cost control and cost reduction (1)

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A Project Report

On

“A Study of Cost Control and Cost Reduction Techniques”

For

“Shaikh & Associates Tax Consultants & Certified Auditor.”

By

“Mr. Mateen Mubeen Sayed Kadri”

Under the guidance of

“Mrs. Payal Samdariya”

Submitted to

“University of Pune”

In partial fulfillment of the requirement for the award of the degree of

Master of Business Administration (MBA)

Through

AKI Poona Institute of Management Sciences and Entrepreneurship,

Pune - 411001



Acknowledgement

I would like to express my special thanks of gratitude to my teacher Mrs. Payal Shreepal

Samdariya as well as our principal Dr. G.M Nazeruddin who gave me the golden

opportunity to do this wonderful project on the topic cost control and cost reduction,

which also helped me in doing a lot of Research and i came to know about so many new

things

I am really thankful to them.

Secondly i would also like to thank my parents and friends who helped me a lot in

finishing this project within the limited time.

I am making this project not only for marks but to also increase my knowledge.

THANKS AGAIN TO ALL WHO HELPED ME.



CERTIFICATE

This is to certify that Mr. Mateen Sayed Kadri has completed the Summer Project Titled

“Cost Control and Cost Reduction Techniques” to my satisfaction and as per the

requirements of the two year full-time MBA programme.



INDEX

Sr. No. Title Page Number

I Executive Summary

II Company Profile

III Objectives of the Study

IV Research Methodology

V Project work undertaken

VI Analysis and interpretation of data



VII Suggestions and Conclusion

VIII Bibliography



EXECUTIVE SUMMARY

Introduction

Finance is the study of funds and management. Its general areas are business finance,

personal finance, and public finance. It also deals with the concepts of time, money, risk,

and the interrelation between the given factors. It is basically focused on how the money

is spent and budgeted. It is one of the most important aspects in handling business.

Finance addresses the methods wherein business entities used their financial resources on

a certain period of time. It is the application of a set of techniques used by organizations

in managing their financial affairs. The income and expenditure are emphasized in

finance and its differences can easily be indicated. Nowadays, loans have been packaged

for resale. This means that the debt has been bought by an investor from the bank. These

bonds are sold to investors by financial corporations who have exceeded beyond their

expenditures. The investor can now collect all the interests and be sold again through a

secondary market. Banks serve as facilitators to companies in the provision of credit and

mutual funds. Investments are managed carefully under a financial risk management to

control gambling chances of these financial assets. Financial instruments are also used to

secure these assets on securities exchanges such as stock exchanges and bonds. A bank

provokes the activities of both borrowers and lenders. Lenders pay deposits to banks on

which it pays the interest rates. The central banks are the last resorts that handle the

monetary funds. These banks affect the interest rates being charged such as an increase in

the money supply will result to a decrease in the interest rates.

Financial capital is a monetary resource allows businesses to purchase items that will

create goods for production and other services. The budget is the documentation of the



entire entrepreneurship. The outline includes the objectives of the business, the target

sets, resulting costs, required investment, planned sales, growth, financing source, and

financial results. It can be directed on long term or on a short term basis. The capital

budget is mainly concerned with the proposed fixed asset requirements. The financing of

the expenditure is also indicated in the capital budget. A detailed plan of all the sources

and cash usage is emphasized in the cash budget. It has six main sections such as the

beginning cash balance, cash collections, cash disbursements, cash excess, cash

deficiencies, financing, the ending cash balance, and the management of current assets. A

credit comes in various forms such as of open accounts, installment sales, credit cards,

and supplier credits. The advantages of a credit trade are gaining loyalty and goodwill

amongst costumers, drawing in more customers than cash trades, stimulates agricultural

and industrial production, and increases rates. But there are also disadvantages to credit

trades as well such as risks of bad debt, high administration expenses, necessitates more

working capital, risks of bankruptcy declaration, and leading to purchasing nonessential

items. An effective credit control may lead to increase in sales, increase in profits,

reduces bad debts, builds costumer loyalty, and increases company capitalization. The

information on creditworthiness is acquired through credit agencies, bank references,

credit agencies, chambers of commerce, and credit application forms. Taking legal

actions is one part of the many duties of the credit department.

