COST & ACCOUNTING

MANAGEMENT

SUBMITTED BY

SANA SIDDIQUI (FA20-MSMG-0018)

SHAHNAWAZ QAMAR (FA20-MSMG-0019)

SUBMITTED TO

SIR FAISAL MAJID

Table of Contents
Acknowledgement.......................................................................................................................3

1. Introduction of Organization.......................................................................................................4

1.1 Vision of Engro......................................................................................................................4

1.2 Mission of Engro...................................................................................................................4

1.3 List of All Engro Industries and Products.............................................................................5

1.3.1 Polymer...........................................................................................................................5

1.3.2. Fertilizer.........................................................................................................................6

1.3.3. Agriculture.....................................................................................................................7

1.3.4. Foods..............................................................................................................................7

1.3.5. Energy............................................................................................................................8

1.3.6 Infrastructure...................................................................................................................8

1.3.7 International Trade..........................................................................................................9

1.3.8 CSR.................................................................................................................................9

1.3.9 Technology...................................................................................................................10

1.3.10 Connectivity................................................................................................................10

2. The Engro Product We Chose...................................................................................................10

2.1 Product.................................................................................................................................10

2.2 Industry................................................................................................................................11

2.3 Department..........................................................................................................................11
 2.4 Regulator..............................................................................................................................11

3. Raw Materials............................................................................................................................11

3.1 Coal......................................................................................................................................11

3.1.1 Method for Inventory Management:.............................................................................12

3.1.2 Days..............................................................................................................................12

3.2 Limestone............................................................................................................................12

3.2.1 Method for Inventory Management:.............................................................................13

3.2.2 Days:.............................................................................................................................13

3.3 Water....................................................................................................................................13

3.3.1 Inventory Management:................................................................................................14

4. Material Procurement & Usage Process....................................................................................14

4.1 Steps:....................................................................................................................................14

5. Labor..........................................................................................................................................15

6. Factory Overhead (F.O.H).........................................................................................................15

8. Costing System of Engro’s of EPTL.....................................................................................15

9. Per Unit Cost..........................................................................................................................15

10. Responsibility Accounting Report......................................................................................16

Acknowledgement
We would like to thanks Mr. Jazib Siddiqui who works
at EPTL as a Financial Reporting Accountant. He
helped us in completing this report by providing us with
the required information.
The values we used in our report are completely based
on assumptions because the data was confidential and
the person helping us was bound to keep it confidential.
Moreover, the details about costing system, methods
and procedure are used in this report without alterations.
Here’s the proof of our collaboration over email with
Mr. Jazib Siddiqui.
1. Introduction of Organization
Envisioning value creation for a multitude of stakeholders, Engro has invested in a diverse

portfolio of businesses across the verticals of energy and related infrastructure, agricultural

outputs, petrochemicals, and telecommunication infrastructure in over 50 years. Engro is

committed to helping overcome Pakistan’s energy crisis by using the country’s resources and

strengthening the agri-food sector by equipping our farmers with the right tools and capabilities.

Engro recognizes that social prosperity is imperative for business growth. Hence, every venture

of Engro operates on an inclusive business growth ideology wherein its success is integrated with

the development of society. Investing today for a better tomorrow for Pakistan is at the

cornerstone of every business we venture into. It is this passion that fuels Engro to step into

unchartered territories, bring sustainable solutions to the forefront, and become the leading

provider of products and services in the energy, agricultural, chemicals, and nutrition sectors.

From uplifting the agri-sector to improving the food value chain to providing sustainable energy

solutions, Engro has left no stone unturned in its pursuit of uplifting the entire nation in a

timespan of over 50 years.

1.1 Vision of Engro

To be the premier Pakistani enterprise with a global reach, passionately pursuing value creation

for all stakeholders.

1.2 Mission of Engro

Unlocking Pakistan’s potential through globally competitive, inclusive solutions to today’s most

pressing issues.

1.3 List of All Engro Industries and Products

Engro caters to ten different industries. The details of each are mentioned below:

1.3.1 Polymer

 Engro Polymer & Chemical Ltd.

 Think PVC Pvt. Ltd.

 Engro Plasticizer Pvt. Ltd.

 Engro Peroxide Pvt. Ltd.

Engro Polymer & Chemicals Limited (EPCL) is the sole manufacturer of PVC resin in Pakistan.

Besides this the company also produces Chlor Alkali products like Caustic Soda, Sodium

Hypochlorite and Hydrochloric Acid.

Products:

1. PVC (Poly vinyl chloride) - PVC suspension resin is the primary product of Engro

Polymer & Chemicals Ltd. Produced in a variety of different grades: SABZ (AU 58, AU

60, AU 72, AU 67R and AU 67S), it is used in the manufacture of varied PVC based

products. The different grades of resin offer a diverse range of properties that can be used

in all the processing methods.

2. Caustic Soda - When Engro Polymer & Chemicals launched caustic soda, it quickly

made its way in the domestic market. EPCL came up with a plan to rectify all issues

being faced by the caustic soda industry, and hired a dedicated distribution fleet with
 epoxy lined tanks to ensure delivery of the highest quality product. Engro Polymer &

Chemicals Ltd. supplies Caustic Soda in the form of:

 Liquid (50% concentration)

 Flakes (99% concentration)

3. Sodium Hypochlorite - Sodium Hypochlorite is a by-product in the manufacturing

process of Caustic Soda. It is used extensively as a bleaching agent, a disinfectant and for

water treatment.

4. Hydrochloric Acid - Hydrochloric Acid is one of the products in the chlor Alkali

manufacturing process. It is used extensively in processes like pickling, oil well

acidizing, water treatment and cleaning. Our sales focus has been in the South region

only, where the bulk of the production is consumed.

1.3.2. Fertilizer

 Engro Fertilizers Ltd.

 EFERT Agritrade Pvt. Ltd.

Engro Fertilizers Limited is a subsidiary of Engro Corporation and, a trusted name for every

farmer in Pakistan. It is traded on the stock market under the name ‘EFERT'.

Products:
Besides these they sell 33 other products including fertilizers, seeds, hybrid seeds, crop

protection compounds. They also offer agri-services and agribusiness solutions.

1.3.3. Agriculture

 Engro Eximp Agriproducts Pvt. Ltd.

Engro Eximp Agriproducts (EEAP) is a wholly owned subsidiary of Engro Corporation. EEAP

processes and exports the finest basmati & non-basmati rice in raw, parboiled and steamed forms

locally and around the world.

1.3.4. Foods

 Friesland Campina Engro Pak Ltd.

FrieslandCampina Engro Pakistan Limited is a Pakistani dairy company and a subsidiary of the

Dutch multinational corporative Royal FrieslandCampina. The Company launched as Engro

Foods in 2005 with our first production facility in Sukkur, Pakistan and the introduction of our

flagship UHT milk brand: Olper’s. Following successful entries in the tea-whitening category

with Tarang in 2007, and the ice-cream market with Omore in 2009, we entered a strategic

partnership with Royal FrieslandCampina of Netherlands in 2016.

Products:

 Olpers

 Omore

 Tarang

1.3.5. Energy

 Engro Energy Ltd.

 Engro Powergen Qadipur Ltd.

 Sindh Engro Coal Mining Company Ltd.

 o Thar Foundation

o Thar Power Company Ltd.

 Engro Powergen Thar Pvt. Ltd.

 Engro Energy Services Ltd.

 Siddiqsons Energy Ltd.

Incorporated in 2008 as a fully owned subsidiary to develop power projects in Pakistan, Engro

Energy is Engro Corp’s first initiative into the country’s power sector. As we aspire to deliver

value and deploy an energy ecosystem through our interventions, we believe that the seeds we

sow today will pave the way for meaningful success tomorrow.

1.3.6 Infrastructure

 Engro VoPak Terminal Ltd.

The only state of the art Terminal and Storage facility for bulk liquid chemicals and LPG in

Pakistan is just one of the 67 terminals of Vopak in 25 countries that capacity is around 34.7

million CBM around the world.

A breakthrough in chemical and LPG storage, Engro Vopak Terminal Limited, is a joint venture

of Royal Vopak of The Netherlands and Engro Corporation Limited. The coming together of the

largest storage and terminal service provider of Chemical, Oil and Gas products in the world and

Pakistan’s most diversified business group has resulted in continuing provision of world class

service to the growing chemical and petrochemical industry of Pakistan since 1997.

 Elengy Terminal Pakistan

 Engro Elengy Terminal Pvt. Ltd.

One of the most cost-efficient LNG terminals in the region, Elengy Terminal has the capacity for

regasification of up to a peak of 690 mmscfd (guaranteed capacity: 630 mmscfd & uncontracted

capacity: 0 mmscfd) or 4.5 million tons of LNG per year and terminal capacity utilization ranges

between 590 to 630 mmscfd based on customer’s demand. The RLNG provided through the

Terminal has reduced the cost of electricity generation by 40%, and in turn, boosts productivity

and bolsters economic growth across Pakistan. The rates and tariffs are decided as per Operation

and Service Agreement with the customer.

