A STUDY ON COST ANALYSIS & CONTROL

(With reference to Hero Motocorp Pvt Ltd)

ABSTRACT
The total cost of producing a specific level of output is the cost of all the factors of input used.
Conventionally economist use models with two inputs capital, K. and labor, L. Capital is
assumed to be the fixed input meaning that the amount of capital used does not vary with the
level of production. The rental price per unit of capital is denoted r. Thus the total fixed costs
equal Kr. Labor is the variable input meaning that the amount of labor used varies with the level
of output. In fact in the short run the only way to vary output is by varying the amount of the
variable input. Labor is denoted L and the per unit cost or wage rate is denoted w so the total
variable costs is Lw. Consequently total cost is fixed costs (FC) plus variable cost (VC)
Valuation in terms of money of (1) effort, (2) material, (3) resources, (4) time and utilities
consumed, (5) risks incurred, and (6) opportunity forgone in production and delivery of a good
or service. All expenses are costs, but not all costs (such as those incurred in acquisition of an
income-generating asset) are expenses.
The profession places itself at the service of the nation, government, industry, and the society to
realize the objectives of a welfare state resulting in the prosperity and the well being of its people
- a fact increasingly realized with the opening up of the country's economy and change in the
economic scenario of the world. In today's world, the profession of conventional accounting and
auditing has taken a back seat and accountants increasingly contribute towards the management
of scarce resources like funds, land and apply strategic decisions. This has opened up further
scope and tremendous opportunities Cost and Works accountants to shoulder responsibility as
Cost and Management Accountants in accordance with new dimensions and vision here in India
and abroad. Members of this profession will be the driving force in the team of management
while in employment and a key consultant, an effective Cost and Management Auditor and an
appropriate advisor in place. This is why Cost Accountants in India are called Management
Accountants all over the world. It’s our other name. We invite you to browse through our web
site. Complete Information on our working, history and professional accreditation are all
available.
 INDEX
CHAPTER-1 PAGES
INTRODUCTION
Introduction about Project 01---03
Scope of the Study 04-----
Objectives of the Study 05-----
Methodology of the Study 06-----
CHAPTER-2
INDUSTRY PROFILE &COMPANY PROFILE
Automobile Industry in India 07-----
History of the Two Wheelers 08---12
Corporate Profile 13---18
Key Milestones of Hero Honda 19---24
Corporate Social Responsibility 25---28
Introduction about Phonix Dealer Profile 29---34
Customer Relationshiop 03---05
CHAPTER-3
REVIEW OF LITERATURE
Determination of Cost & Cost Control 37---45
Types Of Costs & Classifications 46---56
Review Of Project Costs 57---64
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
(Data Reporting by Tables) 65---81
CHAPTER-5
FINDINGS & CONCLUSIONS 83-----
SUGGESTIONS 84-----
BIBLIOGRAPHY 85-----
INTRODUCTION

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 INTRODUCTION

COST:

Cost is essential in every walk of our life – national, domestic and Business. A cost is
prepared to have effective utilization of funds and for the realization of objective as efficiently as
possible. Costing is a powerful tool to the management for performing its functions i.e.,
formulation plans, coordination activities and controlling operations etc., efficiently. For efficient
and effective management planning and control are tow highly essential functions. Costing and
cost control provide a set of basic techniques for planning and control.

A cost fixes a target in terms of rupees or quantities against which the actual performance
is measured. A cost is closely related to both the management function as well as the accounting
function of an organization.

As the size of the organization increases, the need for costing is correspondingly more
because a cost is an effective tool of planning and control. Cost is helpful in coordinating the
various activities (such as production, sales, purchase etc) of the organization with result that all
the activities precede according to the objective. Costs are means of communication. Ideas of the
top management are given the practical shape. As the activities of various department heads are
coordinated at the much needed for the very success of an organization. Cost is necessary to
future to motivate the staff associated, to coordinate the activities of different departments and to
control the performance of various persons operating at different levels.

Costs may be divided into two basic classes. Capital and operating costs. Capital cost is
directed towards proposed expenditure for new projects and often require special financing.The
operating costs are directed towards achieving short-term operational goals of the organization
for instance, production or profit goals in a business firm. Operating costs may be sub-divided
into various departmental of functional costs.
DEFINITION OF 'COST-BENEFIT ANALYSIS'

A process by which business` decisions are analyzed. The benefits of a given situation or
business-related action are summed and then the costs associated with taking that action are
subtracted. Some consultants or analysts also build the model to put a dollar value on intangible
items, such as the benefits and costs associated with living in a certain town. Most analysts will
also factor opportunity cost into such equations.

You may have been intensely creative in generating solutions to a problem, and rigorous
in your selection of the best one available. This solution may still not be worth implementing, as
you may invest a lot of time and money in solving a problem that is not worthy of this effort.

Cost Benefit Analysis or cba is a relatively simple and widely used technique for
deciding whether to make a change. As its name suggests, to use the technique simply add up the
value of the benefits of a course of action, and subtract the costs associated with it.

Costs are either one-off, or may be ongoing. Benefits are most often received over time.
We build this effect of time into our analysis by calculating a payback period. This is the time it
takes for the benefits of a change to repay its costs. Many companies look for payback over a
specified period of time – e.g. three years.

In its simple form, cost-benefit analysis is carried out using only financial costs and
financial benefits. For example, a simple cost/benefit analysis of a road scheme would measure
the cost of building the road, and subtract this from the economic benefit of improving transport
links. It would not measure either the cost of environmental damage or the benefit of quicker and
easier travel to work.
NEED OF THE STUDY:

The importance of cost reduction programs within a company cannot be overstated.

When a company must generate more cash as fast as possible, management will have to
decide which costs can be most effectively reduced. If the reduction is needed quickly, expenses
cut first will normally be those that are not fixed or directly tied to production. It is not a good
idea to drastically reduce expenses that produce the company product or service without careful
evaluation.

If your company understands the importance of cost reduction as a tool to increase

Keeping the competitive edge means keeping the company razor sharp. There is no room
for laxness which dulls the ability of a company to be responsive to market trends. Changes can
occur rapidly, and a company that cannot respond with new methods, new material usage,
service efficiency changes, or technological adaptability will be quickly outperformed by other
businesses. The importance of cost reduction strategies lies in its contribution to a company's
honing of performance.

SCOPE OF THE STUDY:

Since it will not be possible to conduct a micro level study of all type industries in
Andhra Pradesh, the study is restricted to Hero MotoCorp Ltd. (Formerly Hero Honda Motors
Ltd.) (Phoenix Motors Pvt. Ltd).only.
NEED OF THE STUDY:
THE STUDY HAS THE FOLLOWING:

 To provide the material frame work of cost and Cost Control Analysis
 To describe the profit of the organization as a backdrop for undertaking a study
of Cost Benefit Analysis.
 To analyze the cost system in practice in Hero MotoCorp Ltd. (Formerly Hero
Honda Motors Ltd.) (Phoenix Motors Pvt. Ltd)with particular reference to
their objectives and phases of organizational and re-appropriation.
 In addition to the analysis of the conventional cost system in practice in Hero
MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) (Phoenix Motors Pvt.
Ltd) The study aims at evaluation and modification to the current cost system
with reference to the various types of costs. The scope in the formulation of
performance cost is also studied.

SOURCES OF DATA:
The data of Hero MotoCorp Ltd have been collected mainly from secondary
sources
viz.,
 Form the concerned officers of the Hero MotoCorp Ltd
 Hero MotoCorp Ltd journals.
 Accounting books, records.
 Key books of concerned title.
 Statistical records
 Hero MotoCorp Ltd library.