A personal finance is related to how much money is needed by an individual. It is

concerned on financial resources and its usage. Tax policies and family assets will

certainly affect personal decisions. It will also identify the credit score of the lender and

the actual financial standing. Planning for a secured financial future within the



environments economic stability is one primary concern of the personal finance as well.

There are various factors that affect decisions in handling personal finance which are

financing durable goods, paying for education, monthly bills, secured loans, minimal debt

obligations, and health insurance, and retirement plans. Meanwhile, a corporate finance

holds a task in providing financial resources for certain organizations and balances risks

and profitability. It is referred as SME finance for small enterprises. Managerial finance

maximizes a company’s wealth and it also values the stocks. Bonds are long-term funds

created by ownership equity and long-term credits. Short-term funding comes from a line

of credit given by banks as a working capital.

Studying finance will lead you in wiser decisions making on your financial funds. It can

help you identify risks and benefits if you are planning to put up your own business.

Finance discipline requires you certain abilities and trainings which can be developed

over a period of time. Finally, it will give you optimum control over your financial assets

which will certainly help you in attaining a financially secured life.



COMPANY PROFILE

SHAIKH & ASSOCIATES

History

Shaikh & Associates is located at Asha Complex, 414, Mangalwar Peth,

Pune - 411011. It was founded in the year 2000 and is a renowned Tax Consultancy &

Law Firm.

The Firm is associated in serving society with the Consultancy in relation

of Indian Laws and Tax related works such as Tax Payments, Consultancy about

Taxation, Accounts Writing, Return filing of various departments of Govt. viz Central

Govt., State Govt., Local body etc. and various financial service. It is also leading firm in

the field of Law.

Founders and Proprietor

The founder and proprietor of Shaikh & Associates ; Mr. Sameer I Shaikh

is a members of Maharashtra Bar Council, Sales Tax Practitioner Association and others.

He had started the firm with a small office at Nana Peth, Pune – 411002 as tenant then

afterwards he shifted his whole business in a self occupied office at Asha Complex, 414,

Mangalwar Peth, Pune – 411011.



Organization Chart

New Projects

In future the firm is very much positive about its performance in the

concerned fields and looking forward for new projects.

H. K. Builder

H.K. Garden is the First project done by H.K. Builder in Pune. Mitha Nagar Sr. No 42

Kondwa Pune – 48. Basically H.K. Builder is from Mumbai. From Last 3 to 4 Year he is

in Pune. There is 4 to 5 Site Under construction in Pune of H.K.Builder.

Shaikh &

Associates

Legal Dept

Income tax

Dept

Sale Tax

Dept

Service

Dept ROC Dept



Objectives of the Study

Cost control

Cost control means costs are regulated within the set parameters. Cost control implies

sustaining cost at a budgeted or some pre-determined level. The function of cost control

is to keep the costs within prescribed limits. The basic objective of cost control is to

ensure that actual cost conforms to the budgeted or pre-determined standards set by the

management. Management has to lay down cost standards or norms for all the elements

of cost as well as various segments of activity. Actual cost has necessarily to be

considered element-wise or segment-wise so as to pinpoint any deviation from standard

or norms laid down as benchmark.

Cost Control

To identify job costs which are not properly supported

To Determine the cost components for each billing and the amount charged for

each.

To enhance the quality of a final audit and decrease the amount of field work

required.



Cost reduction

Cost reduction simply means bringing down the cost without sacrificing the costs without

sacrificing the utility of the product or service. Cost reduction question the reasons for

spending and try to eliminate wasteful or unproductive expenditure.

