INTRODUCTION

For the purpose of ISA assignment on Paper ADVANCED COSTING for semester three
(Academic Year 2014-2015). We have been asked to prepare an estimated job cost sheet on
any product of our choice.
Taking into consideration some of the major production in Goa and subsequently the demand
in the local market, the cost, production aspects and the availability of the raw materials; I felt
it feasible to select such a product which has its command in Goan market. So the product I
have selected is the Goan Cashew fenny.
In Goa there is a huge demand for cashew liquor throughout the year and also Goan legal
environment also is quite friendly to cashew liquor Production and license mechanism. But
the production can be done only in the season of cashew. Therefore only three months is
available every year for the production of cashew liquor.
Assuming that there is a job order of 6000 bottles (750 ml each) of Cashew liquor, I have
attempted to prepare a job cost sheet of the said job. The production would be done under the
product name BRAND G FENNY.

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STRUCTURE OF BUSINESS AND PRODUCTION PROCESS

General requirements
The production is done in a village area to reduce cost and to have ease in acquiring raw
materials. The cost structure is designed considering the production being done in PARYE
village of SATTARI taluka (GOA).
The Entire finance is arrange by a banl loan for Rs 3,00,000 at the rate of 12% interest.
Further an office is take for rent, production plant called Bhati is also taken for rent, two
labour and one part time accountant is employed, wood being the primary source of power in
the production of BrandG fenny.
It is assumed that job order is for 6000 bottles of 750 ml each, the bottles required is been
outsourced, additionally labelling, and packing cost is also considered. 12 bottles would
contribute to be 1 case, so there will be 500 cases of Brand G fenny.

Legal requirements
Every year auction is been carried out by Government of Goa for allotting liquor production
zone. The highest probable bid in the PARYE zone is considered while estimating the cost.
The state excise regulation and bottling fees are also been considered while estimating the
costs of production of Brand G fenny

Production Process
The production method used is the traditional labour oriented method of production in which
the cashew apple juice are first distilled to produced urrak(the ratio being 4:1 respectively).
Further distillation of cashew juice and urrak at the ratio 5:1 respectively, produces fenny.
The distillation is done in a big earthen pot and is condensed by cold water.
1 kg of cashew apples can give approx. 625 ml of juice. Therefore to produce 4500 litres
(6000 x 750 ml) of Brand G fenny we would require a total 72000 kgs of cashew apple.
i.e. 72000 kgs of apple would produce 45000 litre juice.
Out of which 22500 litre juice will be utilized to produce urrak
i.e. 22500 / 5= 4500 litres of urrak (4:1)
Then 22500 litres of cashew apple juice and 4500 litres of urrak would produce 4500 litres of
Brand G Fenny.
i.e. (22500 + 4500) / 6 = 4500 litres of Brand G Fenny.
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DETAILED COST STRUCTURE

Following is the detail of each cost/expenses to be incurred for the production of BrandG
fenny

Direct material
The raw material that is used for the production of BrandG fenny is the cashew apples. To
produce a total of 6,000 bottles (750 ml each) of fenny would require 72,000 kgs of cashew
apple. The cashew apples are purchased at the rate of Rs. 1.75 per kg. Additionally carriage
for acquiring these would be Rs. 100 per day.
Calculation of Direct Material cost
Purchase of raw material (72,000 kg x 1.75 Rs) =
Carriage inward (100 Rs x 72 days) =
Direct materials

126000 Rs
7,200 Rs
1,33,200 Rs

Direct labour
There can be only two labours employed, each paid at the rate of Rs. 4500 for 24 days of
work.
Calculation of Direct labour cost
Labour (Rs 4,500 x 2 nos x 3 months) =
Direct labour

27000 Rs
27,000 Rs

Direct expenses
Direct expenses are the strange costs, occurs on special events. Therefore auction cost is
included as direct cost
Calculation of Direct Expenses
Auction fees =
Auction Bid (Highest possible) =
Direct Expenses =

100 Rs
6500 Rs
6600 Rs

Factory over heads

The production of Brand G Fenny was practiced by the traditional method of making fenny
in Goa, where the production unit is called as Bhati in local language. The Bhati is taken
on rent for Rs 12000 for the period of 3 months, additionally woods are used as power i.e. at
the rare 2000 per month and maintenance expenses.
Calculation of Factory over heads
Rent of bhati (Rs 4000 x 3 months) =
Woods (power) (2000Rs x 3 months)=
Maintenance expenses =
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Rs 12000
Rs 6000
Rs 3000

