Industrial Engineering and
Operations from University of Michigan, Ann Arbor, USA.

DODDABALLAPUR
8) SURESH SETHURAMAN, CHIEF FINANCIAL OFFICER
Suresh is Chief Financial Officer of Aditya and is responsible for planning, directing and
controlling all financial, human resources and administrative functions for the company. In his
20-year stint, Suresh grew concurrently with the organization while gaining hands on
experience in guiding the financial decision making of management. Over these years, he has
successfully established financial policies, procedures, controls and reporting systems including
ERP systems, treasury systems, payroll and expense management.
A registered chartered accountant from the Institute of Chartered Accountants of India, Suresh’s
educational qualifications include Bachelors degrees in Commerce and General Law and a
course in Company Secretary ship at the Institute of Company Secretaries. He started his career
at M/s Fraser & Ross Chartered Accountants (now part of Deloitte Haskins & Sells) where he
specialized in evaluation of accuracy of accounting systems and internal controls of
corporations, banks and taxation compliances. Suresh has been a key driver in the Aditya’s
growth strategies and continues to be active support to the Board of Directors for steering
various initiatives like mergers & acquisitions, alliance negotiations, corporate restructuring,
trade-union settlements, systems deployment and industry group representations.
3.6 VISION, MISSION AND QUALITY POLICY
VISION
 By2025, we want to be one of India’s top 100automotive suppliers.
 By2040, we want to be one of the top100 auto motive suppliers in the world.

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MISSION
 Ensure customer satisfaction by anticipating and exceeding their needs.
 Involve all employees as growth partners.
 To achieve business excellence, develop process capabilities.
 Pursue achievement while maintaining high ethical standards.
 Increase the value of your company by focusing on productivity-driven growth.
Quality Policy
 Through continuous improvement in our production organizations engineering

knowhow, and superlative examination equipment, Aditya guarantees the timely
delivery of high quality products and services to our frequent customers. All of
Aditya’s facilities have earned the ISO/TS16949, ISO14100, and OHSAS
18000 industry certifications.
 Our divisions additionally adopt quality systems in accordance with customer
specific requirements as result of our diversified customer base.
 VDA6.3, QSB, ASES, and MSME are among them.
 Aditya takes a zero-defect approach to quality and has implemented a

continuous improvement programmer that includes tiered process audits and
real-time monitoring of all quality parameters.
3.7 PRODUCTS/SERVICES PROFILE
Products Profile
1. Window Regulators
2. Door Latches and Sub-assemblies
3. Window regulator motors
4. Headrests

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5. Parking brakes
6. Connecting cables
7. Retention plates and back plates
8. Strut assembly
9. Over mounded connectors
10. Drum and cable
11. Integrated harness
12. Power coos and
13. Other integrated products
1) Window regulator motor

The window regulators are the mechanism that raises and lowers the window. In the same cars,
the window motor and window regulator packaged together, however the window motor can
be replaced independently.
There are two basic types of window regulators:
 The cable type

 The great-drive type
2) Lead wire harness
A wire harness is an arrangement of wires and cables and further components (terminal,
pins, etc.)
The cables are bundled in a cable bundle, for example by clips, cable ties, etc. and are
combined in to wire harness and clamped together a special work bench or an ail board.
3) Electronic shift actuator motor
When it receives a control signal, an actuator responds by converting the sources
Energy into mechanical motion. In the electric, hydraulic, and prelatic sense, it is a form
of automation or automatic control. An actuator is mechanism by which a control
system acts upon to perform an operation or task.

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4) Retention plate and black plate
A back plate is a plate that is positioned at or forms the rear of anything. Secure the
retention plate to the rear plate using the two supplied screws. When employing twin
cylinders, the cylinder bands are used to connect them, and the rear plate is secured to
the studying with wing nuts, which clamps the bands to the cylinders.
5) Cross arm
To drape one arm over the other in front of your torso, fasten it at right angles to an
upright so that each hand is on the opposite elbow. He stood in the doorway with his
arms crossed and a furious expression on his face. An arm or bracket that crosses a pole
or post and is used on poles to transport and divide wires.
6) Compact latch
All locks ensure that doors, panels, and or her surfaces are kept shut. They differ in term
so actuation –the mechanism that closes the latch-and holding type. You can also
acquire a door lock latch, which allows you to lock your latch for extra security.
7) Drum cable
A cable reel is a round, drum-shaped object such as spool used to carry various types of
electrical wires. Cable reels. Which can also be termed as drums, have been used form
many years to transport electronic cables, fiber optic cable and wire products?
8) Parking brakes
In road vehicles, the parking brake, also known as a handbrake or emergency brake (e-
brake), is a mechanism used to keep the vehicle securely motionless when parked. In
most vehicles, the parking brake operates only on the rear wheels, which have reduced
traction while braking.