Cost Reduction:

• To reducing expenditure on various heads.

• To aims at reducing achieving the overall costs without corresponding loss of

efficiency.



Research Methodology

Research Methodology is a method of collecting data and information relevant to the

project. It's a systemized way of getting knowledge and learning new things their

relations and casual explanation and the natural laws which governs them. Research

Methodology is a "Systemized effort to gain new knowledge".

Research Methodology is original contribution to the existing stock of knowledge making

for its advancement. It is the purist of truth with the help of study.

Observation, Comparison and Experiment. In short also covers the systematic method of

finding solution to a problem is research. It also covers the systematic approach

concerning generalization and the formulation of the theory. Different stages involved in

research consists of enacting the problem, formulating a hypothesis, collecting the facts

or data, analyzing the facts and reaching certain conclusion either in the form of solution

towards the concerned problem or in generalization for some theoretical formulation.

Collection of data was done by using questionnaire. A number of questions were typed in

a definite order and this set of questions were given to respondents, who were expected to

read and understand the questions on their own and answer in the space provided in the

questionnaire itself.



In Research Methodology mainly Data plays an important role.

The Data is divided in two parts:

a) Primary Data.

b) Secondary Data.

(a) Primary Data is the data, which is collected directly by direct personal interview,

interview, indirect oral investigation, Information received through local agents,

drafting a schedule, drafting a questionnaire.

(b) Secondary Data is the data, which is collected from the various books, magazine

and material, reports, etc. The data which is stored in the organization and provide by

the HR people are also secondary data. The various information is taken out regarding

that subject as well other subject from various sources and stored.



Scope of Cost Reduction

A cost reduction programme should be all pervasive because cost reduction is attainable

in almost all the area of business activities. There can hardly be any area of operation,

which cannot be improved. Cost reduction cover a wide range of area like product design,

plant layout, production methods, substitution, tool design reduction in wastes,

innovation in marketing, etc. we shall now study the critical area of application of cost

reduction method.

1) Product design

Product design offers the greatest scope for cost reduction of a permanent nature.

Designing bring the first step in manufacturing a product, the impact of a decision at this

stage is felt throughout the manufacturing or processing of the product in the factory.

Most costs are committed at the designing stage

2) Production Planning and control

Production planning and control (including material planning and control)

endeavors to achieve the best coordination among material, manpower and

manufacturing facilities so that delivery commitments are met without causing

waste of resources.

3) Plant layout and equipment

Plant layout is the floor plan which involves analysis and arrangement of

equipment, workstation and floor area to ensure most efficient utilization of

equipment plant facilities and plant service.

4) Factory organization



A considerable cost reduction can be achieved by improving the factory organization.

Although cost reduction resulting from an improvement improve in the organization

cannot be measured.

5) Purchasing and material control

6) Direct labour

7) Marketing

8) Administration Finance



EXAMPLE

Save up to 20 times with the detailed cost estimate report?

Our calculations and feedback from our clients have shown that this report gives you

1000% to 2000% return of your investment. The detailed estimate costs are:

Built Area in Square Feet Price of our report Saving Potential

Up to 2000 sq.ft. Rs. 2.50 per square feet

Report will help you save

from Rs. 25 to Rs. 50 per

Square Feet

From 2001 sq.ft to 5000 Sq.

Ft .

Rs. 2.25 per square feet.

From 5001 sq.ft to 10,000

Sq. Ft .

Rs. 1.75 per square feet

From 10,001 Sq. Ft

onwards.

Rs. 1.25 per square feet.

What do we do need from you to prepare this report?

We will need architectural plan and other drawings that your architect had provided you

have for your home. We review the quantity that is required from each item and then

research the rates from your area.



