It is necessary for BBA student..

1. Welcome
to
our presentation

2. We are group number –5
The members of our group are:
1.Md.Fazlul Bari
2.Md.Al-amin
3.Md.ashraful haq
4.Palash Banik(GL)
5.Md.Badrul alam

3. Now on the dais---------
Md.Fazlul bari
Id: 030802

4. Centralized vs. decentralized purchase
In organizations where production centers are many in number
situated at distant places. It may be an important issue to decide
whether there should be one purchase department to purchase
for all the production centers or there should be one purchase
department for each production centre. the decision shall
depend primarily upon-(a) the distance between the production
centers and the central go down,(b) the nature of the materials
used i.e., bulky, heavy, fragile etc.,(c) the cost and risk of
transport,(d) the police of the firm in this respect; and
secondarily upon the comparative advantages and disadvantage
of the two system.

5. From the point Centralized purchase Decentralized purchase
view
Control Better control exercised on buying. Effective control may not be
present.
Terms of Better terms of purchase may be Less favorable terms may be
purchase available duck to large-scale order. available.
Efficiency Due to specialization efficiency is Purchase by departmental
obtained. heads loaded with other
work cannot be-expected to
be efficient
Standardize of All departments can get standard Standards of materials may
Materials materials purchased by centralized vary from department to
purchasing department department

6. Economy of staff, Centralized purchase Decentralized purchase
accommodation and brings economy of staff requires more staff and
finance and accommodalation and more accommodation(all
also of finance, because taken together)and also
excess of stores need not more finance to purchase.
be held.
Regulation of purchase It is easy to regulate purchase Change in purchase policy
policy policy and give prompt effect can not be easily given effect
to any change in case of to in case of decentralized
centralized purchase. pur-chase.
Initial cost Initial cost is relatively high. Initial cost is relatively low
Transport cost Transport cost from central Transport cost from
go down to production departmental go down to
centers is considerable. production centers is
practically nil.
Interdepartmental relation Central supply may Chances of
sometimes be criticized for misunderstanding ate
favoritisms and there may absent.

7.  Discuss the constituents of material
cost.
Constituents of Material Cost
When material are purchased we do not pay
for the materials only. We also pay sales tax,
excise duty, control, freight insurance etc .at
the same time we often enjoy trade discount
and cash discount. what are the
constituents of material cost? The material
cost includes the following:

8. Invoice price: it is the price of materials
calculated at the agreed rate subject to
deduction of trade discount, if any.
Excise duty, sales tax, octrol etc: these
are the levies made by the governments on
production or sales. So, these are included
in the cost of materials purchase.

9. Freight. Insurance etc: costs of bringing the
materials from suppliers end, when born by the
buyer, are included in the cost of materials,
insurance. thus, carriage included in the cost of
materials.
Packing cost: If packing cost is changed, in
addition to the invoice price. such cost is a part
of the cost of materials. When materials are
delivered in returnable package which are
charged to buyer and credit is given to the buyer
at a lower rate on return, the difference between
the rate charge and the rate credited means hire
charge to be included in the cost materials.

10. Cash discount: If refers to the deductions
available in respect of invoice value, if
payment can be made within the time
prescribed. This is there for a reward for
good financial management and has got
nothing to do with the purchase. So cash
discount should not be deducted in order to
ascertain the cost of materials, although
there is a controversy on this issue amongst
the cost accountants.

11. What are the considerable factor for
fixing minimum level and maximum
level of stock?
Level of stock
(a) Minimum level:
While fixing the minimum level the
following factor are to be taken into
consideration:

12. (1)Nature of the materials: materials the
are regularly stored must maintain a
minimum level. If on customer order a
special item of materials is to be purchase
no minimum level is required to be fixed for
that.
(2)The maximum time required from the
date order to the date of actual delivery:
It is known as the lead time. The longer the
lead time, the lower is the minimum level,
provide the re-order point remains
constant.

13. (3)Rate of consumption of the materials:
The minimum rate, the maximum rate and
the normal rate of consumption are to be
taken into consideration.
(b) Maximum level:
While fixing the maximum level the
following factors required consideration:
(1)Rate of consumption of the materials.
(2)The lead time.

