A STUDY ON THE EFFECTIVENESS OF COST MANAGEMENT AT INTEGRAL COACH FACTORY

- J.DINESH

PRIMARY: To do a study on the cost funding of the Indian railways (ICF-shell division) so as to reduce and control the cost incurred SECONDARY: To identify the effectiveness of the current cost management To implement strategies or ways to cut down fund wastage. To determine ways to avoid lock up of money (fund). focusing of attention on current and future activities to ensure that they are performed in accordance with management wishes

 The study will be useful to the organization in content of understanding costing and it will also be useful to the organization in relation to possible modification in present system. The study will be useful to the other experts and the student researchers to study in the same area. The study may help the organization to improve their resource management. The study will be remaining as guidance for the organization for better cost management The study may help the organization to plan future policies and strategies for better cost management. The project study will help in finding solutions of the problems faced by the organization

 This study which is done in Integral Coach Factory shell division, aims at studying and knowing how cost can be controlled. In this costing system we come across various steps involved to control cost in Integral Coach Factory and also helps us to to study how a railway cost sheet is being prepared and who all are involved in preparing the cost sheet. Moreover it also shows a clear picture that how cost can be controlled because Integral Coach Factory being a large concern has many department/ shop in it. It also helps us to know how the funds are being divided into various departments/shops.

METHODOLOGY
TYPE OF RESEARCH USED: ANALYTICAL

SECONDARY DATA (PAST FINANCIAL RECORDS OF THE COMPANY)

SOURCE OF DATA:

TOOLS USED FOR THE STUDY: RATIO ANALYSIS,

COMPARITIVE AND COMMON SIZE STUDY (FOR BOTH BALANCE SHEET & COST SHEET), ANALYSIS OF CHANGES IN WORKING CAPITAL.

LIMITATIONS FOR THE STUDY

The number of years used for analysis is very limited. The study heavily depends on the secondary data and any shortcomings are bound to be reflected. However such data are correct, when those were audited. Any change in the methods or procedures of accounting systems limits the utility of financial statements. Adequate data required for valuation were not provided

ANALYSIS
COMPARITIVE STUDY OF BOTH COST SHEET & BALANCE SHEETS HAS BEEN MADE TO KNOW THE PERCENTAGE OF FLUCTUATION IN TERMS OF GROWTH & SATURATION. COMMON SIZE STUDY WAS MADE TO RANGE THE WEIGHTAGE OF DIFFERENT COSTS IN THE COST SHEET WHEREAS IT WAS THE WEIGHTAGE OF ASSETS AND LIABILITIES IN CASE OF BALANCE SHEETS. CURRENT RATIO WAS DONE TO FIND OUT THE SHORT TERM SOLVENCY POSITION OF THE ORGANIZATION FOR A PERIOD OF 12MONTHS QUICK RATIO WAS DONE TO KNOW THE SOLVENCY POSITION OF THE ORGANIZATION TO MEET CURRENT LIABILITIES IMMEDIATELY INVENTORY TURNOVER RATIO IS USED TO MEASURE THE NUMBER OF TIMES INVENTORY IS SOLD OR USED IN A PERIOD SUCH AS A YEAR DEBTORS TURNOVER RATIO IS USED TO INDICATE THE NUMBER OF TIMES AVERAGE DEBTORS ARE TURNED OVER DURING A YEAR WORKING CAPITAL TURNOVER RATIO IS USED TO ANALYZE THE RELATIONSHIP BETWEEN THE MONEY USED TO FUND OPERATIONS AND THE SALES GENERATED FROM THESE OPERATIONS ANALYSIS OF CHANGES IN WORKING CAPITAL WAS UTILISED INORDER TO ASCERTAIN THE NET CHANGE (INCREASE OR DECREASE) IN WORKING CAPITAL OVER A PERIOD OF TIME

FINDINGS
MAJORITY OF THE COST INCURRED IS DUE TO COST OF STORAGE OF MATERIALS LIKE RAW MATERIALS, FINISHED GOODS AS WELL AS WORK IN PROGRESS IN BOTH THE BATCHES AND IN BOTH THE YEARS THE COST INCURRED IN STORAGE IS THE ONLY COST THAT SEEMS TO HAVE INCREASED IN THE CONSECUTIVE TWO YEARS THE FINANCIAL POSITION IS STABLE IN THE YEARS 2005-2006, 2006-2007 & 2007-2008 AND IS UNSTABLE IN THE NEXT TWO CONSECUTIVE YEARS THE CURRENT RATIO INDICATED THAT THE SOLVENCY POSITION OF THE ORGANIZATION WAS NOT SATISFACTORY DURING THE YEARS 2005-2006 & 2006-2007 BUT WAS PROVEN TO BE SATISFACTORY IN THE PROCEEDING THREE CONSECUTIVE YEARS THE COMPANY RELIES TOO MUCH ON INVENTORY OR OTHER ASSETS TO PAY ITS SHORT TERM LIABILITIES

THE FLUCTUATION IN INVENTORY IS MAINLY BECAUSE OF INCREASE IN HOLDING OF INVENTORIES THE DEBTOR S TURNOVER RATIO OF INTEGRAL COACH FACTORY INCREASES FOR THE FIRST 3 YEARS SAY 2006-08 AND IT STARTS DECREASING FOR THE YEAR OF 2009-10. THE WORKING CAPITAL RATIO OF ICF OVER THE YEAR IS REDUCING. THIS IS BECAUSE OF THE VARIATION IN THE WORKING CAPITAL THE COMPANY HAS BEEN FINANCIALLY STRONGER WHEN COMPARED TO ITS PRECEEDING YEAR CONSECUTIVE YEAR

 The organization must focus on reducing the storage cost if they intend to go for a cost reduction process The organization though has an decrease in the current ratio in the year 2010 the concern is still in a sound position to take care of unexpected expenses. But should focus on improvising it. The organization must stop relying on inventory and other assets and must focus on making reserve funds to take care of short term liabilities The organization must also focus on the working capital as it seems to be reducing. Effective policies should be formulated for receiving the collections from debtors and unnecessary provisions may be avoided The collection receivables period may be reduced so that accounts may be closed without creating unnecessary suspense accounts.

From the study we came to know how far the costing system has an impact on the organization. Costing is an important yardstick to measure the operational and financial efficiency of the organization as well the efficiency of the organization in utilizing it. A well planned costing system will indulge in an effective and sound financial performance of the organization.