UNIVERSITY OF MUMBAI

PROCESS OF MANUFACTURING SUNFLOWER OIL

MASTER IN COMMERCE
MCOM I (2012-2013)

SUBMITTED

IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE
AWARD OF THE DEGREE OF MASTER IN
COMMERCE

BY

NITESH. R.CHAURASIYA

ROLL NO. 6211

MULUND COLLEGE OF COMMERCE

S.N. ROAD, MULUND WEST, MUMBAI 400080

UNIVERSITY OF MUMBAI

PROCESS OF MANUFACTURING SUNFLOWER OIL

MASTER OF COMMERCE
MCOM-I (2012-2013)

SUBMITTED BY

NITESH.R.CHAURASIYA
ROLL NO. 6211

UNDER THE GUIDANCE OF

PROF. M.S.GANAGI

MULUND COLLEGE OF COMMERCE

S.N. ROAD, MULUND WEST, MUMBAI 400080

DECLARATION

I Mr. NITESH.R.CHAURASIYA the student of MASTER IN

COMMERCE (2012-2013) hereby declare that I have
completed

the

project

on

MANUFACTURING SUNFLOWER

PROCESS
OIL,

OF

under the

guidance of PROF. M.S. GANAGI.

The information submitted is true and original to the best of my
knowledge.

SIGNATURE OF STUDENT
(NITESH.R.CHAURASIYA)
ROL
L
6211

NO.

MULUND COLLEGE OF
COMMERCE
S.N. ROAD, MULUND WEST, MUMBAI 80

CERTIFICATE
This is to certify that Mr.Nitesh.R.Chaurasiya the student of
MASTER OF COMMERCE IN ACCOUNTANCY 1 st YEAR
(2012-2013) has successfully completed the project on
PROCESS OF MANUFACTURING SUNFLOWER OIL,
under the Guidance of PROF. M.S.GANAGI.

COURSE CO-ORDINATOR
PRINCIPAL
PROJECT GUIDE

EXTERNAL EXAMINER

Acknowledgement
Thanks giving seem to be the most pleasant of all
the jobs but it is difficult when one tries to put into words.
On the event of completion of my project on PROCESS
OF MANUFACTURING SUNFLOWER OIL, I take
the opportunity to express my deep sense of gratitude
towards all those people without whose guidance,
inspiration and timely help this project would have never
seen the light of the ray.
I

am

very

thankful

to

my

Guide

Prof.

M.S.GANAGI, who made me realize that I have

potential to work independently and gave me his valuable
suggestions, support and time whenever required and
ensured that I could do the best in this project.

Objective
To study the Process of Manufacturing Oil Industry.
To study How the Sunflower seeds is converting into
Edible Oil.
To study the problems faced by the Oil Industry.
DATA COLLECTION

PRIMARY DATA
RESEARCH

METHODOLOGY:

QUESTIONAIRE METHOD
COMMUNICATED WITH THE PERSON,
WHO IS DOING THIS JOB IN AN OIL
INDUSTRY.

SECONDARY DATA

THE SECONDARY DATA HAS BEEN

COLLECTED

THROUGH

BOOKS

AND

INTERNET.

CONTENTS
SR.NO

TITLE

PAGE NO

1
1.1
1.2
1.3
1.4
1.5
1.6
2
2.1
2.2
3
3.1
3.2
3.3
4

INTRODUCTION OF PROCESS COSTING

Meaning
Definition
Applicability and Necessity
Features of Process Costing
Advantages of Process Costing
Disadvantages of Process Costing
Costing Procedure
Accounting Procedure
Specimen of Process A/c
Wastage and Losses
Meaning
Accounting for Losses
Calculations

6
8
9
14
16

CASE STUDY OF RUCHI SOYA INDUSTRIES LTD

4.1
4.2 Manufacturing Process of Sunflower oil
4.3 Conversion Factors of Sunflower seeds into Oil
Conclusion
5

1
1
2
3
4
5

20
24
25

Simple practical Problem on process of oil manufacturing 26

company
RESEARCH
6.1 Data Collection
6.2 Questionaire
6.3 Bibliography / Webliography

1.

