A STUDY ON COSTING OF IDHAYAM OIL INTRODUCTION In business, retail, and accounting, a cost is the value of money that has

been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this case, money is the input that is gone in order to acquire the thing. This acquisition cost may be the sum of the cost of production as incurred by the original producer, and further costs of transaction as incurred by the acquirer over and above the price paid to the producer. Usually, the price also includes a mark-up for profit over the cost of production.

NEED FOR THE STUDY

The need for this study is to ascertain cost involvement in packing department for three months relating to next month. The study helps to know the cost allocation for all the recourses in packing of bottles and pouches. It helps to ascertain per pouch and per bottle actual cost in turn it will help the researcher to suggest cost savings methods to reduce the overall cost of the product.

INDUSTRY PROFILE

V.V.VANNIAPERUMAL & SONS EDIBLE OILS LIMITED

FACTORY LOCATION:

1/238-A, Villipathiri post, Virudhunagar- 626001 Ph: 04562 - 242526

HEAD OFFICE

443, Bazaar, Virudhunagar Tamil Nadu - INDIA Ph: 04562 243022, Fax: 04562-247789 E-mail: virudhunagar@idhayam.com

FOUNDER CHIEF EXECUTIVE

: :

Shri V.V.V. RAJENDRAN, B.Sc Mr. R. Muthu Mr. R. Sathyam

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PRODUCTION EXECUTIVE :

DEVELOPMENT EXECUTIVE: GENERAL MANAGER: YEAR OF START RAW MATERIAL : :

Mr. R. Thendral Mr.M.Mohan Rathnam 1943 Sesame & Groundnut seeds 45 tones of Sesame seeds/ day 30 tones of groundnut / day

PROCESSING CAPACITY:

PRODUCTS

Sesame oil Groundnut oil

BY PRODUCTS

Sesame oil cake Groundnut oil cake

COMPANY PROFILE

V.V.V.& Sons Edible Oils Ltd is a ISO 9001-2000 company and their brand name is IDHAYAM introduced at 1.12.1986. Idhayam is a strong regional brand in the hugely diverse and un-organized edible oil market in India. Idhayam is the biggest brand in the sesame oil (Gingelly oil) segment. The brand has a rich heritage of over 65 years. The company came into existence in 1943 and over these years the brand has grown to occupy a major share in the south Indian market. Idhayam sells over 13 lakhs liters per month. Idhayam is a classic example of branding a commodity. The brand is now trying out new markets for its sesame oil. Now come out with an innovative marketing strategy OIL PULLING. This is an initiative of the company to pioneer the concept of oil therapy in the country. Oil pulling is the method of rinsing the mouth with oil for twenty minutes by swishing the oil between the teeth. According to the company reports, this process effectively cures glaucoma and gum diseases. Idhayam is a familiar brand. The brand has its basic values rooted in health platform. The brand talks about low cholesterol content and great taste. Health and taste has been the positioning of Idhayam for years now.

Manufactured of superior quality sesame seeds cleaned by a b m/c German technology cleaning system and micro filtration techniques of AMA filters, Holland. The plant has a capacity to process 45000 kg of Sesame seeds per day. For the past two years the company entered the groundnut oil market with brand name MANTRA groundnut oil. Groundnut oil is more widely used than sesame oil. Idhayam has over six decades experience in the sesame oil. Now company looked at new avenues for growth of groundnut oil production. The plant has a capacity to produce 2.25 lakh/liters/month of groundnut oil. The company products are exported to Srilanka, UAE, Australia, London, Canada, Malaysia, USA and Moscow. Idhayam group production units are situated in different areas. Virudhunagar unit are involved in the production of sesame oil. Villipathiri unit are concentrate to produce sesame and groundnut oil. Varallotti unit are used to produce sambandhi- sesame seed and Tahini- sugar coated sesame seed. In Chennai, Dots papad are produced by Lanson Ventures for Idhayam group. Defatted oilseed cake flour is richer in protein than the seed. Oilseed cake is mostly used for cattle feed. But now improved method of extraction and careful handling of cake have helped production of edible grade deoiled meal. This protein rich meal is being used for the development of various products like multipurpose food, which are used in feeding programmes. Defatted oil seed cakes, which contain 50-60% protein, are rich source of protein. Idhayam has started a research and development work on incorporation of defatted oilseed cake flour used in bakery and confectionery items like biscuit, chews berry, bread, and chocolate for human consumption. The factory is equipped with Quality Control Laboratory with facilities of instruments like Soxhlet Extraction Apparatus, Infrared moisture meter, Magnetic stirrer, Distillation set, Tintometer, Baking oven etc. A modest target for Idhayam group is to reach 12 lakh customers. 2.3 PRODUCT PROFILE Idhayam group produced a product many based on sesame seeds and groundnut. They are:
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1. Idhayam 1986 4. Sim sim - 2003 7 .Mantra 2006

