A STUDY OF BATCH COSTING

WITH REFERENCE TO “BAGUL & SONS”

In the Subject of Cost and Works Accounting

SUBMITTED TO
“SAVITRIBAI PHULE PUNE UNIVERSITY”
For the Partial Fulfilment of the degree
“BACHELOR OF COMMERCE”

Submitted by

“PUNIT MUKESH SURANA”

B.Y.K (Sinnar) College of
Commerce, Nashik –
422005
T.Y.B. Com, Division: - H,
Roll No: - 726, YEAR - 2023-24

UNDER THE GUIDANCE OF

Mrs. ANAGHA KANNAV

B.Y.K (SINNAR) COLLEGE OF COMMERCE,

NASHIK-42200

YEAR 2023-24
 ACKNOWLEDGEMENT

I have pleasure in successfully completion of this work titled: BATCH

COSTING

The special environment at B.Y.K. College of Commerce, Nasik that always

supports educational activities, facilitated my work on this project.

I acknowledge the support, and encouragement extended for this study by

Principal Dr. V. N. Suryawanshi.

I greatly appreciate the motivation and understanding extended for the Project
Work by Mr. Bagul and the staff of the surveyed business unit, who responded
promptly and enthusiastically to my request for frank comment despite their
congested schedules.

I am indebted to all of them, who did the best to bring improvements through
their suggestions. I am very much thankful to Mrs. Anagha Kannav for her
encouragement and guidance for this project work, it would not have been
possible for me to complete this work without his suggestions on every part of
this work.

I acknowledge the authors, whose works gave me insights and information

related to this subject.

I am thankful to library staff and administrative staff of B.Y.K. College who,

directly or indirectly, have all been helpful in one way or another.
I thank my father and mother who encourage me to extend my reach with their
help and support; I have been able to complete this work.

Date: - 18 January 2024 Punit Surana

 INDEX
SR PARTICULARS PAGE
NO. NO.
1 Introduction 1

 Introduction to C’ Component
 Need and Importance of project
 Objective of the Project
 Research Methodology

2 Organizational Profile 11

3 Service & Product Profile 14

4 Theory of BATCH COSTING 19

 Meaning
 Applicability
 Advantages
 Need and Importance
 Objectives of Batch costing

5 Data analysis & Interpretation. 32

6 Findings & Recommendation. 38

7 Conclusions 41
 Conclusion from the learning
 Conclusion from the practical

8 Annexure 43
1: - INTRODUCTION
 INTRODUCTION TO COSTING: -

EVOLUTION OF COST ACCOUNTING: -

Prior to the industrial revolution, businesses were small and characterized by

simple market exchanges between individuals and organizations. In those times
there was a need of accurate book keeping though not that much of cost
accounting. However, by the seventeenth century in France, the Royal
Wallpaper Manufacturer had a Cost Accounting System. Some iron masters and
potters in eighteenth century in England too began to produce Cost Accounting
information before the Industrial Revolution.

DEFINITION –
• COSTING: - Costing is defined as the “Technique and Process of
ascertaining costs”.

• COST ACCOUNTING: - Cost Accounting is defined as “The process

of accounting for cost which begins with recording of income and expenditure
or bases on which they are calculated and ends with preparation of
periodical statements and reports foe ascertaining and controlling costs.”

OBJECTIVES OF COST ACOUNTING: -

The main objectives of Cost Accounting are as follows.

1. Ascertainment of cost
2. Determination of selling price
3. Cost control
4. Cost reduction
5. Ascertaining the profit of each activity
6. Assisting management in decision-making
 IMPORTANCE OF COST ACCOUNTING: -

Management of business concerns expects from Cost Accounting detailed cost

information in respect of its operations to equip their executives with relevant
information required for planning, scheduling, controlling and decision making.
To be more specific, management expects from cost accounting – information
and reports to help them in discharge the following functions

A) Budgeting: – Now-a-days detailed estimates in terms of quantities and

amounts are drawn up before the start of each activity. This is done to ensure
that a practicable course of action can be chalked out and the actual
performance corresponds with the estimated or budgeted performance. The
preparation of the budget is the function of costing Department.

B) Price Determination: – Cost accounts should provide information, which

enables the management to fix remunerative selling prices for various items of
products and services in different circumstance.

C) Curtailment of loss during off-seasons: - Cost Accounting can also provide

information, which may enable reduction of overhead, by utilizing idle capacity
during off-season or by lengthening the season.

D) Expansion: – Cost Accounts may provide estimates of production of various

levels on the basis of which the management may be able to formulate its
approach to expansion.

E) Arriving at decisions: - Most of the decisions in a business undertaking

involve correct statements of the likely effect on profits. Cost Accounts are of
vital help in this respect. In fact, without proper cost accounting, decision would
be like taking a jump in the dark, such as when production of products is
stopped.
 ADVANTAGES OF COST ACCOUNTING SYSTEM

1. A good Cost Accounting System helps in identifying unprofitable

activities, loses or inefficiencies in any form.

2. The application of cost reduction techniques, operation research

techniques and value analysis techniques help in achieving the objective of
economy in concern’s operations. Continuous efforts are being made by
business organization for finding new and improved methods for reducing costs.

3. Cost Accounting is useful for identifying the exact causes for decrease
or increase in profit/loss of the business. It also helps in identifying unprofitable
products or product lines so that these may be eliminated or alternative measures
may be taken.