INTRODUCTION OF PROCESS COSTING

1.1

MEANING
(1) Process: A Process means a distinct manufacturing
operation or stage. In Process Industries the raw
material goes through a number of processes in a
sequence before the finished product is finally
produced.
For eg.
Production of coconut oil involves the
following distinct processes.

30
31
36

1. Copra crushing
2. Refining and
3. Finishing.
(2) Process Costing: Process costing is a method of
costing used to find out the cost of the product in
each process.
(3) Process Cost: According to CAS-1, when the
production process is such that goods are produced
from a sequence of continuous or repetitive
operations or processes, the cost incurred during a
period is considered as process cost.
1.2

DEFINITION OF PROCESS COSTING

According to Wheldon, Process costing as a method
of costing used to ascertain the cost of the product at
each stage or operation of manufacture...
According to CIMA, London- it is that form of
Operation Costing where standardized goods are

1.3

produced.
APPLICABILITY AND NECESSITY
Process costing is applicable to several mining,
manufacturing and public utility industries, e.g. mines
and quarries producing minerals and ores; industries
producing textiles, chemicals, soaps, paper, plastics,
alcohol, refined oil, electricity, gas and so on.
It becomes necessary to apply Process Costing to the
Industries belonging to any of the following categories:
(1) One Product, Many Processes: A factory may
produce a single item through a number of processes

or departments. It becomes necessary to find out the

cost of each process or department separately to
control wastage etc.
(2) Many Products, Many Cycles: A Bakery can use
the same equipments to produce either bread or
cakes. It may produce only Bread in one cycle and
change over to production of Cakes in the next
cycle. Each cycle is treated as a separate process so
as to find out the cost of the item produced in a
particular cycle or process.
(3) Many Produces, Same Process: An Oil Refinery
can obtain many Joint Products such as Refined Oil,
Gas, Steam etc. in the same process. Process
Costing is employed to ascertain the individual cost
of each such product.
1.4

FEATURES OF PROCESS COSTING

(a) The Production is Continuous.
(b) The Production is Homogeneous.
(c) The Process is standardized.
(d) Output of one process become raw material of
another process.
(e) The output of the last process is transferred to
finished stock.
(f) Costs are collected process-wise.
(g) Both direct and indirect costs are accumulated in
each process.
(h) If there is a stock of semi-finished goods, it is
expressed in terms of equivalent units.

(i) The total cost of each process is divided by the

normal output of that process to find out cost per
unit of that process.

1.5

ADVANTAGES OF PROCESS COSTING

The method of Process Costing has the following
advantages as compared to other methods of Costing.
(1) Periodical Determination of Costs: Process cost
can be collected and determined for even a short
period like a day, a week or a month. In Job Costing,
on the other hand, costs can be collected and
determined only after the job is complete, which
may take months or even years.

(2) Simple and Cheap: Process Costing is a much

simple, easy and less expensive method of costing
as compared to other methods. There is no need for
an elaborate system of identifying the direct costs of
a job or a batch.
(3) Managerial Control: Being a simple system to
establish and operate, Process Costing facilitates
greater control of the management over costs,
wastage etc.
(4) Standard Processes and Products: Since the
processes and products are standard, it is easy to
make decisions regarding pricing, quotations,
tenders etc.

1.6

DISADVANTAGES OF PROCESS COSTING

The method of Process Costing has the following disadvantages as compared to other method of Costing.
(1) No Detailed Analysis: Process Costing does not
give a detailed analysis of the costs as (a) It
emphasis the period rather than the unit or the
product, and (b) It gives an average cost rather than
the specific cost of the product.

(2) Historical Cost: Process Costing gives only

historical costs which are not useful for forecast of
future trends etc.
(3) Estimates: The determination of percentage of
Normal Loss, Wastage, distribution of costs over byproducts and joint products, valuation of work-inprogress involve estimates based on arbitrary
decisions of the management.

2.

COSTING PROCEDURE

2.1

ACCOUNTING PROCEUDRE

The Accounting Procedure in Process Costing is as follows:

(1) Separate Process A/C: The entire manufacturing
operation is divided into separate stages or processes.