1.3.7 International Trade

 Engro Eximp FZE (Dubai Based)

1.3.8 CSR

 Engro Foundation

1.3.9 Technology

 Engro Infinity Pvt. Ltd.

1.3.10 Connectivity

 Engro Connect Pvt. Ltd.

 Engro Enfrashare Pvt. Ltd.

Engro Enfrashare (Private) Limited is a fully owned entity of the Engro Corporation.

Headquartered in Islamabad, Engro Enfrashare started its operations in November 2018 and has

offices in Karachi, Lahore, and Multan.

2. The Engro Product We Chose

The engro product we chose is Engro Powergen Thar Pvt. Ltd. (EPTL). It was formed in 2014 to

set up a 2x330MW power project in Thar Block II, Sindh, Pakistan. The company is a joint

venture between Engro Powergen Ltd (EPL), China Machinery Engineering Corporation

(CMEC), Habib Bank Ltd (HBL), and Liberty Mills Limited. The project successfully achieved a

commercial operations date on July 10, 2019.

2.1 Product
The product is electricity.

2.2 Industry
The industry is Independent power producers (IPPs).

2.3 Department
The department we are going to do costing for is Accounts and Finance.

2.4 Regulator
NEPRA- National Electric Power Regulatory Authority

The National Electric Power Regulatory Authority (NEPRA) has been established under Section

3 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 to
exclusively regulate the provision of electric power services in Pakistan. The Regulation of

Generation, Transmission and Distribution of Electric Power (Amendment) Act, 2018 [Act No.

XII of 2018] (The Act) has overhauled the role and responsibilities of NEPRA.

3. Raw Materials
Following are the raw materials used in the production of electricity:

3.1 Coal
Coal is procured form Sindh Engro Coal Mining Company (SECMC) is Pakistan’s leading coal

producer operating Pakistan’s first open-pit lignite mine in Block II of Tharparkar area in Sindh

province of Pakistan.

3.1.1 Method for Inventory

Management: 

Perpetual inventory system

FIFO Method is used

3.1.2 Days

15 days Inventory is managed at a

time, cannot store more due to

quality of Coal.
3.2 Limestone 
Limestone is procured form various vendors Operating near Thatta, mining Limestone &

providing it to Thar Block II.

3.2.1 Method for Inventory

Management: 

Perpetual inventory system

FIFO Method is used

3.2.2 Days:

20 Days inventory is managed

3.3 Water
Water is obtained by the Company from

the O&M operator of water supply from

the LBOD Scheme at Nabisar up till

Vajihar. They supply 35 cusecs of treated

water to EPTL in Block-II of Thar parker.

3.3.1 Inventory Management:

No Inventory is managed

4. Material Procurement & Usage Process

Material is procured from Selected vendors Based on price & Quality offered.

4.1 Steps:
1. End-user shall make the PR duly approved as per LOAM and forward it to Commercial

Dept, who shall process the purchases as per the SOP.

2. Invitation of bidding from Commercial Dept.

3. Selection of vendor upon bid

4. Issuance of Purchase Order/ contract 

5. The vendor shall deliver the material to the Site through the warehouse.

6. upon Receipt of good as site, goods receipt Note is prepared in the system, copy of which

is handed over to Vendor.

7. The invoices/bills shall be processed in accordance with SOP -"Payment processing of

Invoices/Bills.”
5. Labor
Labor is outsourced to ‘Operation & Maintenance Service Provider’. The vendor is paid as per

agreement.

6. Factory Overhead (F.O.H)

The following costs are part of admin cost and not directly absorbed in material price as it is

regulated by NEPRA:

 Utilities

 Accommodation to Staff

 Travelling to Site

 Food

8. Costing System of Engro’s of EPTL

The system is completely integrated from procurement to payment in SAP:

 Martial is managed by MM team in SAP and physical.

 PO/Contract is managed by commercial department in SAP.

 Finance and planning department manages all budgets and costs.

 Accounts department manages all records and reporting of tax and assets.

9. Per Unit Cost

We know that, the formula for per unit cost is,
 (Total ¿Cost +Total Variable Cost )
Per unit cost = Total Units Produced

Hence, if Engro produces 120000 units, and its total fixed cost is 1600000 and variable cost is

7.5 per unit then,

(1600000+(120000 x 7.5))
Per unit cost = 120000

Per unit cost = 20.833 Rs.

10. Responsibility Accounting Report

They are PnL (Profit and Loss) report that they share with the top management on monthly basis.