4. It provides information and data to the management to serve as guides in

making decisions involving financial considerations. Guidance may also may be
also given by the cost Accountant on a host of problems such as, whether to
purchase or manufacture a given component, whether to accept order below
cost, which machine to purchase when a no. of choices is available.

5. Cost Accounting is quite useful for price fixation; it serves as a guide to

test the adequacy of selling prices. The price determined may be useful for
preparing estimates or filling tenders.

6. The use of cost accounting technique viz., variance analysis, points out
the deviations from the pre-determined level and thus demands suitable action to
eliminate such deviation in future.

7. The cost of ideal capacity can be easily worked out, when a concern is
not working in full capacity.
 PROJECT WORK

INTRODUCTION TO PROJECT: -

A project is a scientific and systematic study of real issue or a problem intended

to resolve the problem with application of commerce and management concepts
and skills. The study can deal with small or big issue in a division or an
organization. The problem can be from any discipline of commerce and
management. It can even be a case study where a problem has been dealt with
through the process of management.

PROJECT METHODOLOGY: -

MEANING OF PROJECT METHODOLOGY: -

Project refers to systematic method consisting of enunciating the facts and

reacting certain conclusion either in the form of solution towards the concern
problem or in certain generalization for same theoretical formulation.
Research is conducted with the object of acquiring knowledge from the
unknown fields. Research helps to add knowledge. Similarly, new facts,
environment analysis, technological upgradation also become possible.
Research is systematic enquiry seeking facts through objectives variable
methods in order to discover the relationship among them and to deduce from
them board principle or laws.
 CONCEPT OF DATA COLLECTION: -

Data collection is the process of gathering and measuring information on

variables of interest, in an established systematic fashion that enables one
to answer stated research questions, test hypotheses, and evaluate
outcomes. The data collection component of research is common to all
fields of study including physical and social sciences, humanities,
business, etc. While methods vary by discipline, the emphasis on
ensuring accurate and honest collection remains the same.

ACCORDING TO OXFORD DICTIONERY: -

“Project Work is defined as careful investigation or inquiry
Specially through search for new facts in any branch of
Knowledge.”

NEED AND IMPORTANCE: -

Project is the part of curricular and degree program which provides students
opportunity to investigate problems applying knowledge in a scientific manner. It
gives them opportunities to learn in a particular situation and art of conducting a
study in a systematic way and presenting its findings in the project report. It is a
system of recording and analyzing the events for the purpose of gaining knowledge.
So, knowledge is a tool to solve the problems of individual institution and society at
large. It is beneficial for the students to impart certain skills. It develops the
punctuality, skill of interaction and observation. It also develops analytical mind, skill
of presentation, tact of taking interviews etc. Project work provides an opportunity to
investigate a problem applying commerce and management concepts in a scientific
manner. It enables to apply that their conceptual knowledge in a practical situation
and to learn the art of conducting a study in a systematic way and presenting findings
in a coherent report. The aim of project work is gaining knowledge as a tool to solve
the problems of individual, institutions, and society at large. Apart from other
practical education like visits and guest lectures, project work is also necessary for
the future endeavors.
Project work depends upon observation and experience. It consists of
careful procedure and patient activity. For project work, one has to collect
information and analyze data at the same time. Project work is helpful in
providing solutions to the problems. It is a social activity. Project work
will lead to results which are useful and beneficial for the society. The
general objective of the work is to fulfill the requirements of the
organizations and the industry and help the organizations by giving
recommendation related to cost control and reduction Project work
provides an opportunity to investigate a problem applying commerce and
management concepts in a scientific manner.

Need and Importance: -

1. Project work helps the investigation to obtain. The answers to the

question of research.

2. It helps researcher to control the experimental extraneous and error

variance of the particular researcher problem under study.

3. It helps in drawing possible conclusions from the statistical analysis.

4. As it is the basis of the whole study, the study will collapse in the
absence of proper formulated design of project work.

5. It enables investigation to anticipate potential problem.

6. It also helps to plan such techniques for collecting data.

7. It helps to achieve optimum reliability.

8. It helps to minimize the usage of time and money

 2. OBJECTIVE OF THE PROJECT WORK: -

Any Project is done to gain some knowledge & also to give exposure to the
student to his branch of specialization. It gives an insight as to what really
goes in the project is continuous & systematic study of topic under
consideration. The subject of operating costing is selected as the subject to
my project. The basic objectives of understanding this project are as follows.

1. To study the concepts of Costing.

2. To understand Batch Costing.

3. To study the applicability of batch costing in Jewelry Industry.

4. To study the batches prepared in batch costing.

5. To study the organization profile of Bagul and Sons.

6. To study the product profile of the organization.

 PROJECT METHODOLOGY

A “Project” is planned undertaking that is carried out to achieve a particular goal.

Projects can be carried out individually and collaboratively, and may involve
research and design.
A “Project Methodology” is a system of principles, techniques and procedure used
by those who work in a discipline.

DATA COLLECTION - Meaning of data, types of data, and sources of data

collection
Data collection refers to the process of gathering information or data from
various sources, individuals, or observations for research or analysis. It is a
critical step in the research process as the quality and reliability of the collected
data significantly impact the validity of the findings.