DODDABALLAPUR
9) Struts assembly
A complete strut is a combination of two main parts: a spring and a shock absorber. The term
structure refers to the shock absorber portion only, but other times the term issued to denote the
entire assembly including the spring.
3.8 SERVICES PROFILE

Aditya provides a diverse range of services to its clients.
 Delivering international quality at are reasonable price.
 Customers receive ongoing assistance in resolving issues that develop as a result

of the product.
 The company provides a full description of their products as well as sample units
to their customers.
 The company creates and manufactures products that meet the needs of its consumers.
3.9 AREAS OF OPERATION

The area of operation of Aditya auto products limited is in national and regional level
only. Aditya auto products and engineering ltd has wide distribution network.
Headquarter is situated at Doddaballapura, north Bangalore. It has 8 manufacturing
plants and their locations in India.
Products Area of operation
Door and access system Doddaballapura

Bawl (Delhi)
Chakan Pune
Wiring harness division Doddaballapura
Contract manufacturing division Doddaballapura
Electrical and electronic Doddaballapura

division
Motor division Doddaballapura

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3.10 INFRASTRUCTURE FACILITIES

Aditya has a network of manufacturing, design and integration facilities spread over
30000 sq.ft across four campuses in and around Bangalore, and one in Tamilnadu..
The manufacturing process of Aditya auto takes in principle production plans for door
access division, writing harness and integrated products division and contract
manufacturing division which is located in Bangalore, and the vertical integration
facility at Trichy, Tamil Nadu transportation.
3.11 COMPETITORS AND THEIR MARKET SHARE

 IFB automotive limited: -Market Share
Automotive components are manufactured by IFB Automotive India. It is known as at

technology provider for safety and comfort and it creates new products in response o
consumer needs.
 INTEVA products
It is the world’s largest automotive supplier, with operations in 18 countries and

42 locations. It sells its products all over the world.
 MAGNA international Inc.

It is global auto motive supplier the company has been recognized with several
automotive news pace award for its new innovations. It provides an employment
opportunity for 139000 people.
 DURA automotive system
It is a self-contained automobile component designer and manufacture. It has the most

innovation automobile development solution.
 THECHINO industries limited
The company manufactures along with suppliers the auto parts to various companies.

DODDABALLAPUR
 SHIVNI automotive and systems private limited
The company is engaged during sale of motor vehicle parts as well as accessories to
various auto mobile companies.
3 .1 2 CO M PE T I T I VE A D V A N T AG E S
1) STRATEGIC CUSTOMER RELATIONSHIPS
 Seek and use customer feedback to consistently drive for increased responsiveness
to meet and antic.
 Display insight into customer's unstated needs and competition's moves. Translate
business strategies into clear objectives and tactics.
2) LEAN SUPPLY CHAIN
 Display zero tolerance to waste and complacency. Eliminate roadblocks,

barriers and inefficiencies.
 Adopt a value oriented approach to all investment and operational decisions.
3) TECHNOLOGY PARTNERSHIPS
 Quickly embrace new technologies to increase capabilities.
 Embrace care for detail as the primary mind set to develop, evaluate and
improve products and processes.
4) DEEP VERTICAL INTEGRATION
 Influence and shape decisions of others, negotiate persuasively and build

common ground to create win-win results.
 Be flexible to customize processes and redesign systems to delight and add

value to customers.

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5) AGILE PRODUCT DEVELOPMENT
 Focus on the big picture and solve problems despite incomplete and ambiguous
information.
 Sensitize the team to solve problems quickly and orchestrate the pace of change
to achieve the development needs.
3.13 COMPANY COMMITMENT
1) SOCIETY: DEDICATION TO SOCIETY
Since 2002, Aditya has remained committed for the betterment of the community by
donating 5% of annual profits through social initiatives.Beyond just contributing
time and resources to worthwhile social causes, Aditya supports Project Nanhi Kali
in association with Mahindra to help provide primary education to underprivileged
girls in India to help them break the cycle of poverty and malnutrition. Aditya also
actively trains new potential hires through Skill India to embody life-changing
technical knowledge and an impeccable work ethic.

