Contents

Page

Preface ....................................................................................ERROR! BOOKMARK NOT DEFINED. Acknowledgement .............................................................................................................................. 3 Executive Summery ..............................................................ERROR! BOOKMARK NOT DEFINED. Origin Of The Report........................................................................................................................ 5 Objectives Of The Report ................................................................................................................. 5 Methodology Of The Report ............................................................................................................ 6 Limitations Of The Report ............................................................................................................... 6 Introduction ........................................................................................................................................ 7 Navana Furniture Limited ............................................................................................................... 7 Mission................................................................................................................................................. 7 Profile................................................................................................................................................... 8 Costing Method .....................................................................ERROR! BOOKMARK NOT DEFINED. Forecasting Sales And Production .................................................................................................. 9 Forecasting Materials Needed ......................................................................................................... 9
1. 2. 3. 4. Purchase Requisition.................................................................................................................................. 10 Purchase Order .......................................................................................................................................... 10 Receiving Report ........................................................................................................................................ 10 Materials Requisition ................................................................................................................................. 10

Direct Labor ..................................................................................................................................... 10 Factory Overhead ............................................................................................................................ 10 Selling Overhead Expenses ............................................................................................................ 11 Administrative Overhead Expenses .............................................................................................. 11 Distribution Overhead Expenses ................................................................................................... 12 Costing Of Product .......................................................................................................................... 13 Pricing Of Product........................................................................................................................... 14 Cost Of Goods Sold Statement ...................................................................................................... 15 Income Statement .................................................................ERROR! BOOKMARK NOT DEFINED. Conclusion ..............................................................................ERROR! BOOKMARK NOT DEFINED. Bibliography ..........................................................................ERROR! BOOKMARK NOT DEFINED.

After the successful completion of the course named Cost & Managerial Accounting (F302) of the BBA program, preparation for the term paper provides us an opportunity to reduce

the gap between the theoretical knowledge & practical experience. To enhance the analytical competence, we were given the onus to prepare term paper on Product costing and accounting
procedures of NAVANA Furniture Limited which has undoubtedly put fresh impetus to our

understanding of the budgeting of costs, determining the cost of goods sold, calculating net profit, finding up profitability, and margin of safety of a manufacturing company. We tried to demonstrate the objective of the term paper which is to illustrate how to determine and to prepare cost of goods sold statement and income statement.

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Acknowledgement
Our work on preparing a term paper on Product costing and accounting procedures of NAVANA Furniture Limited has been a great experience for us in light of the course Cost and Manegerial Accounting. We strongly believe works like this will surely help us to have a clear concept about Product costing and accounting procedures of NAVANA Furniture Limited. In the different steps of preparing this report, we thank our course teacher Muhammad Salauddin Chowdhury, ACA for providing us proper guidelines to prepare the report. We also thank them for assigning us such a practical report that has boosted our knowledge from different aspects. We are also thankful to Engr. Md. Showkat Kamal, Production Deputy General Manager of NAVANA Furniture Limited, who has provided us necessary information and data of the company.

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The purpose of the term paper is to show a proper overview of roduct costing and accounting trocedures oN eA AeA durniture tiuited. We have prepared this term paper on the basis of the data about costing procedures, coating method, income statement, and cost of goods sold statement of eA AeA durniture tiuited and tessute oNeA AeA durniture tiuited. This term paper also focuses on the costing of manufacturing company.

Cost accounting is an approach to evaluating the overall costs that are associated with conducting business. Generally based on standard accounting practices, cost accounting is one of the tools that managers utilize to determine what type and how much expenses is involved with maintaining the current business model. At the same time, the principles of cost accounting can also be utilized to project changes to these costs in the event that specific changes are implemented. When it comes to measuring how wisely company resources are being utilized, cost accounting helps to provide the data relevant to the current situation. By identifying production costs and further defining the cost of production by three or more successive business cycles, it is possible to note any trends that indicate a rise in production costs without any appreciable changes or increase in production of goods and services. By using this approach, it is possible to identify the reason for the change, and take steps to contain the situation before bottom line profits are impacted to a greater degree. As business became more complex and began producing a greater variety of products, the use of cost accounting to make decisions to maximize profitability came under question. NAVANA Furniture limited calculates costs of goods sold on the basis of standard costing method. In this method, different types of costs are determined base on the preceding year cost data. First, it calculates cost as the percentage of sales and then based on the standard present year costs are determined.

