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A STUDY ON COST ANALYSIS & CONTROL

(With reference to Hero Motocorp Pvt Ltd)


A Project report submitted to Jawaharlal Nehru Technological University, Hyderabad,
in partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

By
KODUMURI VIJAY
Reg. No. 10241E0024
Under the Guidance of
K.K.SUNIL KUMAR
Associate Professor

Department of Management Studies


Gokaraju Rangaraju Institute of Engineering & Technology
(Affiliated to Jawaharlal Technological University, Hyderabad)
Hyderabad
2010-2012

CERTIFICATE

This is to certify that the project entitled A STUDY ON COST ANALYSIS &
CONTROLhas been submitted by Mr.Kodumuri Vijay(Reg. No.10241E0024) in partial
fulfillment of the requirements for the award of Master of Business Administration from
Jawaharlal Nehru Technological University, Hyderabad. The results embodied in the project
have not been submitted to any other University or Institution for the award of any Degree or
Diploma.

K.K.SUNIL KUMAR
Internal Guide
DepartmentofManagement Studies
GRIET

Mr.S. Ravindra Chary


(Project Coordinator)
Associate Professor
Department of Management Studies
GRIET

Sri. KVS Raju


Professor & HOD
Department of Management Studies
GRIET

DECLARATION

I hereby declare that the project entitled A STUDY ON COST ANALYSIS &
CONTROL"Submitted in partial fulfillment of the requirements for award of the
degree of MBA at Gokaraju Rangaraju Institute of Engineering and Technology,
affiliated to Jawaharlal Nehru Technological University, Hyderabad, is an
authentic work and has not been submitted to any other University/Institute for
award of any degree/diploma.

KODUMURI VIJAY
(10241E0024)
MBA, GRIET
HYDERABAD

ACKNOWLEDGEMENT

Firstly I would like to express our immense gratitude towards our institution Gokaraju Rangaraju
Institute of Engineering & Technology, which created a great platform to attain profound
technical skills in the field of MBA, thereby fulfilling our most cherished goal.
I would thank all the finance department of HERO MOTOCORP PVT LTD. specially Mr.Anil
Kumar(Asst.Manager), and the employees in the finance department for guiding me and helping
me in successful completion of the project
I am very much thankful to our professor Mr.K.K.Sunil Kumar sir(Internal Guide) sir for
extending his cooperation in doing this project.
I am also thankful to our project coordinator Mr.S. Ravindra Chary Sir for extending his
cooperation in completion of Project.
I convey my thanks to my beloved parents and my faculty who helped me directly or indirectly
in bringing this project successfully.

KODUMURI VIJAY
(10241E0024)

ABSTRACT

The total cost of producing a specific level of output is the cost of all the factors of input used.
Conventionally economist use models with two inputs capital, K. and labor, L. Capital is
assumed to be the fixed input meaning that the amount of capital used does not vary with the
level of production. The rental price per unit of capital is denoted r. Thus the total fixed costs
equal Kr. Labor is the variable input meaning that the amount of labor used varies with the level
of output. In fact in the short run the only way to vary output is by varying the amount of the
variable input. Labor is denoted L and the per unit cost or wage rate is denoted w so the total
variable costs is Lw. Consequently total cost is fixed costs (FC) plus variable cost (VC)
Valuation in terms of money of (1) effort, (2) material, (3) resources, (4) time and utilities
consumed, (5) risks incurred, and (6) opportunity forgone in production and delivery of a good
or service. All expenses are costs, but not all costs (such as those incurred in acquisition of an
income-generating asset) are expenses.
The profession places itself at the service of the nation, government, industry, and the society to
realize the objectives of a welfare state resulting in the prosperity and the well being of its people
- a fact increasingly realized with the opening up of the country's economy and change in the
economic scenario of the world. In today's world, the profession of conventional accounting and
auditing has taken a back seat and accountants increasingly contribute towards the management
of scarce resources like funds, land and apply strategic decisions. This has opened up further
scope and tremendous opportunities Cost and Works accountants to shoulder responsibility as
Cost and Management Accountants in accordance with new dimensions and vision here in India
and abroad. Members of this profession will be the driving force in the team of management
while in employment and a key consultant, an effective Cost and Management Auditor and an
appropriate advisor in place. This is why Cost Accountants in India are called Management
Accountants all over the world. Its our other name. We invite you to browse through our web
site. Complete Information on our working, history and professional accreditation are all
available.

INDEX
CHAPTER-1

PAGES

INTRODUCTION
Introduction about Project

01---03

Scope of the Study

04-----

Objectives of the Study

05-----

Methodology of the Study

06-----

CHAPTER-2
INDUSTRY PROFILE &COMPANY PROFILE
Automobile Industry in India

07-----

History of the Two Wheelers

08---12

Corporate Profile

13---18

Key Milestones of Hero Honda

19---24

Corporate Social Responsibility

25---28

Introduction about Phonix Dealer Profile

29---34

Customer Relationshiop

03---05

CHAPTER-3
REVIEW OF LITERATURE
Determination of Cost & Cost Control

37---45

Types Of Costs & Classifications

46---56

Review Of Project Costs

57---64

CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
(Data Reporting by Tables)

65---81

CHAPTER-5
FINDINGS & CONCLUSIONS

83-----

SUGGESTIONS

84-----

BIBLIOGRAPHY

85-----

INTRODUCTION

INTRODUCTION

COST:
Cost is essential in every walk of our life national, domestic and Business. A cost is
prepared to have effective utilization of funds and for the realization of objective as efficiently as
possible. Costing is a powerful tool to the management for performing its functions i.e.,
formulation plans, coordination activities and controlling operations etc., efficiently. For efficient
and effective management planning and control are tow highly essential functions. Costing and
cost control provide a set of basic techniques for planning and control.

A cost fixes a target in terms of rupees or quantities against which the actual performance
is measured. A cost is closely related to both the management function as well as the accounting
function of an organization.

As the size of the organization increases, the need for costing is correspondingly more
because a cost is an effective tool of planning and control. Cost is helpful in coordinating the
various activities (such as production, sales, purchase etc) of the organization with result that all
the activities precede according to the objective. Costs are means of communication. Ideas of the
top management are given the practical shape. As the activities of various department heads are
coordinated at the much needed for the very success of an organization. Cost is necessary to
future to motivate the staff associated, to coordinate the activities of different departments and to
control the performance of various persons operating at different levels.

Costs may be divided into two basic classes. Capital and operating costs. Capital cost is
directed towards proposed expenditure for new projects and often require special financing.The
operating costs are directed towards achieving short-term operational goals of the organization
for instance, production or profit goals in a business firm. Operating costs may be sub-divided
into various departmental of functional costs.

DEFINITION OF 'COST-BENEFIT ANALYSIS'

A process by which business` decisions are analyzed. The benefits of a given situation or
business-related action are summed and then the costs associated with taking that action are
subtracted. Some consultants or analysts also build the model to put a dollar value on intangible
items, such as the benefits and costs associated with living in a certain town. Most analysts will
also factor opportunity cost into such equations.
You may have been intensely creative in generating solutions to a problem, and rigorous
in your selection of the best one available. This solution may still not be worth implementing, as
you may invest a lot of time and money in solving a problem that is not worthy of this effort.
Cost Benefit Analysis or cba is a relatively simple and widely used technique for
deciding whether to make a change. As its name suggests, to use the technique simply add up the
value of the benefits of a course of action, and subtract the costs associated with it.
Costs are either one-off, or may be ongoing. Benefits are most often received over time.
We build this effect of time into our analysis by calculating a payback period. This is the time it
takes for the benefits of a change to repay its costs. Many companies look for payback over a
specified period of time e.g. three years.
In its simple form, cost-benefit analysis is carried out using only financial costs and
financial benefits. For example, a simple cost/benefit analysis of a road scheme would measure
the cost of building the road, and subtract this from the economic benefit of improving transport
links. It would not measure either the cost of environmental damage or the benefit of quicker and
easier travel to work.

NEED OF THE STUDY:


The importance of cost reduction programs within a company cannot be overstated.
Companies that are losing money, need to increase profits, or must become more competitive
need to cut expenses in order to succeed. Knowing how to implement effective cost reduction
strategies can be the determining factor in the survival of a business.
When a company must generate more cash as fast as possible, management will have to
decide which costs can be most effectively reduced. If the reduction is needed quickly, expenses
cut first will normally be those that are not fixed or directly tied to production. It is not a good
idea to drastically reduce expenses that produce the company product or service without careful
evaluation.
If your company understands the importance of cost reduction as a tool to increase
profitability, the company will have a much better chance of remaining profitable no matter what
stage of the economic cycle is occurring. That is because cost reduction is an effective tool that
can be responsive to a company's need. Managing expenses is just as important as managing
revenue.
Keeping the competitive edge means keeping the company razor sharp. There is no room
for laxness which dulls the ability of a company to be responsive to market trends. Changes can
occur rapidly, and a company that cannot respond with new methods, new material usage,
service efficiency changes, or technological adaptability will be quickly outperformed by other
businesses. The importance of cost reduction strategies lies in its contribution to a company's
honing of performance.

SCOPE OF THE STUDY:


Since it will not be possible to conduct a micro level study of all type industries in
Andhra Pradesh, the study is restricted to Hero MotoCorp Ltd. (Formerly Hero Honda
Motors Ltd.) (Phoenix Motors Pvt. Ltd).only.

OBJECTIVES OF STUDY
THE STUDY HAS THE FOLLOWING:
 To provide the material frame work of cost and Cost Control Analysis
 To describe the profit of the organization as a backdrop for undertaking a study of Cost
Benefit Analysis.
 To analyze the cost system in practice in Hero MotoCorp Ltd. (Formerly Hero Honda
Motors Ltd.) (Phoenix Motors Pvt. Ltd)with particular reference to their objectives and
phases of organizational and re-appropriation.
 In addition to the analysis of the conventional cost system in practice in Hero MotoCorp
Ltd. (Formerly Hero Honda Motors Ltd.) (Phoenix Motors Pvt. Ltd) The study aims at
evaluation and modification to the current cost system with reference to the various types of
costs. The scope in the formulation of performance cost is also studied.

SOURCES OF DATA:
The data of Hero MotoCorp Ltd have been collected mainly from secondary sources
viz.,
 Form the concerned officers of the Hero MotoCorp Ltd
 Hero MotoCorp Ltd journals.
 Accounting books, records.
 Key books of concerned title.
 Statistical records
 Hero MotoCorp Ltd library.

METHODOLOGY:
The proposed study is carried with the help of both primary and secondary sources of
data.
PRIMARY DATA:
The primary data is collected by interacting with the finance manager and other
concerned executives at the administrative office of the company.
SECONDARY DATA:
All the secondary data used for the study has been extracted from the annual reports,
manuals and other published material of the company.