14. (3)The maximum requirement of the
material at any time.
(4)Nature of the materials: The materials
which deteriorate quickly are stored as little
as possible.
(5)Storage space available for the materials.
(6)Price economy: Seasonal materials are
cheap during the harvesting seasons. so
maximum level is height.
(7)Cost of storage and insurance.

15. (8)Cost of the materials and the finance
available: When the materials is costly the
maximum level is likely to be low. If the
price is likely to go up maximum level
should be height.
(9)Inventory turnover: In case of slow
moving materials the maximum level is low
and in case of quick moving materials the
maximum level is height.
(10)Nature of supply: If the supply is
uncertain the maximum level should be as
high as possible.

16. What do mean by danger level?
In addition to the minimum, maximum and
re-ordering levels there is another level
called danger level. This level is below the
minimum level and when the actual stock
reaches this level urgent measure is to be
taken to replenish stock. When the normal
lead time is not available, the purchase
quantity cannot be accurately fixed. so it is
fixed in such a way that the actual stock
does not fall below danger level by the
actual lead time.

17. This means that the minimum level contains
a Cushing to cover contingencies.
When the danger level is fixed below the
minimum., it being reached by the actual
stock, the defect in the system is detected
and corrective measure becomes necessary
.When the danger level is fixed above the
minimum, it being reached by the actual
stock, preventive measure is to be taken so
that may not go below the minimum level.

18. What is ABC system?
ABC system/selective control system
While acquiring materials, economy in
purchase is the striking point to consider. In
order to achieve economy, all the items of
stock are classified into there classes—
A,B,C. A indicates a small number of items
which requires heavy investment, C
indicates a large number of items for which
total investment required is not much and B
indicates the items between A and C I, e
number of

19.  items in B is lea then that in C but more
then that in A and the total investment is
less than that in A but more than that in C.
The investment in C items is not large the
stock may be acquired for a year. This will
save the cost of placing order and receiving
materials. In case of B items orders may be
placed as and when the stock reaches the
ordering level .So for as A items are
concerned, it is necessary to work-out the
exact quantity of each order economically
justified. The stock of A items should be

20. subject to more cautious control then that of
B items and C items. The system of
classification and control of materials
indicate above is called ABC system.
Distinguish between bin card and store
ledger:

21. Now on the dais---------
Md:al-amin
Roll:030814

22. • It records the inward and outward • It records the same things but in both
movement of the materials and the quantity and value.
balance after each movement, only in
quantity.
• Entries are made in the bin card when • Entries one made in respeet of punch
purchase are returns come in and when use, return and issue, but after
issues go out. recording in bin card.
• The officer in charge of the bin card in • The personnel in charge of the store's
responsible for any discrepancy in ledger is not responsible for any such
materials. discrepancy as he has no connection
with the materials.
• Bin card is a stock record in the true • Stores ledger is a stock control record.
sense.
• Bin card cannot supply inventory value • Stores ledger can supply inventory value
for presentation of financial profit and to help preparing financial profit and
loss statement. loss statement.
• Posting in bin card in made for each • Posting may be made on the basis of
individual transaction. summary of several transaction in the

23. Inventory turnover: Inventory turnover
usually expressed as a ratio, indicates the
numbers of times the inventory is turned
over during a particular period. It is a
meacene of rate at which materials are
consumed. The ratio is calculated by using
the following formula:
Inventory turnover = Cost of materials
consumed Average inventory held during
the period.

24.  Advantages and disadvantages of FIFO
method : FIFO method: In FIFO the earlier
punches shall be exacted earlier and the
stock with represent later purchases.
Advantages: i) Materials shall be charger at
cost. So there will be no difference between
total cost and total charges. (2) In
conditions of falling prices the method
gives better result (3) value of closing stock
will more on less correspond to the market
price.

25. (4) The method is simple in both theory
and practice.
Disadvantages:
1. In conditions of rising prices the method
proves that lower costs are absorbed by
production and higher costs are represented
by closing stock. Replacement of stock will
involve more money.
2. In case of large number of purchases
clerical errors in pricing may crop up.
3. Two jobs may be charged at different
rates. so comparison of cost will give

26.  Labor cost: Labor cost represents human
contribution. From the point of view of
sensitivity of the various elements of cost, Labor
cost is the most sensitive, because it relates to
human behavior.
Time Keeping: In every organization the
opening time, closing time, and lunch break pen
day an week one fixed. So the recoding of
Attendance and departure of every worker is
essential. This recording of attendance and
departure done mainly for administrative
payment purpose is called Time keeping.