Sample Detailed Cost Estimate

1) Cost Analysis

Total Area 3214 sq.ft

Total Cost Rs.3170162 (Rupees Thirty One lack

Seventy Thousand One Hundred and

sixty Two)

Cost Per Sq.ft (total Area/ Total cost) Rs. 987 (Rupees Nine Hundred Eighty

seven Sq. ft

2) Specifications chosen by you

Question: What type of flooring are you planning to use in all the rooms?

Your Reply: Either vitrified tile or Granite not exceeding RS 100 per square

fee (including laying cost)

Question: Which type of frames is being used for doors and windows?

Your Reply: The main entrance door frame and shutters would be teak. All

other frames are pad auk wood

Question: Which type of shutters and wood is being used for doors and

windows? Would it be deodar wood, hillock wood, teak wood

etc.

Your Reply: Windows will have tinted glass shutters

Question: What material are you planning to use on Bathroom and Kitchen

Walls?



Your Reply: Normal good quality Sanitary ware.

Question: What type of finishing will be used for Exterior walls?

Your Reply: I'll use good quality exterior paint.

3) Detail of Material (Required for the whole project)

Stage wise material will help you procure the raw material properly. A lot of times,

the building owner do not keep track of the material used in their construction and the

labor uses this lack of information to either use sub standard material or use less than

the specified quantity.

Sr. no Material Quantity Unit

1 Cement 1250 Bags

2 Sand 3600 C ft

3 Bazari Or Stone Chipping 12 to 20 mm

gauge

3200 C ft

4 Stone Blast/ Brick blast 1000 C ft

5 Brick 50400 No. s

6 Bitumen 200 Kg

7 Polythene sheet 1600 S ft

8 MS Steel bars of different diameter 10896 Kg

9 Ceramic tiles 866 S ft

10 Vitrified tiles 3200 S ft



11 Granite 52 S ft

To know more about purchasing tips of Cement and Bricks click or copy the link

below:

http://www.gharexpert.com/articles/Start-Construction-1460/Purchasing-Guidelines-

Cement-Bricks-_0.aspx

C ft=Cubic Feet

4) Detail of Material (Stage Wise)

Foundation

Sr. no Material Quantity Unit

1 Cement 180 Bags

2 Sand 650 C. ft

3 Bazari or Stone Chippings 12 to 20 mm

gauge

550 C ft

4 Stone Blast / Brick Blast 350 C ft

5 Bricks 8000 No. s

6 Bitumen 250 C ft

7 Polythene sheet 250 C ft

8 MS steel bars of different diameter 1719 Kg

9 Ceramic tiles -- --

10 Vitrified tiles -- --

11 Granite -- --

http://www.gharexpert.com/articles/Start-Construction-1460/Purchasing-Guidelines-Cement-Bricks-_0.aspx







Ground Floor

Sr. .no Material Quantity Unit

1 Cement 570 Bags

2 Sand 1650 C. ft

3 Bazari or Stone Chippings 12 to 20 mm gauge 1400 C ft


5 Bricks 22400 No. s

6 Bitumen -- --

7 Polythene sheet -- --




11 Granite 28 S ft

First Floor

Sr. .no Material Quantity Unit

1 Cement 500 Bags

2 Sand 1350 C. ft

3 Bazari or Stone Chippings 12 to 20 mm gauge 1250 C ft




5 Bricks 20000 No. s

6 Bitumen 175 --

7 Polythene sheet 1350 --




11 Granite 24 S ft

5) Abstract of Cost

Abstract of cost is used for the planning purposes. From the abstract of cost, we will

get stage wise and item wise expenditure. With the help of this we can control the

expenditure item wise and stage wise and also in better position to deal with

contractor & supplier.

Sr.

no

Description Quantity Unit Rate Amou

nt

1 Earth work in excavation in foundation of

columns walls including dressing the side

and ramming the bottom up to 5' lift

2124 C ft 3 6372

2 Earth filling with earth available at site

from excavation around columns footings,

plinth beam and masonry in layers

2124 C ft 1 2124



including watering and compacting.