LIMITATIONS:
 Estimates are used as basis for cost plan and estimates are based mostly on available facts
and best managerial judgment
 Cost control cannot reduce the managerial function to a formula. It is only a managerial.
 Tool which increase effectiveness of managerial control.
 The use of cost may be to restricted use of resources. Costs an often taken as limits.
 Efforts may therefore not be made to exceed the performance beyond the cost targets.
 Frequent changes may be called for in costs due to first changing industrial climate.
 In order that a system may be successful, adequate costs education should be imparted at
least through the formative period. Sufficient training programs should be arranged to make
employees give positive response to cost activities.
 The study is the limited up to the date and information provided by Hero MotoCorp Ltd and
its annual reports.

INDUSTRY PROFILE
&
COMPANY PROFILE

AUTOMOBILE INDUSTRY IN INDIA


The automobile industry in India is the ninth largest in the world with an annual
production of over 2.3 million units in 2008 In 2009, India emerged as Asia's fourth largest
exporter of automobiles, behind Japan, South Korea and Thailand.
Following economic liberalization in India in 1991, the Indian automotive industry has
demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions.
Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and
Mahindra, expanded their domestic and international operations. India's robust economic growth
led to the further expansion of its domestic automobile market which attracted significant Indiaspecific investment by multinational automobile manufacturers. In February 2009, monthly sales
of passenger cars in India exceeded 100,000 units.
Byronic automotive industry emerged in India in the 1940s. Following the independence,
in 1947, the Government of India and the private sector launched efforts to create an automotive
component manufacturing industry to supply to the automobile industry. However, the growth
was relatively slow in the 1950s and 1960s due to nationalization and the license raj which
hampered the Indian private sector. After 1970, the automotive industry started to grow, but the
growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major
luxury. Japanese manufacturers entered the Indian market ultimately leading to the establishment
of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies.
In the 1980s, a number of Japanese manufacturers launched joint-ventures for building
motorcycles and light commercial-vehicles. It was at this time that the Indian government chose
Suzuki for its joint-venture to manufacture small cars. Following the economic liberalization in
1991 and the gradual weakening of the license raj, a number of Indian and multi-national car
companies launched operations. Since then, automotive component and automobile
manufacturing growth has accelerated to meet domestic and export demands.

HISTORY OF THE TWO WHEELERS:


The Britannica Encyclopedia a motorcycle as a bike or tricycle propelled by an internal
combustion engine (or, less often by an electric engine). The automobile was the reply to the
19th century reams of self-propelling the horse-drawn bikeriage. Similarly, the invention of the
motorcycle created the self propelling bicycle. The first commercial design was three-wheeler
built by Edward Butler in Great Britain in 1884. This employed a horizontal single-cylinder
gasoline engine mounted between two steer able front wheels and connected by a drive chain to
the rear wheel. The 1900s saw the conversion of many bicycles or pedal cycles by adding small,
centrally mounted spark ignition engine engines. There was then felt the need for reliable
constructions. This led to road trial tests and competition between manufacturers. Tourist
Trophy (TT) races were held on the Isle of main in 1907 as reliability or endurance races. Such
were the proving ground for many new ideas from early two-stroke-cycle designs to
supercharged multivalent engines mounted on aerodynamic, bikebon fiber reinforced bodywork.

INVENTION OF TWO WHEELERS:


The invention of two wheelers is a much-debated issue.

Who invented the first

motorcycle? May seem like a simple question, safety, bicycle, i.e., bicycle with front and
rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel. Those
bicycles in turn described from high-wheel bicycles. The high wheelers descended from an
early type of pushbike, without pedals, propelled by the riders feet pushing against the ground.
These appeared around 1800, used iron banded wagon wheels, and were called bone-crushers,
both for their jarring ride, and their tendency to toss their riders. Gottiieb Daimler (who credited
with the building the first motorcycle in 1885, one wheel in the front and one in the back,
although it had a smaller spring-loaded outrigger wheel on each side. It was constructed mostly
of wood, the wheels were of the iron-banded wooden-spooked wagon-type and it definitely had a
bone-crusher chassis!

FURTHER DEVELOPMENTS:
Most of the developments during the early phase concentrated on three and four-wheeled
design since it was complex enough to get the machines running with out having to worry about
them falling over. The next notable two-wheeler though was the Hildebrand & Wolf Mueller,
patented in Munich in 1894. In 1895, the French firm of DeDion-button built and engine that
was to make the mass production and common use of motorcycle possible. The first motorcycle
with electric start and a fully modem electrical system; the Hence special from the Indian
Motorcycle Company astounded the industry in 1931. Before World War 1, IMC was the largest
motorcycle manufacturer in the world producing over 20000 bikes per year.

INCREASING POPULARITY:
The popularity of the vehicle grew especially after 1910, in 1916; the Indian motorcycle
company introduced the model H racer, and placed it on sale. During World War 1, all branches
of the armed forces in Europe used motorcycles principally for dispatching. After the war, it
enjoyed a sport vogue until the Great Depression began in motorcycles lasted into the late 20th
century; weight the vehicle being used for high-speed touring and sport competitions. The more
sophisticated of a 125cc model. Since then, an increasing number of powerful bikes have blazed
the roads.

HISTORICAL INDUSTRY DEVELOPMENTS:


Indian is the second largest manufacturer and producer to two wheelers in the World. It
stands next only to Japan and China in terms of the number of V produced and domestic sales
respectively. This destination was achieved due to variety of reason like restrictive policy
followed by the government of India towards the passenger bike industry, rising demand for
personal transport, inefficiency in the public transportation system etc. The Indian two-wheelers
industry made a small beginning in the early 50s when Automobile products of India (API)
started manufacturing scooters in the country. Until 1958, API and Enfield were the sole
producers.

The two wheelers market was opened were opened to foreign competition in the mid80s. And the then market leaders-Escorts and Enfield were caught unaware by the onslaught of
the 100cc bikes of the four Indo- Japanese joint ventures. With the availability of fuel-efficiency
low power bikes, demand swelled, resulting in Hero Honda then the only producer of four
stroke bikes (100cc category), gaining a top slot.
The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki and
Hero Honda brought in the first two-stroke and four-stroke engine motorcycles respectively.
These two players initially started with assembly of CKD Kits, and later on progressed to
indigenous manufacturing.
The industry had a smooth ride in the 50s, 60s and 70s when government prohibited new
entries and strictly controlled capacity expansion. The industry saw a sudden growth in the 80s.
The industry witnessed a steady of 14% leading to a peak volume of 1.9 mn vehicles in 1990.
In 1990 the entire automobile industry saw a drastic fall in demand. This resulted in a
decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles.
Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94. Hero
Honda showed a marginal decline in 1992.
The reason for recession in the sector were the incessant rise in fuel prices, high input
costs and reduced purchasing power due to significant like increased production in 1992, due to
new entrants coupled with recession in the industry resulted in companies either reporting losses
or a fall in profits.

CONCLUSION:
The two-wheelers market has had a perceptible shift from a buyers market to a sellers
market with a variety of choice, players will have compete on various fronts viz. pricing,
technology product design, productivity after sale service, marketing and distribution. In the
short term, market shares of individual manufacturers are going to be sensitive to capacity,
product acceptance, pricing and competitive pressures from other manufacturers.
As incomes grow and people grow and people feel the need to own a private means of
transport, sales of two-wheelers will rise. Penetration is expected to increase to approximately to
more than 25% by 2005.
The motorcycle segment will continue to lead the demand for two-wheelers in the
coming years. Motorcycle sale is expected to increase by 20% yoy as compared to 1% growth in
the scooter market and 3% by moped sales respectively for the next two years.
The four-stroke scooters will add new dimension to the two-wheeler segment in the
coming future.
The Asian continent is that largest user of the two-wheelers in the world. This is due to
poor road infrastructure and low per capita income, restrictive policy on bike industry. This is
due to oligopoly between top five players in the segment, compared to thirsty manufacturers in
the bike industry.
Hero Honda motors LTd., is one of the leading companies in the two-wheeler industry.
At present it is the market leader in the motorcycle segment with around 47% the market share
during FY 2000 01. During the year, company posted a 41.15% yoy rise in turnover to Rs.31,
686.5mn in motorcycles which driven by a 35.17% yoy rise in Motorcycle sales volumes. The
company has emerged as one of the most successful players, much ahead of its competitions an
account of its superior and reliable product quality complemented with excellent marketing
techniques. The company has been consistently addressing the growing demand for motorcycles
and has been cumulative customer base of over 4 million customers, which is expected to reach
5min mark with rural and semi-urban segment being the new class of consumers.

COMPANY PROFILE

CORPORATE PROFILE

Hero MotoCorp Ltd.(Formerly HeroHonda Motars ltd.)is the world's largest


manufacturer of two-wheelers,based in india.
In 2001, the company achieved the coveted position of being the largest two-wheeler
manufacturing company in India and also, the 'World No.1' two-wheeler company in terms of
unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till
date.
Today, every second motorcycle sold in the country is a Hero Honda bike. Every 30
seconds, someone in India buys Hero Honda's top-selling motorcycle Splendor.
Vision
The Hero Honda story began with a simple vision the vision of a mobile and an
empowered India, powered by Hero Honda. This vision was driven by Hero Hondas
commitment to customer, quality and excellence, and while doing so, maintaining the highest
standards of ethics and societal responsibilities. Hero Honda believes that the fastest way to turn
that dream into a reality is by remaining focused on that vision.
Strategy
Hero Hondas key strategy has been driven by innovation in every sphere of activity
building a robust product portfolio across categories, exploring new markets, aggressively
expanding the network and continuing to invest in brand building activities.
Manufacturing
Hero Honda bikes are manufactured across three globally benchmarked manufacturing
facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of
Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar,in
the hill state of Uttarkhand.

Technology
In the 1980's Hero Honda Pioneered the introduced of fuel-effecient,environment friendly
four-stroke motorcycles in the country.Today,HeroHonda continues to be technlogy pioneer.It
become the first company to launch the Fuel Injection(FI) technology in Indian motorcycles,with
the launch of the Glamour FI in June 2006.
Products
Hero Honda's product range includes variety of motorcycles that have set the industry
standards across all the market segments. The company also started manufacturing scooter in
2006. Hero Honda offers large no. of products and caters to wide variety of requirements across
all the segments.
Distribution
The company's growth in the two wheeler market in India is the result of an intrinsic
ability to increase reach in new geographies and growth markets. Hero Honda's extensive sales
and service network now spans close to 4500 customer touch points. These comprise a mix of
authorized dealerships, Service & Spare Parts outlets, and dealer-appointed outlets across the
country.
Brand
The company has been continuously investing in brand building utilizing not only the
new product launch and new campaign launch opportunities but also through innovative
marketing initiatives resolving around cricket,entertainment and ground-level action.
Hero Honda has been actively promoting various sports such as hockey, cricket and golf.
Hero Honda was the title sponsor of the Hero Honda FIH Hockey World Cup that was played in
Delhi during Feb-March 2010. Hero Honda also partners the Commonwealth Games Delhi 2010.