DODDABALLAPUR
2) ENVIRONMENT: GOING GREEN
All facilities are internationally certified as per ISO-14001 as our properly managed
environmental managed systems to better ensure waste reduction and better quality
of the environment. In addition, Aditya follows RoHS standards to restrict the use
of hazardous materials.
As certified by the internationally-recognized standard ISO-14001, Aditya combats all

environment hazards in its production such as air pollution, water and sewage issues, waste
management, soil contamination, and additional problematic factors Aditya dutifully reduces
its carbon footprint through holistic everyday operational practice to lessen the effects of
climate change.
3)SAFETY: SAFE WORKPLACE
Exceeding the best international benchmark for workplace safety to ensure very few
production delays and maintain a safe workplace environment, Aditya adheres diligently to
OHSAS 18001.

DODDABALLAPUR
(SOURCE: https://adityaauto.com/leadership-team
3) INDUSTRIAL SKILL DEVELOPMENT: APPRENTICESHIP PROGRAM
Launched in 2015 and supported by international allies, NEEM aims to train 400 million
people real, employed skills to escape poverty. As an active participant under the NEEM
initiative, Aditya provides much- needed training free transportation, and everything else
needed for the trainees to valuable skill in the field.
After spending 3 years being trained for the career, learning about the inner-workings of the
industry, and is implemented, trainees have the opportunity to be gainfully employed at
Aditya.

DODDABALLAPUR
3.14 RECOGNITIONS
 FKCCI (Federation of Karnataka Chambers of Commerce & Industry) Winner 2018TATA

Motors Vendors Meet 2012
 ACMA Center for Technology - Product Improvement through Layout Changes.
 Maruti Suzuki Vendor Performance Award – Kaizen.
 The Economic Times - India Manufacturing Excellence Awards 2012 (CMD Unit).
 TATA Motors Vendors Meet 2012 - Excellence in Technology & Innovation.
 Honda - Valuable contribution in HCIL's 20 Years of successful journey.
 Toyota Kirloskar - Outstanding contribution by achieving 'Zero Defect Supplies' Idol.
 ACMA - UNIDO Partnership Programme for Productivity & Quality Improvement.
3.15 PURPOSE OF THE COMPANY
 To become a top 100 Automotive suppliers in india by 2025.
 To become a top 100 Automotive suppliers globally 2040.
 Ensure customer delight by proactively exceeding expectations.
 Involve all employees as partners in growth.
 Build process capabilities to achieve business excellence.
 Seek success without compromise on ethical standards.
 Enhance firm value through productivity led growth.

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3.13 SWOC ANALYSIS
STRENGTH
 This corporation has a strong brand image with cutting-edge technologies which
makes the company differentiate
 Aditya has a good working relation by effective HRD.
 The goal is to satisfaction to the customer.
 Management with a high level of involvement.
 The company’s management is very efficient.
 The company’s products are of great quality.
 Place a premium on quality and environmental stewardship.
 Vendor base for auto components that is competitive.
 Manufacturing plants are eligible for government subsidies.

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 Strong engineering design skills,
 Access to raw materials is simple.
 Low cost with a strong technological foundation Close proximity to the market.
WEAKNESESS
 There are no tools ignore production capabilities in-house.
 Importing specific resources raises the cost of production.
 Outstanding critical components.
OPPORTUNITIES
 Market potentials enormous, both domestically and internationally.
 Aditya’ s product line is diverse enough to meet the needs of a wide spectrum
of customers.
 Consumers so that it can take advantage of the chances in the face of a threat
from a competitor.
 Demand is continuing to rise
 Increased training will help to develop the local skill base.
 An expending auto mobile market has the potential to generate new jobs.
 Out sourced design is in high demand. Export market expansion.
CHALLENGES
 The price of gasoline has risen.
 Difference in technology as compared to other countries.
 The auto mobile sectors reliant on government policies.
 For the same product, there are new competitors.
 There is a significant demand for company training.

DODDABALLAPUR
3.13 FUTURE GROWTH AND PROSPECTS
 With the changing needs of customers, Aditya auto wants to be the number one
solution for the automotive industry.
 In the direction of designing products that meet the needs of clients as
technology and generation evolve.
 It has eight manufacturing facilities, and the corporation I considering
expanding its facilities around the world.
 To improve profit growth on tandem with the firm’s value.
 Providing the highest level of service to consumers and building long-term

relationships with them.
 To provide customers with the highest quality products and services possible.
 To hold the market’s top spot in terms of quality while keeping costs and
technology in mind.

