INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH

MANAGEMENT ACCOUNTING AND CONTROL COST SHEET ANALYSIS

SOFTWARE DEVELOPING COMPANIES (IT SECTOR)

MAC Assignment-2 Presented By : Khyati Patel(24), Manju Mishra(28) and Saijeeth Vasudevan(46). IPER PGDM, Trim-2 (2012-2014)

FASTEST CHANGING INDUSTRY

The Software Industry include businesses for development, maintenance and publication of software that are used in any business model. The industry also includes software services such as training, documentation and consulting. Software Development includes research,new development,prototyping, modification, reuse, re-engineering, maintenance or any other activities that result in software products utility minimizing use of man power.

Companies Taken Under Analysis

INDIAN COMPANIES
Infosys Tata Consultancy & Services (TCS) Hexaware

FOREIGN COMPANIES IN INDIA

Mphasis Oracle Finance

COST & COSTING

Cost: - Cost can be defined as the expenditure (actual or notional) incurred on or attributable to a given thing. It can also be described as the resources that have been sacrificed or must be sacrificed to attain a particular objective. Costing: - Costing may be defined as the technique and process of ascertaining costs. According to Wheldon, Costing is classifying, recording, allocation and appropriation of expenses for the determination of cost of products or services and for the presentation of suitably arranged data for the purpose of control and guidance of management. Cost Accounting: - Cost Accounting primarily deals with collection, analysis of relevant of cost data for interpretation and presentation for various problems of management. It is defined as, the establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds.

Costing Absorption Costing. Techniques

Marginal Costing

Standard Costing

Costing Information Unit Costing

Costing Methods
OUTPUT COSTING Process Costing Service Costing Job Costing

Specific Order Costing

Batch Costing

Contract Costing

Cost Sheet of Oracle Financial Services Software Ltd

Vertical Analysis Of Oracle Financial Services Software Ltd

Vertical Analysis Of Oracle Financial Services Software Ltd

Compensation to employees is increasing from the year 2003 to 2011 with respect to total expenses, then it decreased . Significant fluctuations in Outsourced professional jobs from the year 2003 to 2012. Significant fluctuations in Travel expenses from the year 2003 to 2012. Significant fluctuations in Miscellaneous expenditure from the year 2003 to 2012. Significant fluctuations in Provision for direct tax from the year 2003 to 2012.

Cost Sheet of Mphasis Ltd

Vertical Analysis Of Mphasis Ltd

Vertical Analysis Of Mphasis Ltd

Repairs and maintenance kept reducing year on year and seen to be reduced excessively in 2012. Insurance premium paid by the company reduced very significantly in 2005 may be because of change or withdrawal of few policy and thus took up next but again decreased in 2008 and kept the same sequence on next. Particular decrease in Outsourced professional jobs has been seen in consecutive years. Advertising expenses remains nil over all years. Marketing expenses seen to be increased marginally as company now may be concerned about marketing of softwares designed. Communication expenses decreased by a significant amount in the year 2012 although it kept fluctuating all over the earlier years.

 Recent year (2012) admitted a significant decrease in miscellaneous expenditures. Other operational expenses of industrial enterprises came to Zero marking a significant expense reduction in the year 2005 and thus maintained to the same. A significant increase was admitted in the year 2005 as other operational expenses of non-financial services enterprises took up from zero to 0.606908 % of the total expenses which was a big expense added. Provisional expenses fall to Zero in the year 2011 and was accounted to be surplus even in the next year was a good reduce in the expenses incurred by the company.

Cost Sheet of Infosys Ltd

Trend Analysis of Infosys Ltd

Trend Analysis of Infosys Ltd

There was a Significant increase in Non-executive directors' Fees from 2007 till 2010, but was reduced by around 0.000100 % of total cost in 2011 but again took up to the earlier dimensions in the next year. Advertising expenses reduced highly to negligible amount in from the year 2003 to 2010 but again took up in percentage to a significant amount in 2011-2012. Marketing expenses reduced majorly in the year 2009 thus kept on fluctuating within the same respective amount. Miscellaneous expenditure kept on increasing from the year 2003 till 2012 with a significant amount change as the unit taken here is crores. Other operational expenses of industrial enterprises reduced to Zero in the year 2006 and remained the same as now they have no such expenditures

 The other operational expenses of non-financial services enterprises increased to a significant amount as it was nil in 2005 and took up to 0.026116 % of total cost in 2006 and kept on increasing further. Provisional expenses fall to zero suddenly in the year 2010 but took up in 2011 and kept on increasing.