27. Idle Time
Idle time represents the time of a worker
for which wages is paid but no work is
obtained against the payment. Some
amount of idle time is inevitable in any
industry in spite of efficient management,
because men are not machines. The idle
time cost offers a problem for control as far
as possible, but not for total elimination.

28.  Labor Turnover
Labor turnover is defined as the ratio of the
number of workers leaving an organization
during a given period to the average number
of workers on roll during the same period.
High labor turnover ratio indicates unstable
workers due to any reason and the position
is not desirable in any organization. The
following are the different ways of
measuring labor turnover ratio:

29. (a)Separation Method= (Number of workers left
during the period /average
number of workers on roll during the period)
×100
(b) Replacement Method= (Number of workers
replaced during the period
/average number of workers on roll during the
period) ×100
(c) Flux method= (Number of separation +number
of replacements
/average number of workers on roll during the
period) ×100

30. Now on the dais---------
Md ashraful haq
Roll:030844

31.  Causes of labor turnover:
The principle causes of labor turnover may
be arranged under two heads:
(1) Avoidable Causes: a) bad working
conditions, b)lack of job satisfaction, c)
inadequacy of welfare measures, d) lack of
scope for training and promotion, e)long
hours of work, f)lack of facilities for
recreation, children’s education etc. g)
management’s inhumane attitude, h) lack
of understanding amongst the workers etc.

32.  (2) Unavoidable Causes: a) unhealthy
atmosphere of the locality, b) social
unrest, c) retirement and death, d) leaving
on a better chance, e) retrenchment during
off season in case of seasonal industries, f)
disablement due to disease or accident
inside or outside, g) marriage of female
workers, h) change of place due to political
reasons or on the ground of health etc.

33.  Merit rating
Merit rating refers to evaluation of the
individual merits of the employees. Job
evaluation means the systematic analysis
and classification of jobs according to their
characteristics, and merit rating means the
evaluation of the merits of the workers and
their classification on that basis.
Merit rating is done by keeping the
performance records of every worker
assessing the performances in terms of
some norms or standards.

34. Now on the dais---------
Palash banik
Roll:03010

35. Factors considered before selecting a
method of remuneration
(a) Easy understandability: the
remuneration method must be easily
understood by an average worker, otherwise
there may be misunderstanding and
suspicion leading to labor unrest. Simple
remuneration method involves less clerical
cost in preparing wage bills and cost
records.

36. (b) Choice between quality and
quantity: if an organization considers
that quantity is much more important
than quality, a method of remuneration
by result should be selected, because the
workers’ earning and output are directly
related in this method.
(c) Effect on overhead: the fixed
overhead is spread over the units
produced. So, higher the output lower is
the incidence of fixed overhead per unit.

37. (d) Satisfaction to workers: the method
of remuneration must satisfy the workers,
otherwise there will be high labor turnover
involving preventive and replacement cost
of labor turnover. A method which creates
satisfaction shall help to attract efficient
workers from outside the organization.
(e) Conformity: the method of
remuneration selected must be in
conformity with used by similar
organizations in similar sphere.

38. 1. What are the essential features of
successful wage plan?
Successful wage plan must have the following
essential features:
a) Fairness: becomes fair to both employers and
employees when it is based on scientific time and
motion study.
b) Minimum wage Guarantee: Whether under
legal compulsion or not a minimum wage must
be guaranteed to workers. This should fairly
above substance level of income.

39. c) Link between Effort and Remuneration:
Unless a link is established between the value of
work done and remuneration payable, it is bound
to unfair to either the workers or to the employer.
d) Satisfaction for the workers: The plan must
satisfy the workers and as a result there will be
high morale and labor turnover.
e) Conformity with legal provisions and
Trade Agreements: The wage plan must not
violate any of the provisions of law relating to
wage payment nor it should violate any trade
agreement.

40. f) Work Guarantee: In case of payment by
result, even if the rate is too high, the
workers earnings will not be satisfactory
unless there is a continuous work available
to them. In case of payment on time basis
also, unless continuous work is available
there will too much payment for idle time
causing heavy loss to the employer.

