Description
COST AND AUDIT REPORT ON PIONEER CEMENT
COST AUDIT REPORT
PROJECT ON
“COSTAUDIT REPORT ON PIONEER CEMENT LTD”
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF DEGREE OF MASTERS OF COMMERCE (M.COM) FROM THE UNIVERSITY OF MUMBAI
SUMBITTED BY SHREERAJ HARIHARAN M.COM PART-I (SEM-I) ROLL NO 36 2013-2014
UNDER THE GUIDANCE OF PROF. JAI KOTECHA
LORD UNIVERSAL COLLEGE, TOPIWALA MARG, OFF STATION ROAD, GOREGAON (WEST), MUMBAI, 400062
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DECLARATION
I MR SHREERAJ HARIHARAN student of LORD UNIVERSAL COLLEGE, M.com Part-I (SEM I) hereby declare that I have completed project on “COST AND AUDIT REPORT OF HERO MOTO CORP ”, in the academic year 2013-2014.This information is true &original to best of my knowledge
Date:
signature of student
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Certificate
This is to certify that this project entitled COST AND AUDIT REPORT OF HERO MOTO CORP for subject ADVANCE COST ACCOUNTING is done by SHREERAJ HARIHARAN seat number 36 of M.com Part I Semester I in the academic year 2013-2014 and being submitted to University of Mumbai through LORD UNIVERSAL COLLEGE, Goregaon (west)
(PROF JAI KOTECHA) INTERNAL EXAMINER SIGNATURE
EXTERNAL EXAMINER SIGNATURE
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(DR RUKI MIRCHANDANI)
Principal SIGNATURE
Acknowledgement
With deep satisfaction and immense pleasure I am presenting this project report on “COST AND AUDIT REPORTON PIONEER CEMENT LTD” in partial requirements for the M.COM course. I would like to extend my sincere gratitude and appreciation to my project guide Prof. JAI KOTECHA who assisted me into this project. It has indeed been a great experience working under her guidance during the course of the project. I would like to thank her for his valuable advice and support throughout this project. And last but not the least I would like to thank all the Faculty Members, staff of the institute for their help in making my project an unforgettable and great learning experience.
Date:
signature of Student
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CONTENTS
OVERVIEW ……………………………………………………..06 COST AUDIT REPORT…………………………………………07 BIBLIOGRAPHY………………………...………………………34
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OVERVIEW OF THE COMPANY
Pioneer Cement Limited manufactures and sells cement in Pakistan. The company offers ordinary Portland cement, a building material for use in various structural works that include concrete construction; and sulphate resistant cement for use in structures in or near the sea, as well as underground structures where soils are rich in sulfate salts, primarily in water logged and saline areas. Pioneer Cement Limited also exports its products to Afghanistan, India, the Middle East, Europe, and Africa. Pioneer Cement Limited was incorporated in 1986 and is headquartered in Lahore, Pakistan.
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PIONEER CEMENT LTD.
Cost Auditors’ Report
for the year ended June 30, 2009
SIDDIQI & COMPANY
Cost & Management Accountants
Suite # 147, First Floor, Haroon Shopping Emporium, Sector 15-A/1, North Karachi-75850 (Pakistan). Tel: (92-21) 36971814 - 36931527, Fax (92-21) 36931527, E-mail
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Pioneer Cement Limited
Cost Audit Report, 2009
COST AUDITORS’ REPORT
We, SIDDIQI & COMPANY, Cost & Management Accountants having been appointed to conduct an audit of cost accounts of PIONEER CEMENT LIMITED, have examined the books of account and the statement prescribed under clause (e) of subsection 230 of the Companies Ordinance, 1984 and the other relevant records for the year ended June 30, 2009, and report that:1. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of this audit. 2. In our opinion: (a) proper cost accounting records as required by clause (e) of sub-section (1) of section 230 of the Companies Ordinance, 1984 (XLVII of 1984), and as required by these rules, have been kept by the Company; (b) proper returns, statements and schedules for the purpose of audit of cost accounts have been received from offices of the Company situated in Pakistan; (c) the said books and records give the information required by the rules in the manner so required; and 3. In our opinion and, subject to best of our information:8|P age
(a) the annexed statement of capacity utilization and stock-intrade are in agreement with the books of account of the Company and exhibit true and fair view of the Company’s affairs; and (b) cost accounting records have been properly kept so as to give a true and fair view of the cost of production, processing, manufacturing and marketing of the under mentioned products of the Company, namely, 1. Ordinary Portland Cement 2. Sulphate Resistance Cement The matters contained in the ANNEXED Forms are part of this report. SIDDIQI & COMPANY Cost & Management Accountants Karachi : 30 OCT 2009 [1]
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Pioneer Cement Limited Report, 2009 1. CAPACITY (Tonne) (a) Licensed / Installed Utilize d
Cost Audit
Clinker: Line-I (300 – days x 2,350 Line-II (300 – days x 4,300 Total
T/D) T/D)
Capacity 705,000 1,290,000 1,995,000
% of Rated Operatio Capac nal ity Capacity 493,426 70% 651,668 1,145,0 94 51% 57%
– Line-I clinker capacity is based on 300 working days with capacity of 2,350 tonne per day. – Line-II clinker capacity is based on 300 working days with capacity of 4,300 tonne per day. – The company has not utilized its full production capacity due to certain plant modifications and use of local coal during the year. (b) The company is engaged in the manufacturing and sale of cement. 2. COST ACCOUNTING SYSTEM – Manufacturing of cement is a continuous process, therefore, the company uses process cost accounting system as prescribed by SECP as per Cement Industry (Cost Accounting Records) Order, 1994. The company has classified whole manufacturing process into six major stages / departments for the purpose of maintaining cost
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accounting records. The company is operating EXCEL based in house software, which generates cost statements relating to six stages / departments and allocates cost thereon. 3. PRODUCTION (a ) Qty. in Tonne Increase / Decrease
– Clinker – Line-I Ordinary Portland Sulphate Resistance – Line-II Ordinary Portland
Production Yea rs 200 2009 8 493,42 6 493,426
Tonne
%
622,0 (128,586 12 ) (21%) 3,834 (3,834) (100%) 625,8 (132,420 46 ) (21%) 1,014 (362,578 ,246 ) (36%) 1,640 (494,998 ,092 ) (30%)
651,668 1,145,09 4
– Cement Ordinary Portland Sulphate Resistance 1,033,58 7 1,033,58 7 1,486 (453,069 ,656 ) (30%) 5,697 (5,697) (100%) 1,492 (458,766 ,353 ) (31%)
(b) The plant design facilitates production of the various types of cement as per production requirements within the installed capacity
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limits. (c) There was addition in production capacity in the shape of Line-II in the year 2005-06.