2010-11 Performance
Total unit sales of 54,02,444 two-wheelers, growth of 17.44 per cent
Total net operating income ofRs. 19401.15 Crores, growth of 22.32 per cent
Net profit after tax at Rs. 1927.90 Crores
Total dividend of 5250% or Rs. 105 per share including Interin Dividend of Rs. 70 per share on
face value of each share of Rs.2 each
EBIDTA margin for the year 13.49 percent
EPS of Rs.96.54

2009-10 Performance
Total unit sales of 46,00,130 two-wheelers,growth of 23.6 percent
Total net operating income of Rs.15860.51 Crores,growth of 28.1 percent
Net profit after tax at Rs.2231.83 Crores,growth of 74.1 percent
Final dividend of 1500% or Rs30 pershare on face value of each share of Rs.2 EBIDTA margin
for the year 17.4 percent

HERO HONDA'S MISSION


Hero Hondas mission is to strive for synergy between technology , systems and human
resources, to produce products and services that meet the quality , performance and price
aspirations of its customers. At the same time maintain the highest standards of ethics and social
responsiblilities.
This mission is what drives Hero Honda to new heights in excellence and helps the
organization forge a unique and mutually beneficial relationship with all its stake holders.

HERO HONDA'S MANDATE


Hero Honda is a world leader because of its excellent manpower, proven management,
extensive dealer network, efficient supply chain and world-class products with cutting edge
technology from Honda Motor Company, Japan. The teamwork and commitment are manifested
in the highest level of customer satisfaction, and this goes a long way towards reinforcing its
leadership status

BOARD OF DIRECTORS
No.

Name of the Directors

Designation

Mr. Brijmohan Lall Munjal

Chairman & Whole-time Director

Mr. Pawan Munjal

Managing Director & C.E.O.

Mr. Toshiaki Nakagawa

Joint Managing Director

Mr. Sumihisa Fukuda

Technical Director

Mr. Sunil Kant Munjal

Non-Executive Director

Mr. Suman Kant Munjal

Non-Executive Director

Mr. Takashi Nagai

Non-Executive Director

Mr. Yuji Shiga

Non-Executive Director

Mr. Pradeep Dinodia

Non-executive & Independent Director

10

Gen. (Retd.) V. P. Malik

Non-executive & Independent Director

11

Mr. Analjit Singh

Non-executive & Independent Director

12

Dr. Pritam Singh

Non-executive & Independent Director

13

Ms. Shobhana Bhartia

Non-executive & Independent Director

14.

Mr. M. Damodaran

Non-executive & Independent Director

15.

Mr. Ravi Nath

Non-executive & Independent Director

16.

Dr. Anand C. Burman

Non-executive & Independent Director

BRIEF PROFILE OF DIRECTORS


MR. BRIJMOHAN LALL MUNJAL
Mr. Brijmohan Lall Munjal is the founder Director and Chairman of the Company and
the $ 3.2 billion Hero Group. He is the Past President of Confederation of Indian Industry (CII),
Society of Indian Automobile Manufacturers (SIAM) and was a Member of the Board of the
Country's Central Bank (Reserve Bank of India). In recognition of his contribution to industry,
Mr. Munjal was conferred the Padma Bhushan Award by the Union Government.

Mr. Brijmohan Lall Munjal is currently on the board of the following companies:

No. Name of Company

Nature of Office

Hero Honda Motors Limited

Chairman and Whole-time Director

Hero Honda Finlease Limited

Chairman and Director

Munjal Showa Limited

Chairman and Director

Easy Bill Limited

Director

Rockman Industries Limited

Director

Shivam Autotech Limited

Director

KEY MILESTONES OF HERO HONDA


Year Event
1983 Joint Collaboration Agreement with Honda Motor Co.Ltd.Japan signed Shareholders
Agreement signed

1984 Hero Honda Motors Ltd. incorporated


1985 First motorcycle "CD 100" rolled out
100,000th motorcycle produced
1989 New motorcycle model - "Sleek" introduced
1991 New motorcycle model-"CD 100 SS" introduced 5,00,000th motorcycle produced
1992 Raman Munjal Vidya Mandir inaugurated - A School in the memory of founder Managing
Director, Mr. Raman Kant Munjal
1994 New motorcycle model-"Splender" introduced 1,000,000th motorcycle produced
1997 New motorcycle model-"Street" introduced HeroHonda's 2nd manufacturing plant at Gurgon
inaugurated
1998 2,000,000th motorcycle produced
1999 New motorcycle model-"CBZ" introduced Environment Management System of Dharuhera
Plant certified with ISO-14001 by DNV Holland
Raman Munjal Memorial Hospital inaugurated - A Hospital in the memory of founder
Managing Director, Mr. Raman Kant Munjal
2000 4,000,000th motorcycle produced Environment Management System of Gurgaon Plant
certified ISO-14001 by DNV Holland Splender declared 'World No.1'-largest selling single
two-wheeler model "Hero Honda Passport Programme"-CRM Programme launched

2001 New motorcycle model-"Passion" introduced


One million production in one single year
New motorcycle model-"Joy" introduced
5,000,000th motorcycle produced
2002 New motorcycle model-"Dawn" intriduced
New motorcycle model-"Ambition" introduced
Appointed Virender Sehwag,Mohmmad Kaif,Yuvraj Singh,Harbhajan Singh and Zaheer
Khan as Brand Ambassadors
2003 Becomes the first Indian Company to cross the cumulative 7 million sales mark
Splendor has emerged as the World's largest selling model for the third calendar year in a
row (2000,2001,2002)
New motorcycle model-"CD Dawn" introduced
New motorcycle model-"Splender +" introduced
New motorcycle model-"Passion plus" introduced
New motorcycle model - "Karizma" introduced
2004 New motorcycle model-"Ambition 135" introduced
HeroHonda became the World No.1 Company for the third consecutive year.
Crossed sales of over 2 million units in a single year,a global record.
Spleder-World's largest selling motorcycle crossed the 5 millions mark
New motorcycle model-"CBZ*" introduced
Joint Technical Agreements renewed
Total sales crossed a record of 10 million motorcycles
2005 Hero Honda is the World No.1 for the 4th year in a row
New motorcycle model-"Super Splender" introduced
New motorcycle model-"CD Deluxe" introduced
New motorcycle model-"Glamour" introduced
New motorcycle model-"Achiever" introduced
First Scooter model from Hero Honda - "Pleasure" introduced

2006 Hero Honda is World No.1 for the 5th year in a row
15 million production milestone achieved
2007 Hero Honda is the World No.1 for the 6th year in a row
New 'Splender NXG' launched
New 'CD Deluxe' launched
New 'Passion Plus' launched
New motorcycle model 'Hunk' introduced
20 million production milestone achieved
2008 Hero Honda Haridwar Plant inauguration
New 'Pleasure' launched
Splender NXG launched with power start feature
New motorcycle model 'Passion Pro' launched
New 'CBZ Xtreme' launched
25 million production milestone achieved
CD Deluxe launched with power start feature
New 'Glamour' launched
2009 'Hunk' (Limited Edition) launched
Splender completed 11 million production landmark
New motorcycle model 'Karizma-ZMR' launchedSilver jubilee celebrations
New model Splender Pro launched
Launch of new Super Splendor and New Hunk
2010 New licensing arrangement signed between signed Hero and Honda
Launch of new refreshed versions of Glamour, Glamour FI, CBZ Xtreme, Karizma
2011 Crosses the landmark figure of 5 million cumulative sales in a single year

PROMINENT AWARDS TO THE COMPANY


Year Awards & Recognitions

2011 Two-wheeler Manufacturer of the year award by Bike India magazine.


Adjusted the "Bike Manufacturer of the year"at the Economic Times ZigWheels Car and Bile
Awards.
CNBC Awaaz-Storyboard special commendation for "Effective rebranding of a new corporate
entity" by CNBC Awwaz Consumer Awards.
"Most Recommended Two-Wheeler Brand of the Year" award by CNBC Awaaz
Consumer Awards
Colloquy Loyalty Awards "Innovation in Loyalty Marketing International 2011" for
Hero Good Life
"Best Activity Generating Short or Long-Term Brand Loyalty" by the Promotion
Marketing Award of Asia Order of Merit for Hero GoodLife
2010 Ranked No 1 brand in the Auto (Two-Wheelers) category in the Brand Equity "Most Trusted
Brand" 2011 survey
Company of the Year awarded by Economic Times Awards for Corporate Excellence 200809.
CNBC TV18 Overdrive Awards 2010 'Hall of Fame' to Splendor
NDTV Profit Car & Bike Awards 2010

Two-wheeler Manufacturer of the Year

CnB Viewers' Choice Two-wheeler of the Year (Karizma ZMR)

Bike Maker of the Year by ET-ZigWheels Car & Bike of the Year Awards 2009

2009 'Two-wheeler Manufacturer of the Year' by NDTV Profit Car & Bike Awards 2009 and
Passion Pro adjudged as CNB Viewers' Choice two-wheeler
Top Indian Company under the 'Automobile - Two-wheelers' sector by the Dun &
Bradstreet-Rolta Corporate Awards
Won Gold in the Reader's Digest Trusted Brand 2009 in the 'Motorcycles' category
NDTV Profit Business Leadership Awards 2009 - two-wheeler category
2008 NDTV Profit Business Leadership Award 2008 - Hero Honda Wins the Coveted "NDTV
Profit Business Leadership Award 2008"
TopGear Design Awards 2008 - Hunk Bike of the Year Award
NDTV Profit Car India & Bike India Awards - NDTV Viewers Choice Award to Hunk
in Bike category
IndiaTimes Mindscape and Savile Row ( A Forbes Group Venture ) Loyalty Awards Customer and Brand Loyalty Award in Automobile (two-wheeler) sector
Asian Retail Congress Award for Retail Excellence (Strategies and Solutions of business
innovation and transformation) - Best Customer Loyalty Program in Automobile category
NDTV Profit Car India & Bike India Awards - Bike Manufacturer of the year
Overdrive Magazine - Bike Manufacturer of the year
TNS Voice of the Customer Awards:

No.1 executive motorcycle Splendor NXG

No.1 standard motorcycle CD Deluxe

No. premium motorcycle CBZ Xtreme

2007 The NDTV Profit Car India & Bike India Awards 2007 in the following category:

Overall "Bike of the Year" - CBZ X-treme

"Bike of the Year" - CBZ X-treme (up to 150 cc category)

"Bike Technology of the Year" - Glamout PGM FI

"Auto Tech of the year" - Glamour PGM FI by Overdrive Magazine.