ADITYA AUTO PRODUCTS AND ENGINEERING PVT. LTD, AT DODDABALLAPUR
CHAPTER-4
ANALYSIS AND INTERPRETATION OF DATA
INTRODUCTION:
In this chapter the subject allows the cost structure analysis has been given in detail. The chapter
contains the study of the cost structure analysis at Aditya Auto products and engineering pvt.
Ltd. explained by using graphical and table representations of data. An analysis of revenue
receipts has also been along with the study of fare structure and fare revision.
The information is collected, summarized, classified, tabulated, edited, and finally analyzed
interpreted to get the end result as to know the performance of Aditya Auto products and
engineering pvt .ltd. Cost structure analysis is the cost of producing each individual product as
mentioned separately. This method of cost is applied to undertaking which provide services rather
than production of commodities. In this chapter contains the study of cost structure to determine
the profitability of a company. Study focused on misallocation of funds to control cost.
Meaning of data:
Data are the route of information which helps for the study and formulates the interpretation of
study to find a solution for the research problem. Data is the true indicator of research problem if
we studied it clearly, we must get the probable solution to the particular problem.
Meaning of analysis:
Analysis refers to the process of establishing the meaningful relationship between the item of two
financial statements with objective of identifying the financial and operational strength and
weakness of the firm.
Data analysis:
It is a process of verifying and modeling and transforming the data in a systematic way trying to
get the useful information from the data to arrive at proper conclusions.

Meaning of interpretation:
Interpretation refers to the combination of various components and definite conclusions may be
drawn about the earning capacity, profitability, liquidity, solvency, trend etc.
comparison of therefore it is much important for meaningful information.
Meaning of data interpretation:

Data interpretation is the process of making a sense out of a collected information has processed
in a systematic way. This collected information is presented in various graphical or tabular
representations hence need an interpretation of some kind.

TABLE NO- 4.1
THE TABLE SHOWING THE TOTAL RAW MATERIAL

CONSUMED
2020-21 2021-22 2022-23

PARTICULARS In Rs. In Rs. In Rs.
OPENING STOCK 84,53,357 10,23,95,150 11,49,76,904
PURCHASES 96,11,812 17,98,85,389 7,29,40,229
CLOSING STOCK 102395150 11,49,76,904 12,94,48,035
CONSUMPTION 12,04,60,319 39,72,57,443 31,73,65,168
(Source: Company annual report)
Analysis:
Raw material consumed in the year 2020-21 Rs 12,04,60,319 in the year 2021-22
Rs39,72,57,443 in the year 2022-23 Rs 31,73,65,168. Comparison between 2020-21 and 2021-
22 raw material consumption shows clearly that the consumption increased by Rs 27,67,97,124
in the year 2021-22, and comparison between 2021-22 and 2022-23 raw material consumption
was decreased by Rs 7,98,92,275 because of reduction in the utilization of raw material.

GRAPH NO-4.1
THE GRAPH SHOWING THE TOTAL RAW MATERIAL

CONSUMED
450000000
400000000
350000000
300000000
250000000 2020-21
200000000 2021-22
2022-23
150000000
100000000
50000000
0
OPENING STOCK PURCHASES CLOSING STOCK CONSUMPTION
INTERPRETATION:
From the above diagram it can be inferred that the raw materials consumption has increased
gradually from the year 2020-21 to 2021-22 but from 2021-22 to2022-23 it has reduced. There is
nearly 47.58% increase in 2021-22 when compared to 2020-21 and also there is 38%decrease in
raw material consumption in 2020-21 as compared to 2020-21. Raw materials have been
fluctuating because of sales during the year.

TABLE NO- 4.2
THE TABLE SHOWING FACTORY OVER HEADS
PARTICULARS 2020-21(In Rs) 2021-22(In Rs) 2022-23(In Rs)

REPAIRS AND MAINTENANCE 29,176 74,710 2,65,835.5
VEHICLE MAINTENANCE 4,51,403 1,99,671 1,21,885
WATER CHARGES 6,17,921 2,90,094 30,83,771
TRANSPORTATION CHARGES 4,23,216 3,45,484 94,239
ELECTRICITY 1,43,716 14,24,372 20,22,290
SECURITY CHARGES 2,16,000 2,44,000 2,64,000
TOTAL FACTORY OVERHEAD 18,81,432 25,78,331 58,52,020.5
Analysis:
From the above table it can be analyzed that the factory overheads was Rs 18,81,432 in the year
2020-21, but in the year 2021-22 it was increased by Rs 6,96,899 and in the year 2022-213 it
was increased by Rs 32,73,689.5 as compare to the year 2021-22. Factory overhead has been
fluctuating on the basis of volume operation done during the year’s organization need to trouble
shoot the expenditure in order to control the factory overhead.

