The document discusses cost accounting methods used by a large cement manufacturing company in Bangladesh. It details how the company calculates its cost of goods sold using a weighted average method in an Oracle ERP system. The major cost components are raw materials (91%), labor (1%), and factory overhead (8%). Raw material costs are further broken down by type of material. The company uses economic order quantity and safety stock principles for raw material inventory management. Factory overhead is allocated using primary and secondary distribution methods before being absorbed into finished goods.

1. Cost
Accounting
Methods In A
Manufacturin
g
Organization.

2. Company
profile
 Started its production on March 2002.
 Largest cement manufacturing plant, 5.2 million MT
per annum.
 Highest selling brand in country.
 100% Local owned cement company.
 Nation’s leading supplier of Ready mix-concrete.
 The cement plant situated at Mukterpur, Munsigonj.
 Shah Cement has its own power plant with the capacity
of 17 megawatt.

3. How is Cost of Goods Sold (COGS) identified ?
Opening Stock of Raw & Packing Materials XXX
Add: Purchase XXX
XXX
Less: Closing Stock of Raw & Packing Materials XXX
Raw and Packing materials consumed XXX
Add: Manufacturing Expenses/Factory Overhead XXX
XXX
Add: Opening stock of finished products XXX
Finished product available XXX
Less: Closing stock of finished products XXX
Cost of Goods Sold XXX
COGS identification format is described below :

4. Which method is used for recording cost ?
 Oracle ERP Software under Weighted Average method is
used for recording cost.

5. Cost Classification
91.13% Raw material Cost
1.16% labor Cost
7.71% Factory Overhead Cost
Raw Material
91%
Labor
1% FOH
8%
Raw Material Labor FOH

6. Raw Materials Cost
 Clinker Cost- 61.97%percent of raw material
cost
 Fly Ash – 3.64% of raw material cost
 Gypsum-15.49% of raw material cost
 Slag -5.47% of raw material cost
 Lime Stone-4.56% of raw material cost Clinker
68%
Fly Ash
4%
Gypsum
17%
Slag
6%
Lime stone
5%
Clinker
Fly Ash
Gypsum
Slag
Lime stone

7.  Economic order Quantity (EOQ) is used for
ordering raw material.
 Some other factors are also considered:
Which method is used for ordering raw materials?
Price competitiveness
Quality
Secure source
Minimum lead time.

8. Which is the major cost centre?
Raw-material cost
Labor cost
Factory overhead cost

9. Purchase department & Issue department
Both department exists.
 Purchase is controlled from the head office.
Issue is maintained by the firm.

10. Ledger & Bin Card
Used in the office Used in the store

11. Which Inventory Valuation method is used?
 First IN First Out.
 Last IN First Out
 Weighted average method

12. Material Expense Calculation
Annual Material Expense = Ordering Cost+ Carrying Cost +Material Purchase Cost
Which system is used for inventory management?
 Oracle Inventory Management Module.

13. Lead time for Raw Material
Fly Ash
20 Days
Clinker
15 Days
Gypsum
20 Days
Slag
20 Days
Lime Stone
25 days

14. Is there any safety Stock?
Yes
 15 Days safety stock for all raw
materials.

15. Control of labor cost
• Increase the Productivity
of the labor
• Means to labor cost per
unit.

16. Labor cost calculation
• Total Expenses = Monthly
Basis Payment + Overtime
• (labor for a particular
period is consider as the
labor cost)

17. Method of Labor/Employees Are Paid
• Paid in monthly basis.
• In case of extra working
hour is consider for
calculation.

18. Incentives/Bonus
• Higher management fix a
monthly production or
achievement target at
the beginning of the
month.
• Based on that target
achievement, incentive
or bonus is given.

19. How direct/indirect labor is measured
• Labor which is related to
production is considered
as direct
• Which is related to
process other than
production is treated as
indirect.

20. Labor turnover
Separation Method
Replacement method
Flux Method
Improvement version of
replacement method

21. Cost of labor turnover
Preventive Cost
Replacement Cost
Both

22. Overheads or expenses which are
involved in factory operations are
Considered as Factory Overhead.
Factory Overhead

23. Factory related salary
Bonus
Insurance
Overtime
Power
Labor,etc.
Factory Overhead Considered by
Shah Cement

24. Way of Factory Overhead Allocation:
Primary Distribution (Allocation & Apportionment)
 Secondary Distribution (Re-apportionment)
Absorption

25. Way of Absorption
On the basis of ‘Production units
 As a % of Direct Labour Cost
 As a % of Direct Material Cost
As a % of Prime Cost
On the basis of Direct Labour Hours
On the basis of Machine Hours