METHODS USED IN THE PROJECT: -

1. Primary Data:
Primary data refers to the original data collected by researchers for a specific
purpose. It is obtained through methods such as surveys, interviews, or
experiments, and is considered reliable and accurate for analysis. This type of data
is valuable in academic research as it allows for the exploration of new hypotheses
and the generation of fresh insights.
An interview of Mr. Girish Bagul, owner of Bagul and Sons was conducted as the source of Primary
Data. Many questions regarding their work and team were asked.

2. Secondary Data:
Secondary data refers to information collected by someone other than the researcher
for a different purpose. It can provide valuable insights and support research by
saving time and resources. However, caution must be exercised in ensuring the
accuracy and reliability of the data, as it may be subject to biases or limitations
inherent in its original collection process.
The Secondary Data was collected from various reference books, brochures of the
organization and necessary websites.
 DATA COLLECTION FOR THE PROJECT: -

To collect information regarding this subject a proper guidance from the person
who are concerned with this, is necessary. So, I visited to ‘BAGUL & SONS’ at
Jalgaon. Primary Data was collected through schedule and Secondary Data was
collected with the help of books and website.
1. ORGANIZATIONAL PROFILE
 PROFILE OF THE ORGANIZATION.

 Name of the organization: - Bagul and Sons.

 Address: - Shop no. 8, S/no. 1724, Soni Complex, Bhavani Peth,

Jalgaon, Jalgaon - 425001, Maharashtra, India.

 Phone No.: - 9763789122/ 8830822679

 Email Id: - girishb1509@gmail.com

 Owner: -Girish Nandu Bagul.

 Year of Establishment: - 1996

 Years of Service: - 28

 Staff Members: - 22 labors.

 Work: - For the past 28 years, Bagul and Sons has worked in
manufacturing, retail, and wholesale. They have been providing the
greatest goods and services to their customers. Through their efforts and
successes, they have earned respect and have endured over the previous
28 years.
Team: -
‘Our team comprises experienced and skilled artisans and dedicated staff.
Together, we bring a wealth of expertise and enthusiasm to every jewelry,
ensuring a seamless and enjoyable experience for our clients. Experts in CAD
(computerized aided designs)/ CAM (computerized machines).
 ABOUT THE OWNER: -

 Name: - Girish Nandu Bagul.

 Phone No.: - 9763789122/ 8830822679

Mr. Girish has not taken any professional training related to jewelry business,
still he has managed to run the business successfully. This business was
started by his father “Mr. Nandu Bagul” on very small scale, slowly and
steadily expanded that.

Now “BAGUL & SONS” has become a well-known jewelry makers and
retailers along with wholesale business. Mr. Girish has one motive “TO
PROVIDE THE BEST QUALITY OF THE WORK” and this motive has
helped him and his business a lot in creating Goodwill among all class of
people.

Mr. Girish has a very charismatic personality and is always ready to take risk
and try to think outside box. He loves challenges and adapts to the changing
situation. He is the 2nd Generation of his family to manage this business.

Vision:
"Our goal is to be known as the best place that creates and sells elegant and unique
jewelry that makes people feel special and stylish."

Mission:
"Our mission is to craft exquisite jewelry pieces that resonate with individuality and
express the unique stories of our customers. We aim to provide unparalleled
craftsmanship, exceptional quality, and personalized service and affordable designs.
Through continuous innovation and dedication to sustainability, we strive to redefine
luxury and enrich lives with timeless elegance."
3: - SERVICE & PRODUCT PROFILE.
Services Offered: -

1. Jewelry making/production:
 Creates many jewelry items such as gahu mani (golden beads)
(shaped as wheat), football mani, pipe mani and etc. *Mani =
Jewel.
 Creates jewelry items on the basis of orders placed by the retailer.
 Polishing and Finishing.
 Computer-Aided designing.

2. Retail Business:
 Selling of new jewelry ornaments.
 Buying of old jewelry ornaments.
 Mainly deals in gold and diamond jewelry ornaments.
 Mainly handles the retail customers for the wedding and big
functions.

3. Wholesale Business:
 Sells small jewelry ornaments (jewel, earrings, pendals) to the
retail shop owners.
 Takes order from the retails shop owners for the big or highly
skilled and time taking ornaments.
 Trades with the retails shop owners in fine gold.
 Products Prepared:

 Gahu Mani (Golden beads):

Gahu mani i.e. golden beads are basically

used in mangalsutra and are generally of 999/916 purities. These
beads are shaped as wheat, which named them as gahu mani.

 Pipe Mani:

Pipe Mani are carved in the shape of pipes and

are small in sizes. These beads are carved in various designs
according to the requirement in the market. These beads are made
in an alloy of 916 purity of gold.
 Gol Mani:

These beads are circular in shape and are prepared

in various sizes, such as (1*16), (1*20) and etc. i.e. 16 beads in a
gram and so on. These are also prepared in 916 purity of gold
alloy.

and many more.

Products sold:

 Necklace: Necklace is an elegant piece of jewelry worn around

the neck either with single palates of pedals or more.

 Rings: Rings are jewelryAuthor

item is licensed under
that are worn in the fingers. Rings
are round in shape and comes with lot of designs and figures.
  Earrings: Earrings are worn on the lower part of the ear. As the
name goes; rings for the ears. Rings are worn by women around
the world, which describes the elegance.