GRAPH NO- 4.2
THE GRAPH DEFICTING FACTORY OVERHEADS
TOTAL FACTORY OVERHEAD

7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
2020-21 2021-22 2022-23
Interpretation:
From the above diagram it can be inferred that the factory overhead are increased in the
year 2021-22 when compared to the year 2020-21 by 25% where as in the year 2022-23 it
has increased by 56.75% which has taken away the profits of the company and adding up
to selling price of the company. The company should concentrate on the factory overhead
otherwise it is necessary to increase the selling price of the company.

TABLE NO-4.3
THE TABLE DEFICTING SALARY AND ALLOWENCES
SALARY 5,25,892 62,47,692 59,00,912
WORKER BONUS 158233 233090 2,49,019
STAFF WELFARE 71,430 61,533 1,14,238
TOTAL 7,55,555 65,42,315 62,64,169
Analysis:
Salary and allowances in the year 2020-21was Rs 7,55,555 in the year 2021-22 Rs
65,42,315 in the year 2022-23 Rs 62,64,169. Comparison between 2020-21 salary and
worker’s bonus was increased by Rs 57,86,760 in the year 2021-22 and the amount was
decreased by Rs 2,78,146 in the year 2020-21 when compared to year 2020-21. Salary and
worker bonus has been increasing gradually organization should fixed the target spending
on the salary and bonus of employees in order to control the cost.

GRAPH NO- 4.3
THE GRAPH DEFICTING TOTAL SALARY AND ALLOWANCE
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
TOTAL
2020-21 2021-22 2022-23
Interpretation:
From the above diagram it is clearly inferred that the wages and worker bonus was increased in
the year 2021-22 by 48.24 % in the year 2022-23 the amount was decreased by 46.19 % when
compared to year 2021-22. The graph is indicating that the salary and allowances of a company
have been increasing based on volume of operations it is necessary expenditure at the same time
make sure about the cost control also.

TABLE NO- 4.4
THE TABLE DEFICTING DEPRECIATION EXPENSES
TOTAL DEPRECIATION COST 23,58,729 26,45,143 36,60,323
Analysis:
From the above table it is indicating that the depreciation in the year 2020-21was Rs 23,58,729
and in the year 2021-22 it was increased Rs 2,86,414 and It was further increased to Rs 10,15,180
in the year 2021-22. It is clearly indicating that the organization is purchasing the maximum
number of machineries from year to year that's why the depreciation cost is in the increasing trend.
The organization should purchase required machineries in order to control cost and efficient
utilization of available resources.

GRAPH NO- 4.4
THE GRAPH DEFICTING DEPRECIATION EXPENSES
TOTAL DEPRECIATION COST

4000000
3500000 TOTAL
3000000 DEPRECIATIO
N COST
2500000
2000000
1500000
1000000
500000
0
2020-21 2021-22 2022-23
Interpretation:
The above graph shows that the depreciation expenses have gradually increased from year
to year. In the year 2021-22 it was raised by 30.53 % and in the year 2022-23 it was again
raised by 42.25 % when compared to year 2020-21. From this it can be indicated that there
was a purchase of fixed assets in both the years, And organization should ensuring that the
efficient utilization of available resources in order to control cost.

TABLE NO- 4.5
THE TABLE DEFICTING ADMINISTEATION OVERHEADS

PRINTING AND STATIONARY 57,354 2,177 31,988
RATES AND TAXES 11,04,055 5,80,194 5,31,671
TELEPHONE CHARGES 53,705 27,658 2,02,815
PROFESSIONAL CHARGES 83,125 2,875 35,400
FIRE INSURANCE 25,051 20,000 48,334
TOTAL ADMINISTARATION
OVERHEADS 13,23,290 6,32,904 8,50,208
Analysis:
From the above table it can be analyzed that the overheads have been fluctuated gradually
from the year 2020-21 to 2021-22. In the year 2020-21 the total overheads were Rs
13,23,290 and in the year 2021-22 it was reduced to Rs 6,32,904 and in the year 2022-23
it was Rs 8,50,208 and the trend was clearly indicating that expenditure management of a
company at favorable condition to control cost. Utilize the available resources efficiently
and to achieve the cost control and reduction.

GRAPH NO-4.5
THE GRAPH DEFICTING ADMINISTEATION OVERHEADS
TOTAL ADMINISTARATION OVERHEADS

1400000
1200000
1000000
800000
600000
400000
200000
0
2020-21 2021-22 2022-23
Interpretation:
The above graph shows that the administrative overheads have been speculated gradually
from year to year in 2021-22 overheads reduced to 22.55 % compared to 2020-21. And in
the year 2022-23 it was reduced by 30.30% when compared to 2020-21 the above chart
clearly indicates that the company is in favorable position by managing efficiency in cost
control even though volume of sale increases.