Each Process of production is treated as a distinct cost

centre. A separate Process Account is opened to record
the cost incurred in each process.
(2) Debit Side of Process A/C: Each Process Account is
charged with the expenses directly incurred for that
process and plus its share of the overheads. The Process
Account is debited with the direct and indirect expenses
(material, wages and overheads) pertaining to that
process.
(a) Material: The raw material, sundry materials and
stores required for a process are issued directly from
the stores against a Material Requisition Slip. In
addition, the cost of units transferred from the
earlier process, if any, also appears on the Debit side
of the Process Account. Usually, the distinction
between Direct Materials and Indirect Materials is
not significant in process costing.
(b) Labour: Wages paid to workers directly employed
in a process are debited to the Process Account
(through Pay-rolls). Like Material, the distinction
between Direct and Indirect Labour is not important
in Process Costings. Indirect Labour expenses (e.g.
managers salaries) may, if necessary, be debited on
the basis of ratio of Direct Wages.
(c) Expenses: The expenses directly related to the
process such as repairs of machinery, power etc. are
debited to the respective process account. Indirect

expenses (overheads) are apportioned over and

absorbed by various processes on a suitable basis
such as ration of material costs, Labour Costs or
Prime costs.
(3) Credit Side of Process A/c (Sale Value of Residue):
The Process Account is credited with the sale value
of residue etc.
(4) Net Cost of Process: The Net Cost of the output of
the process (Total Cost less Sale Value of Residue) is
transferred to the next process. The cost of each
process is thus made up of (i) cost brought forward
from previous process and (ii) Net cost of materials,
labour and overheads added in the process less sale
value of residue. The Net Cost of the last process is
transferred to the Finished Goods Account.
(5) Average Unit Cost: The Net Cost is divided by the
number of Units produced to determine the Average
Cost per Unit in that Process.

2.2

SPECIMEN

PROCESS

ACCOUNT
The specimen of Process Account would appear as follows:
Dr.

Process A/c
Cr.

Particulars
Units
To Transfer from
Earlier Process

Rate

Rs.

Particulars
By Normal Loss
By Abnormal Loss

To Materials
To Wages

By Transfer to next
Process / Finished
Goods.

To Expenses
To Overheads
To Abnormal Gain
Total

Total

Units

Rate

Rs.

3.

WASTAGE AND LOSSES

3.1

MEANING

A manufacturing process is likely to give rise to some waste

and losses. Let us first be clear about the exact meaning of
these terms-viz. waste and losses.
Waste: It represents the portion of basic raw materials lost in
processing having no recoverable value. Waste may be visible remnants of basic raw materials or invisible; e.g.,
disappearance of basic raw materials through evaporation,
smoke etc. Shrinkage of material due to natural causes may
also be a form of a material wastage. Normal waste is absorbed
in the cost of net output, whereas abnormal waste is transferred
to the Costing Profit and Loss Account. For effective control of
waste, normal allowances for yield and waste should be made
from past experience, technical factors and special features of
the material process and product. Actual yield and waste should
be compared with anticipated figures and appropriate actions
should be taken where necessary. Responsibility should be
fixed on purchasing, storage, maintenance, production and
inspection staff to maintain standards. A systematic procedure

for feedback of achievement against laid down standards

should be established.

Spoilage: It is the term used for materials which are badly

damaged in manufacturing operations, and they cannot be
rectified economically and hence taken out of process to be
disposed of in some manner without further processing.
Spoilage may be either normal or abnormal. Normal spoilage
(i.e. which is inherent in the operation) costs are included in
costs either charging the loss due to spoilage to the production
order or by charging it to production overhead so that it is
spread over all products. Any value realized from spoilage is
credited to production order or production overhead account, as
the case may be. The cost of abnormal spoilage (i.e. arising out
of causes not inherent in manufacturing process) is charged to
the Costing Profit and Loss Account. When spoiled work is the
result of rigid specification, the cost of spoiled work is
absorbed by good production while the cost of disposal is
charged to production overhead. To control spoilage, allowance