2. Sambandhi 1992 5. Idhayam wealth 2005 8. Dots 2006

3. Idhayam delit - 1996 6. Tahini - 2005

SESAME PROCESS FLOW CHART

Receiving of Sesame seeds

Receiving of Palm Jaggery

Blending & Cleaning Cake Cae Cake Crushing Oil cake Cake Filtering Cae CakePacking Cae Cake
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Cae Cake

PACKING UNIT IDHAYAM: Packaging plays a vital role in the conservation, preservation and transportation of food production. Packaged products create confidence in the consumer with respect to quality, quantity, safety and production. In Idhayam, packaging material of pouches was made in Chennai and the packaging material of bottles was made in varallotti unit. They got a food grade certificate for packaging materials.10ml, 50ml, 100ml, 200ml, 500ml, 1lit, 2lit, 5lit pouches/ bottles are available for sesame oil. Free fatty acid was first checked for the oil received from the extraction unit and the oil is passed through micro filter. 1.5% of free fatty acid is only allowed to store at 3300lt tank for Idhayam sesame oil and below 1% free fatty acid for delit product. From the main tank, oil is pumped in to the sub tank and it is packed in pouches / bottles. For packing, different machineries were used. Five track machine 1000 pouches/hour Single track machine 1080 pouches/hour Multi track machine - 5000 pouches/hour 4 head bottle machine 500 bottles/hour 8 head bottle machine 1000 bottles/hour 12 head bottle machine 1000 bottles/hour MANTRA: In Mantra, packaging material of pouches are 200ml, 500ml and 1lit only available for groundnut oil. Remaining procedure is same as like that of sesame oil. For groundnut oil packing, Single track machine only used with the capacity of 1000 pouches/hour

IDHAYAM PACKING PROCESS FLOW CHART

Oil from sub tank Bottle & Sleeves

Is3m-3 Is3m-4 Is3m-5
5 Track 8 Track 8 head bottl e 4 head bottl e 12 head bottl e

Film Roll & Carry Bags

Is3m-1 Is3m-2

Pouch Filling

Bottle Filling

Carton Box

Carton Box Packing Weighing

Carton Box Packing Weighing

Carton Box

Central Go down Despatch

Activites: Final product sampling for testing Transfer the oil (crushing to overhead tank) Pouch packing Pouch testing Pouch covering & sealing Cotton box packing Machine maintenance Transfer to central Godown
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 Sample checking at Godown Despatch (Loading) Packed finished product stock maintenance (Oil, Gift articles) Packing raw material stock (cartoon box, sleeve, pp bag) Records: Final inspection report OIL Packing report (Pouch) Packing report (Bottle) STORE request slip Incoming inspection record (cartoon box & Pouch) Final packing sample inspection register Loading checklist (based on the order form) Fire extinguisher record Cooling machine maintenance record Stabilizer maintenance record Break down Register Machine history card Operator performance report Stock note

OBJECTIVES To ascertain the various cost involved in packing department. To suggest cost savings methods in packing department.

A BLOCK POUCH COST ANALYSIS

A BLOCK 1 litre STAFF SALARY & BONUS STAFF WELFARE WAGES SALARY WAGES WELARE ELECTRICITY CHARGE GENSET EXPENSES DIESEL EXPENSES CONSUMABLE & MAINTEANCE COST PRIZE EXPENSES TOTAL 10ml STAFF SALARY & BONUS STAFF WELFARE WAGES SALARY WAGES WELARE ELECTRICITY CHARGE GENSET EXPENSES DIESEL EXPENSES CONSUMABLE & MAINTEANCE COST PRIZE EXPENSES TOTAL

AMOUNT

24572 955.76 11900 2189.46 348.8 966.7 14232

1589.61 450 57204.3 AMOUNT 24572 955.76 11900 2189.46 410.9 966.7 14232

50 450 55726.8

TABLE 4.3 B BLOCK POUCH COST ANALYSIS B BLOCK 100ml STAFF SALARY & BONUS STAFF WELFARE WAGES SALARY WAGES WELARE ELECTRICITY CHARGE GENSET EXPENSES DIESEL EXPENSES CONSUMABLE & MAINTEANCE COST PRIZE EXPENSES TOTAL 200ml STAFF SALARY & BONUS STAFF WELFARE WAGES SALARY WAGES WELARE ELECTRICITY CHARGE GENSET EXPENSES DIESEL EXPENSES CONSUMABLE & MAINTEANCE COST PRIZE EXPENSES TOTAL 4247.5 941.61 19791 6073.52 2192.5 966.7 14232 3136.2 0 51581 AMOUNT 4247.5 941.61 16904 2839.21 1594 966.7 14232 3975.92 0 45700.9 AMOUNT