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ORIGIN OF THE REPORT As a requirement of BBA Program under Finance Department, University Of Dhaka, the report entitled- Product costing and accounting procedures of NAVANA Furniture Limited has been prepared. Our honorable course instructor Muhammad Salauddin Chowdhury, ACA, Department of Finance, University Of Dhaka, has assigned us to prepare this report.

OBJECTIVES OF THE REPORT This report has been prepared with a view to analyzing - Product costing and accounting procedures of NAVANA Furniture Limited, this report has been composed to obtain the following objectives: Enhance individual performance To improve our skills on report writing. To meet the curiosity in this stated subject. To focus on the key factors that influence implementation of the government project. To acquire practical knowledge.

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METHODOLOGY OF THE REPORT

Identifying Data Sources

Collection of Data

Classification, Analysis, Interpretation and Presentation of Data

Findings of the Study

Final Report Preparation

LIMITATIONS OF THE REPORT There are some limitations to do any types of work. We have also faced a number of problems that may be turned as the limitation of the study. The problems are given below:

Lack of availability of information regarding actual numerical figure. Lack of experience acted as constraints in the way of meticulous exploration on the topic. Insufficient data: The data required for sufficient analysis for writing report couldnt collect due to the excessive torkload.

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Introduction
Cost accounting establishes budget and actual cost of operations, processes, departments or product and the analysis of variances, profitability or social use of funds. Managers use cost accounting to support decision-making to cut a company's costs and improve profitability.

NAVANA FURNITURE LIMITED

NAVANA Group comprises of a number of companies and over a decade the group has established itself as one of the leading, fast growing & highly diversifying group of conglomerates in Bangladeshi Market. It is one of the leading furniture manufacturer and retailer in Bangladesh. We sell stylish, high quality and great value Office solutions, Home solutions, Medical and Lab solutions, Industrial solutions and also Interior Designing Furniture. We employ over a thousand people in and out of Bangladesh. We have more than 80 outlets across Bangladesh and also expanding business internationally. NAVANA Furniture is the Brand Name of the Navana furniture Ltd. of Aftab Automobile Ltd. Founded in 2002, NAVANA furniture possesses capabilities that are fully integrated, from designing, prototyping, material selection and moulding through testing, assembling and distribution. Abreast of being a strong leading player in the market, all our -produced furniture are guaranteed to have met the stringent quality and standards. NAVANA Furniture has its own factory in Savar. Operating in a combined area of more than 12,000 sq.m of factory and warehousing. Using fully mechanized system, imported raw material, modern technology for manufacturing furniture of contemporary designs. All our Products are tasteful, durable, functional and of competitive price. We offer a wide product range that can be tailored for customer requirement and most suitable for modern offices.

Mission

Customer Focused To take customers interest at heart Excellence in Design To strive for high creativity and conceptual breakthrough in design Service Uncompromising Quality Standard To constantly set high quality standards for products Advanced Technology To leverage on advanced technology for competitive advantage

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Profile
Name of the Company Brand Name Company Status Enlisted in DSE Belongs to Registered Head Office Display Center Navana Furniture Ltd NAVANA Furniture Public Limited Company, Navana Group 125/A, Motijheel C/A, Dhaka 64, Gulshan Avenue , Gulshan-1, Dhaka Islam Chamber, 125/A, Motejheel C/A, Dhaka 37, Agrabad C/A, Chittagong 8/C Panthapath, Dhaka And in all major cities & towns of Bangladesh Through over 25 franchises Raj-Fulbariah, Savar, Dhaka 12,000 sqm 513

Plant Factory Land Area Number of Staff & Employees

There are three methods to calculate the cost of production. Which method is appropriate and properly applicable for a manufacturing company to determine unit cost as well as total cost of production is totally depended on the nature production and business of that company. Engr. Md. Showkat Kamal, Production Deputy General Manager of NAVANA Furniture tiuited, said There are 2000 uodels oN diNNerent troducts in our industry and approximately 800 different types of materials are used in troduction systeu. NAVANA Furniture Limited follows neither job order costing method nor process costing to calculate cost of production. It follows standard costing method because there are so many variations in the production line & length. In this method, different types of costs are determined base on the preceding year cost data. First, it calculates cost as the percentage of sales and then based on the standard present year costs are determined.
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Forecasting sales and production

NAVANA Furniture Ltd. forecasts future needed production based on the forecasted demand of products. The hypothetical budget of production of NAVANA Furniture Limited of six months of the year 2012

Products
June Chairs Computer Tables Tables Dressing Table Cupboard Bed & Bed Side Cabinet Rocking Chair Dining Table & Chair Total 5000 3200 2400 1450 3580 850 2575 550 19605 July 5420 3000 2610 1375 4510 700 2360 500 20475 August 4960 2850 2150 1225 3850 600 2150 650 18435

