The document outlines lecture 1 of a textile costing and management course, which introduces important concepts such as defining costs and their components, the role and advantages of cost accounting, classifying costs as fixed, variable, or semi-variable, and how to summarize total manufacturing costs by nature, department, or in a combined format. The lecture also discusses learning outcomes around understanding cost and management techniques, evaluating waste costs, and developing documentation for fabric cost sheets.

1. YANGON TECHNOLOGICAL UNIVERSITY
DEPARTMENT OF TEXTILE ENGINEERING
TE 52027
Textile Costing and Management
Lectured by
Thinzar Phyo Wyint

2. Lecture 1
Introduction
Date: 10.6.2019
Outlines
 Learning Outcomes & Requirement
 Assessment System & References
 Cost – Definition & Components
 The Role of Cost Accounting in Industry
 Advantages of Cost Accounting
 Elements of Manufacturing or Production Cost
 Classification of Cost
 How to Summarize the Cost
 Recap & Question

3. Introduction
Consists of two portions:
 The basic concepts of the management for a mill
 The calculations of the cost of the finished product
Learning Outcomes
 To have a throughout understanding of the concepts, techniques and practices of cost and management accounting
 To evaluate the waste cost of each process in manufacturing plant
 To analyze the record and collect the necessary data for cost accounting in textile mill
 To develop the documentation related more with detailed fabric cost sheet in fabric manufacturing plant
Requirement : knowledge about Yarn Forming Technology & Weaving Technology
 What is ERP?

4. Assessment System and Breakdown of Marks
Coursework Marks
Test & Assignment 10% & 10%
Final Examination 80%
Total 100%
Main References:
 Lock, W.J. and Maxwell, A.D. Textile Costing : An Aid to Management, The Textile Foundation.
 Ratnam, T.V., Doraiswamy, I., Seshadri S., and Rajamanickam, R. (1992). Cost Control and Costing in Spinning
Mills, The South India Textile Research Association.
Additional References:
 Purushothama, B. (2013). Work Quality Management in the Textile Industry, Woodhead Publishing Ltd.
 Westemcy, R.E. (1997). The Engineer's Cost Handbook, Consultants International, Inc.

5. Rubrics for Assignment
No. Mark 1-4 5-7 8-10
Criteria FAIL PASS EXCELLENT
1. Technical Not providing and matching a
suitable technical approach for
the given problem
Providing a suitable technical
approach for the given problem
Providing with a correct technical
approach and acceptable solution
2. Effort Insufficient effort in solving the
given problem without acceptable
results
Sufficiently effort in solving the
given problem with acceptable
results, assumptions and references
Well effort in solving the given
problem with satisfactory results,
assumptions and references
3. Submission Cannot submit the assignment
within the given period of time
Can submit the assignment within
the given period of time but with
uncomplete formatting
Can submit the assignment within
the given period of time with
complete formatting

6. Learning Outcomes of Lecture 1
The students will be able to
 Differentiate between cost and costing
 Classify the various type of cost
 Differentiate between the total cost and production cost of a specific product
 Realize the important of cost accounting in industry
 Differentiate among direct cost, indirect cost, fixed cost, variable cost, semi-variable cost, product cost, period cost
and thereof.

7. Cost – Definition & its Components
Cost
 The sum of the expenditures which are assigned to departments, or units of product being
manufactured.
 Sum total of the value of resources used like raw material and labor and expenses incurred in
producing or manufacturing of given quantity.
 The amount resources used for the purpose of production of goods or rendering services.
Costing
 The process of determining the cost
 Process of estimating the total resource investment required to merchandise, produce and market a
product.
 The system of computing cost of production or of running a business, by allocating expenditure to
various stages of production or to different operations of a firm.
 The deciding factor of the prices and the important thing to be followed in all important stages
like purchase, production, marketing, sales, etc.
Cost
Accounting
 The process of accounting for cost which begins with recording and end with reporting
 The method of classifying and summarizing mill expenditures in order that the cost per unit of
output may be known.
Revenue Total of all receipt from the sale of company's product during a stated period

8. The Role of Accounting in Industry
Accounting Department must - be well organized
- supply any request for accounting information
- prepare accounting analyses within a reasonable period of time
Purpose - To evaluate, to record historically, to summarize and to interpret the financial and
operating facts of a business enterprise
Functions of the cost accountant – To keep an accurate record of the cost of the direct material
used in each division of the manufacturing plant, and the amount of the material cost assignable to
each unit of product.
Why Cost Accounting is important in Manufacturing
• The value of cost reports hinges to the cost accounting procedures
• In order to get an intelligent statement of a company's financial position
• To determine profits with any degree of accuracy.
Efficient operation Cooperation Proper planning Proper cost reports

