Project Report

on

Cost and Management Accounting

(Jammu Apparels)

(Textile industry)

Group 12

Submitted by

Jay Bhamre

KSS Mythili

Sreelakshmi M

Toyaja Chaturvedi

Submitted to
Jammu Apparels

Dr. Prateeksha Maurya

(Indian Institute of management, Jammu)

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 Acknowledgement

“We (Team) take this occas ion to expres s our genuine gratitude and
res pons ibility to our res pected guide/P rofes s or w ith pleas ure and candour.
D r. Prateek s h a Mau rya .
We would not have been able to finis h our Cos t and management
accounting project w ithout her w is e direction and cooperation.

F inally, w e appreciat e the support, encouragement, and patience of our

entire team, as well as P rofess or and other IIM , J ammu s tudents , and, as
alw ays , nothing in our lives w ould be pos s ible w ithout our G od”.

Thank Y ou!

Jammu Apparels

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 COMPANY INFORMATION

Jammu Apparels

Clothing for men and children is available at Jammu Apparels. Customers can enjoy a world-
class shopping experience with the latest international fashion from across the world, as well as
Jammu Apparel's own brand of in-house creations in carefully chosen colour palettes. Every
season, over 2,000 designs in fresh new patterns, shapes, and materials are available at
unbelievable prices.

Jammu Apparels

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PRODUCTS

Product Name

Category - Men’s wear

Subcategory - Bottom

 Jeans
 Trousers
 Shorts

Subcategory - Tops

 Tees
 Polo
 Shirts
Jammu Apparels

PROCESSES OF MANUFACTURING
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Manufacturing Steps

1. Receiving Fabrics

Company gets fabric from overseas textile manufacturers in colossal bolts with cardboard or

plastic middle tubes, or in sacks. Fabric is supplied in steel commercial shipping containers and
forklifts are used to unload them. Between arrival and manufacturing at garment factories, fabric
is typically kept in a warehouse or designated space.

2. Fabric Relaxing

The term "relaxing" refers to the process of letting a material to relax and contract before it is
built. This technique is necessary because the material is always under stress during several
phases of the textile production process, including weaving, dyeing, and other finishing
Jammu Apparels

activities. Fabrics shrink during the relaxing process, which helps to prevent additional shrinking
when the client uses them.

3. Spreading, Form layout and Cutting

The fabric is moved to the spreading and cutting room of the garment manufacturing plant once
it has been relaxed. The cloth is cut into consistent plies and then distributed manually or using a

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computer-controlled system to prepare for the cutting step. The fabric is strewn throughout the
following areas:

Operator is allowed to detect the fabric flaws,

During cutting, adjust fabric tension and slack.,
Ensure that each ply is perfectly aligned with the others.

Fabric, spreading method, cutting equipment, and garment order size all influence the
number of plies used in each spread.

4. Layout

Laying down a paper design is meant to tentatively plan the positioning of the pattern elements.

The steps of laying down are as follows: -

First a large piece is placed, followed by smaller ones.

Laying down and cutting saves a lot of money. Hundreds of layers of cloth will be laid
and cut at the same time, thus even a small quantity of material saved in a single layer
will help save a significant amount of money.
When laid flat, the length of the garment is parallel to the selvedge of the cloth. In
addition, the design follows the grain of the wood. Fabrics drape and fall better and last
longer when woven on the longitudinal grain.
Parts that must be placed on the fold is placed exactly on the fold's edge.
All laying is done on the material's backside.
When drawing out the paper pattern, the fabric's design is kept in mind. It's important to
double-check that the design is running in the same direction across the garment. Both
lengthwise and across the seams, all checks and strips should match.
5. Marking
It can be either manual or automated method.
Full-size designs are used in the marker planner, which is then cost-effectively arranged
on marker paper.
Jammu Apparels

This is a sheet of paper with symbols on it that the marker planner uses to visually
manage component placement along defined grain lines.
Paper makers are attached to fabric using pins, staples, or an adhesive paper that is heat
fused to the top layer of the fabric.

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 The spreads' details are provided through marker planning. In the cutting room, fabric
inlays 100 (layers) and production marks, as well as any in-orders, are manually or with
a spreading machine laid.

6. Cutting
The cutting room's primary function is to distribute and cut into clothes. Because there is
little that can be done to rectify serious defects once the cloth has been cut, this is the most
critical operation in the cutting room.
The first question in planning is whether the totals calculated in the cutting room are the
same as those necessary to maintain full output in the sewing room, and hence the
predicted delivery timeline. Fabric difficulties in the cutting room might affect
production in the sewing room. The next stage is to extend the cutting room program to
the sewing room, provided that all fabric, design, and trim components are satisfactory
and properly planned and cut.
Knife cutting machines perform all operations associated with cutting.
7. Embroidery and Screen Printing.

Embroidery and screen printing are two processes that are only performed if the customer asks
them; as a result, these activities are typically outsourced to off-site facilities. Embroidery is
frequently done with automated technology, with many machines embroidering the same pattern
on various pieces of clothing at once. Each production line has anywhere from ten to twenty
embroidery stations. Customers can have their apparel embroidered with logos or other
accessories.

Screen printing is the technique of applying paint-based graphics to fabric with the help of
presses and textile dryers. By brushing a rubber blade across a permeable screen, ink is
transferred through a stencil and onto fabric. After that, the screen-printed cloth pieces are dried
to solidify the ink. This method might be somewhat automated or completely manual. The buyer
has complete control over screen printing and embroidery. It may be used to print logos or other
Jammu Apparels

designs on garments, as well as brand and size information, rather of using tags.

8. Sewing

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After the cut pieces are packed according to size, color, and quantity designated by the sewing
room, stitching or sewing takes place.

Garments are sewed on an assembly line, and as the garment advances down the line, it becomes
complete. Operators of sewing machines take a bundle of cut fabric and sew the same section of
the garment over and over again, passing the completed portion to the next operator. The first
operator, for example, might sew the collar to the body of the garment, while the second
operator might sew the sleeve to the body. At the end of the sewing line, quality assurance is
undertaken to confirm that the garment has been properly assembled and that there are no
manufacturing flaws.

9. Checking

It is reasonable to expect that no matter how well a factory's inspection or quality control
procedures are implemented, a certain percentage of clothes will be rejected for various reasons.

10. Spot Cleaning and Laundry

Employees entrusted with quality assurance search for visual flaws, stains, or other areas on the
garment that may have occurred during the cutting and sewing procedures, in addition to finding
manufacturing defects. Spots are usually tagged with a sticker and sent to a spot-cleaning
facility, where they are cleaned using steam, hot water, or chemical stain removers

11. Fusing and Pressing

Fusing and pressing are the two operations that have the most impact on a garment's final
appearance. The foundation is laid by fusing, and the ultimate mark of excellence is applied by
pressing.

Pressing and finishing machines

Hand Iron
Scissors press
Steam dolly
Jammu Apparels

12. Packing and Shipping

Clothes are folded, tagged, sized, and packaged according to customer specifications in the last
steps of making a product retail ready. In addition, clothing may be packed in protective plastic
bags, either manually or automatically, to keep the material clean and pressed throughout

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shipping. Finally, the clothing is packed into cardboard boxes and delivered to client distribution
sites, where they will be sold in retail outlets.

Resources For Production

Textile Raw Material

Fiber
Yarn
Fabric
Dyes
Chemical and Auxiliaries
Packing materials.

Textile Machineries

Spinning Machine.
Weaving and Knitting Machine.
Textile Dyeing and Printing Machines.
Cutting and Stitching Machines
Scissors

Labor

Skilled labor
Unskilled labor

Other Materials and Spares

Jammu Apparels

Signage
Shelves and Racks
Hangers
Mannequins
Furniture and fixtures
Security system

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Pekay Apparels Manufacture Men’s Garments. The company deals in 6 products mentioned
above. The company’s simple costing has three direct cost categories (Material, Labor and
Machinery & Other cost) and Indirect cost. The simple costing system allocate indirect cost on
the basis of units produced.

Exhibit 1 & 3.

Exhibit 2.

Traditional Costing System

According to Traditional Costing system, the company were Distributing the Indirect cost as per the
Units produced.

Costing As per the Traditional costing system.

Jammu Apparels

Solution 1. Costing as per Traditional Costing method.

Recently we realized that the ABC costing system gives the accurate cost per unit than the
Traditional costing system. The company is curious to know how an ABC system would affect
their costing decision. After analyzing the Indirect cost of all the products. The company
identify five activities as generating indirect cost. All five activities/cost drivers are given below.

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Exhibit 4.
Activity Based costing
As per the Activity based costing, Indirect cost is distributed as per the cost drivers identify
by the company.

After distributing the indirect cost, Cost per unit is calculated as per the ABC costing system.

Analysis
After implementation of ABC costing system, the company realized that the actual gross profit margin
of every product is change. It is realized that Gross profit margin of “Shorts” is only 0.63%.and others
product’s gross profit margin is change but with less differentiation. As per the analysis, the
management decide to discontinue the “shorts” from the following financial Year. ABC costing gives
the more accurate cost per unit than the traditional costing.

Jammu Apparels

After analysis, Costs are divided into Fixed and variable cost.

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Decision making as per [Cost – Volume - profit Analysis]
As per the CVP analysis we had calculated contribution margin and Contribution margin %.

We had calculated the Breakeven units for decision making as per the CVP analysis.

If the company want to earn Rs. 1 crore profit on each product, then how much unit’s company needs
to produce and sale.

Cost - Volume – Profit Graph

Jammu Apparels

Jeans

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 Jeans
20,000,000.00

15,000,000.00

10,000,000.00

5,000,000.00

-
1 2 3
(5,000,000.00)

Total Units Total fixed costs Total Variable costs

Total cost Sales value Profit/Loss

Trouser

Trouser
30,000,000.00
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
-
1 2 3
(5,000,000.00)

Total Units Total fixed costs Total Variable costs

Total cost Sales value Profit/Loss

Shorts
Jammu Apparels

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 Shorts
60,000,000.00
50,000,000.00
40,000,000.00
30,000,000.00
20,000,000.00
10,000,000.00
-
1 2 3
(10,000,000.00)

Total Units Total fixed costs Total Variable costs

Total cost Sales value Profit/Loss

Tees

Tees
30,000,000.00
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
-
1 2 3
(5,000,000.00)

Total Units Total fixed costs Total Variable costs

Total cost Sales value Profit/Loss

Polo
Jammu Apparels

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 Polo
30,000,000.00
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
-
1 2 3
(5,000,000.00)

Total Units Total fixed costs Total Variable costs

Total cost Sales value Profit/Loss

Shirts

Shirts
45,000,000.00
40,000,000.00
35,000,000.00
30,000,000.00
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
-
(5,000,000.00) 1 2 3

Total Units Total fixed costs Total Variable costs

Total cost Sales value Profit/Loss

Note: The following link is the link of Excel sheet which is used for calculation of both costing
method and CVP analysis.
https://docs.google.com/spreadsheets/d/1Pwn3NCc63XQ782XHpUlCerElaxyzI5f6/edit?
Jammu Apparels

usp=sharing&ouid=110037310426746067813&rtpof=true&sd=true

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 Thanks

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Jammu Apparels