 Nathani: Nathani are worn by the Maharashtrian women piercing

through nostril. Nathani is made using beads and gold strings.

 Gold Biscuit: Gold biscuits are generally pure gold in biscuit shapes.
4: - THEORY RELATED TO BATCH COSTING
 BATCH COSTING: -

A batch is a lot in which certain articles are to be manufactured. A lot means a

certain quantity or quality of products which can be produced economically and
costed easily. A batch is a cost unit consisting of a group of identical items which
maintain their identity throughout one or more stages of production. A batch of
similar products is treated as a job.
Batch Costing is used where items or articles are produced in batches and held in
stock for assembly of components to produce finished products or for sale to
customers. Costs are collected against each batch. When the batch is completed,
costs per unit is computed by dividing total cost by the number of units in each
batch.

DEFINITION:
According to I. C. M. A. London,
“Batch costing is that form of specific order costing which applies where similar
articles are manufactured in batches either for sale or use within the company ”

Applicability:
Batch Costing is generally undertaken in the case of those undertakings where
continuous production is not possible because of changes made in fashion, taste,
style or technology. For example, drugs and pharmaceuticals, boots and shoes,
ready-made garments, toys, biscuit factories, etc.

Features:
 Batch costing is also known as “lot costing”. In batch costing, a large number of
units of an identical product are produced as order by the customer or for storage
and sale in the market.
 Each batch is given a separate number and the output of the batch is identified by
the number of the batch recorded on each unit of the batch.
 The unit cost of a product varies with the size of the batch.
 Batch is a unit for cost calculations.
Advantages:

Batch costing is a method of costing used in manufacturing or service industries

where the production or service is carried out in batches rather than continuously.
Here are some advantages of batch costing:

1. Cost Control: Batch costing allows for better cost control as costs can be
specifically attributed to each batch produced. This enables management to
identify areas where costs can be reduced or optimized within each batch.

2. Efficiency: By grouping similar products or services into batches, production or

service processes can be streamlined, leading to increased efficiency. This
efficiency can result in reduced production times and costs per unit.

3. Flexibility: Batch costing provides flexibility in production planning and

scheduling. Different batches can be produced in response to changes in demand or
market conditions without disrupting the entire production process.

4. Accurate Costing: Batch costing facilitates accurate costing of products or

services by assigning costs to each batch based on actual production or service
delivery. This ensures that costs are allocated appropriately and helps in setting
competitive prices.

5. Inventory Management: Batch costing aids in inventory management by

tracking the costs associated with each batch of production. This information is
valuable for managing inventory levels, minimizing stockouts, and avoiding
overstock situations.

6. Decision Making: The detailed cost information provided by batch costing helps
management in making informed decisions regarding pricing, product mix,
resource allocation, and process improvement initiatives.

Overall, batch costing offers several advantages for businesses seeking to

efficiently manage costs, improve decision-making, and enhance competitiveness
in dynamic market environments.
 Need and Importance of Batch Costing:
Batch costing is a cost accounting method used by businesses to determine
the cost of producing a group or batch of similar products or services. It's
particularly useful in industries where products or services are produced in batches
rather than continuously.
1. Cost control: Batch costing allows businesses to track and control costs
associated with specific batches of products or services. This enables better cost
management and helps in identifying cost overruns or inefficiencies within a batch.
2. Pricing decisions: Understanding the cost of producing a batch is essential for
setting competitive prices. Accurate cost information helps businesses determine
the right pricing strategy to ensure profitability.
3. Inventory management: Batch costing helps in managing inventory levels
efficiently. By knowing the cost of each batch, businesses can optimize their
production and inventory levels to reduce carrying costs and avoid stock outs.

4. Resource allocation: It assists in allocating resources such as labour, materials,

and equipment to specific batches, ensuring that resources are used effectively and
efficiently.

5. Performance evaluation: Batch costing provides a basis for evaluating the

performance of different batches or production runs. Managers can compare the
costs, revenues, and profits associated with different batches to identify areas for
improvement.
6. Cost analysis: It helps in analyzing the cost components of a batch, including
direct materials, direct labour, and overhead costs. This breakdown allows for cost
reduction initiatives and better cost control.

Objectives of Batch Costing:

The primary objectives of batch costing include:
1. Determine Batch Cost: The fundamental objective of batch costing is to
calculate the cost associated with producing a specific batch of products or services.
This includes direct costs (materials and labour) and indirect costs (overhead).
2. Cost Control: Batch costing helps in monitoring and controlling costs for each
batch. This is crucial for cost management and ensuring that production costs do not
exceed budgeted amounts.

3. Pricing Decisions: Understanding the cost of each batch is essential for setting
appropriate prices for the products or services within the batch. Businesses can use
batch costing to ensure that prices are competitive and profitable.
4. Inventory Management: Batch costing assists in managing inventory levels
effectively. By associating costs with specific batches, businesses can make
informed decisions about batch size, reorder points, and inventory turnover rates.
5. Resource Allocation: It enables businesses to allocate resources such as labour,
materials, and machinery to specific batches efficiently. This ensures that resources
are utilized optimally and reduces waste.
6. Performance Evaluation: Batch costing provides a basis for evaluating the
performance of different batches or production runs. Managers can compare the
costs, revenues, and profits associated with various batches to identify areas for
improvement.
7. Decision-Making: Batch costing helps in making informed decisions about
whether to accept custom orders or special production runs. By estimating the costs
of producing a particular batch, businesses can decide whether it is economically
viable.
8. Product Differentiation: In cases where multiple variations or versions of a
product are produced within a batch, batch costing allows for the differentiation of
costs associated with each product variant. This information can be valuable for
marketing and sales strategies.
9. Compliance and Reporting: In some industries, regulatory and financial
reporting requirements necessitate batch costing to ensure accurate financial
statements and compliance with accounting standards.