41. g) Restrictive Provision: When under a
wage plan a worker is paid on the basis of
output, he is likely to go on producing as
much as he can in order to maximize his
earning. So, unless there is provision which
will restrict his output, there may be
undesirability over-production, too much
depreciation to workers health greater
chances of breakdown and scraps and
defectives etc.

42. h) Cost of Implementation: he cost of
implementation of the wage plan must as
low as possible.
i) Flexibility: The wage plan must not be
rigid. It should be flexible. If the situation
changes some changes may have to be
incorporated in the wage plan also. A rigid
plan is never suitable for modification

43.  Brief discuss the Taylors Differential Piece
Rate System.
This was introduced in the United States by F. W.
Taylor, who is regarded as the father of scientific
management:
In this system two different piece rates are fixed
for each job. The lower rate equivalent to 83% of
the time rate is applicable to workers working at
less than 100% efficiency. The higher rate is
applicable to workers working at and above 100%
efficiency. The rate is fixed at 125% of time rate
plus 50% of time rate in the form of incentive.

44. A standard time may be fixed for performing a
standard task. The efficiency is worked out, in this
case, as below:
% Efficiency =standard time/actual time
taken×100
Alternatively, a standard output may be fixed during
a standard time. The efficiency is measured, in this
case, as below:
%Efficiency= actual output/standard
output×100
Taylor did not guarantee any day wage. Since the
lower rate is abnormally low, the workers who can
not attain 100% efficiency are panelized. The higher
rate being very high, the efficient workers get very
high reward.

45. Now on the dais---------
Md:Badrul alam
Roll:03014

46.  What is overhead?
Eric L. Kohler defined overhead, any cost of
doing business other than a business direct cost
of an output of product and service.
He also points out that overhead is a generic
name for manufacturing costs of materials and
services not readily identifiable with the products
or services that constitute the main output of an
operation.
Overhead therefore means those expenses which
can not be allocated to any product or services.

47. According to H. J. Wheldon, overhead represents
the cost of indirect material, indirect labor and
such other expenses including services as can not
conveniently be charged to a specific unit.
Briefly discuss the classification of
overhead.
Overhead may be classified in various ways as
stated below:
(a)Function wise classification.
(b)Element wise classification.
(c)Behavior wise classification.

48. (d)Control wise classification.
Let us discuss each of the above briefly,
(a)Function wise classification: Every
manufacturing organization has three distinct
functions, namely
1.Production function
2.Administration function and
3.Selling and distribution function
All indirect expenses incurred in connection with
production function are production overhead or
factory overhead or works overhead

49. (b)Element wise classification: If indirect
expenses are classified element wise we come
across three classes,
1.Indirect materials
2.Indirect labor
3.Indirect expenses
4. Element wise classification may be done within
each function or for all functions taken together
(c)Behavior wise classification: How each
element of overhead behaves when there is a
change in the volume of production is the main
consideration for behavior wise classification.

50. Expenses that remain the same irrespective of the
level of output constitute fixed overhead,
expenses that change proportionately with the
change in the level of output constitute variable
overhead and expenses that change but not
proportionately with the change in the level of
output constitute semi variable overhead or semi
fixed overhead.
Behavioral classification is of fundamental
importance for the purpose of marginal costing
for preparing flexible budget or standards and
also for the purpose of control of overhead cost

51. (d)Control wise classification: Overhead costs
which can be controlled by the exercise of proper
managerial influence are controllable costs and
overhead costs that can not be controlled in spite
of the best exercise of managerial influence are
uncontrollable costs.
What are the points to be considered while
making an attempt for recovery or absorption
of overhead?
1.Absorption should be as accurate as possible that
is overhead incurred should be fully absorbed.
2.There should not be much clerical work and cost
involved in the process of absorption.

52. 3.Production factors, like time of production
skill of workers etc. should dully considered
4.It should be remembered that the nature
and method of production in every
department are not the same. So methods
of absorption shall vary from department to
department.
Whatever may be the method of absorption
followed by any production department
such method must assure accurate cost
ascertainment and appropriate cost control.

53. Thanks to all_ _ _