"Bike of the year"- CBZ X-treme by Overdrive Magazine.
Ranked CBZ X-treme "Bike of the year" - by BS Motoring Magazine.
"Most Trusted Company" ,by TNS Voice of the Customer Awards 2006.
CD Deluxe rated as "No 1 standard motorcycle" by TNS Voice of the Customer Awards 2006.

2006 Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler
Company).
One of the 8 Indian companies to enter the Forbes top 200 list of worlds most reputed
companies.
No. 1 in automobile industry by TNS Corporate Social Responsibility Award.
Best in its class awards for each category by TNS Total Customer Satisfaction Awards
2006:

Splendor Plus (Executive)

CD Deluxe (Entry)

Pleasure (Gearless Scooters)

Splendor & Passion - Top two models in two wheeler category by ET Brand Equity Survey
2006.
Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler
Company).
Top Indian company in the Automobile - Two Wheeler sector by Dun & Bradstreet American Express Corporate Awards 2006.
Hero Honda Splendor rated as India's most preferred two-wheeler brand at the Awaaz
Consumer Awards 2006.
Certificate of Export Excellence for outstanding export performance during 2003-04 for twowheeler & three- wheelers - Complete (Non SSI) by Engineering Export Promotion Council.
The NDTV Profit Car India & Bike India Awards 2006 in the following category:

Bike Maker of the Year

Bike of the Year - Achiever

Bike of the Year - Achiever (up to 150 cc category)

Bike of the Year - Glamour (up to 125 cc category)

NDTV Viewers' Choice Award to Glamour in the bike category

CORPORATE SOCIAL RESPONSIBILITY (CSR)


STAKEHOLDER TIES AT THE GRASSROOTS
Hero Honda Motors takes considerable pride in its stakeholder relationships, especially
ones developed at the grassroots. The Company believes it has managed to bring an
economically and socially backward region in Dharuhera, Haryana, into the national economic
mainstream.
An Integrated Rural Development Centre has been set up on 40 acres of land along the
Delhi-Jaipur Highway. The Centre-complete with wide approach roads, clean water, and
education facilities for both adults and children-now nurtures a vibrant, educated and healthy
community.
The Foundation has adopted various villages located within vicinity of the Hero Honda
factory at Dharuhera for integrated rural development. This includes:
 Installation of deep bore hand pumps to provide clean drinking water.
 Constructing metalled roads and connecting these villages to the National Highway(NH-8).
 Renovating primary school buildings and providing hygienic water and toilet facilities.
 Ensuring a proper drainage system at each of these villages to prevent water-logging.
 Promoting non-conventional sources of energy by providing a 50 per cent subsidy on biogas

plants.
The Raman Munjal Vidya Mandir began with three classes (up to class II) and 55
students from nearby areas. It has now grown into a modern Senior Secondary, CBSE affiliated
co-educational school with over 1200 students and 61 teachers. The school has a spacious
playground, an ultra-modern laboratory, a well-equipped audio visual room, an activity room, a
well-stocked library and a computer centre.The Raman Munjal Sports Complex has basketball
courts, volleyball courts, and hockey and football grounds are used by the local villagers. In the
near future, sports academies are planned for volley ball and basket ball, in collaboration with
National Sports Authority of India.

Vocational Training Centre


In order to help local rural people, especially women, Hero Honda has set up a
Vocational Training Centre. So far 26 batches comprising of nearly 625 women have been
trained in tailoring, embroidery and knitting. The Company has helped women trained at this
centre to set up a production unit to stitch uniforms for Hero Honda employees. Interestingly,
most of the women are now self-employed.
Adult Literacy Mission

This Scheme was launched on 21st September, 1999, covering the nearby villages of
Malpura, Kapriwas and Sidhrawali. The project started with a modest enrolment of 36 adults.
Hero Honda is now in the process of imparting Adult Literacy Capsules to another 100 adults by
getting village heads and other prominent villagers to motivate illiterate adults.

Marriages of underprivileged girls


Marriages are organized from time to time, particularly for girls from backward classes,
by the Foundation by providing financial help and other support to the families.
Rural Health Care

Besides setting up a modern hospital, the Foundation also regularly provides doorstep
health care services to the local community. Free health care and medical camps are now a
regular feature in the Hero Group's community outreach program.

KEY POLICIES AN ENVIRONMENTALLY AND SOCIALLY,


AWARE COMPANY
At Hero Honda, our goal is not only to sell you a bike, but also to help you every step of
the way in making your world a better place to live in. Besides its will to provide a high-quality
service to all of its customers, Hero Honda takes a stand as a socially responsible enterprise
respectual of its environment and respectful of the important issues.
Hero Honda has been strongly committed not only to environmental conservation
programmers but also expresses the increasingly inseparable balance between the economic
concerns and the environmental and social issues faced by a business. A business must not grow
at

the expense of mankind

and

man's future but

rather

must

serve

mankind.

"We must do something for the community from whose land we generate our wealth."
A famous quote from our Worthy Chairman Mr.Brijmohan Lall Munjal.

Environment Policy
We at Hero Honda are committed to demonstrate excellence in our environmental
performance on a continual basis, as an intrinsic element of our corporate philosophy.
To achieve this we commit ourselves to:
 Integrate environmental attributes and cleaner production in all our business processes and

practices with specific consideration to substitution of hazardous chemicals, where viable and
strengthen the greening of supply chain.
 Continue product innovations to improve environmental compatibility.
 Comply with all applicable environmental legislation and also controlling our environmental

discharges through the principles of "alara" (as low as reasonably achievable).


 Institutionalise resource conservation, in particular, in the areas of oil, water, electrical

energy, paints and chemicals.


 Enhance environmental awareness of our employees and dealers / vendors, while promoting

their involvement in ensuring sound environmental management.

Quality Policy
Excellence in quality is the core value of Hero Honda's philosophy.
We are committed at all levels to achieve high quality in whatever we do, particularly in
our products and services which will meet and exceed customer's growing aspirations through:
 Innovation in products, processes and services.
 Continuous improvement in our total quality management systems.
 Teamwork and responsibility.

Safety Policy
Hero Honda is committed to safety and health of its employees and other persons who
may be affected by its operations. We believe that the safe work practices lead to better
business performance,motivated workforce and productivity.
We shall create a safety culture in the organization by:
 Integrating safety and health matters in all our activities.
 Ensuring compliance with all applicable legislative requirements.
 Empowering employees to ensure safety in their respective work places.
 Promoting safety and health awareness amongst employees, suppliers and contractors.
 Continuous improvements in safety performance through precautions besides participation

and training of employees.

INTRODUCTION

ABOUT

PHOENIX

DEALER

PROFILE

(PHOENIX MOTORS)
PHOENIX MOTORS PVT LTD is dealership type of business. PHOENIX MOTORS PVT
LTD. is established on 21st march 2003.
The business is running by only one man. The owner name is ch .madhu mathi the firm
is located at habsiguda in Hyderabad.
Generally the sale will be either on cash basis or on institutional basis. Bank like ICICI,
HDFC and CENTURION are providing loans to customers.
Advertising strategy of phoenix motors:
They are giving the ads through newspapers, wall paintings, hoardings and field staff.
They are upgrading sales by introducing the schemes, group bookings, institutional sales and
customer door-to-door activities.

Categorization of Staff members:


Staff members are categorized for technicians, 25 members are allotted for field staff, 5
members are recruited for sales for persons, 5 persons are placed for evaluating for spare parts, 5
members are allotted for managerial accounts and another 3 persons for cash transaction and
other members are allotted for remaining work.

Customer relationship:
They entertain the showroom providing a customers huge having pool game, internet
facility and television with home there system. They provide bile maintenance programs on
every week.
According to other dealers PHOENIX motors in first in sales and best in service. They
treat customer, is the very important person at PHOENIX motors customer satisfaction is their
motto, why because, they will satisfied customer is the best advertisement. They provide better
value for the customers and as well as employees also. At PHOENIX motors the customer is the
boss.

SALES STRATEGY OF PHOENIX MOTORS:


Average they are selling 25 vehicles per day. PHOENIX motors PVT L.T.D is the A.P
s NO.1 dealership in sales and other activities? It is a QLAD (qualify leader through quality
dealer). At PHOENIX motor they gave the quality service to the customers why because the
cost is long forgotten but the quality is remembered for ever. They treat quality has a...
Q

Quest for excellence

Understanding customers needs

Action to achieve customers appreciation.

Leadership determined to be a leader

involving all the people

Team spirit to work for a common goal

Yard sticks to measure programs.

WARRANTY ON PROPRIETARY ITEMS:


Warranty on proprietary items like Tyros, Tubes and Battery etc, will be directly handled
by the respective original manufactures (OEMs) except AMCO for batteries and Dunlop and
Falcon tires and Tubes. In case of any defect in proprietary items, other than the above two
mentioned OEMS the dealers must approach the Brach office dealer of the respective
manufacture. For AMCO batteries and Dunlop and falcon tires, tubes claims will be accepted at
our authorized dealerships per the mutually agreed terms and conditions between HERO
HONDA and of these two OEMs in case the claim is not accepted for invalid reasons. Then the
claim along with the refusal note form the OEM can be sent to the warranty section at gorgon
plan after due to recommendation of the area service engineer.

If any other six services or subsequent paid services is not availed as per the
recommended schedule given in the owners manual. If HERO HONDA recommended engine
oil is not used. To normal wear & tear components like bulbs, electric wiring, filters, spark plug,
clutch plates, braded shoes, fasteners, shim washers, oil seals, gaskets, rubber parts (other than
tyre and tube) plastic components, chain$ sprockets and in case of wheel rim misalignment or
bend.

If there is any damage due o modification or fittings of accessories other than ones
recommended by HERO HONDA. If the motor has been used in any competitive events like
tracking races or rallies. If there is any damage to the painted surface due to industrial pollution
or other extraneous factors. For clams made for any consequential damage due to any previous
malfunction. For normal phenomenon like noise, vibration, oil seepage, which do not affect the
performance of the motorcycles.

SOCIAL SERVICE ACTIVITIES


PHOENIX motors participate and conduct social service activities. Recently the phoenix
motors organized a BLOOD DONATION CAMP for the trust on 21st January 2006.they
motivated on the consumers to participated in this camp and also provide certificate for the
customers.

THE MARKETED BIKES OF PHOENIX (All Hero Moto Corp.)

CUSTOMER RELATIONSHIP:
To entertain the customers the showroom providing a customers huge having pool game,
Internet facility and television with home theatre system. They provide bike maintenance
programs on every week. According to other dealers PHOENIX motors in first in sales and best
in service. They treat customer, is the very important person at PHOENIX motors customer
satisfaction is their motto, why because, the well satisfied customer is the best advertisement.
They provide better value for the customers and as well as employees also. At PHONIX motors
the customer is the boss.

SOCIAL SERVICE ACTIVITIES


PHOENIX Motors participates in social service activities. The Phoenix motors organize
a BLOOD DONATION CAMP for the trust in every year. They motivated on the customers to
participated in this camp and also provide Certificate for the customers.