of normal spoilage should be fixed and actual spoilage should

be compared with standard set. A systematic procedure of
reporting would help control over spoilage. A systematic
procedure of reporting would help control over spoilage. A
spoilage report should highlight the normal and abnormal
spoilage, the department responsible, the causes of spoilage and
the corrective action taken, if any.
Salvage: It signifies those units or portions of production
which can be rectified and turned out as good units by the
application of additional material, labour or other service.
For example, some mudguards produced in a bicycle factory
may have dents; or there may be duplication of pages or
omission of some pages in a book. Defectives arise due to substandard

materials,

bad-supervision,

bad-planning,

poor

workmanship, inadequate-equipment and careless inspection.

To some extent, defectives may be unavoidable but usually,
with proper care it should be possible to avoid defect in the
goods produced.
Rectification: In the case of articles that have been spoiled, it
is necessary to take steps to salvage/ reclaim as much of the
loss as possible. For this purpose: (1) All defective units should
be sent to a place fixed for the purpose; (2) These should be
dismantled; (3) Goods are serviceable parts should be separated
and taken into stock; (4) Parts which can be made serviceable

by further work should be separated and sent to the workshop

for the purpose and taken into stock after the defects have been
removed; and (5) Parts which cannot be made serviceable
should be collected in one place for being melted or sold.
Scrap: It has been defined as the incidental residue from
certain types of manufacture, usually of small amount and low
value, recoverable without further processing. Scrap may be
treated in cost accounts in the following ways:(1) Where the value of scrap is negligible, it may be excluded
from costs. In other words, the cost of scrap is borne by
good units and income scrap is treated as other income.
(2) The sale values of scrap net of selling and distribution cost
is deducted from overhead to reduce the overhead rate. A
variation of this method is to deduct the net realizable
value from material cost. This method is followed when
scraps cannot be aggregated job or process-wise.
(3) When scrap is identifiable with a particular job or process
and its values is significant, the scrap account should be
charged with full cost. The credit is given to the job or
process concerned. The profit or loss in the scrap account,
on realization, will be transferred to the Costing Profit and
Loss Account.
Control of scrap really means the maximum effective
utilization of raw material, scrap control does not, therefore,
start in the production department; it starts from the stage of

product designing. Thus the most suitable type of materials, the

right type of equipment and personnel would help in getting
maximum quantity if finished product from a given raw
material.
A standard allowance for scrap should be fixed and actual
scrap should be collected, recorded and reported indication the
cost centre responsible for it. A periodical scrap report would
serve the purpose where two or more departments or cost
centers are responsible for the scrap; the reports should be
routed through the departments concerned.

CAS-6
The provisions of CAS-6 (Material Cost) relating to scrap,
waste, etc. are as follows(1) Scrap: Scrap means discarded material having some value
in few cases and which is usually either disposed of
without further treatment ( other than reclamation and
handling) or reintroduced into production process in place
of raw material.
(2) Waste: Waste means material loss during production or
storage due to various factors such as evaporation,
chemical reaction, contamination, unrecoverable residue,
shrinkage, etc., and discarded material which may or may
not have value.
(3) Spoilage: Spoilage means production that does not meet
with dimensional or quality standards in such a way that it
cannot be rectified economically and is sold for a disposal
value. Net Spoilage is the difference between costs
accumulated up to the point of rejection and the salvage
value.
(4) Marketable Scrap: The production process may generate
marketable scrap or waste. Realized or realizable value of
scrap or waste shall be credited to the cost of production.
(5) Reprocessed Scrap: In case, scrap or waste does not have
ready market and it is used for reprocessing, the scrap or
waste values is taken at a rate of input cost depending upon
the stage at which such scrap or waste is recycled. The
expenses incurred for making the scrap suitable for

reprocessing shall be deducted from value of scrap or

waste.

