8 Main Annexures to Cost Audit Report

This article throws light upon the eight main annexures to cost audit report with their respective explanations. The annexures are: 1. General 2. Cost Accounting System 3. Process of Manufacture 4. Quantitative Details 5. Break-Up of Cost of Input Materials Imported during the Year 6. Power, Fuel and Utilities 7. Salaries and Wages 8. Repairs and Maintenance.

Cost Audit Report: Annexure # 1. General:

The name and address of registered office of the company, and that of the Cost Auditor; Reference No. and date of the Government’s Cost Audit Order; Reference No. and date of Government’s letter approving the appointment of the Cost Auditor; Company’s financial year under audit; Location of factory/factories; Location where accounts are maintained; Date of first commencement of commercial production (particulars of all factories, if more than one); the number of Audit Committee meetings held and the number attended by the cost auditor; Note on the nature of other activities besides the manufacture of the product under reference (if any); Copy of the Annual Report along with the audited Profit and Loss Account and Balance Sheet and Auditor’s Report for the company’s financial year under audit to be enclosed.

This Annexure also requires the cost auditor to furnish the following information:

(i) Date of Board of Directors’ meeting wherein the Annexure and Proforma to the cost audit report were approved;

(ii) Name, qualification and designation of the officer heading the cost accounting section or department;

(iii) In case of loan license/job work assignment by the company, the name of the third party and location of the factory, where the product has been produced/ manufactured; and

(iv) If there is any foreign technical collaboration, the particulars of — name and address of the foreign collaborators, the main terms of agreement, amount of royalty/lump-sum payment/ technical aid fee payable and the basis of calculation, and the technical collaborators’ contribution (if any) to the share capital and the amount of paid-up share capital so held by each of them.

Most of the above information are of factual nature and available with the company. These can be collected by the Cost Auditor from the company. In this Annexure, the expression ‘other activities’ means any activity other than the manufacture and sales of the product under reference.

The cost auditor should ask for a write-up from the company on ‘the nature of other activities’ and finalize the same for incorporation as a ‘Note’ against item (8) after having deliberations with the concerned officials for own assessment as to the adequacy and relevancy.

Examples of ‘other activities’ are:

(a) Manufacture of products not covered by the Cost Accounting Records Rules,

(b) Job work or process work undertaken on the materials owned and supplied by other companies for eventual return to the latter,

(c) Packaging of bulk quantities of ‘product under reference’ belonging to the other companies, etc.

Cost Audit Report: Annexure # 2. Cost Accounting System:

Description and the adequacy or otherwise of the system (in a ‘Comment’ form) to determine correctly the cost of production of the product, including the procedures for accounting of materials, labour depreciation, overheads, treatment of by-products/joint-products/scrap, etc. and inventory valuation.

While reporting under this Para, a Cost Auditor of a company should bear in mind that mere description of the system and its sub-systems will not be sufficient, although such description needs mention.

As he is specifically required to state whether the Cost System is adequate or not for the correct ascertainment/determination of the cost of the product, it is definitely expected of him that he would critically examine the system, appraise and evaluate its adequacy, and then offer his comments.

System:

As regards the description of the system the Cost Auditor should broadly follow the requirements of the Cost Accounting Records Rules for the Products (s) under reference.

In his description, he should cover the following:

(i) The type of costing adopted, i.e., Process Costing, Unit or Job or Batch Costing or a combination thereof;

(ii) Raw Materials;

(iii) Process Materials;

(iv) Consumable stores, tools, machinery spares, etc.;

(v) Salaries and wages, including basis of differentiation of Direct and Indirect Labour;

(vi) Depreciation;

(vii) Overheads including classification procedure;

(viii) Departmentalisation — Production and Service department expenses; system of apportionment, reapportionment of services’ expenses to production;

(ix) Method of recovery of costs to the products;

(x) Valuation of work-in-progress inventories;

(xi) Valuation of items captivity consumed;

(xii) System of preparation of different Cost Statements as required under the relevant Cost Accounting Record Rules;

(xiii) System followed for the reconciliation of Cost Accounts Records with the Financial Books of Account;

(xiv) The determination of value of joint-products, by-products, own manufactured components;

(xv) System of Standard costing, if any, in operation and a reference as to whether the cost accounting is done on a historical basis.