REVIEW OF LITERATURE

INTRODUCION TO COST & COST CONTROL


The management is efficient if it is able to accomplish the objective of the enterprise. It is
effective when it accomplishes the objectives with minimum effort and cost in order to attain
long-range efficiency and effectiveness management must chat out its course in advance. A
systematic approach to facilitate effective management performance is profit planning and
control or costing. Costing is therefore an integral part of management in a way, a cost control
system has been described as a historical combination of a goal setting machine for increasing
an enterprises profits and a goal achieving machine for facilitating organizational co ordination
and planning while achieving the costed targets.

MEANING OF COST:
It is a financial and quantitative statement, prepared and approved prior to a defined
period of time of policy to be pursued during that period for purpose of attaining a given
objective. It may include income, expenditure and employment capital.
In other words is a pre-determined detailed plan of action developed and distributed as
a guide to current operations and as a partial basis for the subsequent evaluation of performance.

MEANING OF COSTING:
The process of planning all flows of financial resources into with in and from an entity
during some specified future period. It includes providing for the detailed allocation of expected
available future resources to projects, functions, responsibilities and time periods.

From above definition it is clear that costing is the actual act of preparing the cost. It is
the process of evolving the final statement. Cost is the end product of costing.

MEANING OF COSTORY CONTROL:


It is the process of establishing of departmental costs relating the responsibilities of
executives to the requirements of a policy, and the continuous comparison of actual with costed
results, either to secure by individual action the objectives of the policy a firm basis for its
revision.
First of all costs are prepared and then actual results are the comparison of costed and
actual figures will enable the management to find out discrepancies and take remedial measures
at a proper time. The cost control is continuous process, which helps in planning and co
ordination. It provides a method of control too. A cost is a means and cost control is the end
result.

In the word of J.A Solt cost control is the system of management control and
accounting in which all operations are forecast and so as possible planned ahead and actual
results compared with the forecast and the planned ones.

ESSENTIALS OF COST CONTROL:


Costing, or the process of preparing the cost, is the starting point for cost control
Distribution of costs pertaining to each function to all the relevant section within organization.
Collection of actual data pertaining to till costed activities. Continuous comparison of actual
performance with costed performance. Initiation of corrective action to ensure that actual
performance is in line with costed performance Revision of costed if it is felt that the costs
prepared are no longer relevant on account of unforeseen developments.

OBJECTIVES OF COST CONTROL:


The primary objective of cost controls to help the management is systematic planning
and in controlling the operations of the enterprise. The primary objective can be met only of
there is proper communication and coordination amongst different within the organization. Thus
the objectives can be stated as:
1. PLANNING:
Businesses require planning to ensure efficient and maximum use of their resources. The
first step in planning is to define the broad aims and objectives of the business. Then, strategies
to achieve the desired goals are formulated and tentative schedule of eh proposed combinations
of the various factors of production, which is the most profitable for the defined period. Cost
influences strategies that need to be followed by the originations. It cultivates forced planning
aiming managers.

2. CO-ORDINATION:
Co-ordination is managerial functions under which all factors of production and all
departmental activities are balanced and integrated achieve the objectives of the organization.
Costing provides the basis for individual in all department to exchange ides on how best the
organizations objectives can be realized. Executives are forced ot think of the relationship
between their department and the company as a whole. This removes unconscious bases against
other departments. It also helps to identify weaknesses in the organization structure.
3. COMMUNICATIONS:
All people in the organization must know the objectives, policies and performances of the
organizations. They must have a clear understanding of their part in the organizations goals. This
is made possible by ensuring their participation in the costing process.
4. CONTROLS AND PERFORMANCE EVALUTION:
Control ensures control by continuous comparison of actual performance with the costed
performance. Variances are highlighted and corrective action can be initiated. Costs also from
the basis of performance evaluation in an organization as they reflect realistic estimates of
acceptable and expected performance.

COST, COSTING AND COST CONTROL:


A cost is BLUE PRINT of a plan expressed in a quantitative terms. Costing is a technique
for formulating costs. Cost control relates to the principles, procedures, and practice of achieving
given objectives thorough costs.
From the above definitions we can differentiated the three terms as costs are the
individuals objectives of a department, etc, where as costing may be said to be the act of building
cost. Cost control embraces all and in addition includes the science of planning the costs to effect
on overall management tool for the business planning and control.

1.ESSENTIALS OF COST CONTROL:


The proper organization is essential for the successful preparation, maintenance and
administration of costs. A cost committee is formed which comprises the departmental heads of
various departments. All the functional heads are entrusted with the responsibility if ensuring
proper implementation of their respective departmental costs.
The chief executive is the overall in charge of cost system. He constitutes a cost
committee for preparing realistic costs. A cost officer is the convener of the cost committee who
co-ordinates the costs of different departments. The managers of different departments are made
responsible for their departmental costs.

2.COST OFFICER:
The chief executive appoints cost officer. Such cost officer also called as cost controller
or cost director. His rank should be equal to other functional managers.
The cost officer does not have the direct responsibility of preparing the costs. The various
functional managers prepare the costs. His role is that of a supervisor. The cost officer has the
specific duty of administering the cost.
He is responsible for timely completion of costing activity by various departments and for coordination between them so the t there is a proper link between them. He is empowered to
scrutinize the costs prepared by different functional heads and to make changes in them. If the
situation so demands.

The cost officer works as a coordinator among different department. He continuously


monitors the actual performance of different departments. He determines the deviations in the
costs and takes necessary steps to rectify the deficiencies, if any. He also informs the top
management about the performance of different department.
The cost officer will be able to carry out his work only if is conversant with the working
of all the departments he must have technical knowledge of the business and should also possess
accounting knowledge.

3. COST COMMITTEE:
A cost committee is formed to assist the cost officer. The heads of the entire important
departments are made members of this committee. The committee is responsible for preparation
and execution of costs. The members of this committee put up the case of their respective
departments and help the committee to take collective decisions, if necessary. The cost
committee is responsible for reviewing the costs prepared by various functional heads. Co
ordinate all the costs and approve the final costs, the cost officer acts as coordinator of this
committee. All the functional heads are entrusted with the responsibility of ensuring proper of
ensuring proper implementation of their respective final departmental costs.

4. COSTS CENTERS:
A cost centers is that part of the organization for which the cost is prepared. A cost center
may be a department, section of a department or any other part of the department. Ideally, the
head of every center should be a member of the cost committee. However, it must be ensured
that each cost center at least has an indirect representation in the cost committee.
The establishment of cost centers is essential for covering all parts of the organization
becomes easy. When different centers are establishment. The cost centers are also necessary for
cost control purposes.

5. COST MANUAL:
a) A cost manual is a document that spells out the duties and responsible of the various
executives concerned it specifies among various functional areas. A cost manual covers the
following matters.
b) A cost manual clearly defines the objectives of cost control system. It also gives the benefits
and principles of this system.
c) The duties and responsibilities of various persons dealing with preparation and exec ton of
costs are also given in a cost manual. It enables the management to know the persons dealing
with various aspects to costs and provides clarity on their duties and responsibilities,
d) It gives information about the sanctioning authorities of various costs. The financial powers
of different managers are given in the manual for enabling he spending amount on various
expenses.
e) A proper table for costs including the sending of performance reports is drawn so that every
work starts in time and systematic control is exercise.
f) The specimen forms and number of copies to be listed for cost repots is also stated. Cost
involved should be clearly stated.
g) The length of various cost periods and control points is clearly given.
h) The procedure to the followed in the entire system is clearly stated.
i) A method of accounting to be used for various expenditures is also stated in the manual.
The cost manual helps in documentation the role of every employee, his duties,
responsibilities the ways of undertaking various tasks etc. thus it also in reducing ambiguity at
any point of time.

6. COST PERIOD:
A cost period is the length of time for which a cost is prepared. It depends upon a number
of factors. The choice of a cost period depends upon the following considerations. The types of
cost (long/short)

The nature of demand for the products.

The timings for the availability of the finance.

The economic situations of the cycles.

All the above mentioned factors are taken into account while fixing the period of costs. In
this costing process the financial manager has to take the financial decision on the costs.
The financial manager usually responsible for organizing this cost, he must perform the
following functions.


To decide the general policies and guidelines.

To officer technical advice

To suggest changes

To receive and review individual cost estimates

To reconcile divergent views

To co-ordinate costing activities.

To approve costs with or without revisions.

To scrutinize control reports later on

To scrutinize cost repots later on

To diss

eminate these guide lines.

CONTINUOUS COSTING SYSTEM:


A continuous costing system is a method of having two different cost periods with in the
same cost. The purpose of having this system is to have greater control in terms of operational
activities without losing sight is to have greater control in terms of it results in incorporating the
effect of changes in the short term on the long-term targets of the organization.

DETERMINATION OF KEY FACTOR:


The costs are prepared for all functional areas. These costs are interring dependent and
inter-related. A proper co-ordination among different costs in necessary for cost control to be
successful. The constraints on some costs may have an effect on other costs too. A factor which
influences all other costs is known as key factor or principal factor.
The key factor may not necessity remain the same. The raw materials supply may be
limited at one time but it may be easily available at another time. Similarly, other factors may
also improve at different times. The key factor highlights are limitations of the enterprise. This
will enable the management to improve the working of these departments where scope for
improvement exists.

REQUISITES FOR A SUCCESSFUL COST CONTROL SYSTEM


For making a cost control system successful requisites are required.

1. CLARIFYING OBJECTIVES:
The costs are used to realize objectives of the business. The objective must be clearly
spelt out to that costs are properly prepared. In the absence of clear goals, the costs will also be
unrealistic.

2. PROPER DELEGATION OF AUTHORITY AND RESPONSIBILITY:


Cost preparation and control is done are every level of management. Even though costs
are finalized at top level but involvement of persons from lower levels of management is
essential for their success. This necessitates proper delegation of authority and responsibility.

3. PROPER COMMUNICATION SYSTEM:


An effective system of communication is required for a successful cost control. The flow
of information regarding costs should be quick so that these are implemented. The upward
communication will help in knowing the difficulties in implementation of costs. The
performance reports of various levels will help top management in cost control.

4. COST EDUCATION:
The employees should be educated about the benefit of costing system. They should be
the benefits of costing system they should be educating about their roles in the success of this
system. Cost control may not be taken only as a control device by the employees but it should be
used as a tool to improve their efficiency.

5. FLEXIBILITY:
Flexibility in costs is required to make them suitable under changed circumstances. Costs
are prepared for the future, which is always uncertain, even though costs are prepared by
considering the future possibilities but still some adjustment. Flexibility makes the costs more
appropriate and realistic.

6. MOTIVATION:
Costs are to be implemented by human beings. Their successful implementation will
depend upon the interest shown by the employees. All persons should be motivated to improve
their working so that costing is successful. A proper system of motivation should be introduced
for making this system a success.