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Pioneer Cement Limited Report, 2009 4. RAW MATERIAL (a Major Raw Materials ) Consumed 2009 2008
Cost Audit
2007 Rate Value per Rs. in Tonn '000 e 142,32 6 91 12,162 34,628 17,240 28,777 235,13
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Limestone Clay Laterite Bauxite Gypsum Fly Ash Direct raw material cost
Quan Rate Quant Rate Quant tity Value per ity Value per ity (Ton Rs. in Tonn (Tonn Rs. in Tonn (Tonn ne) '000 e e) '000 e e) 1,498, 140,50 2,122, 1,572, 106 7 94 977 188,396 89 270 192,1 291,02 209,90 21 11,133 58 2 16,401 56 2 66,20 121,93 7 35,879 542 3 62,485 512 64,657 11,47 2 6,670 581 23,068 10,422 452 32,755 42,65 7 15,573 365 89,032 35,747 402 73,034 809 307 210,07 380 313,451 -
58 536 526 394 -
0 Add / (less): Material handling & other cost Duty draw back on exports Total cost of raw material consumed
3
11,669 (1,530) 220,20 9
24,329 (1,050)
21,579 10,182 266,89 4
336,730
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Pioneer Cement Limited Report, 2009
Cost Audit
(b) Major Raw Materials consumption per unit of production compared with standard requirements. ACTU AL Descri ption % Increase / (Decrease) as compared to Budget Standard 2008 2007
Stand ard 2009 2008 2007 Tonn Tonn Tonn e e Tonne e 2009 Clink er Clink er Clink er Clink er Clink er Cem ent 1.32 0.16 0.04 0.01 1.53 0.05 1.31 0.17 0.06 0.01 1.54 0.04 1.29 0.18 0.07 0.01 1.52 0.06
Limestone – Clay / Shale – Laterite/Iro n Ore – Bauxite – TOTA L – Gypsum –
1.27 (1.11) (2.49) (4.01) 0.17 5.52 13.21 6.92
0.05 52.15 84.21 31.58 0.03 1.53 0.18 - 200.00 0.20
0.91 (0.78)
0.06 (17.46) 16.00 20.00
(c) Explanation of Variances – The variances from standards are attributed to chemical contents of raw materials. (d)Method of Accounting – The company is maintaining raw material records using perpetual inventory system. The per unit cost for issue of material is determined using average cost basis.
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– Limestone and shale / overburden are extracted from leased mines. – Laterite, Iron ore, Bauxite and Gypsum are purchased from open market. The quantities and values are recorded in the stores ledgers and general ledgers from receiving reports. 5. WAGES AND SALARIES (a) Total wages and salaries paid for all categories of employees Increase / 2009 2008 (Decrease) Rs. in Rs. in Rs. in '000 '000 '000 % 137,84 117,29 1 1 20,550 18 57,219 59,006 (1,787) (3) 195,06 176,29 0 7 18,763 69,126 57,529 11,597 31,425 31,895 (470)
– Direct labour cost on production – Indirect labour cost on production – Total Direct & Indirect Labour Cost – Employees' cost on administration – Employees' cost on selling and distribution
11 20 (1)
Total employees cost
295,61 265,72 1 1 29,890
11
– Salaries & wages increased mainly due to inflationary trend and annual increments.
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Pioneer Cement Limited (b) Salaries and perquisites of chief executive, directors and executives
Cost Audit Report, 2009 Rs. in '000 Chief Executive Executives 2009 2008 2009 2008 1 1 17 15 (Rupees in '000') 4,784 4,200 19,764 17,188 1,660 5,774 12,218 928 6,329 12,120 3,108 20,276 17,673 8,236 46,369 46,981
Total number
Basic salary Contirbution to provident fund and gratutiy Allowances & benefits
– In addition, the chief executive and all the executives of the company have been provided with free use of company owned and maintained cars with other benefits in accordance with their entitlements as per rules of the company. Payments to CEO includes arrears on account of previous two years increments paid during the year. Worke d Avail % able Worked 108,60 71,314 0 66
(c) Total man-days of direct labour Available: 300 days x 362 workers = 108,600 days Worked: 197 days x 362 workers = 71,314 days
(d) Average number of production workers employed (e) Direct labour cost per tonne
2009 362
2008 342
% of Increase/(Decr ease) 6
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Direct Labour Cost (Rs. in '000) Production in Tonne - Cement Cost per Tonne (Rs. / tonne)
% of Increase/(Decr 2009 2008 ease) 117,29 1 137,841 1 8 1,033,5 1,492,3 87 53 (31) 6 133 79 8
(f) Per tonne direct labour cost increased mainly due to decrease in volume of production as compared to last year. (g) Comments on Incentives Scheme – Gratutiy Permanent employees The company operates a funded gratutiy scheme for all its permanent employees which provides for a graduated scale of benefits dependent on the length of service of the employee, subject to the completion of minimum qualifying period of service. Contributions are made to the fund on the basis of actuarial recommendations. As at the Balance Sheet date on 30-06-2009, the gratuity scheme has been terminated. Contractual workers The company also operates unfunded gratuity scheme for its contractual workers. The charge has been made on the basis of actuarial recommendations. – Provident Fund The company also operates an approved contributory provident fund for all its permanent employees who have completed the minimum qualifying period of service and equal monthly contributions are made both by the company and the employees of at the rate of 10 percent of basic salary.
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Pioneer Cement Limited Report, 2009 STORES AND 6. SPARE PARTS
Cost Audit
(a Expenditure per ) unit of output
2009
2008
Increa se / (Decre ase) % 7 (31) 55
Stores & Spares Production Cost per tonne
(Rs. in '000) (Qty. in tonne) (Rs. / tonne)
156,17 145,88 7 7 1,033,5 1,492,3 87 53 151 98
– Per tonne stores and spares increased due to inflationery increase in prices of stores & spares and low of volume of production. (b) System of stores – These are valued at lower of moving average cost and net realizable value, except for furnance oil and coal, which are valued at average cost. Items in transit are valued at cost comprising invoice value plus other charges incurred thereon. – All items of stores are properly coded and entered by designated staff members of the stores department, on daily basis. (c) Proportion of closing inventory of stores representing items which have not moved for over twenty four months. – No provision has been made for slow moving items in the accounts during the year under review.