3.2

ACCOUNTING FOR LOSSES

The loss relating to scrap etc. may be accounted in two ways

(1) Actual basis or
(2) Normal basis.
(1) Actual basis: In this case, the actual sale value of
scrap, spoilage or defectives is credited to the
process account. Thus, the amount of loss (Cost
Less Sale Value) relating to defective units is wholly
charged to the process account. This means that the
amount of loss is absorbed by or spread over the
good units. However, losses are of two types,
Normal Loss and Abnormal Loss. Normal Loss
denotes the unavoidable or uncontrollable loss.
Abnormal Loss, on the other hand, denotes the
avoidable or controllable loss. In Actual basis, no
distinction is made between Normal Loss and
Abnormal Loss. Both type of losses are mixed up
together and charged to the cost of the good units.
The management cannot ascertain whether the
losses could have been avoided or not. Further, the

actual quantity of scrap usually varies from period

to period. Hence in this method, the cost per unit
may vary from period to period. This vitiates or
distorts the unit costs of process.

(2) Normal basis: The Normal Basis of Scrap

Accounting seeks to (a) enable the management to
control avoidable costs by distinguishing between
the Normal Loss and Abnormal Loss, and (b) avoid
variations in unit costs due to change in amounts of
scrap.
In this method of scrap accounting, the figure of
Normal Loss for each process is fixed on the basis
of past experience or technical data. Any loss above
this figure is treated as Abnormal Gains. Normal
Loss is treated as normal cost of production. But
cost of Abnormal Loss or Gain is taken out from the
process account. The net financial loss on account
of Abnormal Loss is debited to the Costing Profit
and Loss account. The net profit on account of
Abnormal Gains is credited to the Costing Profit and

Loss Account. Thus, management can analyse the

causes of Abnormal Losses/Gains and find out
which process needs better control and supervision.
This also ensures that the efficiency of inefficiency
of one process is not passed on to the next process
through the cost of units transferred. Further, the
normal cost per unit remains constant over a
period of time.

3.3

CALCULATIONS

The calculation of normal loss etc. under the Normal Basis is

summed up in the following worksheet:
CALCULATIONS OF NORMAL LOSS ETC.
Step
1.

What is to be calculated
Normal Loss

How is to be calculated
= input x % of Normal Loss

[Note]
[1]

2.

Normal Output

= Input Normal Loss

[2]

Normal Cost
Normal Output

[3]

3.

Unit Cost

Cost of ProcessSale Value of Normal Loss [4]

InputNormal Loss

Abnormal Loss
Or
Abnormal Gains

4.

Cost of Actual Output

= Normal Output Actual Output

[5]

= Actual Output Normal Output

5.

[6]

Cost of Abnormal Loss

6.

= Unit Cost x Units of Actual Output

Cost of Abnormal Gains
= Unit Cost x Units of Abnormal Loss

7.

= Unit Cost x Units of Abnormal Gains

Notes:

(1) Determine Normal Loss: The first step is to fix the

percentage of Normal Loss on the basis of technical
studies or past experience. Normal Loss is the loss
expected under normal circumstances. It is the
unavoidable or uncontrollable loss. It is inherent in the
nature of materials or process.
(2) Determine Normal Output: The Normal or Expected
Output can be derived by deducting the Normal Loss
from the Input.

[7]

(3) Find out Unit Cost: Under the Normal basis of Scrap
Accounting, the process account is not credited with the
sale value of Actual Loss. It is credited with the sale
value of the Normal Loss. The net cost is therefore =
Gross Cost Less Sale of Value of Normal Loss =
Normal Cost. This Net Cost is divided by the Net
Output to arrive at the Unit Cost. The Net Output is =
Input Less Normal Loss = Normal Output. Cost of
process means the total of the debit side of the Process
Account viz. Cost b/f From Earlier Process + Material +
Labour + Expenses + Overheads. Sale value of Normal
Loss means the sale value of normal scrap or defectives.
This is computed as follows: sale value of Normal
Loss = Sale Price x Quantity of Normal Loss. It should
be noted that this is the sale value of expected or
Normal Loss; the actual loss may be more or less. In
case of waste or weight loss the sale value of Normal
Loss would be Nil. The Sales Value of Normal Loss is
credited to the Process Account. Input in the above
formula indicates the total units handled in the process
viz. Units b/f from earlier process + Units of Raw
Material Consumed in the Process itself.
Normal Loss means the units derived by the formula
explained above viz. Input x % of Normal Loss. It
should be noted that the above formula gives the
normal, expected or standard loss; the actual loss may