TYPES OF COSTS:

1. LONG -TERM COSTS:


The long-term costs prepared for a long period of five to ten years. They are concerned
with planning the operations of a firm over a considerably long period of time. The financial
controller exclusively for the top management usually prepares long-term costs. These costs
are very useful in terms of physical units (i.e. quantities) or percentages, since accrued values
may be difficult to forecast over such long-period. Capital expenditure, research and
development costs, etc, are examples of long-term costs.

2. SHORT TERM COSTS:


Short-term costs are costs prepared for a short period of one to two year. They are
prepared for those activities the trend in which cannot be for seen easily over long periods. These
costs are very useful in case of consumer goods industries such as sugar, cotton, textiles, etc.
they are generally prepared in terms of physical units (i.e. quantities) as well as monetary units
(i.e. values) materials cost. Each cost etc, are example of short-term cost. They are useful to
lower level of management for control purpose.

3. CURRENT COSTS:
Current cost is a cost, which is established for use over a short period of time and is
related to current conditions. Thus current costs are essentially short term costs adjusted to
current (i.e., present or prevailing) condition or circumstances. They are prepared for a very short
period. Say, a quarter or a month. They related to current activities of the costs.

4. INTERIM COSTS:
Interim costs are costs, which are prepared in between two cost periods. These costs may
get integrated with the cost of the following period.

CLASSIFICATION OF COSTS ACCORDING TO CONTENT:


Costs may be classified into costs in physical terms and into costs in monetary terms.

A) COSTS IN PHYSICAL TERMS:


Costs in physical terms are cost in terms quantities only. They do not include
corresponding rupee value. Long-term costs are usually prepared in physical terms. Examples of
such costs are production costs, material cost etc

B) COSTS IN MONETARY TERMS:


Costs in monetary terms are costs that cost in terms of quantities as well as their
corresponding rupee value, sales cost, purchase cost, etc are example of such costs. Costs such as
cash cost, capital expenditure cost, etc that may not have physical quantities also from part of
costs in monetary terms.

CLASSIFICATION OF COSTS ACCORDING TO FUNCTION:


Costs can be classified into:
1.operating costs
2.financial costs
3.master costs

1) OPERATING COST:
These costs relate to different activities or operations of a firm. The number of such costs
depends upon the size and nature of the business, the commonly used operating costs are:
1) Sales costs
2) Purchase costs
3) Raw material costs
4) Labor costs
5) Factory utilization cost
6) Manufacturing expenses or works overhead cost
7) Administrative and selling expenses cost etc.

The operating cost for a firm may be constructed in terms of programmers or responsibility
areas, and hence may consist of:
Programmed cost
Responsibility cost

A) PROGRAMMED COST:
It consists of expected revenues and costs of various products or projects that are Termed
as the major programmers of the firm, such a cost can be prepared for each product line or
project showing revenues, cost and the relative profitability of the various in locating areas
where efforts may be required to reduce costs and increase revenues. They are also useful in
determining imbalance and inadequacies in programmers so that corrective action may be taken
in future.

B) RESPONSIBILITY COSTS:
Where the operating cost of a firm is constructed in terms of responsibility Areas, such a cost
show the plan in terms of persons responsible for achieving them. It is used by the management
as a control them. It is used by the management as a control device to evaluate the performance
of executives who are in charge of various cost centers. Their performance is compared to the
targets (costs), set for them and proper action is taken for adverse results.
Responsibility areas may be classified under three broad categories:
Cost /expense center
Profit center
Investment center

2) FINANACIAL COSTS:
Financial costs are concerned with cash receipts and disbursements, working Capital,
financial position and results of business operations. The commonly used financial costs include
cash cost, working capital cost and income statement cost, statement of retained earnings cost,
costed balance sheet or position statement cost.

3) MASTER COSTS:
The master cost is the summary cost incorporating its functional costs.All The
operational and financial costs are integrated into the master cost. The cost officer for the benefit
of the top level management prepares this cost. This cost is used to coordinate the activities of
various functional departments. It is also used as an effective control device.

CLASSIFICATION ON THE BASIS OF FLEXIBILITY:


A) FIXED COST:
According to ICMA London a fixed cost is a cost which is designed to
Remain unchanged irrespective of the level of activity actually attained it is based on a fixed
volume of activity and shows one volume of output and related cost. It is not adjusted according
to the actual level of activity attained.
A fixed cost is useful only when the actual level of activity corresponds with the costed
level of activity. But this generally does not happen as such a fixed costs is not useful for
managerial purposes.

B) FLEXIBILE VARIABLE SLIDING SCALE OR CONTROL TYPE


COSTS:
According to ICMA London a flexible cost is a cost which is designed to Change in
accordance with the level of activity actually attained. Thus a flexible cost changes according to
the change in the level of activity. In other words it provides the costed costs at any level of
activity.Business activity cannot be accurately predicted on account of uncertainties of
Business environment. A flexible cost contains several estimates for different assumed
circumstances instead of just one estimate, it provides for automatic adjustments with changes in
the volume of activity. Hence, a situations operating in an unpredictable environment.

COST OUTPUT AND RELATIONSHIP :


Short run cost curve is divided into total fixed cost and total variable cost. So, we can
indicate it as:
TC = TFC+TVC
TC = Total Cost
TFC = Total Fixed Cost
TVC = Total Variable Cost
TVC is known as the total variable cost which changes directly with the change in output.
It refers cost of labour, raw material, power etc.

We can show it in a figure:

Total Fixed Cost Curve

There is another diagram which will show the curve of Total Variable Cost:

Total Variable Cost Curve


We can show the diagram to put all the curves also:

The TC, TVC and TFC Curves

At last, we can say that costs are very important in decision making because though all
the units are sold in the same price but the cost of production of these units are not same.
Marginal cost and incremental cost are relevant in decision making whereas sunk cost are
irrelevant.

COST AND COST SYSTEM IN Hero MotoCorp Ltd


The costing process is used in the performance costing for the construction of phase.
Which includes pre-commission activities. Besides meeting the essential requirements of
managerial control. The costing exercise also covers the long-term capital costing, which is
presented in the form of annual plan.

OBJECTIVES OF THE COST SYSTEM:


1). To prepare annual costs in such a manner those managers at various levels in the organization
carry out periodical exercise in respect of each contact or responsibility center for physical
planning and matching resources broke up into monthly targets or cash flows.
2). To introduce and operate responsible for achievement of specified targets with the resources
allocated for the purpose.
3). To bring about effective co-ordination of all activities of the organization of all activities of
the organization and to gear up service divisions to meet effectively the requirement of projects.

COST PERIOD AND PHASING:


The cost period or annual costs should correspond with the financial year. The cost
should be drawn up for the ensuring financial year in the form of cost estimates financial year in
the form of Revised Estimates (R.E) in addition, the cost are to be reviewed on monthly basis by
project review teams, in the light of actual expenditure and projections in the cost period. Costs
should indicate monthly phasing of expenditure and targets for the first and quarterly phasing for
the second half of the year. At the time of review of the cost estimates to frame revised estimates
the quarterly phasing should be broken up into monthly phasing.
While drawing up the actual cost in October every year, the long-term capital cost for
ongoing and new schemes should be formulated as a part of the exercise for preparation of
Annual plan. The long term capital cost should indicate for a period of six years following the
cost period project wise annual phasing of the capital expenditure and physical schedules
resource based network.

COST HEADS:
For uniform accounting, it is essential that costs are collected for each system of the
factory tough this may involve splitting up of payments against contracts which embrace more
than one system. Allocation of the cost as system wise affords a sound basis for cost accounting,
inter-firm comparisons and provides valuable inputs to data bank. Cost provisions are related to
project estimated and monitoring of actual expenditure where as control cables for part control
and instrumentation system.
Factory piping which include pipelines, for ash water mains, compressed air system and civil
works piping.
Auxiliary pumps for water treatment plant and civil works system. If there are, any
contracts not covered in the cost heads provision for such contracts should be shown against the
appropriate system head by adding code number.

5 TYPES OF COSTS IN HERO MOTOCORP LTD (HMIL) :


According to the nature expenditure cost are classified as under
 Direct capital outlay on works
 Technical consultancy
 Incident expenditure during construction
 Employee cost
Other establishment expenses:
 Training and recruitment
 Preliminary expenses
 Misc. brought-out assets
 Township cost

BRIEF

EXPLANATION

TO

THE

NATURE

OF

EXPENDITURE

INCLUDED IN EACH COST INDICATED BELOW:


These comprises of salaries, wages, allowance, contribution to PF and other funds and
welfare expenses such as LIC, Medical reimbursement, canteen subsidy etc., and provision for
areas of salary/D.A.

OFFICE AND OTHER EXPENSES:


Expenses incidental to construction and capital works not traceable directly to incidental
expenditure, during contribution equipments, vehicle running expense, office rent. Cost of
drawings, traveling expenses, printing & stationery, communication expenses, advertisement for
tenders etc., are major items in this category.

TRIANING

RECRUITMENT

&

OTHER

DEFFERED

REVENUE

EXPENDITURE:
The first part of the cost consist of expenses for training executives, and non-executive
trainees, rent for training halls and expenses for management development courses. The second
part consists of expenses for recruitment such as advertisement for recruitment, interview
expenses for to candidate etc., the third part combines preliminary expenses including share
registration lees and research and development expenses.

MISCELLANEOUS BOUGHT OUT PASSESS:


Vehicles, furniture and fixtures equipments, hospital and medical equipment,
miscellaneous assesses town ship figure in this cost.

REVIEW OF PROJECT COST:


MONTHLY REVIEW:
At monthly intervals, the costs should be reviewed by project review committee (PRC).
Project cost should report actual expenditure against cost heads. Works heads and corporate cost
by the 7th of the month following the reporting month. The monthly review should be examined
by project review team (PRT), who should record reasons for any aviations and action proposed
for expending works in the minutes of the meetings reasons for any variations in the case of cost
heads exceeding 10% of the cost estimates revised estimates or whichever is lower Rs.5 lakhs
should be analyzed and reported upon.

QUATERLY REVIEW:

PRT should conduct a quarterly cost review with a view to projecting anticipated
expenditure during the year against approved cost estimates/ revised estimates. As time is
essence of such review, only a quick estimate of anticipated expenditure for individual cost
heads involving provisions exceeding for individual cost heads involving provisions exceeding
Rs 50 lakhs in each case should be made and reported upon in minutes of PRT. For this purpose,
project cost should furnish all the relevant data to general manager (project) and planning and
systems by the 10th of the month following the quarter project cost committee should review the
actual expenditure and assess anticipated expenditure contract co ordination/engineers in charge
the assessments of anticipated expenditure should be furnished by the project cost committee to
general manager (project) by the 30th of the month following the quarter under review.

COST OF SERVICE DIVISION / CORPORATE COSTS:


A review of costs of service and corporate divisions should be conducted at quarterly
intervals by corporate cost committee (CSC). for this purpose, corporate accounts should report
actual expenditure up to the end of the quarter by the 10th of the month following quarter to
corporate cost and cost co-ordination of the remaining period of the year should be sent to
corporate cost should be sent to corporate cost should put up a consolidated report division wise
and project wise to corporate cost committee (CBC) by the 15th of the may, August, November
and February every year.

OBJECTIVES OF THE CURRENT COST CONTROL SYSTEM IN


Hero MotoCorp Ltd.
In current to corporate cost control system operating phase has been compiled to achieve
the following objectives.
 To control actual performance with reference to standards / norms adopted in the cost,
ascertain the deviations analyze and establish the reasons.
 To identify constraints in generation and tamely action for estimation of constraints.
 To monitor the generation of internal resources so as to ensure availability of adequate funds.
 To prepare revenue cost so as to forecasting the periodical profitability of the organization.
 To develop standards / norms of performance in the various areas of operation and
maintenance based on the experience.
 To involve managers at various in the process of developing performance cost so as to
introduce the concept of responsibility accounting and participate management.
 To ensure effective co-ordinate planning of all activities so the all the inputs and services
necessary for achieving the physical targets are available at appropriate time.
 To create cost consciousness among the managers responsible for decision making.
 To provide data regarding operational norms and costs for the purpose of formulating tariff.
 To provide data a basis for assessment of working capital requirements.
 To control the working capital particularly book debts, spears and other items or inventory.
 To improve profitability and internal resources generation.

SCOPE OF THE PERFORMANCE COST:


The cost for operation and maintenance activities will be called performance cost
operation. This, in effect means that all financial targets in the cost will be based on performance
targets in physical terms.
The current cost control system operation phase envisages generation and transmission
line projects as independents investment centers. It becomes applicable to a project in the year in
which it plans to commercialize its first generation unit. However, the costing for expenses (net
of revenue) from the date of synchronization to the date of commercial generation (i.e. during
trail run) is to be taken case of in the capital cost of the respective project. Similarly, in the case
of transmission line project, the system becomes applicable from the year in the date commercial
generation of the first unit of generating project, with which this line is associated, whichever is
later. For subsequent lines, the O & M will be prepared from the energisation.
The sum totals of costs of the cost centers will be the cost for the investment center.
However, the cost for the profit center will be worked out by apportioning the revenue and cost
of various cost centers to individuals profits centers bases on specified norms.
The performance cost operation will consists of following costs along with the supporting
schedules
A. Cost balance sheet
B. Cost profit and loss account
C. Revenue cost
In addition, separate costs for revenue activities other than operation for research and
development consultancy contracts etc.
The expenses in respect of developmental expenditure for improvements, additions,
replaautomobile, renewals, balancing facilities etc., are of capital nature and will be costed for in
the construction cost of cost control system construction phase.
To facilitate management control the system also envisages, phasing of these costs into
monthly/quarterly targets. The actual performance then will be reasons for variations will be
analyzed and established for taking corrective remedial actions. The scope also includes
projections of internal resources for a period ranging from 5 to 15 years and updating of 5years
plan as well as perspective plan of the company.

STAGES IN THE FORMULATION OF PERFORMANCE COST:


The system provides for a two stages formulation for performance cost-operation the
stages are given below.

INITIAL PROPOSAL:
In the initial proposal, the project is required to indicate yearly targets. In he addition, to
furnishing basic information like synchronization and commercial generation dates
Constraints on coal operation at less than the designed specification, calorific value of
raw material and lime stone, material consumption in physical terms for items whose
consumption value in Rs.5 lakhs or more, planned shut down for a maintenance and overhauling
and norm for various operation parameters provided for design specification and in the tariff
agreements to the corporate cost committee.
In the initial proposals is planned to be submitted after considering these factors and
keeping in view the perspective plan of the organization, fixes as well as norms for various
operating parameters. These targets and norms are then communicated to all stations and
transmissions line offices in the last week of July to be used for formulating detailed cost in the
firm of final proposal.

FINAL PROPOSAL:

Costed balance sheet, costed profit & loss account and costs in the form of cash cost
along with the proposal will consist of detailed supporting schedules for each of the investment
center / cost center. This final proposal needs to be submitted to corporate center with in 3 weeks
of receiving approval for initial proposal.

The final proposal, after approval by board, will become the basis of monitoring
performance for cost centers and investment centers.

The frequency and extent review and monitoring will be done is under:
i.

The monitoring of actual performance against costed targets for investment center / profit
center on monthly basis and for cost centers on quarterly for remedial / corrective actions.

ii.

The review of performance cost on quarterly basis to assess the anticipated profitability.
The first step in the preparation of performance cost, O & M is formulation of maintenance
and overhauling schedules for Boiler and to which generation, then considering the grid
demand, the availability or inputs and factory problems. The utilization of capacity will be
worked out on month-month basis for the cost period the gross generation targets can be
worked and accordingly.
NEXT GENERATION:
The sales value will be determined from quantum of net generation (i.e. gross generation
aux. Consumption)

AUXILIARY CONSUMPTION / CONSUMPTION BY UTILITES:

The automobile consumption by each of the cost centers for individuals unit auxiliaries,
station auxiliaries as well as transformer losses are to be estimated separately based on designed
specifications and added in order to workout total auxiliary consumption rather than fixing a
overall percentage. Similarly consumption by utilities will also need to be indicated by
concerned cost centers / departments like township and construction department. This will be
valued at cost net generation to arrive at the sales values for owns consumptions.

CHEMICAL CONSUMPTION:

The chemical are used by many cost centers for treatment of water. The consumption of
chemicals will be correlated with volume of water treated and certain norms will have to be
developed for different type of chemicals and different types of treatment.
Based on these norms, each of the cost centers will indicate consumption of chemical in
quantitative as well as financial terms. The cost center wise requirement will be consolidated to
arrive at total chemicals consumption to be charged to profit and loss account. The valuation of
chemical will be done at current prices only.

EMPLOYEE COST:
The basis employee cost will be approved manpower cost effective for respective years
of cost period. The estimation of employee cost is to be done for each grade considering midpoint of the scale as basis pay and after adding various allowance like D.A., H.R.A., C.C.A
project allowance etc., as admissible in respective grades. This is to be worked 49 out or each of
the cost period based on existing strength (at the time of estimation) in each grade and additions
during each quarter (taking 70% satisfaction for additions).
The provisions for LTC, medical reimbursement, PF and other welfare expenses are to be
made based on trend of expenses in previous years and taking into account polices changes, if
any. The details of welfare expenses like liveries and uniforms, safety expenses, accident
compensation, games & sports, canteen subsidy etc., are to list out as per chart of account. The
provisions for incentive, bonus and payments of one time nature are to be shown separately
based on total employee cost for executives, supervisors and non-supervisors and total man
power in these categories, separate rates of cost per employee will be worked out for each of
these categories as under.
1. Salaries and allowance
2. Contribution to PF and other funds
3. Welfare expenses
The cost center of employee cost will be worked out based on these rates separately for
executives, supervisors and non-supervisors. This will again be consolidated separately for
operations. Maintenance and common service function. The employee cost of common function
will be appropriated between construction and O & M costs in the ratio of capital expenditure
and sales during the respective years.

REPAIRS & MAINTANANCE:


In line, with costing system following three activities can represent major classification
of repairs and maintenance.
1. Major overhaul
2. Preventive maintenance
3. Break down maintenance
Normally costing will be done for the former two: under each activity separate estimates
will be prepared for consumption of materials and maintenance jobs. This estimation will be
done at each of the sub cost center wise details are required to be mentioned.
The consumption material for repairs and maintenance will be classified into spares,
lubricants, loose tools and plants, consumables and others.

The cost center wise total separately for three activities will be added to arrive at
summary of material consumption and maintenance jobs, which will be reflected in the profit &
loss account.

The material consumption especially of spares can be estimated based on the expected
life of various consumption / spears in the installed equipment the frequency of breakdowns in
the past and the requirement for prevented maintenance and major overhauls. The actual life of
components may be different from that indicated in the manufacturers specification. Therefore,
it is very difficult t estimate requirements of spares. But this new station it will be advisable to
collect such information from old stations that have gained experience in this field.
Normally maintenance of equipment through contractors should be avoided. But in
certain areas, if the expertise and in house capability or sufficient man power is not available,
maintenance jobs can be got done through contractors. Such contracts will need to be listed out
separately. If any owner supply items are covered in such contracts the cost of these items will be
included in the material cost.

FACTORY & GENERAL OVERHEADS:


All the items of expenditures under this head will be estimated based on past trend with
due adjustment for policy changes. The estimates will be given by cost center needs for items
identified with respective cost centers. The total administrative cost of service cost centers will
be allocated between construction and O & M in the ration of capital expenditure and sales
during the respective years.

DEPRECIATION:

This is to be charged as per ES act from the year following the year in which assets have
been capitalized. This will be done separately by each of the cost centers on the basis of
capitalized value and rates of depreciation furnished by site finance and account for different
categories of assets. Cost center-wise depreciation will be added at total depreciation for the
investment center.

INTEREST ON FIXED CAPITAL:


As per existing accounting policy, the interest is to be charged to profit & loss account
based on the loan content in the capitalized assets restricted to total accrued interest on the actual
loans.
For costing purposes, interest will be worked on equated loan content or equated loan
which ever is less.
EQUATED LOAN CONTENT:
Equated loan content is to taken as 50% if total capital cost and adjusted for number of
operating months in respective years. In case of both generating factory and transmission lines
with associated factory, the cost for each profit center will be taker as per actual or anticipated
capital cost.
The equated loan content is to be individual units transmission lines separately for each
of the phases / stages. The total capital cost will be taken as proposed in the performance cost
construction.

DATA ANALYSIS AND INTERPRETATION

HERO MOTOCORP PVT LTD .


TABLE-I
Coasted estimated for Actual for the year
SL.NO

the 2010-11

2010-11

(Rs in corers)

(Rs in corers)

Fixed cost recovery

724

72.4

618

61.8

Variable cost recovery

840

84.0

740

74.0

Fuel price adjustment recovery

820

82.0

863

86.3

Own consumption

132

13.2

148

14.8

Total of 1

2516

251.6

2369

236.9

Average intensives

102

10.2

98

9.8

Other income

56

5.6

49

4.9

GRAND TOTAL (1+2+3)

2674

267.4

2516

251.6

PARTICULAR

Sales

INTERPRETATION
The data pertaining to the generation and consumption have been obtained from the year
2010-11 and represented in table -1. The aspect included are total generation in (crores Rs) and
utilization for auxiliary consumption respectively.
During the year 2010-11 the sales, fixed costs, variable cost , own Consumption was
decreased. When the estimated costed so sales consumption is 267% respectively.
During the year 2010-11 the average intensive are decreased 9.8% the other Income also
decreased 7% respectively.