In this Para, the Cost Auditor need not describe the accounting procedures that the company follows in respect of ‘Materials’ and ‘Stores and Spare Parts’, but should give a reference to the other paras of the Annexure where these have been discussed.

Adequacy or Otherwise of the System:

The Cost Auditor should critically analyse and evaluate the following so as to draw conclusions for offering his comments:

(i) Whether the type of costing adopted by the company is appropriate to the industry;

(ii) Whether the standards — physical and monetary — fixed by company are reasonable; how have these standards been set? What are the criteria taken into consideration? Whether the standards are realistic and workable under the present operating conditions, if a standard costing system is in existence, of course;

(iii) Whether the distinction made between direct and indirect labour is reasonable to meet the requirements of the costing system;

(iv) Whether the allocation of salaries and wages is appropriately made. What could be the possible limitations in the system?

(v) Whether the classification and codification of materials facilitate easy identification. Are these adequate?

(vi) Whether the system is reasonably flexible for collection of significant data on wastages, spoilages, defectives, rejections, etc. Whether it provides for generation of data on non-moving, slow-moving and obsolete items. How are the fast-moving items and sundry materials treated?

(vii) How is the system of overheads classification? Is the classification procedure understood and applied consistently? Is there any Standard Chart of Accounts? Is it rational under the present set-up? Is the system of Standing Order Numbers adequate and appropriate?

How is the inter-relationship between the Profit and Loss Account and the Cost Accounts (since the relevant Cost Accounting Rules state that details of all such overhead expenses are to be collected from the Financial Accounts)?

(viii) How are the different overhead rates (i.e., Machine hour rate, Labour hour rate, Prime cost percentage rate, Direct wages rate, etc.) determined? Are the numerator and denominator — contents to find out the rates proper and being applied consistently? What is the length of the period considered for computation of rate?

Does the system provide for computation of pre-determined rates? If so, how are the under- and over- absorption of overheads treated for adjustments in Cost Accounts? Are the absorption rates periodically studied by the management? Does the management enquire into the fluctuations thrown up by the adoption of predetermined rates?

(ix) Are the basis of apportionment of overheads to the various production and service departments properly determined with reference to technical factors and followed consistently?

(x) In the system of Reconciliation of the books of Cost Accounts with the Financial books adequate? Does it need any improvement?

The cost auditor should also specifically mention the following in this Annexure:

(i) Adequacy or otherwise of the system to determine correctly the cost of production/ sales, sales realisation and margin of the product;

(ii) Inventory valuation policies and systems for raw materials, work-in-progress and finished products by highlighting the distinguishing features and consistency in practices; and

(iii) Changes that might have been made in the systems of costing, overheads allocation/ apportionment/absorption during the year under audit compared to the previous year as also their quantification in terms of value and effects on cost.

[Note: The word ‘correctly’ should be construed to mean ‘true and fair view’ — the conceptual meaning of which has been discussed under Paragraph 2 of the Form of the Cost Audit Report vide 4.5.]

Cost Audit Report: Annexure # 3. Process of Manufacture:

With a view to giving a note on the process of manufacture of the product under reference, the cost auditor should:

(a) Obtain a write-up on the manufacturing process and a production-process flow chart from a competent technical person;

(b) Visit the plant, discuss with key technical people, understand the material flow from the input (or throughput) to the various manufacturing stages to the output and quality control unit reaching the stockyard or warehouse; and

(c) Ascertain the flow of operations, input-output relationship, product-wise norms, key plants and their efficiency, critical factors involved in loading and off-loading and the interaction or inter linkages between the ‘Product’ producing plants and plants meant for other activities.