Trend Analysis of Hexaware Technologies Ltd

Trend Analysis of Hexaware Technologies Ltd

Trend Analysis of Hexaware Technologies Ltd

Compensation to employees has been increasing from the year 2003 to 2005, but after that it has been fluctuating till 2012. Indirect taxes has been constantly fluctuating from the year 2004 to 2012. Rent & lease rent has been fluctuating from the year 2003 to 2012. Sudden significant increase in the year 2004 in Outsourced professional jobs and then it has been fluctuating till 2012. Travel expenses has been significantly decreased in the year 2004 from 2003, then till 2012 there are slight fluctuations in the expenses. Other operational expenses of industrial enterprises have been significantly decreased from year 2003 to 2004 and then in 2005, it reduced to 0.00% i.e. no change in expenses occurred till 2012. Significant fluctuations from the year 2005 to 2012 in other operational expenses of non-financial services enterprises. Depreciation (net of transfer from revaluation reserves) has been decreased from the year 2003 to 2008 and then fluctuating till 2012. Significant fluctuation in Prior period and extra-ordinary expenses from the year 2003 to 2012.

Cost Sheet of Tata Consultancy Services Ltd

Trend Analysis of Tata Consultancy Services Ltd

Trend Analysis of Tata Consultancy Services Ltd

Raw materials, stores & spares cost around 0.004414 % in the year 2006 initially and thus kept reducing and reached to 0.00038% of total expense in the year 2012. TCS incurred a 0.14311 % of total cost as expenditure once in the year 2006 and thus never after. Insurance premium paid by the firm kept on reducing year on year from 2005 and educed significantly in 2102 to 0.00005% of the total cost. Incurred a 0.07027% expense of the total only once in the year 2005 and thus reduced to zero for next all years. The company incurred a expenditure involving other operational expenses of non-financial services enterprises consecutively from 2006 till recent year under observation. Provisional expenses were reduced significantly in the year 2012

Trend Analysis
1) Oracle Financial Services Software Ltd Rate of increase of total expenses was higher than the rate of sales throughout the years except the year 2011. In the year 2011 the rate of increase of sales was higher than the rate of increase of total expenses.
600.00% 500.00% 400.00% 300.00% 200.00% Total expenses

Sales
100.00% 0.00%

Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

2) Mphasis Ltd Rate of increase of total expenses was much higher than the rate of increase of sales throughout the years.
2500.00%

2000.00%

1500.00% Total expenses Sales 500.00%

1000.00%

0.00%

Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

3) Infosys Ltd Rate of increase of sales was slightly higher than rate of increase of total expenses from year 2003-2007. Rate of increase of sales was lower than rate of increase of total expenses from year 2008-2012.
1000.00% 900.00% 800.00% 700.00% 600.00% 500.00% 400.00% 300.00% 200.00% 100.00% 0.00% Mar-03Mar-04Mar-05Mar-06Mar-07Mar-08Mar-09Mar-10Mar-11Mar-12 Sales Total expenses

4) Hexaware Technologies Ltd Throughout the years, rate of increase of sales was higher than rate of increase of total expense, except in the years 2008 and 2011 with respect to the base year 2003.
800.00% 700.00% 600.00% 500.00% 400.00%

300.00% 200.00%
100.00% 0.00%

Total expenses Sales

Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

5) Tata Consultancy Services Ltd Rate of increase of sales is much more than the rate of increase of total expenses throughout. The gap between both the rates is becoming wider which shows that the company's profit is increasing year by year.
180000
160000 140000

120000
100000 80000 60000 40000 20000 0 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Total expenses Sales

Comparison between Companies

Sales/total Expense (Hexaware) Sales/total Expenses (Infosys) Sales/Total Expenses (Mphasis) Sales/Total Expenses (Oracle Financial Software Services) Sales/Total Expenses (TCS)
Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

Analysis: In the year 2003 Sales/Total Expense Ratio of Mphasis was highest and lowest ratio was of TCS. In the year 2004 Sales/Total Expense Ratio of Mphasis was again highest and lowest ratio was again of TCS. In the year 2005 Sales/Total Expense Ratio of Infosys was highest and lowest ratio was of Hexaware In the year 2006 Sales/Total Expense Ratio of Infosys was again highest and lowest ratio was of Mphasis. In the year 2007 Sales/Total Expense Ratio of Infosys was again highest and lowest ratio was of Hexaware.

In the year 2008 Sales/Total Expense Ratio of Infosys was again highest and lowest ratio was again of Hexaware .
In the year 2009 Sales/Total Expense Ratio of Oracle financial Software Services was highest and lowest ratio was again of Hexaware.

 In the year 2010 Sales/Total Expense Ratio of Oracle financial Software Services was highest and lowest ratio was again of Hexaware.