TABLE NO- 4.6

THE TABLE DEFICTING TOTAL CURRENT ASSETS
CURRENT INCREASED/DECREASED
YEAR ASSETS(In Rs) %
2020-21 10,23,95,150 29.52%
2021-22 11,49,76,294 33.15%
2022-23 12,94,48,035 37.33%
Analysis:
The above graph shows that the current asset was increased in the year 2021-22 by 33.15
% when compared to 2020-21, this is because of operations incurred in that year. In the
year 22-23 the current assets were increased by 37.33%compared to 2021-22 due to low
operations incurred in the year. From the above table it is clearly indicating that the
organizations volume of operation is increasing year by year by maintaining good
liquidity position of a company.

GRAPH NO- 4.6
THE GRAPH DEFICTING TOTAL CURRENT ASSETS
DEFICTING TOTAL CURRENT ASSETS

140
120
100
80
60
40
20
0
INCREASED/DECREASED %
2020-21 2021-22 2022-23
Interpretation:
The above graph shows that the current asset was increased in the year 2021-22 by
33.15% when compared to 2020-21, this is because of operations incurred in that year. In
the year 2022-23 the current assets were increased by 37.33 %compared to 2020-21 due
to low operations incurred in the year. From the above graph it is clearly depicting that
the organization liquidity position of a company very good.

TABLE NO- 4.7
THE TABLE DEFICTING TOTAL CURRENT LIABILITY
CURRENT INCREASED/DECREASED
YEAR LIABILITY(In Rs) %
2020-21 6,87,36,188.5 29.75%
2021-22 7,46,20,596.4 32.30%
2022-23 8,76,69,082 37.95%
Analysis:
It is clear from the above table shows that the total current liability was in the year 2020-
21 Rs 6,87,36,188.5. But is has increased to Rs 7,46,20,596.4 in the year in2021-22, again
it was a slight increase in the year 2022-23 that was Rs 8,76,69,082 From the above table
it is clearly depicting that the organization is maintaining short term obligations in a neat
and systematic way by maintaining the very good liquidity position in the company.

GRAPH NO- 4.7
THE GRAPH DEPICTING TOTAL CURRENT LIABILITY
CURRENT LIABILITY
140
120
100
80
60
40
20
0
INCREASED/DECREASED %
2020-21 2021-22 2022-23
Interpretation:
The above graph shows that the current liability was increased in the year 2021-22 by
32.30 % when compared to 2020-21, this is because of operations incurred in that year. In
the year 2022-23 the current liability was again increased by 37.95 % compared to 2020-
21 due to low operations incurred in the year. It is clearly indicating that the company is
maintaining efficiently by paying short term obligations neat and systematically.

TABLE NO- 4.8
THE TABLE DEFICTING TOTAL SALES
SALES 11,18,68,598 20,52,52,110 8,03,27,789
Analysis:
From the above table it is clear that the total sales were in the year Rs 11,18,68,598 2020-21. but
is has increased to in the year Rs 20,52,53,110 in 2021-22, but there was a slight decrease in the
year 2022-23 that was Rs 8,03,27,789. From the analysis it is came know that the organization
should not maintaining the promotional advertisements in a consistent that's why organization
sales have been fluctuating from the year by year.

GRAPH NO- 4.8
THE GRAPH DEFICTING TOTAL SALES
SALES
250000000
200000000
150000000
SALES
100000000
50000000
0
2020-21 2021-22 2022-23
Interpretation:
Form the above graph shows that total sales was increased in the year 2021-22 by
51.64%when compared to 2020-21, this is because of heavy operations incurred in that
year. In the year 2020-21 the total sales decreased by 28.15% compared to 2020-21 due
to low operations incurred in the year. From the above graph it is Cleary depicting that
the sales have been speculating based on the promotional and publicity activities done by
the organization. So organization should maintain the promotional activities consistently
to increase the volume of sales in the company.

TABLE NO-4.9
THE TABLE DEFICTING NET PROFIT
NET PROFIT 38,80,623 30,33,43,517 21,83,41,419
ANALYSIS:
From the above table it is clear that the net profit were in the year Rs 3,88,06,623 2020-21. but is
has increased to in the year Rs 30,33,43,517 in 2021-22, but there was a slight decrease in the year
2022-23 that was Rs 21,83,41,419. From the analysis it is came know that the organization should
learn about financial strategies you can use in organization to improve profit and decrease costs
from the year by year.