The note on the manufacturing process should be drafted in a simple language and without the use of unfamiliar technical terms.

In the study of the process of manufacture for the purposes of effective cost audit planning, the cost auditor should keep in his mind the following essential points:

1. The nature of industry — Engineering, chemical or mining; and the types —job orders or process industries.

2. The methods of production and processing, and their sub-systems.

3. The state of automation and mechanisation of the processes or operations.

4. Whether the industry is labour-intensive or machine-intensive, and if both, which of the production and service departments fall under these categories.

5. The systems of production planning and controls, viz., process layout, product layout, production plans and scheduling and important stages of production where the raw materials are converted to semi-finished or finished products, or where the components and parts are sub- assembled and/or assembled to the products.

6. The reports of Industrial Engineering Department relating to rated capacity, time and motion study, etc., to ascertain

(i) Scope of optimising facilities of men, materials and machines,

(ii) Imbalances in capacities, and

(iii) Bottlenecks in work flow, if any; and the licensed and installed capacities of the various plants in the process.

7. The systems of recovery of process materials/chemicals, defectives, rejection, and spoilages in the production and assembly departments, and of reckoning these arising at the important stages in the course of manufacture.

8. The ‘production process flow chart’ showing the input of materials, process materials stocks at the beginning and at the end, output of materials at different stages of operation.

9. The existence of process-related service departments, viz., Quality control, Effluent treatment, Water treatment, Steam, Power, Compressed Air, Heat treatment, etc., and their relationship with the identifiable processes of manufacture.

Cost Audit Report: Annexure # 4. Quantitative Details:

(a) Installed capacity, although available in the Balance Sheet, should not be considered straightway.

The cost auditor should consider following points for this:

(i) Rated capacity available from the manufacturers’ catalogue;

(ii) Technical certification as well as age of the plant;

(iii) Additions or renovation made so as to increase the original capacity;

(iv) Number of shifts working — single, double or triple; and

(v) Technical estimate of hourly production, particularly when different types or sizes are manufactured in different plants [Hourly production should be multiplied by normal working hours based on total days available less weekly off days, statutory holidays and normal shut-down for repairs and maintenance.]

In case of continuous plant, annual capacity should be computed for 365 days less normal shut-down period for plant overhauling..

In case of different plants having different capacities for different operations or processes, the lowest capacity of the series becomes the capacity of the plant as a whole.

In case of multi-product industrial unit, the installed capacity should be computed in terms of standard hours, machine hours, equipment or vessel occupancy hours, crushing hours, spindle/loom shifts, etc.

In case of certain products requiring different operation time (i.e., speed), the capacity should relate to that speed.

In case of non-availability of technical data regarding installed capacity, maximum production achieved on any one day in a particular year may be considered for calculating the installed capacity.

Capacity and various states:

Capacity is the rate of output at which there is no incentive to alter the size of the plant if that rate of output is expected to be permanent.

The need to optimize between the existing facilities and market demand of products gives rise to various states of capacity production.

These are as follows:

Practical capacity:

Practical capacity represents the installed or rated capacity less normal capacity losses due to repairs, maintenance, breakdowns, etc. It is also called operating capacity.

Normal capacity:

“The normal capacity basis is the total possible time (that means, any kind of work, machine or otherwise) less reasonable allowances for breakdowns, repairs, inefficiency, reasonable lack of operators and all other regular normal delays outside lack of orders to run on.” It represents the capacity to manufacture and sell.

Idle capacity is a part of the productive capacity of a plant lost because of repairing, oiling, overhauling, maintenance, job-setting, absenteeism, bottlenecks or unavoidable machine idleness.

Average capacity refers to the average of the capacities achieved and utilised in the past over a period of time. It, therefore, concerns itself to actually realised conditions.

Limiting capacity (or Critical capacity) under which the ‘key factor’ limiting the flow of production is considered. This ‘key factor’ relates to the least capacity in the production process flow-line. For example, if a production flow-line requires two plants A and B, and the capacity of A is not adequate to cope with B, it will be necessary to take the least capacity as the controlling Critical capacity.

The overall net capacity of a unit is thus determined by taking into account the corresponding matching capacities of other plants. This method throws up the degree of imbalances in production capacities between individual plants.

(b) Production capacity enhanced by leasing and all details of added capacities and other utilizations. The cost auditor has to report all details of production capacity; that is, capacity owned, capacity increased by leasing of plants, capacity increased by adding new plants or altered by replacement, etc.

(c) The information under this Para may be given either product group-wise or in totality, e.g., tablets, capsules, liquids, etc.

For proper understanding of installed capacity and production capacity, ICWAI publication “Guidelines on Capacity Determination” may be referred to.

SI. no. 2. Capacity enhanced…. If some plants have been taken on lease, its capacity should be shown here. Similarly, where some of the plants have been given on lease, their capacities should be reduced from installed capacity to arrive at available capacity.

SI. no. 4(b). Third party on job work: It means the company has manufactured goods for others.

SI. no. 4(c). The term ‘Loan license basis’ means that the company gets manufactured goods from outside parties.

In the case of plants operating at varying speeds (time factor) producing different thicknesses/gauges of products, installed capacity in terms of M.T. etc. may not be comparable with actual production in M.T. for arriving at capacity utilisation. Therefore, it would be better to calculate capacity utilisation in terms of machine hours, etc. as per Note (2) of this Para. In such cases, installed capacity and actual production should also be expressed in terms of machine hours etc.

Sl. No. 10. Quantity captively consumed:

This should include quantity transferred for subsequent product/process and/or for samples.

Here, the term ‘production capacity’ must be distinguished from ‘productive capacity’ this is defined as the industrial unit’s ability to produce within its present facilities saleable goods and to accumulate saleable inventories.

The production capacities of various utilities like water, steam, power etc. should also be stated. The additions to capacity that have not contributed to the production of products or utilities should also be considered for the computation of production capacity.

Where the products are of different sizes, grades, gauges, etc. having different production capacities then all items should be converted to a particular size, etc. in order to determine the equivalent production capacity.

The above data can be collected from the statistical records maintained by a company.

(d) Actual Production:

This data are available from the ‘Production Records’ to be maintained by a company in accordance with the cost accounting records rules. The production should be shown under: (a) Self-manufactured, (b) Job work and (c) Loan license.

In case of widely varying opening/closing WIP stocks, equivalent production should be computed in order to obtain the actual production.

In case of products of various sizes/shapes/dimension, etc. itemized actual production should be converted to equivalent production in a standard unit so as to make it comparable with that of installed capacity as required under sub-Para(5) below.

The cost auditor should cross-check the actual production figures with those of excise records and returns to DGTD, Directorate of Industries, National sample Survey, etc. SI. no. 6 of this Annexure requires indication of ‘Production as per Excise Records’.

Production awaiting testing, quality control and final inspection should not be considered. The production quantities shown in the Annual Accounts (financial) may not serve the purpose adequately.

(e) Percentage of Production to Installed Capacity:

The cost auditor has to indicate the percentage only but he has to ensure that both production and installed capacity are expressed in the same unit. For this the figure under SI. no. 3 should be compared with the figures under SI. no. 4(a) plus 4(b) only.

If there is shortfall in production of the product as compared to the installed capacity, the cost auditor should give brief comments as to the reasons for such shortfall stating clearly the extent to which they are controllable both in short term as well as long term [in terms of Note no. (3) below the Explanation clause of definition of ‘terms’].

The reasons for shortfall in production may be on account of:

(a) Internal factors such as faulty production planning/programming/scheduling, imbalance in production facilities causing bottlenecks in production flow line, lack of harmony in the production units, lack of technical knowledge on the part of the operation personnel, poor quality or deficiencies in the raw materials, deficiencies in the plant design and layout, frequent plant break-downs, excessive absenteeism of operatives, absence or ineffectiveness of production incentive plans, improper maintenance of productive plants, failure to keep the plant staff contended, etc.; and

(a) External factors such as absence of market, fall in the market demand, restrictions as to the availability of raw materials, sudden scarcity of raw material inputs, acute power shortage, seasonality of the products, lock out, poor order book position, non-availability of imported materials when needed, high rate of skilled labour turnover owing to attractive terms offered by the competitors, product substitutes appearing in the market, product life cycle approaching the stage of obsolescence, change in fashion and technology forcing cuts in production, etc.

While giving comments, the cost auditor should study and weigh each and every reason for shortfall in production, furnished by the company, in the light of controllability vis-a-vis effects in short term or in the long term.

(f) SI. no. 11 : Quantity sold :

This needs to be shown under the following break­ups;

(a) Domestic at controlled price,

(b) Domestic at market price,

(c) Export under advance licence,

(d) Export under other obligation, and

(e) Export at market price.

While furnishing these details, the cost auditor must ensure agreement of this information with those furnished under the Annexure 20: Sales of the product under reference.

5(A). Major input materials/Components consumed.

5(B). Standard/Actual consumption of input materials per unit.

Cost Audit Report: Annexure # 5. Break-Up of Cost of Input Materials Imported during the Year:

The reporting under these Annexures takes the form of Statements with information contents in figures. Information has to be given for three years — current year and two preceding years.

Important points in the requirements are:

(a) Details should be furnished in respect of major input materials each constituting at least 2% of total raw material cost.

(b) For imported raw materials — FOB value, ocean freight, insurance, customs duty and inland freight, clearing charges should be separately indicated.

(c) The consumption figures of raw materials separately for indigenous and imported categories should be shown so that percentage mix of consumption both in quantity and value may be ascertained in order to report under Para 5 of the main certificates if deemed necessary.

(d) Quantity of consumption per unit of production and against standard requirement/ theoretical norm together with the reasons for variations should be ascertained in order to give observation/suggestion under Para 5 of the main certificate if deemed necessary.

[The reasons for variations may be: poor quality of input materials, abnormal wastage/ spoilages/rejections/losses, sub-standard efficiency of operators, fall in the performance efficiency of the plants, wrong specification of raw materials/components purchased, etc.]

(e) Value of raw materials, components, finished and semi-finished parts not moving for more than 12 months should be identified and its proportion to the value of stock at the end of the year should be ascertained for reporting under Proforma 18(A): Non-Moving Stock.

[This analysis helps in tracing out slow-moving items, contributes towards better inventory control, and reduces the cost of inventory carrying].

The cost auditor should study the basis for determination of standards or theoretical norms per unit of production in terms of quantity.

If the company fails to develop such standard or norms, the cost auditor should report such fact specifically.

The cost auditor must ensure that the item-wise raw materials consumption both in quantity and value shown in his Statements tally with relevant details of the relevant Cost Proforma and also with the information contained in the Annexure to Schedule VI of the profit and loss account. For the differences between them, the same should be adequately dealt with in the Reconciliation Statement.

The consumption of process materials, process chemicals and dyes or agents which are incidental or extra to the production of the product should not be considered for reporting, but materials which get converted into the product during the manufacturing process should be considered.

For example, coal used in a cement industry is not a raw material, but components bought-out and assembled in the final assembly of an air conditioner or refrigerator are raw materials. Similarly, metal jacket, paper tubes or metal discus used as primary packing materials in a dry-cell battery are raw materials.

Semi-finished components purchased from outside require further processing before use in the sub-assembly/final assembly of an engineering product and the cost of processing should be considered in the computation of ‘value’. In case of raw materials imported against the export commitment of the ‘product under reference’, import duty not paid and export profits earned should also be ascertained.

Cost Audit Report: Annexure # 6. Power, Fuel and Utilities:

The cost auditor has to report and offer comments in respect of (a) details of quantity, rate per unit and total cost of each major form of power (e.g., solar power, atomic power, electricity, etc.) and fuel (e.g., coal, furnace oil, diesel oil, etc.) used in the production of product and other utilities like water, steam, etc., separately for purchased, self-generated and imported categories; and (b) differences noticed by having comparison between the actual consumption and standard consumption per unit of production of the product and with the preceding two years.

The cost auditor should consider also the following:

(a) Statements of ‘power’ and other ‘utilities’ as per the Proforma ‘A’ of the cost accounting records rules give the desired information.

(b) Basis adopted for inter-unit transfer charge in case of power supplied from another unit or transferred to another unit.

(c) Special features as to the costs common to utility centres like power, steam, water, etc. and their allocation bases.

(d) Characteristics of input materials like ash content in coal, efficiency of fuel gas and furnace oil, etc.

While auditing these items, it would be better should the cost auditor ascertain the impact on the unit product cost on account of measures taken for the conservation of energy. The cost auditor should appreciate that this calls for ‘Energy Audit’.

So, he should engage an energy specialist with emphasis on:

(i) Identifying the quantity and cost of various forms of energy,

(ii) Identifying energy consumption at various levels, and

(iii) Highlighting wastages by relating energy input and production output. This aspect would assist him to give his observation under Para 5 of the main certificate, if deemed necessary.

The diagnostic audit profile may concentrate on:

(i) Technical analysis of processes,

(ii) Quantum of energy spent, and

(iii) Evaluation of managerial and technical devices for energy conservation programme.

The Government departments like Bureau of Industrial Costs and Prices (BICP) carry out energy audit in respect of energy audit in respect of energy-intensive industries like Cement, Aluminium, Paper, Fertilisers, Steel, etc.

The scope of such audit includes:

(i) Monitoring energy consumption factors,

(ii) Identifying possibilities of savings,

(iii) Recommending policies for bringing about savings in energy consumption; and

(iv) Possibility of avoiding losses thereby — conserving energy.

Few Comments:

(1) Various forms of utilities such as power, steam, chilling plant, humidification, air compressor etc. should be covered under this Para.

(2) In case of fuel, data may be getting repeated under utility cost.

(3) Cost data for purchased power and self-generated power have to be given separately.

(4) ‘Note’ under this Para seems to be not relevant, hence may be ignored.

(5) In case a company is in a position to provide data for standards/ budgeted consumption per unit of production, then those have to be compared with the actual figures, other­wise actual figures per unit of production have to be compared with the figures of the previous 2 years and commented upon.

Various items of utilities should be expressed in terms of quantity per unit of production of major types. In case of company manufacturing numerous products, if appropriate, this information may be given per machine shift etc. instead of per unit or production of major types.

Cost Audit Report: Annexure # 7. Salaries and Wages:

(1) All information is factual and can be collected from the concerned records and account heads. Other fringe benefits like contribution to PF, FPF, ESI, LTC and group insurance should be included but not the amounts of annual bonus and gratuity paid-under B: Cost detail.

Direct labour cost on production refers to the labour costs of all production centres including packing departments.

Other employee cost refers to the salaries and wages paid for departments other than those indicated in (1) to (4) (e.g., payments to contract labour).

Indirect employee cost on production refers to the salaries and wages of all service and utility centres arrived at after apportionment.

Attendance records for both regular and causal workmen give clues to these information. There should be a proper reconciliation of man-days available and actually worked with due consideration of man-days lost due to absenteeism, idle time, lay-off, leave, raw materials shortage, power shortage/failures, etc.

Idle man-days:

In the normal working situation a factory may not have idle work force, since in case of any unexpected temporary idleness the same worker is provided with alternate work or used for maintenance work. Therefore, there is little change of idle man-days.