In the year 2011 Sales/Total Expense Ratio of Oracle financial Software Services was highest and lowest ratio was again of Hexaware
In the year 2012 Sales/Total Expense Ratio of Hexaware was highest and lowest ratio was again of Oracle financial Software Services. From the year 2003 to 2012, Infosys can be considered to be stable as the sales/total expense ratio was not fluctuating too much. Mphasis was stable in year 2003 & 2004 but was not able to maintain the consistency in the further years. From the year 2003 to 2012, TCS has been growing. Hexaware and Oracle Financial Software Services have been fluctuating throughout the years.

 The average sales/total expense ratio of Indian Companies was increasing from the year 2003 to 2006, and then the ratio started fluctuating from the year 2006 to 2012. The average sales/total expense ratio of Foreign Companies was decreasing from the year 2003 to 2005, and then the ratio started fluctuating from the year 2005 to 2012. Both Foreign as well as Indian companies are running neck to neck.
1.60 1.40 1.20 1.00 0.80

Comparison between Foreign and Indian Companies

Average sales/total expense ratio (Indian Companies)

Average sales/total expense ratio (Foreign Companies)

0.60
0.40 0.20 0.00

Mar-03Mar-04Mar-05Mar-06Mar-07Mar-08Mar-09Mar-10Mar-11Mar-12

Forecasting of Sales and Total Expenses for all Companies

We have used Linear Regression method for forecasting Expenses as well as for Sales. Y= a+bX Year Total expenses Where X= Year and Y= Sales 2003 417.6 a= y (b*x) 2004 550.21 b= xy (n*xy) 2005 734.29 2006 945.61 1) Oracle Financial Services Software Ltd 2007 1234.8 Forecasted Value of Total Expenses in 2008 1468.8 Rs. Crores for the year 2013 is 2261.8 2009 1685.2 2010 1674.3 2011 1554.7 2012 2219.2

 Forecasted Value of Sales in Rs. Crores for the year 2013 is 2941.

Year
2003 2004 2005 2006 2007

Sales
568.43 684.46 902.86 1153.8 1552.3

2008
2009 2010 2011 2012

1793
2212.6 2243.5 2360.5 2589.9

2) Mphasis Ltd. Forecasted Value of Total Expenses in Rs. Crores for the year 2013 is 3220.5 Forecasted Value of Sales in Rs. Crores for the year 2013 is 3997.9 Year 2003 2004 Total expenses 146.01 182.56 Year 2003 2004 Sales 207.99 259.97

2005
2006 2007 2008 2009 2010 2011

211.07
313.69 973.33 1505.4 1231.4 2624.1 2884.7

2005
2006 2007 2008 2009

247.77
380.67 1102.9 1703.6 1451.6

2010
2011

3405
3770.1

2012

2787.3

2012

3337.6

3) Infosys Ltd. Forecasted Value of Total Expenses in Rs. Crores for the year 2013 is 25194. Forecasted Value of Sales in Rs. Crores for the year 2013 is 31806. Year 2003 Total expenses 2783.21

Year 2003
2004 2005 2006 2007

Sales

3622.69
4760.89 6860 9028 13149

2004 2005 2006 2007 2008 2009 2010 2011 2012

3645.3 5130 6854 9873 12153 15659 16623 20089 25097

2008
2009 2010 2011 2012

15648
20297 21140 25385 31254

4) Hexaware Technologies Ltd. Forecasted Value of Total Expenses in Rs. Crores for the year 2013 is 605.983. Forecasted Value of Sales in Rs. Crores for the year 2013 is 677.46. Year Total expenses Sales

2003
2004 2005 2006 2007

93.01
150.14 223.12 292.56 373.81

2003
2004 2005 2006 2007

98.24
154.76 254.04 355.79 412.69

2008
2009 2010 2011 2012

535.09
485.28 396.7 450.51 525.5

2008
2009 2010 2011 2012

468.8
500.96 490.04 425.13 680.2

5) Tata Consultancy Services Ltd. Forecasted Value of Total Expenses in Rs. Crores for the year 2013 is 30574.9. Forecasted Value of Sales in Rs. Crores for the year 2013 is 38828.9. Year 2003 2004 2005 Total expenses 0.95 2.57 6314.91 Year 2003 2004 2005 2006 2007 2008 Sales 0.25 2.05 8054.57 11239.3 14944.6 18293.7

2006
2007 2008 2009 2010 2011

8624.57
11401.16 14862.80 18104.58 17835.32 22360.26

2009
2010 2011

22407.9
23047.3 29277

2012

31060.44

2012

38860.4