GRAPH NO- 4.9
THE GRAPH DEFICTING NET PROFIT
NET PROFIT
350000000
300000000
250000000
200000000
150000000 NET PROFIT
100000000
50000000
0
2020-21 2021-22 2022-23
Interpretation:
The above graph shows that the total net profit increased in the year 2021-22 by Rs.
30,33,43,517 compared to 2020-21, this is because of heavy operations incurred in that
year. In the year 2020-23 the total net profit decreased by Rs 21,83,41,419 compared
2020-21 due to low operations incurred.

TABLE NO-4.10
THE TABLE DEFICTING NET PROFIT AND SALES
NET PROFIT 3,88,06,623 30,33,43,517 21,83,41,419
SALES 11,18,68,598 20,52,52,110 8,03,27,789
Analysis:
It is clear from the above table that the net profit was Rs 3,88,06,623 in the year2020-21
but it has been increased to Rs 30,33,43,517 in the year 2021-22 , the total net profit
increased to Rs 21,83,41,419 in the final year 2022-23.the table depicting that the net
profit has been increasing from to year .From the above table the net profit of a company
is increasing year by year in small volume at the same the volume of money is increasing
year by year small rise in profit volume will not positively impact to the organization , at
the same time sale of a company have been fluctuating year by year.

GRAPH NO-4.10
THE GRAPH DEFICTING NET PROFIT AND SALES
350000000
300000000
250000000
200000000
NET PROFIT
150000000 SALES
100000000
50000000
0
2020-21 2021-22 2022-23
Interpretation:
It has been showed from the above diagram that in the year 2020-21 to 2021-22 it is
increased at 37% % and in the year 2021-22 to 2022-23 it has slightly increased to 16%
% and this indicates net profit is in increasing trend from year to year gradually. From the
above table depicting that the net profit of a company is increasing year by year but sales
have been speculating because of low effective promotional measures done by the
company.

CHAPTER - 5
FINDINGS, SUGGESTION AND CONCLUSION
5.1 FINDINGS:
1) The raw material consumption has speculative over the year has also increased sales. There
is an increase in the 2021-22 by 47.58% and by 38% decreased in the year 2022-23 when
compared to the year 2020-21 has sales increased, the consumption of raw material has
also increased has also increased has sales decreased consumption of raw materials has
decreased consumption of raw materials has also decreased proportionately.
2) The factory overhead was Rs 18,81,432 In the year but it was increased by 25 in the year
2021-22 and also increased in the year 2022-23 by 56.75% as compared to 2020-21.
3) The salary and allowances expenditure has increased 2021-22 and 2022-23 were compared
to 2020-21.
4) The depreciation expenses have increased in the year 2020-21 by 10.82% and again
increased in the year 2021-22 by 35.35% which can be understood that some machines
were purchased.
5) The administrative overheads changes from year to year. there is an increase in 2020-21
and decrease 30.50% in the year 2021-22 and increase 24% compared to 2020-21.
6) The company’s ability to pay it’s short –term obligations means current assets increasing
year to year.
7) Current liability of the company has been fluctuating due to variable cost operations
incurred in the company.
8) The net profit of the company has been increasing year to year.
9) The profitability of the company depends on cost and sales of the company.

5.2 SUGGESTIONS
1) It would maximize a company’s market value which minimizing its cost of capital, if
it maintains optimum cost structure.
2) If company maintains cost accounting as per standards so that an analysis of cost is

made and planning procedure can be under taken for future that would benefit the
company from misstating cast or manipulating financial status.
3) The firm should accelerate the sales promotion and publicity activities in order to
increase the volume of sales.
4) The salary and allowances increasing over the year hence it is suggested to be
reasonable. Firm should be aware about the measures to reduce the machineries. Good
maintenance leads to effective working conditions of the machineries.
5) Company can also inculcate the quality standards technique in production in order to
produce a low-cost high-quality product with fewer defects.
6) It is suggested that the company should ensure that the reduction in costs improve
profitability position of the company.
7) The company should have effective and efficient control on cash inflows and cash
outflows in order to meet payment obligations.
8) The only way to maximize profit is either increase sale price or decrease cost of cost
control.

5.3 CONCLUSION
In conclusion it can be said that the company is doing extremely well with regards to the
management of cost, as the authority and responsibility of each executive is well defined. The
cost incurred is collected from each area of responsibility and reporting and management has
drawn optionally good performance
It is gradually improved the overall performance by using application of costing methods and
techniques. This study is helpful to understand the cost structure analysis in a systematic way as
a whole. The management has found efficient and control over the company.
The company should ensure efficient control and measures over the overheads of the company.
The cost structure analysis is helping out the company by suggesting investment decisions and
giving the value for money for producing the products. This study was provided practical
knowledge about the applications of costing methods and techniques.