2012
September 4790 2500 2350 1360 3590 950 2245 490 18275 October 6035 2790 2275 1050 3760 1000 2450 520 19880 November 5560 2850 1890 1145 3600 1300 2350 560 19255 December 3750 2400 1750 1360 3200 1200 2000 600 16260

Total
35515 19590 15425 8965 26090 6600 16130 3870 132185

Forecasting Materials Needed

NAVANA Furniture Ltd. forecasts future needed amount of raw materials to satisfy the future required production. Name of Raw material Edging & Fittings Chair
Components
Beneficiary

Cost of Raw materials In BDT

July August September October November December Total

Wooden Shell Lock

Scanwolf/M alaysia Green Tool/ Malaysia Weaden/ Malaysia Siam Interlock/ Thailand
Total Value

50,000 36,000 8,000 17,000

45,000 37,000 9,500 18,000

55,000 40,000 10,000 20,000

60,000 36,000 10,500 21,000

60,000 37,000 9,500 18,000

70,000 148,000 9,000 19,000

340,000 334,000 56,500 113,000

111,000

109,500

125,000

127,500

124,500

246,000

843,500

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1. Purchase requisition
Production department of NAVANA Furniture Limited issues purchase requisition after determining the budgeted amount of raw materials on the basis of production requirement.

2. Purchase Order
NAVANA Furniture Limited finds out the appropriate supplier of raw materials in terms of price, delivery date, payment system, and terms &condition. Then sends purchase order to the selected raw material supplier by indicating the amount of materials, no of units, delivery time, discount amount, description of the materials.

3. Receiving Report
After receiving the ordered raw materials, store keeper keeps record of the raw materials including the amount, weight, and color of the materials.

4. Materials Requisition
Store keeper requisites the needed materials for the factory and keeps the record.

Direct Labor
NAVANA Furniture Limited calculates the wages of the employees who are directly related to the production process as the direct labor cost. There are 450 employees in NAVANA Furniture Limited who are engaged production.

Factory Overhead
NAVANA Furniture Limited accounts the indirect factory costs which are not directly related to production as factory overhead.

NAVANA Furniture Limited

Factory Overhead For The Month Of March, 2012 Particulars Supervisor Salary Repair Electricity Insurance Total Factory Overhead Amount 1,875,425 750,170 2,250,510 482,252 5,358,357

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Selling Overhead Expenses Navana Furniture Limited

Selling Overhead For The Month Of March, 2012
Particulars Discount Advertising Repairing And Warrentte Packaging Total Selling Overhead Amount 189,550 267,985 45,753 150,333 653,621

Administrative Overhead Expenses

Navana Furniture Limited

Administrative Overhead For The Month Of March, 2012
Particulars Salary Of Managers Electricity Insurance Depreciation Maintainnce Stationary & Printing Postage Miscellanious Total Administrative Overhead Amount in BDT 798,095 172,138 93,894 266,032 109,542 31,298 15,649 78,245 1,564,892

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Distribution Overhead Expenses Navana Furniture Limited

Distribution Overhead For The Month Of March, 2012 Particulars Amount Wages Of Distributor 394,881 Maintenance Of Lorry 86,681 Fuel 250,412 Salary Of Driver 163,731 Tax On Lorry 67,419 963,124 Total Distribution Overhead

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Costing of Product
(NAVANA Furniture Limited calculates the cost of each unit production based on the standard costing method which is built based on the past year cost of production.)

Navana Furniture Limited Product Costing Name : Altum Product Category: Bed Model : Hbk0812 Sl. Particulars Basis # 1 Direct Raw Materials A. Raw Materials BOM B. Fitting & Fixing Materials BOM C. Packing Materials BOM D. Safety Allowance 6% On (A) 2 Total Direct Raw Materials Cost 3 Direct Labor 4 Prime Cost (2+3) 5 Variable Factory Overhead Cost 6 Total Variable Cost Of Goods Sold (4+5) Fixed Factory Overhead Cost 7.91% On Prime Cost Production Cost Administrative Overhead Cost 6.51% On Prime Cost 7 Ex-Factory Cost 8 Variable Selling & Distribution 5.50% On Sales Overhead Cost 9 Fixed Distribution Overhead Cost 1.00% On Sales 10 Fixed Selling Overhead Cost 7.50% On Sales 11 VAT 6.00% On Sales 12 Discount 13.00% On Sales 13 Total Cost Of Sales (7 To 12) 5.00% On Sales 14 Margin 15 Proposed Selling Price(13+14) Check Point: Price (Without Discount) Price (Without Profit & Discount)