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7. DEPRECIATION (a) Method of depreciation – Depreciation is calculated on straight line method except plant and machinery and coal firing system on which depreciation is charged on the basis of units of production method. Depreciation on additions is charged from the month in which the asset is available for use and on disposals upto the month of disposal. Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitilized. Gains and losses on disposals of assets, if any, are included in the profit and loss account. (b) Basis of allocation of depreciation on common assets to the different departments. Depreciation on common assets is allocated as under: 2009 2008 Rs. in % Rs. in % '000 age '000 age 373,493 98 427,440 98 3,106 3,719 380,318 1 4,434 1 1 100
(i) Cost of Sales (ii ) Admin. & General (iii ) Selling & Distribution
1 3,432 100 435,306
(c) Basis of charging depreciation to cost of products – The depreciation is allocated to cost of production on the value of assets employed. [ 6 ]
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Pioneer Cement Limited Report, 2009 8. OVERHEADS (a) Total amounts of the overheads
Cost Audit
(i) Factory (ii) Administration (iii ) Selling & distribution (iv ) Financial charges
2009 2008 2007 Rs. in Rs. in Rs. in '000 '000 '000 449,84 6 507,475 446,767 97,654 89,978 86,876 359,97 5 466,047 108,405 451,46 5 413,203 365,848 1,358,9 1,476,7 1,007,8 40 03 96 % Increase / (Decrease) Based Based on on
(i) Factory Overheads 2009 Rs. in '000 27,318 10,236 37,935 2,324 2008 Rs. in '000 23,284 10,423 44,131 2,695 2007
Travelling and conveyance Insurance Repairs & maintenance Communication Depreciation Other manufacturing expenses
Rs. in '000 2008 2007 16,122 17 69 10,072 (2) 2 46,517 (14) (18) 2,894 (14) (20) 357,68 362,299 416,238 1 (13) 1 9,734 10,704 13,481 449,846 507,475 446,76 (9) (11) (28) 1
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7 – Factory overheads decreased mainly due to decrease in repairs & maintenance and depreciation cost. (ii) Administration Overheads 2009 2008 2007 % Increase / (Decrease) Based Based on on
Salaries, wages and benefits Travelling and conveyance Vehicle running expenses Communication Printing and stationery Utilities Repair & maintenance Rent, rates and taxes Legal and professional charges Insurance Auditors' remuneration Fee and subscription Entertainment Depreciation Others
Rs. in Rs. in Rs. in '000 '000 '000 2008 2007 69,126 57,529 52,268 20 32 2,095 4,150 2,232 1,528 3,809 1,667 1,846 4,177 3,319 2,262 1,786 2,583 1,544 1,995 5,155 3,256 2,943 1,628 2,660 1,792 4,142 (50) 25 (1) (14) 47 8 (7) (41) (10) 11 (77) 2 (30) 273 9 (59) 27 (24) (6) 43 (7) (55) 2 (5) 162 (83) (15) (30) 23 12
1,835 3,108 1,791 799 892 837 3,381 3,033 1,289 548 2,402 3,180 707 693 828 3,106 4,434 4,436 825 221 671 97,654 89,978 86,876
– The admin overheads increased mainly due to increase in salaries, wages & benefits, vehicle running exp. utilities and others. [ 7 ]
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Pioneer Cement Limited Report, 2009
Cost Audit
(iii) Selling and Distribution Overheads % Increase / (Decrease) Based Based on on
2009
2008
2007
Salaries, wages and benefits Travelling and conveyance 722 1,011 1,169 Vehicle running expenses 3,474 3,128 3,407 Communication 2,335 3,005 2,452 Printing and stationery 1,454 1,490 1,308 Rent, rates and taxes 1,789 2,676 1,768 Utilities 1,457 1,331 1,627 Repairs & maintenance 1,597 1,269 1,854 Legal and professional charges 5,038 3,447 1,342 Insurance 830 847 688 Fee & subscription 1,661 1,036 1,193 Advertisements / sales promotion 2,137 1,236 5,406 Frieght & handling Charges 301,599 409,457 53,931 Entertainment 738 787 771 Depreciation 3,719 3,432 2,409 Miscellaneous 3 359,975 466,047 108,405
Rs. in Rs. in Rs. in '000 '000 '000 2008 2007 31,425 31,895 29,077 (1) 8 (29) 11 (22) (2) (33) 9 26 46 (2) 60 73 (26) (6) 8 (23) (38) 2 (5) 11 1 (10) (14) 275 21 39 (60) 459 (4) 54 (100) 232
– Selling and distribution overheads decreased mainly due to decrease in frieght and handling charges which relates directly to exports.
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(iv) Financial Charges % Increase / (Decrease) Based Based on on 2008 2007
2009
2008
2007 Rs. in '000 298,40 5 32,458 16,033 18,952 365,84 8
Rs. in Rs. in '000 '000 – Mark-up on long term financing/loans/lease / profit on musharaka and 354,22 murhaba 361,790 6 – Interest on long / short term finances 74,974 34,314 Fee, charges and – commission 14,701 22,897 Advisory, arrangments – and upfront fee 1,766 413,20 451,465 3
2 118 (36) (100) 9
21 131 (8) (100) 23
– The increase in financial cost was due to increase in Mark up on long term financing / loans / lease / Profit on Musharka and murhaba and interest on long / short term finances. (b) Reasons for any significant variances – Reasons are already stated against each para shown above. (c) Basis of allocation of overheads – The allocation was made on activity based on %age basis. [ 8 ]
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Pioneer Cement Limited Report, 2009
Cost Audit
(d ) Cost of Packing (OPC + SRC) – Packed Cement – Bulk Cement Total Quantinty in Tonne 2009 1,015,0 44 11,701 1,026,7 45
2008 1,482,4 61 9,120 1,491,5 81 Increase / (Decrease) Rupee s/Ton % 70.81 29 1.86 30 0.28 9 13.87 0.06 0.28 1.51 2.12 90.79 146 43 49 27 20 32
2009 2008 Rs. in Rupee Rs. in Rupee '000 s/Ton '000 s/Ton Packing material 322,517 317.74 366,057 246.93 Power 8,256 8.04 9,223 6.18 Stores and spares 3,530 3.44 4,707 3.16 Salaries and other benefits 23,969 23.34 14,140 9.48 Insurance 205 0.20 208 0.14 Repairs and maintenance 866 0.84 843 0.57 Depreciation 7,285 7.09 8,325 5.58 Other overheads 12,827 12.49 15,471 10.37 379,454 373.19 418,974 282.40
– Per tonne cost of packing material has been calculated on the basis of cement packed into bags. – Per tonne packing cost increased due to increase in cost of packing materials.
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9. ROYALTY / TECHNICAL AID PAYMENTS 2 00 9 Produ Rupees ction Rupees / in in Tonn '00 e 0 Tonne 1,706, 29,61 702 0 17.35 2 0 08 Produ Rupees ction Rupees / in Tonn in e '000 Tonne 2,414, 659 39,964 16.55
Limestone / Clay
– Royalty and excise duty is paid to the Provincial Govt. on the quantity of lime stone / clay extracted and transported to mill from land at statutory rates.