10. Continuous Improvement: Batch costing data can be used to analyze trends and
patterns over time, facilitating continuous improvement efforts.
 How BATCH COSTING is applied in corporate world and Markets?
Batch costing is widely applied in the corporate world and markets to
determine the cost of producing a specific batch of products, aiding in
production planning, cost allocation, and inventory management. It helps in
analyzing profitability, making informed pricing decisions, and controlling
costs, thereby enabling efficient budgeting and strategic decision-making. By
providing insights into cost-efficient production methods and facilitating
resource allocation, batch costing plays a crucial role in optimizing production
processes and enhancing overall profitability in various industries.

 Why is BATCH COSTING important and how it will be beneficial in

the future?
Batch costing holds significant importance in the industry for various reasons.
Firstly, it facilitates effective cost management by providing insights into the
cost of producing specific batches of products, enabling companies to optimize
their pricing strategies and achieve competitive advantage. Secondly, it aids in
efficient resource allocation, ensuring that resources are utilized optimally and
reducing the risk of over or under utilization
Looking towards the future, batch costing is expected to continue playing a
crucial role in the industry, especially with the increasing emphasis on cost
optimization and sustainable production practices. It will help businesses adapt
to evolving market demands, streamline their production processes, and make
informed decisions that contribute to long-term sustainability.
Overall, batch costing is poised to remain a cornerstone of effective cost
management and strategic decision-making, contributing significantly to the
sustainable growth and success of businesses in the future.

COST UNIT

In batch costing, the cost unit is typically a batch of products or services

produced or processed together. A batch can consist of a specific quantity of
items produced in a single production run or a group of services provided
simultaneously. The costs incurred in producing or providing this batch are then
allocated to determine the cost per unit.
 For example, if a company manufactures 100 units of a particular product in a
single production run, the cost unit would be the batch of 100 units. The total cost
incurred in producing these 100 units would be divided by the number of units in the
batch to determine the cost per unit.

Batch costing is commonly used in industries where products or services are

produced or provided in batches rather than on a continuous basis, such as food
processing, pharmaceuticals, and manufacturing. It allows businesses to allocate costs
more accurately to each batch of production or service delivery, enabling better decision-
making and cost control.

 FORMAT OF BATCH COST SHEET

PARTICULARS COST PER TOTAL
(For “y” no. of Batch) BATCH COST

Direct Material Cost X XX

Direct Wages X XX
Set-up Cost X XX
Add: Production Overheads X XX

∴ Total Production Cost XX XXX

Add: Selling, Distribution and Administration

Overheads. X XX

∴ Total Cost XXX XXX

Add: Profit X XXX

∴ Selling cost XX XXX

CLASSIFICATION OF COST IN BATCH COSTING: -

In batch costing, costs are classified into various categories to effectively allocate
and analyze the expenses associated with producing a batch of products. The
classification of costs in batch costing typically includes the following categories:

1. Direct Materials Cost: These are the costs directly attributable to the materials
used in manufacturing the batch. It includes the cost of raw materials, components,
and supplies that are consumed in the production process.

2. Direct Labor Cost: Direct labor costs are the expenses associated with the
workforce directly involved in manufacturing the batch. This includes wages,
salaries, benefits, and other expenses directly tied to labor utilized in producing
the batch.

3. Direct Expenses: Direct expenses are additional costs directly attributable to

the batch production but not categorized under materials or labor. This may
include expenses such as subcontracting costs, special tools, or equipment rentals
specifically used for the batch.

4. Indirect Materials Cost: These are materials that are not directly traceable to a
specific batch but are consumed in the production process. Indirect materials may
include items such as lubricants, cleaning supplies, or small tools used across
multiple batches.

5. Indirect Labor Cost: Indirect labor costs are the expenses associated with the
workforce indirectly involved in manufacturing the batch. This includes salaries,
wages, benefits, and other expenses for personnel such as supervisors,
maintenance staff, or quality control inspectors.

6. Indirect Expenses: Indirect expenses are costs incurred in the production

process that cannot be directly attributed to a specific batch but are necessary for
overall production operations. Examples include factory rent, utilities,
depreciation of factory equipment, and other overhead costs.

7. Overhead Costs: Overhead costs represent the indirect costs of production,

including indirect materials, indirect labor, and other indirect expenses. These
costs are allocated to batches using predetermined overhead rates based on factors
such as machine hours, labor hours, or material usage.

8. Setup Costs: Setup costs refer to the expenses incurred in preparing equipment,
machinery, or production lines for the manufacturing of a batch. These costs
include labor, machine setup time, and any necessary adjustments or
reconfigurations.

9. Administrative Costs: Administrative costs are associated with the general

management and administrative functions of the organization. While not directly
related to batch production, these costs may still be allocated to batches as part of
overall cost determination.