Total Factory overheads =

Rs 21000

Administrative Over head

For the administration purpose a part time accountant is employed for the period of three
months (job period) to handle administrative and accounts work. Office is taken for rent for
three months at Rs 3800 per month.
Bank loan instalment would be 60250 annually and bank charges (ie. Opening a bank
account, cheque book charges, etc) would amount to Rs 500.
Stationary and other general expenses are taken on expected bases.
Calculation of Administrative Over head
Stationary =
Office Rent (1300 Rs x 3 months)=
Bank loan Instalment (annual)=

Rs 500
Rs 3,900
Rs 60,250

Bank Charges =
Accountant salary ( Rs 3800 x 3 months) =

Rs 200
Rs 11,400

General Expenses =
Total Administration Over Heads =

Rs 500
Rs 76,750

Selling and Distribution Over head

Being the job of Brand G fenny is for 6000 bottles of 750 ml, there is a requirement to
bottle the produced liquor and that is been outsourced as mentioned above at the rate of Rs
2.50 per bottle. There are legal charges for acquiring the bottling licence called as bottling
fees ie Rs 2.50 per case (max 9 litres per case) subject to minimum of Rs 2000. In addition to
this; labelling at Rs 0.20 per bottle, packing Rs 15 per case and excise duty of Rs 1.50 per
litre.
These bottles are delivered at the end of every month; delivery cost being Rs 1000.

Calculation of Selling and Distribution Over head

Carriage Outward (Rs 1000 x 3 months) =

Rs 3,000

bottling charges (Rs 2.5 x 6000 bottles) =

Rs 15,000

Bottling fees (Minimum Rs 2000) =

Rs 2,000

labling (Rs 0.20 x 6000 bottles) =

Rs 1,200

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packing (Rs 15 x 500 cases) =

Rs 7,500

Exise duty (Rs 1.50 x 6000 bottles) =

Rs 6,750

Total Selling and distribution Over Head

Rs 35,450.00

Bases on the above aggregate cost; a profit margin is fixed per bottle of production. While
fixing the profit rate; it is considered that the job for producing Brand G fenny is undertaken
seasonally therefore the profit margin is also kept high to cover the losses that can occur due
to this time gap.

ESTIMATED JOB COST SHEET

Estimated job cost sheet of Brand G Fenny
Per Case
Particulars
Per Bottle
(12 bottles)
Direct Materials*
22.20
266.40
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Amount
(6000 bottles)
1,33,200.00

Direct Labour*
Direct Charges

4.50
1.10

54.00
13.20

27,000.00
6,600.00

Prime cost (A)

Add :- Factory Over Heads:
Factory Rent
Factory Power*
Maintenance Expenses

27.80

333.60

1,66,800.00

2.00
1.00
0.50

24.00
12.00
6.00

12,000.00
6,000.00
3,000.00

Total Factory Over Heads (B)

Works cost (A) + (B)
Add:- Administration Over Heads:Stationary

3.50
31.30

42.00
375.60

21,000.00
1,87,800.00

0.08

1.00

500.00

0.65

7.80

3,900.00

10.04

120.50

60,250.00

Office Rent

Bank loan Instalment

Bank Charges

0.03

0.40

200.00

1.90

22.80

11,400.00

0.08

1.00

500.00

Total Administration Over Heads (C)

Cost of Production (C) + (A)+(B)
Add:- Selling and Distribution OH:Carriage Outward*
bottling charges*
Bottling fees*
Labelling*
packing*
Excise duty*
Total Selling and distribution OH (D)
Cost of Sales (D)+(A)+(B)+(C)
Profit

12.79
44.09

153.50
529.10

76,750.00
2,64,550.00

0.50
2.50
0.33
0.20
1.25
1.13
5.91
50.00
30.00

6.00
30.00
4.00
2.40
15.00
13.50
70.90
600.00
360.00

3,000.00
15,000.00
2,000.00
1,200.00
7,500.00
6,750.00
35,450.00
3,00,000.00
1,80,000.00

Sales

80.00

960.00

4,80,000.00

Accountant salary
General Expenses

Variable Costs
Fixed cost

CONCLUSION
In the above estimated Job cost sheet of Brand G fenny; I have tried to cover all the aspects
related to the production of cashew liquor in Goa. The figures give an impression that it can
be a very profitable job considering the prevailing market status for the similar product.

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Goan Government is not so strict on their policies regarding liquor production, licensing and
other legal proceed. The above job cost sheet shows a total cost of Rs 50 per bottle and hence
the profit fixed is 30 per bottle which is 60% on cost.
There is a total of 2,01,650 Rs of variable cost and 98,350 Rs of fixed cost. This makes the
production process flexible to produce required quantity of product as per the job.

REFFERNCES
http://www.goastateexcise.goa.gov.in
Oral questioning to local liquor producers and seller
Jaykrishna Gaonkar
Sundar Bugde.

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