10. ABNORMAL NON-RECURRING FEATURES (a) Features affecting production = NONE = (b) Special expenses = NONE = ]
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Pioneer Cement Limited Report, 2009
Cost Audit
11. COST OF PRODUCTION (As per Schedule-1 attached) Increas e/ (Decrea Rs. se) Per % Rs. Ton P/Ton
2009 Qty. Rs. in in Tonn e 000 Cement 1,033, 3,330,9 OPC 587 21 SRC 1,033,5 3,330,9 87 21 Clinker consumed for sale 139,35 359,22 OPC 0 8 3,690,1 50
2008 Rs. Per Ton Qty. in Rs. in Tonn e 000
3,22 1,486,6 3,733,8 3 56 02 5,697 14,621 3,22 1,492,3 3,748,4 3 53 23
2,512 2,566 2,512
28 (100) 28
2,57 594,42 8 293,432 9 4,342,8 52
2,026
27
Reasons for variances – Following factors are attributed to the increase in cost of production: i) Increase in cost of fuel. ii) Increase in cost of power. iii) Increase in cost of packing material. iv) Low volume of production. 12. SALES
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(As per Schedule-2 attached) Increas e/ (Decrea Rs. se) Per % Rs. Ton P/Ton
2009 Qty. in Rs. in Tonn e 000 Local – OPC – SRC 922,51 3,973,0 0 92 922,51 3,973,0 0 92 104,23 456,06 5 4 139,35 571,07 0 9 243,58 1,027,1 5 43 1,166,0 5,000,2 95 35 Rs. Per Ton
2008 Qty. in Rs. in Tonn e 000
4,30 1,329,9 3,383,5 7 26 37 7,298 18,327 4,30 1,337,2 3,401,8 7 24 64 4,37 154,35 555,25 5 8 3 4,09 293,43 896,64 8 2 7 4,21 1,451,9 7 447,790 00 4,28 1,785,0 4,853,7 8 14 64
2,544 2,511 2,544
69 (100) 69
Export – OPC – Clinker 3,597 3,056 3,242 22 34 30
Total
2,719
58
– Cement was exported to Aghanistan, India and Dubai. – Clinker was exported to Dubai.
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Pioneer Cement Limited Report, 2009
Cost Audit
13. PROFITABILITY (As per Schedule-3 attached) 2009 Qty. in Rs. in Tonn e 000 922,51 342,16 0 5 922,51 342,16 0 5 Rs. Per Ton 2008 Qty. in Rs. in Tonn e 000 Increas e/ (Decrea Rs. se) Per % Rs. Ton P/Ton
Profit / (Loss) Local – OPC – SRC
1,329,9 (455,85 371 26 8) 7,298 (2,403) 1,337,2 (458,26 371 24 1)
(343) (329) (343)
(208) (100) (208)
Export – OPC – Clinker 104,23 (104,76 154,35 (38,176 5 0) (1,005) 8 ) 139,35 (63,099 293,43 (77,577 0 ) (453) 2 ) 243,58 (167,85 (115,75 5 9) (689) 447,790 3) 1,166, 174,30 095 6 1,785,0 (574,01 149 14 4) (247) (264) (258) 306 71 167
Total
(322)
(146)
– Inspite of the adverse effect of cost inputs and exchange fluctuation loss the improved selling price has provided relief in achieving profitability.
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14. COST AUDITORS' OBSERVATIONS AND CONCLUSIONS (a) Matters which appear to him to be clearly wrong in principle or apparently unjustifiable. – No such matters have so far come to our notice except that current liabilities Rs. 3,489,131 million against current assets Rs. 1,020,577 million shows that current liabilties increased by 242% over the current assets. The current ratio is negative which speaks of weak liquidity position of the company.
(b) Cases where the company funds have been used in a negligent or inefficient manner. = NONE =
(c) Factors which could have been controlled but have not been done resulting in increase in the cost of production. – Plant capacity has not been fully utilized which is the main cause of low profitability.
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Pioneer Cement Limited Report, 2009
Cost Audit
(d) (i) The Adequacy or otherwise of Budgetary Control System, if any, in vogue in the company. – The company prepares its budget on annual basis. A monthly report comparing actual results with budget is generated alongwith the reasons for major variances. On the basis of such variances, corrective measures are initiated, implemented and followed up. (ii) The scope and performance of Internal Audit, if any. – A full fledged internal audit department has been established by the company. The audit findings are reported to the top management through the audit committee and corrective measures are immediately adopted wherever necessary. (e) Suggestion for improvements in performance. (i) rectification of general imbalance in production facilities – Cement grinding capacity of 1,620,000 M.Tonne is not in harmony with clinker capacity of 1,995,000 M.Tonne. Management may consider to rectify the imbalance in the plant. (ii) fuller utilization of installed capacity – Optimum plant capacity has not been fully utilized in the year under review. Efforts should be made to utilize the company at the maximum level. (iii) Comments on areas offering scope for (a ) Cost reduction The management shall have to fully utilize the plant capacity to – reduce per tonne cost on larger volume of
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production. (b ) Increased productivity – Same comments as above. (c) Key limiting factors causing production bottle necks – Owing to technical reasons modification had been carried out in the plant to remove the bottle necks. (d) Improved inventory policies – Present inventory policies appear to be satisfactory except dead / unuseable stores and spares which are lying in inventory. (e) Energy conservancy – The company is using `COAL' irrespective of its proper blend of local and imported quality to which cost saving in cost was lost. (iv) State of technology
– The company uses 'Dry Process' which is the latest technology in cement production. (v) Plant – Initially the plant was new when installed. However during the year 2005-2006, a second line (Kiln-II) was installed and commissioned which includes new and used equipments. [ 12 ]
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Pioneer Cement Limited Report, 2009
Cost Audit
1 5. RECONCILIATIONS WITH FINANCIAL STATEMENTS Cost accounts of the company are in agreement with financial – accounts for the year ended June 30, 2009. 1 6. COST STATEMENTS
–
Copies of all cost statements on the formats prescribed by Securities and Exchange Commission of Pakistan under clause (e) of subsection (1) of section 230 of the Companies Ordinance, 1984, duly authenticated by the Chief Executive and Chief Financial Officer of the company, and verified by us are appended to the report.
17. MISCELLANEOUS – Figures have been rounded off to the nearest thousand and rupee one. – Previous year's figures have been re-arranged and regrouped where necessary to facilitate comparison.
SIDDIQI & COMPANY Cost & Management Accountants Karachi : 30 OCT 2009
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BIBLIOGRAPHY ? www.google.com ?
34
doc_205538315.docx
COST AND AUDIT REPORT ON PIONEER CEMENT
COST AUDIT REPORT
PROJECT ON
“COSTAUDIT REPORT ON PIONEER CEMENT LTD”
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF DEGREE OF MASTERS OF COMMERCE (M.COM) FROM THE UNIVERSITY OF MUMBAI
SUMBITTED BY SHREERAJ HARIHARAN M.COM PART-I (SEM-I) ROLL NO 36 2013-2014
UNDER THE GUIDANCE OF PROF. JAI KOTECHA
LORD UNIVERSAL COLLEGE, TOPIWALA MARG, OFF STATION ROAD, GOREGAON (WEST), MUMBAI, 400062
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DECLARATION
I MR SHREERAJ HARIHARAN student of LORD UNIVERSAL COLLEGE, M.com Part-I (SEM I) hereby declare that I have completed project on “COST AND AUDIT REPORT OF HERO MOTO CORP ”, in the academic year 2013-2014.This information is true &original to best of my knowledge
Date:
signature of student
2|P age
Certificate
This is to certify that this project entitled COST AND AUDIT REPORT OF HERO MOTO CORP for subject ADVANCE COST ACCOUNTING is done by SHREERAJ HARIHARAN seat number 36 of M.com Part I Semester I in the academic year 2013-2014 and being submitted to University of Mumbai through LORD UNIVERSAL COLLEGE, Goregaon (west)
(PROF JAI KOTECHA) INTERNAL EXAMINER SIGNATURE
EXTERNAL EXAMINER SIGNATURE
3|P age
(DR RUKI MIRCHANDANI)
Principal SIGNATURE
Acknowledgement
With deep satisfaction and immense pleasure I am presenting this project report on “COST AND AUDIT REPORTON PIONEER CEMENT LTD” in partial requirements for the M.COM course. I would like to extend my sincere gratitude and appreciation to my project guide Prof. JAI KOTECHA who assisted me into this project. It has indeed been a great experience working under her guidance during the course of the project. I would like to thank her for his valuable advice and support throughout this project. And last but not the least I would like to thank all the Faculty Members, staff of the institute for their help in making my project an unforgettable and great learning experience.
Date:
signature of Student
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CONTENTS
OVERVIEW ……………………………………………………..06 COST AUDIT REPORT…………………………………………07 BIBLIOGRAPHY………………………...………………………34
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OVERVIEW OF THE COMPANY
Pioneer Cement Limited manufactures and sells cement in Pakistan. The company offers ordinary Portland cement, a building material for use in various structural works that include concrete construction; and sulphate resistant cement for use in structures in or near the sea, as well as underground structures where soils are rich in sulfate salts, primarily in water logged and saline areas. Pioneer Cement Limited also exports its products to Afghanistan, India, the Middle East, Europe, and Africa. Pioneer Cement Limited was incorporated in 1986 and is headquartered in Lahore, Pakistan.
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PIONEER CEMENT LTD.
Cost Auditors’ Report
for the year ended June 30, 2009
SIDDIQI & COMPANY
Cost & Management Accountants
Suite # 147, First Floor, Haroon Shopping Emporium, Sector 15-A/1, North Karachi-75850 (Pakistan). Tel: (92-21) 36971814 - 36931527, Fax (92-21) 36931527, E-mail
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Pioneer Cement Limited
Cost Audit Report, 2009
COST AUDITORS’ REPORT
We, SIDDIQI & COMPANY, Cost & Management Accountants having been appointed to conduct an audit of cost accounts of PIONEER CEMENT LIMITED, have examined the books of account and the statement prescribed under clause (e) of subsection 230 of the Companies Ordinance, 1984 and the other relevant records for the year ended June 30, 2009, and report that:1. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of this audit. 2. In our opinion: (a) proper cost accounting records as required by clause (e) of sub-section (1) of section 230 of the Companies Ordinance, 1984 (XLVII of 1984), and as required by these rules, have been kept by the Company; (b) proper returns, statements and schedules for the purpose of audit of cost accounts have been received from offices of the Company situated in Pakistan; (c) the said books and records give the information required by the rules in the manner so required; and 3. In our opinion and, subject to best of our information:8|P age
(a) the annexed statement of capacity utilization and stock-intrade are in agreement with the books of account of the Company and exhibit true and fair view of the Company’s affairs; and (b) cost accounting records have been properly kept so as to give a true and fair view of the cost of production, processing, manufacturing and marketing of the under mentioned products of the Company, namely, 1. Ordinary Portland Cement 2. Sulphate Resistance Cement The matters contained in the ANNEXED Forms are part of this report. SIDDIQI & COMPANY Cost & Management Accountants Karachi : 30 OCT 2009 [1]
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Pioneer Cement Limited Report, 2009 1. CAPACITY (Tonne) (a) Licensed / Installed Utilize d
Cost Audit
Clinker: Line-I (300 – days x 2,350 Line-II (300 – days x 4,300 Total
T/D) T/D)
Capacity 705,000 1,290,000 1,995,000
% of Rated Operatio Capac nal ity Capacity 493,426 70% 651,668 1,145,0 94 51% 57%
– Line-I clinker capacity is based on 300 working days with capacity of 2,350 tonne per day. – Line-II clinker capacity is based on 300 working days with capacity of 4,300 tonne per day. – The company has not utilized its full production capacity due to certain plant modifications and use of local coal during the year. (b) The company is engaged in the manufacturing and sale of cement. 2. COST ACCOUNTING SYSTEM – Manufacturing of cement is a continuous process, therefore, the company uses process cost accounting system as prescribed by SECP as per Cement Industry (Cost Accounting Records) Order, 1994. The company has classified whole manufacturing process into six major stages / departments for the purpose of maintaining cost
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accounting records. The company is operating EXCEL based in house software, which generates cost statements relating to six stages / departments and allocates cost thereon. 3. PRODUCTION (a ) Qty. in Tonne Increase / Decrease
– Clinker – Line-I Ordinary Portland Sulphate Resistance – Line-II Ordinary Portland
Production Yea rs 200 2009 8 493,42 6 493,426
Tonne
%
622,0 (128,586 12 ) (21%) 3,834 (3,834) (100%) 625,8 (132,420 46 ) (21%) 1,014 (362,578 ,246 ) (36%) 1,640 (494,998 ,092 ) (30%)
651,668 1,145,09 4
– Cement Ordinary Portland Sulphate Resistance 1,033,58 7 1,033,58 7 1,486 (453,069 ,656 ) (30%) 5,697 (5,697) (100%) 1,492 (458,766 ,353 ) (31%)
(b) The plant design facilitates production of the various types of cement as per production requirements within the installed capacity
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limits. (c) There was addition in production capacity in the shape of Line-II in the year 2005-06.
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Pioneer Cement Limited Report, 2009 4. RAW MATERIAL (a Major Raw Materials ) Consumed 2009 2008
Cost Audit
2007 Rate Value per Rs. in Tonn '000 e 142,32 6 91 12,162 34,628 17,240 28,777 235,13
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Limestone Clay Laterite Bauxite Gypsum Fly Ash Direct raw material cost
Quan Rate Quant Rate Quant tity Value per ity Value per ity (Ton Rs. in Tonn (Tonn Rs. in Tonn (Tonn ne) '000 e e) '000 e e) 1,498, 140,50 2,122, 1,572, 106 7 94 977 188,396 89 270 192,1 291,02 209,90 21 11,133 58 2 16,401 56 2 66,20 121,93 7 35,879 542 3 62,485 512 64,657 11,47 2 6,670 581 23,068 10,422 452 32,755 42,65 7 15,573 365 89,032 35,747 402 73,034 809 307 210,07 380 313,451 -
58 536 526 394 -
0 Add / (less): Material handling & other cost Duty draw back on exports Total cost of raw material consumed
3
11,669 (1,530) 220,20 9
24,329 (1,050)
21,579 10,182 266,89 4
336,730
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Pioneer Cement Limited Report, 2009
Cost Audit
(b) Major Raw Materials consumption per unit of production compared with standard requirements. ACTU AL Descri ption % Increase / (Decrease) as compared to Budget Standard 2008 2007
Stand ard 2009 2008 2007 Tonn Tonn Tonn e e Tonne e 2009 Clink er Clink er Clink er Clink er Clink er Cem ent 1.32 0.16 0.04 0.01 1.53 0.05 1.31 0.17 0.06 0.01 1.54 0.04 1.29 0.18 0.07 0.01 1.52 0.06
Limestone – Clay / Shale – Laterite/Iro n Ore – Bauxite – TOTA L – Gypsum –
1.27 (1.11) (2.49) (4.01) 0.17 5.52 13.21 6.92
0.05 52.15 84.21 31.58 0.03 1.53 0.18 - 200.00 0.20
0.91 (0.78)
0.06 (17.46) 16.00 20.00
(c) Explanation of Variances – The variances from standards are attributed to chemical contents of raw materials. (d)Method of Accounting – The company is maintaining raw material records using perpetual inventory system. The per unit cost for issue of material is determined using average cost basis.
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– Limestone and shale / overburden are extracted from leased mines. – Laterite, Iron ore, Bauxite and Gypsum are purchased from open market. The quantities and values are recorded in the stores ledgers and general ledgers from receiving reports. 5. WAGES AND SALARIES (a) Total wages and salaries paid for all categories of employees Increase / 2009 2008 (Decrease) Rs. in Rs. in Rs. in '000 '000 '000 % 137,84 117,29 1 1 20,550 18 57,219 59,006 (1,787) (3) 195,06 176,29 0 7 18,763 69,126 57,529 11,597 31,425 31,895 (470)
– Direct labour cost on production – Indirect labour cost on production – Total Direct & Indirect Labour Cost – Employees' cost on administration – Employees' cost on selling and distribution
11 20 (1)
Total employees cost
295,61 265,72 1 1 29,890
11
– Salaries & wages increased mainly due to inflationary trend and annual increments.
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Pioneer Cement Limited (b) Salaries and perquisites of chief executive, directors and executives
Cost Audit Report, 2009 Rs. in '000 Chief Executive Executives 2009 2008 2009 2008 1 1 17 15 (Rupees in '000') 4,784 4,200 19,764 17,188 1,660 5,774 12,218 928 6,329 12,120 3,108 20,276 17,673 8,236 46,369 46,981
Total number
Basic salary Contirbution to provident fund and gratutiy Allowances & benefits
– In addition, the chief executive and all the executives of the company have been provided with free use of company owned and maintained cars with other benefits in accordance with their entitlements as per rules of the company. Payments to CEO includes arrears on account of previous two years increments paid during the year. Worke d Avail % able Worked 108,60 71,314 0 66
(c) Total man-days of direct labour Available: 300 days x 362 workers = 108,600 days Worked: 197 days x 362 workers = 71,314 days
(d) Average number of production workers employed (e) Direct labour cost per tonne
2009 362
2008 342
% of Increase/(Decr ease) 6
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Direct Labour Cost (Rs. in '000) Production in Tonne - Cement Cost per Tonne (Rs. / tonne)
% of Increase/(Decr 2009 2008 ease) 117,29 1 137,841 1 8 1,033,5 1,492,3 87 53 (31) 6 133 79 8
(f) Per tonne direct labour cost increased mainly due to decrease in volume of production as compared to last year. (g) Comments on Incentives Scheme – Gratutiy Permanent employees The company operates a funded gratutiy scheme for all its permanent employees which provides for a graduated scale of benefits dependent on the length of service of the employee, subject to the completion of minimum qualifying period of service. Contributions are made to the fund on the basis of actuarial recommendations. As at the Balance Sheet date on 30-06-2009, the gratuity scheme has been terminated. Contractual workers The company also operates unfunded gratuity scheme for its contractual workers. The charge has been made on the basis of actuarial recommendations. – Provident Fund The company also operates an approved contributory provident fund for all its permanent employees who have completed the minimum qualifying period of service and equal monthly contributions are made both by the company and the employees of at the rate of 10 percent of basic salary.
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Pioneer Cement Limited Report, 2009 STORES AND 6. SPARE PARTS
Cost Audit
(a Expenditure per ) unit of output
2009
2008
Increa se / (Decre ase) % 7 (31) 55
Stores & Spares Production Cost per tonne
(Rs. in '000) (Qty. in tonne) (Rs. / tonne)
156,17 145,88 7 7 1,033,5 1,492,3 87 53 151 98
– Per tonne stores and spares increased due to inflationery increase in prices of stores & spares and low of volume of production. (b) System of stores – These are valued at lower of moving average cost and net realizable value, except for furnance oil and coal, which are valued at average cost. Items in transit are valued at cost comprising invoice value plus other charges incurred thereon. – All items of stores are properly coded and entered by designated staff members of the stores department, on daily basis. (c) Proportion of closing inventory of stores representing items which have not moved for over twenty four months. – No provision has been made for slow moving items in the accounts during the year under review.