Date: March, 2012 Last Total % Of Year % Amount Sales 20,615 46%

1.50% 4.25% 3.50% 5.50% 1.00% 7.50% 6.00% 13.00% 5.00%

1,237 21,852 3,672 25,524 712 26,236 2,018 28,254 1,662 29,916 2,612 475 3,561 2,849 5,698 45,111 2,374 47,485 2.17 6,173 39,413

3% 46% 8% 54% 1% 55% 4% 60% 4% 63% 6% 1% 7% 6% 12% 95% 5% 100% 13% 83%

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Pricing of Product
The pricing method of NAVANA Furniture Limited is not similar to that of other manufacturing company. The dissimilarities are: It counts the discount as the cost of production. It deducts VAT from the recommended selling price. It gets Gross Contribution Margin (CM) after deducting Variable Cost Of

Goods Sold from the net sales. From Gross Contribution Margin (CM) it deducts Variable Selling Overhead and calculates the Net Contribution Margin (CM). By deducting Fixed Overhead Cost from Net Contribution Margin (CM)
NAVANA Furniture Limited get Net Income. Net income of NAVANA Furniture Limited is 4% of sales amount

Navana Furniture Limited

Product Costing Name : Altum Product Category: Bed Model : Hbk0812
Position Breakdown Recommended Price Discount VAT Net Sales Variable Cost Of Goods Sold Gross Contribution Margin (CM) Variable Selling Overhead Net Contribution Margin (CM) Fixed Overhead Cost Net Profit

Date: March, 2012

Per Unit BDT 47,485 6,173 2,849 38,463 26,236 12,227 2,612 9,615 7,717 1,898 %Of Sales 100% 13% 6% 81% 55% 26% 6% 20% 16% 4%

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Cost of Goods Sold Statement

NAVANA Furniture Limited
Particulars Cost Of Goods Sold Statement For The Month Of March, 2012 Note Amount In BDT 2,564,951 8,356,016 10,920,967 (4,956,315) 5,964,652 (50,617) 5,914,035 7,382,045 13,296,080 1 5,358,357 18,654,437 3,649,715 22,304,152 Less: Closing Stock Of Work In Process Cost Of Goods Manufactured Add: Oppening Stock Of Finished Goods Less: Closing Stock Of Finished Goods Cost Of Goods Sold (4,756,471) 17,547,681 3,919,645 (5,148,965) 16,318,361

Opening Stock Of Materials Add: Purchase During The Month Materials Available For Use Less: Closing Stock Of Materials Materials Including Dead Stock Less: Sale Of Dead Stock Materials Consumed Add: Direct Labor Prime Cost Add: Factory Overhead Works Cost Add: Oppening Stock Of Work In Process

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NAVANA Furniture Limited

Cost Of Goods Sold Statement For The Month Of March, 2012 Particulars Gross Sales Less: Discount Less: Return Inward Less: VAT Net Sales Less: Cost Of Goods Sold Gross Income Less: Administrative Overhead Less: Distribution Overhead Less: Selling Overhead Net Income From Operation Add: Non-Operating Income Net Income Note Amount in BDT 25697965 3340735 287435 1541878 20527917 16,318,361 4,209,556 1564892 963124 653621 1027919 245987 1273906 % of Sales 100.00% 13.00% 1.12% 6.00% 79.88% 63.50% 16.38% 6.09% 3.75% 2.54% 4.00%

1 2 3

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Cost accounting establishes budget and actual cost of operations, processes, departments or product and the analysis of variances, profitability or social use of funds. Managers use cost accounting to support decision-making to cut a company's costs and improve profitability. There are variations between theoretical and practical cost procedures in real world. In modern cost accounting, the concept of recording historical costs was taken further, by allocating the company's fixed costs over a given period of time to the items produced during that period, and recording the result as the total cost of production. This allowed the full cost of products that were not sold in the period they were produced to be recorded in inventory using a variety of complex accounting methods, which was consistent with the principles of GAAP (Generally Accepted Accounting Principles). As business became more complex and began producing a greater variety of products, the use of cost accounting to make decisions to maximize profitability came under question.

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Person
Muhammad Salauddin Chowdhury, ACA Course Instructor, Faculty of Business Studies, Department of Finance University of Dhaka Engr. Md. Showkat Kamal, Production Deputy General Manager, NAVANA Furniture Limited

Website
www.navanafurniture.com www.google.com www.cama.com

Books
Cost accounting, By Murtz & USRY

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