3 Earth filling under floor with earth

brought from out side including carriage

of earth, loading, un loading watering and

compacting the same. at site around

columns footings , plinth beam and

masonry.

3275 C ft 4 13100

4 Supplying and laying sand filling in

foundation of footing under PCC

827.6 C ft 50 41380

5 Pc c 1:5:10 with granite stone aggregate

of 40mm and down size mechanically

mixed and vibrated including laying

compacting as per requirement.

366 C ft 70 25648

6 Cement concrete 1:1.5:3 with stone

chipping or bazri 12 mm to 20 mm gauze

in foundation of columns footings, plinth

beam etc including centering and

shuttering but excluding steel re-

enforcement mechanically mixed and

vibrated complete in position as per

specification.

573 C ft 140 80220

6) Detail of Quantities



Abstract or detail of quantities provides us quantities required to complete the

construction. With the help of this we are able to know the quantities of each item

stage wise, unit wise and this will help in doing agreement, procurement of raw

materials according to need. Save wastage in materials, labor. And timely

Construction.

Sr.

no

Particulars No

.s

L

(Length)

B

(Width)

H

(Height)

Q(Quantity) Unit

1

Earth work in

excavation in

foundation of

columns walls

including

dressing the side

and ramming the

bottom up to7'

lift

Columns

footings

Footing I 4 4 4 5 320 C ft.

Footing II 8 4 4 5 640 C ft.

Footing IV 4 4 5 5 400 C ft.

Plinth beam 2 40 1.5 1.5 180 C ft.



bed1,2 and toilet

vertical

Plinth beam

bed1,2 and toilet

internal

4 12.5 1.5 1.5 112.5 C ft.

Plinth beam

toilet internal1 8.5 1.5 1.5 19.13 Cf t.

Plinth beam

toilet internal

1 10.33 1.5 1.5 23.24 C ft.

Plinth beam

right side

1 52 1.5 1.5 117 C ft.

Plinth beam

living, study,

and kitchen.

3 21.5 1.5 1.5 145.1 C ft.

Plinth beam

kitchen.1 14 1.5 1.5 31.5 C ft.

Plinth beam

kitchen.

1 11.25 1.5 1.5 25.31 C ft.

Plinth beam

living

1 13.25 1.5 1.5 29.81 C ft.

Total 2124 C ft



Techniques of Cost control

Techniques for ensuring cost control include the following:

i. System of budgetary control;

ii. Standard costing and variance analysis;

iii. Control on purchase, handling and investment in materials;

iv. Control on labour cost including labour time, productivity and remuneration ;

v. Control on production, office and selling overheads;

Definition of Budgeting:

A budget may be defined as a comprehensive and coordinated plan of action,

expressed in monetary terms. It is prepared and approved prior to the budget

period and may show income, expenditure and capital to be employed to attain the

objective.



Techniques of Cost Reduction

Techniques of cost reduction are similar to those used for cost control. These are;

i. Budgetary control,

ii. Standard costing,

iii. Control on material cost,

iv. Control on labour cost,

v. Control on overheads,

vi. Standardization of product,

vii. Product simplification,

viii. Production scheduling,

ix. Product designing

x. Engineering improvements,

xi. Technological up gradation,

xii. Production research,

xiii. Market research operation research,

xiv. Improvement in plant layout,

xv. Value analysis,

xvi. Cost benefit studies,

xvii. Contribution analysis,

xviii. Quality measurement and research,

xix. Job evaluation and rating,

xx. Work studies.



Project Work Undertaken

Cost Control and Cost Reduction

A study on Cost Control and Cost Reduction with Special reference to “Shaikh &

Associates Tax Consultants & Certified Auditor.”

“Shaikh & Associates Tax Consultants & Certified Auditor.” It help in Tax

Consultants to the people and Company’s

The Office of “Shaikh & Associates Tax Consultants & Certified Auditor.” Is located in

Asha Complex 414 new mangalwar peth Pune 411011.