FINDINGS
Packing cost forms a substantial portion of the total cost and it is fixed. The cost of packing material is the major determinant of the cost of the final product. Staff salary and labor wages are the main determinant for per bag cost in overall cost in packing process. 30% of manual power is being wasted during power cut timings. Moreover the company does not have contract laborers for packing department and hence it leads to under utilization of human resources. Electricity cycle process has not been effectively checked out in packing system. Shortage in diesel for generator is not being checked up and the machine is not sent for regular services. Present packing pouches and bottle designs has increased the oil filling capacity. Every packing cost ascertainment assumes a top priority. Primary purpose of packaging is to prevent damage during the movement of the product. Power interpretation during production time is very frequent and poor machine maintenance leads to higher expenses at all time. Cost accounting standards need to be developed for cost ascertainment right from the identification of all the requirements like structural design, marketing ,shelf life, quality assurance, legal, logistics, environmental, etc There is minimum wastages during oil filling and packing process in the department.

SUGGESTIONS
Time consumption and labor savings leads to maximum number of packing. Cost and production factor must be ascertained by using closed techniques for packing. Normal packing can be used to find out actual cost, but application of new packing must also be used to analyze the cost reduction.
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 Difference in costs in normal packing and new application packing is the very important factor of cost savings . Maintenance of machinery parts and services must have regular periodic checkup which will reduce wastages and have more efficiency. Ready stock of diesel for generator must be maintained and it should be sent regularly for services. Shape and size can be altered to maximize the number of packets per box with less packing material. Thickness of packaging material can be reduced like laminate, wrapper, tapes, etc,. Avoid excessive packaging like having over wraps on packed products. Separate cost accountant must be appointed for maintaining cost and managing every cost expenses effectively in packing department. Efficient management control leads in preparing good cost reports. Proper measures must be taken to reduce wastages in process of oil filling and packing process. Details of spoiled packing materials shall be maintained in respect of each product.

CONCLUSION
The company VVV &SONS EDIBLE OILS LIMITED manufactures various cooking oil products like Idhayam, Sambandhi , Idhayam delit, Sim Sim, Idhayam Wealth, Tahini Mantra, Dots. There are various departments like Blending and Cleaning, Filtering, Administration departments. Since the company was in need of finding an effective shop floor cost management in packing department the project study was conducted in packing department which plays major role in pricing the final product. Packing department staffs were suggested to analyze every small cost incurred in arriving at the final cost of packing. The role of packaging has assumed a heightened significance over the years. From being considered as a necessary element of protection, it has carved its own niche as a strategic weapon. The role of packaging today is not restricted to a shelter for the core product, but has grown manifold as a promotional tool, means of advertising , and a platform for the consumers to interact with the product.
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Packaging, and not the product, is the first touch-point that the customer comes into contact with. Thus, all these above aspects, which need to be considered in while ascertaining packing cost. Hence developing a cost Accounting Standards for packing assumes greater significance.

BIBLIOGRAPHY:
JOURNALS: Walter Soroka,Fundamentals of packaging technology, published by Institute of packaging professionals,2000 Muhir Mukherjee ,Packaging cost determined by raw meterials cost Competing downstreams helps optimize cost,Jan 21,2008.Sourcing Insights. Lectures in Packaging Logistics.MTT 211,Peter Hartwall (Arca). Albright, T. Software for Activity-Based Management. Journal of Cost Management, 1995. (Spring): 6-25. Artto, K. A. Life cycle cost concepts and methodologies. Journal of Cost Management, 1994. (Fall): 28-32.

BOOKS: Edward Blocher , David Stout, and Gary Cokins Cost Management: A Strategic Emphasis (Hardcover - Sep 23, 2009) Ronald W. Hilton, Michael W. Maher, and Frank Selto Cost Management: Strategies for Business Decisions (Paperback - Oct 1, 2007) Sapp, Richard, David Crawford and Steven Rebishcke Journal of Bank Cost and Management Accounting (Volume 3, Number 2), 1990. Gideon Halevi "Industrial Competitiveness: Cost Reduction (Hardcover - May 5, 2006) WEBSITES: www.articlesbase.com www.ebsco.com www.idhyam.com www.wikipedia.com www.costmangement.net
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