By classifying costs into these categories, businesses can better understand and
control their expenses related to batch production, enabling more accurate cost
estimation, pricing decisions, and performance analysis.

USE OF BATCH COSTING IN JEWELRY MAKING

INDUSTRY: -

DEFINITION OF THE JEWELRY INDUSTRY: -

The jewelry industry encompasses a vast network of businesses involved in the

creation, manufacturing, distribution, and sale of adornments made from
precious metals and gemstones. This diverse sector includes designers who
conceptualize intricate and innovative designs, craftsmen who bring these
designs to life through traditional or modern techniques, wholesalers who
purchase in bulk and distribute to retailers, and retailers who sell directly to
consumers through various channels. The jewelry industry is deeply intertwined
with fashion trends, cultural preferences, and economic conditions, catering to a
broad spectrum of consumers ranging from those seeking high-end luxury
pieces to those looking for affordable fashion accessories. It is characterized by
its fusion of artistry, craftsmanship, and commercial viability, making it a
significant contributor to global commerce and culture.
ECONOMICS: -

The economics of the jewelry industry are shaped by a complex interplay of factors,
including supply and demand dynamics for raw materials such as gold, silver,
diamonds, and gemstones, which can be influenced by geopolitical events,
environmental regulations, and mining output. Price volatility in commodity
markets, coupled with fluctuations in consumer spending driven by economic
conditions and cultural trends, directly impacts jewelry prices and profitability.
Understanding and navigating these economic factors is essential for businesses in
the jewelry industry to optimize sourcing, production, pricing, and marketing
strategies, ensuring long-term viability and success in a dynamic and globally
interconnected marketplace.

FUTURE IN JEWELRY INDUSTRY: -

The jewelry industry offers a wide range of opportunities and has a promising scope for
individuals interested in pursuing a career in this field. Here's a brief overview of the
scope in the jewelry industry:

1. Employment Opportunities: The jewelry industry provides various job roles such as
jewelry designers, gemologists, jewelry appraisers, jewelry marketers, jewelry
merchandisers, and jewelry store managers. These roles are available in both large
jewelry brands and smaller, independent jewelry businesses.

2. Entrepreneurship: The jewelry industry offers opportunities for individuals to start

their own jewelry businesses, either as jewelry designers or as retailers. With the rise of e-
commerce, it has become easier to set up an online jewelry store and reach a global
customer base.

3. Global Demand: Jewelry is a universal form of adornment, and there is a consistent

demand for jewelry across the globe. Whether it's fine jewelry, fashion jewelry, or
handmade artisanal pieces, there is a market for various types of jewelry.

4. Innovation and Creativity: The jewelry industry values innovation and creativity,
allowing individuals to express their artistic talents through jewelry design. The industry
encourages unique designs and craftsmanship, giving jewelry professionals the
opportunity to showcase their skills and create distinct pieces.
5. Advancements in Technology: The jewelry industry is embracing technological
advancements such as 3D printing, CAD/CAM design, and virtual reality. These
technologies are revolutionizing the way jewelry is designed, manufactured, and
marketed.

6. Sustainable and Ethical Practices: There is a growing demand for sustainable and
ethically sourced jewelry. Consumers are becoming more conscious about the
environmental and social impact of jewelry production, creating opportunities for
businesses that focus on responsible sourcing and sustainable practices.

7. Personalization and Customization: Consumers are increasingly seeking

personalized and customized jewelry. This trend opens up opportunities for jewelry
designers and businesses to cater to individual preferences and create unique, one-of-a-
kind pieces.

TERMINOLOGIES USED IN BATCH COSTING AND

JEWELRY INDUSTRY: -

In batch costing, as well as in the jewelry industry, there are several common
terminologies used to describe various aspects of the production process,
materials, and products. Here are some common terminologies:

Batch Costing Terminologies:

1. Batch: A group of products produced together in a single production run, often

sharing common characteristics or specifications.

2. Batch Cost: The total cost incurred in producing a specific batch of products,
including direct materials, direct labor, and overhead costs.

3. Cost Sheet: A document or record that outlines the costs associated with
producing a batch, including itemized costs for materials, labor, and overhead.

4. Job Order: A specific task or assignment within a production batch, often

associated with a unique set of requirements or specifications.

5. Overhead Absorption Rate: The predetermined rate used to allocate overhead

costs to batches based on a chosen allocation base, such as machine hours or
labor hours.
6. Unit Cost: The average cost per unit produced within a batch, calculated by
dividing the total batch cost by the number of units produced.

7. Waste: Material or resources that are discarded or lost during the production
process, impacting the overall cost efficiency of batch production.

Jewelry Industry Terminologies:

1. Karats (or Carats): A measure of the purity of gold or the mass of gemstones,
often used to indicate the quality or value of jewelry.

2. Gemstones: Precious or semi-precious stones used in jewelry, such as

diamonds, rubies, sapphires, emeralds, etc.

3. Settings: The method by which gemstones are held in place within a piece of
jewelry, such as prong setting, bezel setting, pave setting, etc.

4. Hallmark: A mark or stamp indicating the quality or authenticity of precious

metals, often required by law in many countries.

5. Findings: The components used to assemble jewelry pieces, such as clasps,

earring hooks, jump rings, etc.

6. Mountings: The framework or structure onto which gemstones or other

decorative elements are attached to create a piece of jewelry.