Finally with regard to the result in revenue cost of HERO MOTOCORP LTD
totally decreased 251.6% in the year 2010-11 respectively.

HERO MOTOCORP PVT LTD.


TABLE-II
Costed estimated for Actual for the year
SL.NO

the 2009-10

2009-10

(Rs in corers)

(Rs in corers)

Fixed cost recovery

702

70.2

598

59.8

Variable cost recovery

802

80.2

680

68.0

adjustment recovery

790

79.0

852

85.2

Own consumption

121

12.1

122

12.2

Total of 1

2398

239.8

2168

216.8

Average intensives

96

9.6

84

8.4

Other income

51

5.1

40

4.0

GRAND TOTAL (1+2+3)

2545

254.5

2292

229.2

PARTICULAR

Sales

INTERPRETATION
The data pertaining to the generation and consumption have been obtained from the year
2009-10 and represented in table -2. The aspect included are total generation in (crores Rs) and
utilization for auxiliary consumption respectively.
During the year 2009-10 the sales, fixed costs, variable cost, own Consumption was
decreased. When the estimated costed so sales consumption is 254.5% respectively.
During the year 2009-10 the average intensive are decreased 13% the other Income also
decreased11% respectively.

Finally with regard to the result in revenue cost of HERO MOTOCORP LTD
totally decreased 229.2% in the year 2009-10 respectively.

HERO MOTOCORP PVT LTD.


TABLE-III
Costed estimated for Actual for the year
SL.NO

PARTICULAR

the 2008-09

2008-09

(Rs in corers)

(Rs in corers)

Sales

Fixed cost recovery

657

65.7

565

56.5

Variable cost recovery

762

76.2

563

56.3

adjustment recovery

750

75.0

798

79.8

Own consumption

121

12.1

102

10.2

Total of 1

2290

229.0

2028

202.8

Average intensives

89

8.9

84

8.4

Other income

51

5.1

40

4.0

GRAND TOTAL (1+2+3)

2430

243.0

2152

215.2

INTERPRETATION
The data pertaining to the generation and consumption have been obtained from the year
2008-09 and represented in table -3. The aspect included are total generation in (crores Rs) and
utilization for auxiliary consumption respectively.
During the year 2008-09 the sales, fixed costs, variable cost , own Consumption was
decreased. When the estimated costed so sales consumption is 243.0% respectively.
During the year 2008-09 the average intensive are decreased 5% the other Income also
decreased11% respectively.

Finally with regard to the result in revenue cost of HERO MOTOCORP LTD
totally decreased 215.2% in the year 2008-09 respectively.

HERO MOTOCORP PVT LTD.


TABLE-IV
Costed estimated for Actual for the year
SL.NO

PARTICULAR

the 2007-08

2007-08

(Rs in corers)

(Rs in corers)

Sales

Fixed cost recovery

680

68.0

569

56.9

Variable cost recovery

789

78.9

623

62.3

adjustment recovery

695

69.5

812

81.2

Own consumption

121

12.1

122

12.2

Total of 1

2285

228.5

2126

212.6

Average intensives

96

9.6

84

8.4

Other income

51

5.1

40

4.0

GRAND TOTAL (1+2+3)

2432

243.2

2250

225.0

INTERPRETATION
The data pertaining to the generation and consumption have been obtained from the year
2007-08 and represented in table -4. The aspect included are total generation in (crores Rs) and
utilization for auxiliary consumption respectively.
During the year 2007-08 the sales, fixed costs, variable cost , own Consumption was
decreased. When the estimated costed so sales consumption is 243.2% respectively.
During the year 2007-08 the average intensive are decreased 13% the other Income also
decreased11% respectively.

Finally with regard to the result in revenue cost of HERO MOTOCORP LTD
totally decreased 225.0% in the year 2007-08 respectively.

HERO MOTOCORP PVT LTD.


Operational Expenditure Cost for the Year 2010-11

TABLE I

S.N
O

COSTED
PARTICULAR

ESTIMATED ACTUAL FOR THE

FOR THE 2010-11

YEAR

(Rs in corers)

2010-11

(Rs in corers)

AMOUNT

RS/MT

AMOUNT

897

89.7

856

85.6

254

25.4

215

21.5

Deprecation

42

4.2

15

1.5

Interest on fixed capital

18

1.8

20

2.0

Total of 3

60

6.0

35

3.5

GRAND TOTAL (1+2+3)

1211

121.1

1106

110.6

VARIABLE COST

OPERATIVE
MAINTENANCE COST

S/MT

FINANCE CHARGES

INTERPRETATION
Observed from the above table that the operational expenditure cost of Hero MotoCorp
Ltd in the year 2010-11. Maintenance, employee cost, stationary & general expenses, rebate and
share of other expenses is all are fluctuating with the expenses of the year 2009-10. However the
total operating maintenance costs are 25.4% decreasing respectively.

In finance charges depreciation and interest on fixed capital, has been included
The total finance charges recording decreasing of 9.5% in the year 2010-11 respectively.

The overall costs results of Hero MotoCorp Ltd are earning more profits.

HERO MOTOCORP PVT LTD.


Operational Expenditure Cost for the Year 2009-10

TABLE II

COSTED
S.NO

PARTICULAR

ESTIMATED ACTUAL FOR THE

FOR THE 2009-10

YEAR

(Rs in corers)

2009-10

(Rs in corers)

AMOUNT

RS/MT

AMOUNT

841

84.1

822

82.2

247

24.7

201

20.1

Deprecation

39

3.9

12

1.2

Interest on fixed capital

15

1.5

18

1.8

Total of 3

54

5.4

30

3.0

GRAND TOTAL (1+2+3)

1142

114.2

1053

105.3

VARIABLE COST
OPERATIVE
MAINTENANCE COST

S/MT

FINANCE CHARGES

INTERPRETATION
Observed from the above table that the operational expenditure cost of Hero MotoCorp
Ltd in the year 2008-09. Maintenance, employee cost, stationary & general expenses, rebate and
share of other expenses is all are fluctuating with the expenses of the year 2009-10. However the
total operating maintenance costs are 24.7% decreasing respectively.
In finance charges depreciation and interest on fixed capital, has been included

The total finance charges recording decreasing of 2.4% in the year 2009-10 respectively.

The overall costs results of Hero MotoCorp Ltd are earning more profits.

HERO MOTOCORP PVT LTD.


Operational Expenditure Cost for the Year 2008-09

TABLE III

SL.N
O

COSTED
PARTICULAR

ESTIMATED ACTUAL FOR THE

FOR THE 2008-09

YEAR

(Rs in corers)

2008-09
(Rs in corers)

AMOUNT

RS/MT

AMOUNT

811

81.1

798

79.8

214

21.4

157

15.7

Deprecation

36

3.6

11

1.1

Interest on fixed capital

15

1.5

18

1.8

Total of 3

51

5.1

29

2.9

GRAND TOTAL (1+2+3)

1076

107.6

984

98.4

VARIABLE COST
OPERATIVE
MAINTENANCE COST

S/MT

FINANCE CHARGES

INTERPRETATION
Observed from the above table that the operational expenditure cost of Hero MotoCorp
Ltd in the year 2008-09. Maintenance, employee cost, stationary & general expenses, rebate and
share of other expenses is all are fluctuating with the expenses of the year 2008-09. However the
total operating maintenance costs are 21.4% decreasing respectively.
In finance charges depreciation and interest on fixed capital, has been included

The total finance charges recording decreasing of 2.2% in the year 2008-09 respectively.
The overall costs results of Hero MotoCorp Ltd are earning more profits.

HERO MOTOCORP PVT LTD.


Operational Expenditure Cost for the Year 2007-08

TABLE IV

COSTED
S.NO. PARTICULAR

ESTIMATED ACTUAL FOR THE

FOR THE 2007-08

YEAR

(Rs in corers)

2007-08

(Rs in corers)

AMOUNT

RS/MT

AMOUNT

754

75.4

658

65.8

198

19.8

135

13.5

Deprecation

29

2.9

0.9

Interest on fixed capital

15

1.5

18

1.8

Total of 3

44

4.4

27

2.7

GRAND TOTAL (1+2+3)

996

99.6

820

82.0

VARIABLE COST

OPERATIVE
MAINTENANCE COST

S/MT

FINANCE CHARGES

INTERPRETATION
Observed from the above table that the operational expenditure cost of Hero MotoCorp
Ltd in the year 2007-08. Maintenance, employee cost, stationary & general expenses, rebate and
share of other expenses is all are fluctuating with the expenses of the year 2007-08. However the
total operating maintenance costs are 19.8% decreasing respectively.
In finance charges depreciation and interest on fixed capital, has been included
The total finance charges recording decreasing of 5.3% in the year 2007-08 respectively.
The overall costs results of Hero MotoCorp Ltd are earning more profits.

FINDINGS & CONCLUSIONS


SUGGESTIONS
BIBLIOGRAPHY

FINDINGS & CONCLUSIONS


Every organization has pre-determined set of objectives and goals, but reaching those
objectives and goals only by proper planning and executing of the plans economically.

The Hero MotoCorp Ltd is objectives of planning promoting and organizing an


integrated development of cement Company.

The corporation mission of Hero MotoCorp Ltd is to make available and quality service
in increasingly large quantities, the company will spear head the process of accelerated
development of banking sector by expeditiously.

The organization needs the capable personalities as management to lead the organization
successfully, the management makes the plans and implement of these plans are expressed in
terms of cost and cost control.

The Hero MotoCorp Ltd has cost process in two stages. One is the capital expenditure
cost and another is operating maintenance cost, the capital expenditure cost shows the list of
capital projects selected for investment along with their estimated cost, operating & maintenance
cost refers to the repairs & maintenance costs, the special costs are rarely used in the
organization like long-term costs, research & development cost and cost for consultancy.
It Is to make available and quality work efficient resources and implementation of
sophisticated technology and cement generation and also creating ambience of collective
working of its employees.

SUGGESTIONS
Planning has become the primary function of management most of the planning relates to
individual and individual proposals. Costs are nothing but his expressions, largely in financial
terms, cost control has, therefore become and essential tool of management for controlling and
maximizing profits.
 The company objectives of the organization and how they can be achieved through cost
control
 Time tables for all stages of costing follow
 Reports, statements, forms and other record to be maintained
 Continuous comparison of actual performance with coasted performance.

BIBLIOGRAPHY

 FINANCIAL ACCOUNTING

RP TRIVEDI

 FINANCIAL MANAGEMENT

I.M. PANDEY

 ANNUAL REPORT OF HERO MOTOCORP PVT LTD


 FUNDAMENTAL OF FINANCIAL MANAGEMENT
PRASANNA CHANDRA

DETAILED PROJECT REPORT OF Hero MotoCorp PVT Ltd

www.google.com

www.hero.com

www.costcontrolinindia.com

www.yahoofinance.com

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