BIBILOGRAPHY
BOOKS AND REFERENCES
1. BARBOLE A.N., Y. D. (June 2013). Impact of Cost Control and Cost Reduction
Techniques on Manufacturing Sector. Indian Streams Research Journal, Vol 3.
2. Keng An exploration of cost overrun in building construction projects, Global Business
and Management Research, An International Journal, Vol.10, Issue 2 (Apr 2018).
3. Chong-Chuo Chang (2019), Relationship between capital structure and Profitability:

Evidence from four Asian tigers, Journal of management information and decision
sciences, vol 22 issue 2
4. Kavita Chavali, (2018), Relationship Between capital structure and Profitability: A study
of Non- Banking Finance companies in India, Academy of Accounting And Financial
Studies Journal, vol 22 issue 1 pp 1-7
5. Nilesh P Movalia (2015), A Study on capital structure analysis and profitability of Indian
tyres Industry, Pacific Business Review International, vol 8 issue 3 pp 78-84
Websites
 https://www.wikipedia.org/
 https://www.ask.com/
 http://esteemindia.com/
 http://www.yourarticlelibrary.com/
 https://shodhganga.inflibnet.ac.in/handle/10603/395218
 https://adityaauto.com/leadership-team

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A STUDY ON IMPACT OF COST STRUCTURE ON THE PROFITABILITY AT

ADITYA AUTO PRODUCTS AND ENGINEERING PVT. LTD, AT

1.1 INTRODUCTION TO COST ACCOUNTING

1.2 HISTORY OF COST ACCOUNTING

NAGARJUNA DEGREE COLLEGE Page 1

NAGARJUNA DEGREE COLLEGE Page 2

1.3 INTRODUCTION TO COST STRUCTURE

NAGARJUNA DEGREE COLLEGE Page 3

1.4 MEANING OF COST STRUCTURE

1.5 DEFINITION OF COST STRUCTURE

NAGARJUNA DEGREE COLLEGE Page 4

1.6 IMPORTANCE OF COST STRUCTURE

 Cost shape evaluation gives for the suited classification of cost.

 It additionally helps in willpower of growth and contraction policies.

 Cost structure analysis is essential for assessing the profitability of a business.

1.7 CHARACTERISTICS OF COST STRUCTURE

NAGARJUNA DEGREE COLLEGE Page 5

1.8 MEANING OF COST

1.8 DEFINITION OF COST

1.10 MEANING OF COSTING

NAGARJUNA DEGREE COLLEGE Page 6

1.12 COST MANAGEMENT

1.13 COST ACCOUNTING

1.14 SCOPE OF COST ACCOUNTING

NAGARJUNA DEGREE COLLEGE Page 7

It is a deliberate advantageous approach to reduce expenditure. It is a corrective feature by way

NAGARJUNA DEGREE COLLEGE Page 8

1.15 THEORETICAL FRAMEWORK FOR COST ACCOUNTING

OBJECTIVES OF COST ACCOUNTING

 To disclose sources of economic system by putting in and enforcing a gadget of value

ADVANTAGES OF COST ACCOUNTING

 It helps in fee manipulate and decision making.

 It helps management in formula of policies.

 It guides future production policies and helps in growing profit.

 It offers tailored answer for the problems.

NAGARJUNA DEGREE COLLEGE Page 9

DISADVANTAGES OF COST ACCOUNTING

 Cost accounting is an exact science and includes inherent factor of judgments.

1.16 IMPORTANCE OF COST ACCOUNTING INFORMATION TO

NAGARJUNA DEGREE COLLEGE Page 10

Control of substances cost:

Control of labor cost:

NAGARJUNA DEGREE COLLEGE Page 11

Curtailment of loss at some point of the off-season:

1.17 ESSENTIALS OF GOOD COST ACCOUNTING SYSTEM

NAGARJUNA DEGREE COLLEGE Page 12

1.18 CONCEPTS OF AN INSTALLATION OF A COSTING SYSTEM

NAGARJUNA DEGREE COLLEGE Page 13

When a preference to installation a system is taken, it has to be so designed as to serve the

1.19 BASIC CONSIDERATION OR REQUISITES OF A GOOD

1.20 STEPS INVOLVED IN THE INSTALLATION

NAGARJUNA DEGREE COLLEGE Page 14

1.21 PRACTICAL DIFFICULTIES IN INSTALLING A COSTING

Lack of Support from Top Management:

Resistance from the Existing Accounting Staff:

NAGARJUNA DEGREE COLLEGE Page 15

Non-Cooperation at Other Levels of Organization: