COST

ANALY
TAT
SIS
A
MO
TOR
Mana
geme
PGDM
S
nt
2016-
Accou
18 by:
Presented
Avinash Jaiswal
nting
Deepak Rohilla
Rajat Singhal
Subhrajyoti
Sarkar
Tanu Rani
Chander
Vivek Sinha
 About

Tata Motors was established in 1945 as Tata Engineering and

Locomotive Co. Ltd. to manufacture locomotives and other
engineering products. Now the company is the world's fourth
largest truck manufacturer, and the world's second largest bus
manufacturer.

The company's 68,089 employees are guided by the vision to

be 'best in the manner in which they operate best in the
Tata Motors' manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune
(Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka).
Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat
Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat
powertrains. The company is establishing a new plant at Sanand (Gujarat). The company's
dealership, sales, services and spare parts network comprises over 3500 touch points; Tata
Motors also distributes and markets Fiat branded cars in India.

Tata Motors is also expanding its international footprint, established through exports since 1961.
The company's commercial and passenger vehicles are already being marketed in several
countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It
has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and
Senegal.

The foundation of the company's growth over the last 50 years is a deep understanding of
economic stimuli and customer needs, and the ability to translate them into customerdesired
offerings through leading edge R&D. With over 2,000 engineers and scientists, the company's
Engineering Research Centre, established in 1966, has enabled pioneering technologies and
products. The company today has R&D centres in Pune, Jamshedpur, Lucknow, in India, and in
South Korea, Spain, and the UK. It was Tata Motors, which developed the first indigenously
developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata
Indica, India's first fully indigenous passenger car. Within two years of launch, Tata Indica
became India's largest selling car in its segment. In 2005, Tata Motors created a new segment
by launching the Tata Ace, India's first indigenously developed minitruck.

In January 2008, Tata Motors unveiled its People's Car, the Tata
Nano, which India and the world have been looking forward to.
The Tata Nano has been subsequently launched, as planned, in
India in March 2009. A development, which signifies a first for
the global automobile industry, the Nano brings the comfort and
safety of a car within the reach of thousands of families. The
standard version has been priced at 100,000 (excluding VAT
and transportation cost).
 The Current Cost Control System

In current to cooperate cost control system- The Companys ability to leverage its
technological capabilities and the manufacturing facilities among its commercial vehicle and
passenger vehicle businesses enables it to reduce costs.

As an example, the diesel engine used in the Indica platform was modified for use in the Ace
platform, which helped to reduce development costs. Similarly, platform sharing for
manufacturing of pick-up trucks and utility vehicles enables the company to reduce capital
investment that would otherwise be required, while allowing it to improve the utilization levels
at its manufacturing facilities.

The company's vendor relationships also contribute to cost reductions. For examples, the
company believes that the vendor rationalization program that it is undertaking will provide
economies of scale to its vendors, which would benefit the company's cost programmes.

The company is also undertaking various internal and external benchmarking exercises that
would enable it to improve the cost effectiveness of its components, system and sub systems.

The company has intensified efforts to review its cost structure through a number of measures,
such as reduction of manpower costs and rationalization of other fixed costs. And also has
undertaken initiatives, such as increased sourcing of materials from low-cost countries,
reduction in the number of suppliers, the rationalization of its marketing efforts, a reduction of
manpower costs through increased employee flexibility between sites and several other
 Cost Analysis of Tata Motors for the year 2015-16
In the financial year 2015-16 TATA Motors limited has made total sale of 2,75,561 crore. Tata
Motors has used spare parts and accessories of 12850.27 crore. Tata Motors' manufacturing
base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar
Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). Total 68,089 employees are
working with them across India for whom Tata Motors has paid 14,047 crore as wages and
14048.51 crore as salary. Moreover Tata Motors have incurred direct expenses of 35549.51
crore. A report shows that they have used Raw material of 152445.39 crore in their factory for
the financial year 2015-16 and processing expenses was of 1,110.68 crore. The Factory
manager gives the details of following expenditure

Stores, spare parts & tools consumed 2097.24 Crore

Freight, transportation, port charges 9787.41 Crore
Repair to Building 118.28 Crore
Repairs to plant, machinery 524.37 Crore
Power & Fuel 1169.44 Crore

During Fiscal 2016 the increase in depreciation is increased by 26.5% to 8,220.51 crore.
On 1 st April, 2015 Tata Motors had semi-finished goods costing 15955.16 crore and at the
end of the year the same stood at 13078.54 crore. They have paid rent of 453.20 crore and
Excise duty paid by them was 13.87 crore. They have paid other rates and taxes of 376.77
crore. To keep the competition with other manufacturers Tata Motors have spent a huge amount
of 8847.93 crore for publicity.

Notes:
a) Freight, transportation and port charges are 30% fixed
b) Repair to building, Repair to plant & machinery and depreciation are fixed costs
c) Salaries and Rent are fixed expenses
d) Taxes paid by the company are Excise Duty and Rates and taxes
e) The Company has a borrowing of 15887.25 crore from various banks in India for which
they paid interest of 1481.11 crore
f) Dividend paid by the company for the year 2015-16 is 2015.72 crore

Required:

(a) Cost Sheet of Tata Motors for the financial year 2015-16.
(b)
 Statement of Cost

Unit ..

Amount Amount Amount

Particular ( in ( in ( in
crore) crore) crore)
Direct Material
12850.2
-Spare parts & accessories for sale Parts 7
14047.0
Direct Labour 0
35549.5
Direct Expense 1
62446.7
Prime Cost 8
Factory Overheads
152445.
Consumption of Raw Materials 39
Processing Charges 1110.68
Stores, spare parts & tools consumed 2097.24
Freight, transportation, port charges 9787.41
Repairs to building 118.28
Repairs to plant, machinery 524.37
Power & Fuel 1169.44
Depreciation 8220.51
175473.
Work Cost(Gross) 32
15955.1
Opening WIP 6
13078.5 178349.
Less: Closing 4 2876.62 94
240796.
Works Cost(Net) 72
Administrative Overheads
14048.5
Salaries 1
Excise Duty on Change in Stock in Trade 13.87
Rent 453.20
14892.3
Rates & Taxes 376.77 5
Cost of production of 255689.
Saleable units 07
Selling and Distribution Expenses
Publicity 8847.93 8847.93
264537.
Cost of Sales 00
Profit 11024
275561.
Sales 00