Please use this identifier to cite or link to this item: https://repository.iimb.ac.in/handle/2074/9922
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dc.contributor.advisorNarayanaswamy, R-
dc.contributor.authorRamarathnam, Raja
dc.date.accessioned2019-08-02T09:54:19Z-
dc.date.available2019-08-02T09:54:19Z-
dc.date.created1998
dc.date.issued1998
dc.identifier.urihttp://repository.iimb.ac.in/handle/2074/9922
dc.description.abstractHINDUSTAN AERONAUTICS LIMITED was formed in 1940, to produce a select class of aviation products. The company has made a beginning in international export program by utilizing its core competence -Manufacture of aviation parts. The company has re-oriented itself to be competitive and customer oriented. HAL Nasik division was formed to manufacture MiG series of aircraft with Russian collaboration. The division manufactures airframe, assembles the engine and integrates accessories and avionics to produce complete aircraft, tests and then delivers to the customer. It manufactures around25,000 detail parts/assemblies and 8000 standard parts. Economic liberalization policy adopted by the Government of India has forced competition in and HAL now has to compete with global suppliers. The falling order book position of HAL has also prompted HAL to look for customers other than the Armed Forces and in the process utilize the excess capacity available. The prospect for supply of aviation standard components for the various missiles and launch vehicles product ionised by DRDO has broadened the scope of HAL. The crash of the erstwhile Soviet Union into small federal states has given HAL a business opportunity in the military aviation sector for supply of spares and components. These factors have necessitated HAL to look into its costing policies, which it has followed over the years, and modify the same to suit the present business scenario. The major objectives of the project include1. The study of the existing costing system and analyze appropriation ofoverheads.2. Evaluating the existing system to establish whether the costs are reliable and accurate.3. To explore the feasibility of introducing a new costing system using ABC by using the existing framework. The methodology followed was1. Studying the existing costing system.2. Information gathering regarding activities carried out.3. Selecting the cost driver.4. Apportioning overheads based on cost drivers and resources consumed.5. Comparing the cost arrived at using both systems.6. Suggesting area for improvements. The scope of the project has been limited to the products manufactured in the Standard Parts Shop of HAL, Nasik Division. The Existing Costing System follows overhead absorption based on Man-Hour Rate. The Man-Hour Rate is arrived at by dividing the total expenses ofthe Division by the productive man hours. The advantages of the existing system are1. The system is simple.2. The cost of collection of data is minimal.3. The division is able to recover all the expenditure incurred. The major disadvantages of the existing system are that the system does not give department wise classification of costs the information of the actual expenses of the departments remain unknown. The system also does not provide for accurate cost information required for preparing competitive bids in the present scenario of business. In, ABC system the overheads are picked up by a product as it flows through. The overheads are allotted to each activity and thus ABC ensures that the product, which makes an activity necessary, picks up the corresponding overhead. Thus, along with other benefits ABC provides information for strategic decisions. Identification of Cost Drivers and calculation of the Cost Driver Multiplier, for various Activities carried out in the Division, forms a major component of ABC system. Findings that emanate form the analyses are :-Global: The Existing system under costs all the items analyzed. Areas of concern :Consumables : The contribution of consumables is Rs. 6.54 per unit time (min) of machine operation for a component and hence needs to be looked in to. Tooling : The tooling costs are also found to contribute significantly to the product cost. The recommendations that follow are :1) The expense on tooling and consumables needs to be looked into. Wastage, if any, needs to be eliminated. Usage of improved tools needs to be explored. A detailed study for the purpose needs to be undertaken.2) Process changes that need to be effected, in the existing setup, with a view to reduce Cost of Production needs to be examined.3) Procurement of new machines may be considered for products of high volume after carrying out cost analysis using ABC. The existing costing system does not give any information regarding expense on a machine. The machine wise expense details, if collected, can also aid in machine replacement decisions.4) The new computer network being commissioned in the Division can be exploited for detailed cost collection as required for ABC. The existing setup of infrastructure and personnel is not sufficient for collecting and collating the data that would be generated for effective ABC systemimplementation.5) It is essential to bring about cost awareness among personnel (which is seen lacking today) in the Division. This will bring about ideas from various levels for cost reduction.6) Implementing ABC would provide information to managers and aid them indecision making (which the existing system does not provide for).
dc.language.isoen_US
dc.publisherIndian Institute of Management Bangalore
dc.relation.ispartofseriesProject Report-Management Programme for Technologist; PR-MPT-N7-12-
dc.subjectCost management
dc.titleActivity based costing approach at HAL Nasik division
dc.typeProject Report-MPT
dc.pages50p.
dc.identifier.accessionE24951
Appears in Collections:1995-1999
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