7. Casting: The process of creating metal jewelry components by pouring molten

metal into a mold and allowing it to solidify.

8. Finishing: The final steps in the jewelry production process, including polishing,
buffing, and applying surface treatments to enhance the appearance of the
finished piece.

Understanding these terminologies is essential for effective communication and

management within both batch costing and the jewelry industry, facilitating
accurate cost estimation, production planning, and quality control.
SPECIMEN OF JEWELRY INDUSTRY
COST SHEET:
CHAPTER 5: - DATA ANALYSIS AND
INTERPRETATION: -
  Raw Material Purchase:
Year 2020 to 2023
Year Amount (in cr.)
2020 1.5
2021 2
2022 3.5
2023 4.3

Raw Material Purchase.

5
4.5
4.5
4
3.5
3.5
3
2.5
2
2
1.5
1.5
1
0.5
0
2020 2021 2022 2023

The above graph shows the purchases of raw material made from the year of 2020 – 2023.
Taking the sales data into consideration it is clearly observed that raw material
purchased during the years are approximately 10% of the sales.
During the period of Covid-19, i.e. in the year of 2020, purchases were just of Rs. 1.5
crores, but as the market start to open, raw material purchases were increase
simultaneously.
In the next year, i.e. 2021, a growth of nearly of half crores were seen, which makes the
total purchase of Rs. 2crore.
In the year of 2022, when the demand starts to increase, the purchases were also
increased. The purchases made during the year of 2022 were 3.5 crore.
As the market has fully restored, the organization survived perfectly, and stands out
among the other competitors.
In the year of 2023 a purchase of Rs. 4.3crore was made.
 SALES between 2020 to 2023

Year Sales in cr.

2020 15
2021 24
2022 37
2023 40

Sales in cr.
42.5 40
37
37.5
32.5
27.5 24
22.5
17.5 15
12.5
7.5
2.5
2020 2021 2022 2023
Sales in cr. 15 24 37 40

Sales in cr. Linear (Sales in cr.)

The above bar graph shows the sales results of the organization “BAGUL &
SONS” from 2020 to 2023.

Due to the covid the sales in 2020 was not up to expectations, they still made 15
crores in the year 2020.

As the lockdown started to open slowly there was a rise in their sales as well, and
in 2021 they made 24 crores in sales.

They were back on track in the year 2022, as they made an enormous sales
compared to last couple of years. In 2022, they made 47 crores in sales.

They were satisfied and fully back on the track and gained the confidence in the
year 2023 as they made a huge turnover of 60 crores rupees.
  Profit during the quarters of 2023.

Quarters Profit (in lakhs)

1st 47
2nd 52
3rd 59
4th 60

Profit (in lakhs)

70
59 60
60 52
50 47
40
30
20
10
0
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Profit (in lakhs) Linear (Profit (in lakhs))

During the year 2023, we can see a continuous/steady growth in the profit of the
organization “BAGUL & SONS”.
In the 1st quarter the profit was nearly 47 lakhs, and with the steady growth their
profit in 2nd quarter rose to 52 lakhs.

The organization closed the 3rd quarter with the profit of 59 lakhs.

Same with the 4th quarter with the profit of 60 lakhs.

At the end of the year their total profit was nearly 2.18 crores through all the
means i.e. wholesale, retail and small works.

An average wholesaler in the jewelry industry has an estimated profit margin up to

4-6 %.

Compared to the 1st quarter, the 2nd and 3rd quarters have a slight increase in
profit. The reason behind this is the marriages that took place in the 2nd and 3rd
quarters in India.
  Customer Graph.

From 2000 to 2020.

Year Customers(approx.) Total
2000-2005 20 20
2006-2010 29 49
2011-2015 26 75
2016-2020 12 87
(Customers* Retailers, Consumers and other small size wholesalers)

Customers
35
30
25
20
15
10
5
0
2000-2005 2006-2010 2011-2015 2016-2020

Customers

The above graph shows the number of customers over the period of time, as the business
expands its area of work and service.
During the initial years starting from 1996, the organization operated with just 7
customers only with the wholesale business. But as they entered in production, retail and
repairing, the customer base started to increase, which helped them to go profitable over
the years.

During the period of 2000 to 2005 they had approximately 20 customers, and
expanded their area of work.

Later in 2006 they introduced new schemes for their customers, which eventually
rose the customer base for them over 29 new customers.

Same continued over the years and in the period of 2011 to 2015 Mr. Girish took
over the business and continued the legacy, and gained significant customer base
approximately over 26 new customers.

But during the period of 2016 to 2020, their increase in new customers declined,
the main reason stated by them was the emergence or introduction of E-shopping.
Though people didn’t trust online purchase of jewelry, it still affected them and
their customer base rose by just 12 new customers.
Currently the organization handles over 120 customers in their data.
Batch Cost sheet for 10 grams of gahu mani.