H. K. Builder

H.K. Garden is the First project done by H.K. Builder in Pune. Mitha Nagar Sr. No 42

Kondwa Pune – 48. Basically H.K. Builder is from Mumbai. From Last 3 to 4 Year he is

in Pune. There is 4 to 5 Site Under construction in Pune of H.K.Builder.



Analysis and Interpretation of data

Q1. What type of flooring are you planning to use in all the rooms?

Answer: - Either vitrified tile or Granite not exceeding RS 100 per square fee (including

laying cost)

Types of flooring Answers

Granite Yes

laminated wooden flooring No

vitrified Maybe

Granite Tiles are strong and good looking tiles and it fit in the budget. (Rs.100 per.sq.ft)

48

4

48

Granite Tiles laminated wooden

flooring

Vitrified Tiles

Types of flooring

Types of flooring

type of flooring



Laminated wooden flooring is awesome but they are very costly. . (Rs.350 Per.sq.ft)

Vitrified tiles are good tile and can fit in budget. (Rs.60 per.sq.ft)

Q2. Which type of frames is being used for doors and windows?

Answer: - The main entrance door frame and shutters would be teak wood. All

Other frames are pad auk wood.

Type of Door Answers

Teak Wood Doors Yes

Maple wood door As per request

Sandal wood As per request

Teak Wood Doors is nice and commly use door is cost Rs 3000 each.

0%

10%

20%

30%

40%

50%

60%

Teak Wood Doors Pak auk Doors Sandal wood

Requirement of types of Doors

Requirement of types of Doors



Maple wood door are imported door they are Costly. (Rs.10000 each)

Sandal wood Door is very costly then any other door in the whole world.

Sandal wood cost Rs.6000 per Kg. The door weight is 40 Kg.

That means Rs 240000

Q3. Which type of Safety Wood is being used for doors?

Answer: - Iron Safety Door or Wooden Safety Door

Types of safety Door Answer

Iron Safety Door As per request

Wooden Safety Door As per request

Iron Safety Door is most costly but strong. (Rs.13,000 each)

Wooden Safety Door is stylesh and cost Rs 7,000 each.

0%

10%

20%

30%

40%

50%

60%

70%

Iron Safety Door Wooden Safety Door

As per Requirement Shutter Doors

As per Requirement Shutter

Doors



Suggestion & Conclusions

Better Technique should be use to decrease the time.

Gas Pipe line should be given in every flat.

CC TV Camera should install in every building and every floor.

The builder is using old techniques to build the building so he should use new

techniques that decrease the time to make building.



Bibliography

Introduction

http://www.bigrefinance.com/

Meaning & Definition

From Pragati page 1.1

Objectives of the Study

http://www.managementparadise.com/forums/final-100-mark-project/175617-

cost-control-cost-reduction.html

Ppt of

23.2.2 Scope of cost reduction

Book: - principles and practice of cost accounting

Third edition by Asish K. Bhattacharyya

Chapter no: 23 cost reduction and productivity

Page 1041

Techniques of Cost control

Book cost Accounting for P.E.II (C.A.), NEW Syllabus

By D.K.MITTAL

Chapter 19: cost control and Cost reduction

Page: 808

Techniques of Cost Reduction

Book cost Accounting for P.E.II (C.A.), NEW Syllabus

By D.K.MITTAL




Page: 814

Definition of Cost Control

Book: - cost Accounting for P.E.II (C.A.), NEW Syllabus

By D.K.MITTAL


Page: 807

Definition of cost Reduction

Book: - Management Accounting

By Prof. A.P.Rao

Chapter: - 15 Cost Control and Cost reduction

Page: - 412

Distinction between Cost Control and cost reduction

Book: - cost Accounting for P.E.II (C.A.), NEW Syllabus

By D.K.MITTAL


Page: 810

cost control and cost reduction (1)

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