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7. DEPRECIATION (a) Method of depreciation – Depreciation is calculated on straight line method except plant and machinery and coal firing system on which depreciation is charged on the basis of units of production method. Depreciation on additions is charged from the month in which the asset is available for use and on disposals upto the month of disposal. Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitilized. Gains and losses on disposals of assets, if any, are included in the profit and loss account. (b) Basis of allocation of depreciation on common assets to the different departments. Depreciation on common assets is allocated as under: 2009 2008 Rs. in % Rs. in % '000 age '000 age 373,493 98 427,440 98 3,106 3,719 380,318 1 4,434 1 1 100
(i) Cost of Sales (ii ) Admin. & General (iii ) Selling & Distribution
1 3,432 100 435,306
(c) Basis of charging depreciation to cost of products – The depreciation is allocated to cost of production on the value of assets employed. [ 6 ]
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Pioneer Cement Limited Report, 2009 8. OVERHEADS (a) Total amounts of the overheads
Cost Audit
(i) Factory (ii) Administration (iii ) Selling & distribution (iv ) Financial charges
2009 2008 2007 Rs. in Rs. in Rs. in '000 '000 '000 449,84 6 507,475 446,767 97,654 89,978 86,876 359,97 5 466,047 108,405 451,46 5 413,203 365,848 1,358,9 1,476,7 1,007,8 40 03 96 % Increase / (Decrease) Based Based on on
(i) Factory Overheads 2009 Rs. in '000 27,318 10,236 37,935 2,324 2008 Rs. in '000 23,284 10,423 44,131 2,695 2007
Travelling and conveyance Insurance Repairs & maintenance Communication Depreciation Other manufacturing expenses
Rs. in '000 2008 2007 16,122 17 69 10,072 (2) 2 46,517 (14) (18) 2,894 (14) (20) 357,68 362,299 416,238 1 (13) 1 9,734 10,704 13,481 449,846 507,475 446,76 (9) (11) (28) 1
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7 – Factory overheads decreased mainly due to decrease in repairs & maintenance and depreciation cost. (ii) Administration Overheads 2009 2008 2007 % Increase / (Decrease) Based Based on on
Salaries, wages and benefits Travelling and conveyance Vehicle running expenses Communication Printing and stationery Utilities Repair & maintenance Rent, rates and taxes Legal and professional charges Insurance Auditors' remuneration Fee and subscription Entertainment Depreciation Others
Rs. in Rs. in Rs. in '000 '000 '000 2008 2007 69,126 57,529 52,268 20 32 2,095 4,150 2,232 1,528 3,809 1,667 1,846 4,177 3,319 2,262 1,786 2,583 1,544 1,995 5,155 3,256 2,943 1,628 2,660 1,792 4,142 (50) 25 (1) (14) 47 8 (7) (41) (10) 11 (77) 2 (30) 273 9 (59) 27 (24) (6) 43 (7) (55) 2 (5) 162 (83) (15) (30) 23 12
1,835 3,108 1,791 799 892 837 3,381 3,033 1,289 548 2,402 3,180 707 693 828 3,106 4,434 4,436 825 221 671 97,654 89,978 86,876
– The admin overheads increased mainly due to increase in salaries, wages & benefits, vehicle running exp. utilities and others. [ 7 ]
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Pioneer Cement Limited Report, 2009
Cost Audit
(iii) Selling and Distribution Overheads % Increase / (Decrease) Based Based on on
2009
2008
2007
Salaries, wages and benefits Travelling and conveyance 722 1,011 1,169 Vehicle running expenses 3,474 3,128 3,407 Communication 2,335 3,005 2,452 Printing and stationery 1,454 1,490 1,308 Rent, rates and taxes 1,789 2,676 1,768 Utilities 1,457 1,331 1,627 Repairs & maintenance 1,597 1,269 1,854 Legal and professional charges 5,038 3,447 1,342 Insurance 830 847 688 Fee & subscription 1,661 1,036 1,193 Advertisements / sales promotion 2,137 1,236 5,406 Frieght & handling Charges 301,599 409,457 53,931 Entertainment 738 787 771 Depreciation 3,719 3,432 2,409 Miscellaneous 3 359,975 466,047 108,405
Rs. in Rs. in Rs. in '000 '000 '000 2008 2007 31,425 31,895 29,077 (1) 8 (29) 11 (22) (2) (33) 9 26 46 (2) 60 73 (26) (6) 8 (23) (38) 2 (5) 11 1 (10) (14) 275 21 39 (60) 459 (4) 54 (100) 232
– Selling and distribution overheads decreased mainly due to decrease in frieght and handling charges which relates directly to exports.
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(iv) Financial Charges % Increase / (Decrease) Based Based on on 2008 2007
2009
2008
2007 Rs. in '000 298,40 5 32,458 16,033 18,952 365,84 8
Rs. in Rs. in '000 '000 – Mark-up on long term financing/loans/lease / profit on musharaka and 354,22 murhaba 361,790 6 – Interest on long / short term finances 74,974 34,314 Fee, charges and – commission 14,701 22,897 Advisory, arrangments – and upfront fee 1,766 413,20 451,465 3
2 118 (36) (100) 9
21 131 (8) (100) 23
– The increase in financial cost was due to increase in Mark up on long term financing / loans / lease / Profit on Musharka and murhaba and interest on long / short term finances. (b) Reasons for any significant variances – Reasons are already stated against each para shown above. (c) Basis of allocation of overheads – The allocation was made on activity based on %age basis. [ 8 ]
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Pioneer Cement Limited Report, 2009
Cost Audit
(d ) Cost of Packing (OPC + SRC) – Packed Cement – Bulk Cement Total Quantinty in Tonne 2009 1,015,0 44 11,701 1,026,7 45
2008 1,482,4 61 9,120 1,491,5 81 Increase / (Decrease) Rupee s/Ton % 70.81 29 1.86 30 0.28 9 13.87 0.06 0.28 1.51 2.12 90.79 146 43 49 27 20 32
2009 2008 Rs. in Rupee Rs. in Rupee '000 s/Ton '000 s/Ton Packing material 322,517 317.74 366,057 246.93 Power 8,256 8.04 9,223 6.18 Stores and spares 3,530 3.44 4,707 3.16 Salaries and other benefits 23,969 23.34 14,140 9.48 Insurance 205 0.20 208 0.14 Repairs and maintenance 866 0.84 843 0.57 Depreciation 7,285 7.09 8,325 5.58 Other overheads 12,827 12.49 15,471 10.37 379,454 373.19 418,974 282.40
– Per tonne cost of packing material has been calculated on the basis of cement packed into bags. – Per tonne packing cost increased due to increase in cost of packing materials.
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9. ROYALTY / TECHNICAL AID PAYMENTS 2 00 9 Produ Rupees ction Rupees / in in Tonn '00 e 0 Tonne 1,706, 29,61 702 0 17.35 2 0 08 Produ Rupees ction Rupees / in Tonn in e '000 Tonne 2,414, 659 39,964 16.55
Limestone / Clay
– Royalty and excise duty is paid to the Provincial Govt. on the quantity of lime stone / clay extracted and transported to mill from land at statutory rates.