9. Advantages of
Cost Accounting
Cost
Determination
Selling Price
Determination
Product
Profitability
Analysis
Decision
Making/
Budgeting
Cost Control
Cost Reduction
Statutory
Compliance
Advantages of Cost Accounting

10. Elements of Manufacturing or Production Costs
Material Labor
Manufacturing Expenses
or Overhead
Direct
Material
Cost
Direct
Labor
Cost
Indirect Material
Cost
Indirect labor
Cost
all indirect
material,
indirect labor
and all other
manufacturing
costs
Expenditures for heat, Use
of water,
Building repairs, Machine
repairs, Sweepers,
Fire insurance costs, Taxes,
Rent, Marketing, Accounts
Direct Material Cost - The cost of the raw material which can be definitely traced to
the finished product of the mill
Indirect Material Cost - The cost of the raw material which cannot be definitely traced
to the finished product being manufactured
Direct Labor Cost - if the labor effort expended can be traced to the product being
manufactured
If not, it is Indirect Labor Cost
Manufacturing or Production Costs
 All expenses incurred in making a finished product available

11. Prime Cost
Direct Material – actual cost of the material that will make up the finished product
Direct Labor – wages cost of those employees who actually manufacture the finished product
Direct Expenses – without which a specific product could not be made
Direct Costs
 Direct Material
 Direct Labor
 Direct Expenses
Indirect Costs
 Indirect Material
 indirect Labor
 Indirect Expenses
Factory Overheads
Indirect Material – material used in factory which do not form a part of the finished product
Direct Labor – wages of employees who work in the factory but do not form a part of the
finished product
Direct Expenses – all other factory expenses
Fixed Cost – Costs that do not get affected by output of business. Eg. Rent
Variable Costs – Costs which vary with output of business. Eg. Machine parts
Semi-variable Costs – Contain elements of both fixed and variable

12. TOTAL
COST
Selling &
Distribution
Cost
Admin &
Finance
Production
Cost
Direct
Material
Direct
Labor
Direct
Expenses
Prime Cost
Indirect
Material
Indirect
Labor
Indirect
Expenses
Factory
Overhead
Cost Behavior Basis
a) Fixed cost
b) Variable cost
c) Semi-variable cost
Cost Inventory Basis
a) Product cost
b) Period cost
Cost Relation to Cost Centre
Basis
a) Direct cost
b) Indirect cost
Classification of Cost

13. Fixed Cost
- Remains constant within a given period of time and range of activity in spite of fluctuations in production.
- Per unit fixed cost varies with the change in the volume of production.
- E.g., Rent and insurance of building, depreciation on plant and machinery, salary of employees
Variable cost
- Vary directly in proportion to change in volume of production/output.
- The cost which increases or decreases in the same proportion in which the units produced is termed as variable cost.
- E.g.., Direct material, direct labour, direct expenses, variable overheads are some examples of variable cost.
Semi-variable cost
- Contains both fixed and variable component and which is thus partly affected by fluctuations in the level of activity.
- Semi-variable costs is that cost of which some part remains fixed at the given level of production and other part varies with the
change in the volume of production but not in the same proportion of change in production.
- E.g., Telephone expenses of which rent portion is fixed and call charges are variable.
Product costs
- are charged and identified with the product and included in stock value.
- the costs that are the cost of manufacturing a product are called product cost.
- Product cost includes direct material, direct labour, direct expenses, and manufacturing overheads.
Period costs
- are not charged to products but are written off as expenses against revenue of the period during which these are incurred.
- not transferred as a part of value of stock to the next accounting year.
- are charged against the revenue of the relevant period.
- Period costs include all fixed costs and total administration, selling and distribution costs.

14. Total manufacturing cost can be summarized
 By the nature of cost
Material ………………………$ 52,000 52%
Labor …………………………$ 25,000 25%
Manufacturing Overhead …….$ 23,000 23%
Total ……………………….$ 100,000 100%
 By department
Spinning …………………….$ 71,000 71%
Weaving ……………………..$ 18,000 18%
Finishing …………………… $ 11,000 11%
Total ………………… ….$ 100,000 100%
 In combined form
Spinning Weaving Finishing Total
Material Cost………………………$ 41,000 $7,000 $ 4,000 $ 52,000
Labor Cost ……………………… $ 15,000 $ 5,500 $ 4,500 $ 25,000
Manufacturing Overhead ………….$ 15,000 $ 5,500 $ 2,500 $ 23,000
Total ……………………… $ 71,000 $ 18,000 $ 11,000 $ 100,000

15. Please
Give
Your
Comments
Mention what
you
know/get
from
this Lecture ?