Further, absenteeism cannot be treated as idle man-days; hence need not be shown here.

There may be two approaches to determine the average number of direct or indirect workers employed:

(i) Dividing the total man-days of direct or indirect workers available by the number of days worked during the year, and

(ii) Aggregating the strength of direct or indirect workers at each month-end for the year and dividing the same by 12.

Direct labour cost per unit of output which is referred as SI. no. 4: Direct wages and salaries as per Proforma showing the ‘cost of production’ should be computed. In case of several processes involved, such labour costs are to be grouped together making adjustment for the quantities processed in different centres to obtain one unit product. The computation appears like this —

If standard costing system is adopted the cost variances are required to be adjusted to obtain actual costs.

Year to year variations in the direct labour costs (i.e., SI. no. 4: Direct wages and salaries) per unit should be properly ascertained with causes. Reasons for variations may be: rise or fall in the working class cost of living index, wage revisions by union-management agreement or wage board, rationalisation of labour, mechanisation, productivity changes, etc.

This aspect would assist the cost auditor for reporting under Para 5 of the main certificate.

Incentive scheme and its effects on productivity and cost of production: The cost auditor should ascertain the scheme, ask for a ‘Note’ from the company regarding this and increased productivity claims and verify the same with reference to the relevant records. Contributory factors towards productivity increase may be: improved attendance during the ‘peak season’ of work, improved quality of production, more production quantity with minimum of rejections/defectives/wastes, etc. This aspect, if deemed fit, may be reported under Para 5 of the main certificate.

Example:

(i) Attendance Bonus:

In order to avoid absenteeism during the season, the Sugar Company has a scheme of an incentive payment of ‘attendance all’ to all workmen who have attended to their work as outlined next:

For 26 days’ attendance: Rs. 60 per month

For 25 days’ attendance: Rs. 50 per month

For 24 days’ attendance: Rs. 40 per month

For 23 days’ attendance: Rs. 35 per month

For 22 days’ attendance: Rs. 20 per month

For attendance falling below 22 days, no attendance bonus is payable.

This scheme is in operation since 1990. The management opines that such scheme is yielding good results towards improvement in attendance during the ‘peak’ season-period thereby increasing the production of Sugar.

(ii) In addition, the company management has formulated a scheme of an incentive payment to workmen at the following operations, since October 1994.

At Crystallizer Section:

The incentive is paid to the workmen group @ 30 paise at the minimum and 45 paise maximum per quintal depending upon the quality of crystallization achieved as per the ‘Analysis Report’ of the Laboratory. This rate and amount is recommended every month by the Departmental Head and shared equally by each workman in the group.

According to the management, the quality has improved to a considerable extent and the productivity has shown an increasing trend.

At Despatch Section:

The rate is 15 paise per quintal of Sugar despatched. The scheme is working satisfactorily. The effect on the cost of storage is, to some extent, significant.

(7) The provision for and actual payments under any VRS (Voluntary Retirement from Service) scheme should also be indicated under SI. no. 7(a) and 7(b) in B : Cost Detail.

Cost Audit Report: Annexure # 8. Repairs and Maintenance:

(1) For reporting of factual data, the cost auditor should refer to the proforma of ‘Cost of Production’ wherein this figure is available, and also the records under this head maintained by the company as per the cost accounting record rules.

The proforma shows the total of ‘repairs and maintenance’ and the records provide for the expenses for each item, namely, stores and spares, labour charges, and outside contract repair charges, and so there should be a reconciliation between them.

The job cards and outside contract cards for maintenance and major repairs for the production centres (excluding the works of capital nature) should be sorted out and a summary sheet obtained for data collection as follows —

Repairs and maintenance expenses on staff-quarters and colony are included in Administrative overheads and will therefore appear as an item in the break-up for Administrative overheads also. Amount capitalized will not be forming part of the expenditure. Hence, net of Repairs and Maintenance expenditure SI. no. 7 does not arise.