10. ABNORMAL NON-RECURRING FEATURES (a) Features affecting production = NONE = (b) Special expenses = NONE = ]
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Pioneer Cement Limited Report, 2009
Cost Audit
11. COST OF PRODUCTION (As per Schedule-1 attached) Increas e/ (Decrea Rs. se) Per % Rs. Ton P/Ton
2009 Qty. Rs. in in Tonn e 000 Cement 1,033, 3,330,9 OPC 587 21 SRC 1,033,5 3,330,9 87 21 Clinker consumed for sale 139,35 359,22 OPC 0 8 3,690,1 50
2008 Rs. Per Ton Qty. in Rs. in Tonn e 000
3,22 1,486,6 3,733,8 3 56 02 5,697 14,621 3,22 1,492,3 3,748,4 3 53 23
2,512 2,566 2,512
28 (100) 28
2,57 594,42 8 293,432 9 4,342,8 52
2,026
27
Reasons for variances – Following factors are attributed to the increase in cost of production: i) Increase in cost of fuel. ii) Increase in cost of power. iii) Increase in cost of packing material. iv) Low volume of production. 12. SALES
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(As per Schedule-2 attached) Increas e/ (Decrea Rs. se) Per % Rs. Ton P/Ton
2009 Qty. in Rs. in Tonn e 000 Local – OPC – SRC 922,51 3,973,0 0 92 922,51 3,973,0 0 92 104,23 456,06 5 4 139,35 571,07 0 9 243,58 1,027,1 5 43 1,166,0 5,000,2 95 35 Rs. Per Ton
2008 Qty. in Rs. in Tonn e 000
4,30 1,329,9 3,383,5 7 26 37 7,298 18,327 4,30 1,337,2 3,401,8 7 24 64 4,37 154,35 555,25 5 8 3 4,09 293,43 896,64 8 2 7 4,21 1,451,9 7 447,790 00 4,28 1,785,0 4,853,7 8 14 64
2,544 2,511 2,544
69 (100) 69
Export – OPC – Clinker 3,597 3,056 3,242 22 34 30
Total
2,719
58
– Cement was exported to Aghanistan, India and Dubai. – Clinker was exported to Dubai.
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Pioneer Cement Limited Report, 2009
Cost Audit
13. PROFITABILITY (As per Schedule-3 attached) 2009 Qty. in Rs. in Tonn e 000 922,51 342,16 0 5 922,51 342,16 0 5 Rs. Per Ton 2008 Qty. in Rs. in Tonn e 000 Increas e/ (Decrea Rs. se) Per % Rs. Ton P/Ton
Profit / (Loss) Local – OPC – SRC
1,329,9 (455,85 371 26 8) 7,298 (2,403) 1,337,2 (458,26 371 24 1)
(343) (329) (343)
(208) (100) (208)
Export – OPC – Clinker 104,23 (104,76 154,35 (38,176 5 0) (1,005) 8 ) 139,35 (63,099 293,43 (77,577 0 ) (453) 2 ) 243,58 (167,85 (115,75 5 9) (689) 447,790 3) 1,166, 174,30 095 6 1,785,0 (574,01 149 14 4) (247) (264) (258) 306 71 167
Total
(322)
(146)
– Inspite of the adverse effect of cost inputs and exchange fluctuation loss the improved selling price has provided relief in achieving profitability.
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14. COST AUDITORS' OBSERVATIONS AND CONCLUSIONS (a) Matters which appear to him to be clearly wrong in principle or apparently unjustifiable. – No such matters have so far come to our notice except that current liabilities Rs. 3,489,131 million against current assets Rs. 1,020,577 million shows that current liabilties increased by 242% over the current assets. The current ratio is negative which speaks of weak liquidity position of the company.
(b) Cases where the company funds have been used in a negligent or inefficient manner. = NONE =
(c) Factors which could have been controlled but have not been done resulting in increase in the cost of production. – Plant capacity has not been fully utilized which is the main cause of low profitability.
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Pioneer Cement Limited Report, 2009
Cost Audit
(d) (i) The Adequacy or otherwise of Budgetary Control System, if any, in vogue in the company. – The company prepares its budget on annual basis. A monthly report comparing actual results with budget is generated alongwith the reasons for major variances. On the basis of such variances, corrective measures are initiated, implemented and followed up. (ii) The scope and performance of Internal Audit, if any. – A full fledged internal audit department has been established by the company. The audit findings are reported to the top management through the audit committee and corrective measures are immediately adopted wherever necessary. (e) Suggestion for improvements in performance. (i) rectification of general imbalance in production facilities – Cement grinding capacity of 1,620,000 M.Tonne is not in harmony with clinker capacity of 1,995,000 M.Tonne. Management may consider to rectify the imbalance in the plant. (ii) fuller utilization of installed capacity – Optimum plant capacity has not been fully utilized in the year under review. Efforts should be made to utilize the company at the maximum level. (iii) Comments on areas offering scope for (a ) Cost reduction The management shall have to fully utilize the plant capacity to – reduce per tonne cost on larger volume of
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production. (b ) Increased productivity – Same comments as above. (c) Key limiting factors causing production bottle necks – Owing to technical reasons modification had been carried out in the plant to remove the bottle necks. (d) Improved inventory policies – Present inventory policies appear to be satisfactory except dead / unuseable stores and spares which are lying in inventory. (e) Energy conservancy – The company is using `COAL' irrespective of its proper blend of local and imported quality to which cost saving in cost was lost. (iv) State of technology
– The company uses 'Dry Process' which is the latest technology in cement production. (v) Plant – Initially the plant was new when installed. However during the year 2005-2006, a second line (Kiln-II) was installed and commissioned which includes new and used equipments. [ 12 ]
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Pioneer Cement Limited Report, 2009
Cost Audit
1 5. RECONCILIATIONS WITH FINANCIAL STATEMENTS Cost accounts of the company are in agreement with financial – accounts for the year ended June 30, 2009. 1 6. COST STATEMENTS
–
Copies of all cost statements on the formats prescribed by Securities and Exchange Commission of Pakistan under clause (e) of subsection (1) of section 230 of the Companies Ordinance, 1984, duly authenticated by the Chief Executive and Chief Financial Officer of the company, and verified by us are appended to the report.
17. MISCELLANEOUS – Figures have been rounded off to the nearest thousand and rupee one. – Previous year's figures have been re-arranged and regrouped where necessary to facilitate comparison.
SIDDIQI & COMPANY Cost & Management Accountants Karachi : 30 OCT 2009
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BIBLIOGRAPHY ? www.google.com ?
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