Particulars Cost per Total cost

(for 50 grams of Gahu mani) gram for 10 grams

Direct Material Cost (Gold) 6300 63000

Direct Wages (Making charges) (4%) 252 2520

Labour Charges (4%) 252 252

∴Total Cost 6804 68040

Profit Margin (6%) 408.24 4082.4

∴ Total Selling Cost 7212.24 72122.4

CHAPTER 6: - FINDINGS AND RECOMMENDATION
 FINDINGS:

While completing and working on the project, I found many positive and negative sides
of the organization. A few of them are listed below

1. Currently, they are working with and sustaining skilled employees so that they can
give the best possible designs and products to their customers.
2. They have organized their way of working in such a way that their customers won’t
have to face any problems during their purchases or trade.
3. In the past 28 years, Bagul & Sons have created massive goodwill in the industry.
4. They have the skilled and loyal staff, that takes care of the business, in absence of
the owner.
5. In the world of technology, the organization has few CAD/ CAM operator, which
makes difficult to keep up with the generational designs.
6. During the peak season, as the work load increases, things start to get difficult for
them to manage.
 SUGGESTIONS:
In this project, study effort has been made to study jewelry industry from
cost accounting point of view. This business comes under production
industry and batch costing and therefore, it is necessary to record
transactions in such a way that cost of services can be calculated.

1. One of the problems is associated with the prices of precious gemstones

and metals. So, it is better to create a long-term contract with the supplier,
to minimize the risk of the volatile market.

2. One of the major problems that organizations face is about designs and
quality control expenses. As, the organization is also involved in production
area, so I suggested them to make a one-time investment towards
CAD/CAM. It will help them to control the expenses of hiring/outsourcing
designers for the orders that are specifically prepared and can also use them
in daily creation of the ornaments.

3. It is hard to find skilled and trained labors, and it is not cost effective. So,
as to sustain them they have to train them. Certain suggestions were made
to BAGUL & SONS regarding the cost, effectiveness and investments.
 7: - CONCLUSION.

 Conclusion form the Learning.

 Conclusion from the Practical.
CONCLUSION FROM THE PRACTICAL: -

The practical application of batch costing in various industries, including the

jewelry sector, facilitates precise cost allocation, enabling businesses to refine
pricing strategies, optimize resource utilization, analyze profitability, and make
informed decisions. By monitoring and controlling costs associated with
specific batches, businesses can enhance overall efficiency, maximize
profitability, and strategically allocate resources, ultimately contributing to
improved operational effectiveness and financial performance.

CONCLUSION FROM THE LEARNINGS: -

The learning from the practical application of batch costing in the jewelry
industry underscore its critical role in enhancing cost management, refining
pricing strategies, and optimizing resource allocation. By accurately allocating
costs to specific batches, jewelers can gain insights into profitability, identify
areas for cost reduction, and make informed decisions to improve overall
operational efficiency and financial performance. This approach not only aids
in maintaining better control over production costs but also empowers
businesses to strategically position themselves within the competitive market,
ensuring sustained growth and profitability in the dynamic landscape of the
jewelry industry
8: - ANNEXURE
 BIBLIOGRAPHY: -

 Various Reference books on Cost and Works Accounting: -

1) Principles & Practices of Cost Accounting

Author : N. K. Prasad
Published By : Shree P. C. Bhowal

2) Cost Management- A Strategic Emphasis

Author : Gary Cokins, Thomas W. Lin, Kung H. Chen,
Edward J. Blocher
Published By : Tata McGraw- Hill Publishing Company Ltd.

3) Research Methodology- Methods & Techniques

Author : C. R. Kothari
Published By : New Age International Ltd.

 WEBSITES: -

1) www.wikipedia.com

2) www.accountingtools.com

3) www.iedunote.com
 SCHEDULE: -

 What is the commencement date of the firm?

 How many staff members in the organization?

 What type of orders are taken in the organization?

 What is main objective of organization?

 What is main motto while providing services?

 How did you first get started in the jewelry business?

 What inspired you to focus on ornament production?

 What do you find most fulfilling about creating jewelry?

 What is the mission and vision of the organization?

 Have you found any specific tools or software particularly helpful in

implementing batch costing effectively?

 What are some of the main difficulties or obstacles you've encountered

while using batch costing in your jewelry business?

 Where do you see your jewelry business in the next 5-10 years?

 Are there any new trends or innovations in jewelry making that you're
excited about exploring?

 How important is customer feedback and market demand in shaping the

direction of your business strategy?
 Gallery and Location of the Organization.

 Entrance of the Organization

 Staff of Bagul & Sons.

https://maps.google.https://maps.google.com/maps?q=21.0141344%2C75.5715548&z=17&hl=encom/maps?
q=21.0141344%2C75.5715548&z=17&hl=en
 Summary of the Project with reference to Bagul & Sons.

1st Chapter: In the 1st chapter, we understood the concept, need, importance of Costing.
We also summarised the area of Project Methodiology, to understand its meaning and
types of data.

2nd Chapter: In 2nd chapter, we summarised the profile of the organization and
understood their work.

3rd Chapter: In 3rd chapter, we understood the various types of services and products
offered by the organization.

4th Chapter: In 4th chapter, we learned the concept, meaning, need, importance,
advantages of batch costing, and thoroughly learned about cost unit and its importance
in jewelry industry.

5th Chapter: In 5th chapter, we composed various bills of the organization, learned
different charges paid by the customers, and the various methods of payments from
which a retailer could pay or settle the transaction with the organization.

6th Chapter: In 6th chapter, we analyzed the cost and works related problems of the
organization and provided the data with the solution to the problems.

7th Chapter: In 7th chapter, we concluded the practical application of batch costing in
various industries and practical application of batch costing in the jewelry industry
from the practical.