be more or less. Thus, this formula gives the Unit Cost

of the Process. It gives the expected cost per unit of the
process. It is in short the standard cost of the process
and not the actual cost.
(4) Determine Quantity of Abnormal Loss/Gain: The
next step is to compare the normal output with the
Actual Output of the process to determine the Quantity
of abnormal loss or Abnormal Gains. This comparison
is made by preparing a statement of Quantity
Reconciliation. If the Actual Output is equal to the
Normal Output, it indicates an Abnormal Loss. On the
other hand, if the Actual Output is more than the
Normal Output, it indicated Abnormal Gains. Abnormal
Loss may be caused by abnormal circumstances such as
accidents, inefficiency of workers, power failures, bad
quality of raw materials and so on. Abnormal Gains
may arise due to efficiency of the workers, excellent
quality of material, recent repairs of machinery and so
on. In both cases, it is desirable for the management to
find out and analyse the reason for the abnormally.

(5) Find out Cost of Actual output: The unit cost worked
out in the above step no.3 is applied to the (1) quantity
of Actual Output, (2) quantity of Abnormal Loss or (3)

quantity of Abnormal Gains, determined in step no.4 in

order to find out their respective total cost. The unit cost
multiplied by the actual units of good output of the
process gives the total cost of the good output. The total
cost is transferred to the next process.
(6) Find out Cost of Abnormal Loss: The unit cost
multiplied with the units of abnormal loss of the process
gives the total cost of the abnormal loss. This cost is
debited to the abnormal loss account and credited to the
process account. This entry ensures that the cost of
abnormal loss does not affect the cost of the process.
The cost of abnormal loss is isolated in a separate
account for further analysis by the management. The
cost of abnormal loss is transferred from the process
account to the abnormal loss account.
(7) Find out Cost of Abnormal Gains: The unit cost
multiplied with the units of abnormal gains gives the
total cost of the abnormal gains. This cost is debited to
the process account and credited to the abnormal gains
account. This entry ensures that the value of abnormal
gains does not affect the cost of the process.

CASE STUDY OF RUCHI SOYA

INDUSTRIES LTD

Ruchi Soya Industries LTD is a company who is producing and

manufacturing so many types of oil. For manufacturing the
sunflower oil the company has to follow some steps. The steps
of manufacturing sunflower oil is discussed and shown below.
Sunflower oil manufacture involves cleaning the seeds,
grinding them, pressing and extracting the crude oil from them,
and further refining. In extracting the oil, a volatile
hydrocarbon3 such as hexane is used as a solvent to extract the
oil.
4.1

Sunflower Oil Manufacturing Process

Cleaning and grinding:

Incoming oil seeds are passed over magnets to remove any

trace of metal before being de-hulled. The de-hulled seeds are
then ground into coarse meal to provide more surface area to be
pressed. Mechanized grooved rollers or hammer mills crush the
material to the proper consistency. The meal is then heated to
facilitate the extraction of the oil. While this procedure allows
more oil to be pressed out, more impurities are also released
with the oil, and these must be removed before the oil can be
deemed edible.

Pressing:
The heated meal is then fed continuously into a screw press,
which increases the pressure progressively as the meal passes
through a slotted barrel. Pressure generally increases from
68,950 to 206,850 kilopascals as the oil is squeezed out through
the slots in the barrel, and is recovered.

Extracting additional oil with solvents:

After the oil has been recovered from the screw press, the oil
cake remaining in the press is processed by solvent extraction
to attain the maximum yield. A volatile hydrocarbon (most
commonly hexane) dissolves the oil out of the oil cake, is then

distilled out of the oil and passes through the matter, to be

collected at the bottom.

Removing solvent traces

Ninety percent of the hydrocarbon remaining in the extracted
oil simply evaporates, and, as it does, it is collected for reuse.
The remaining 17 hydrocarbon is retrieved with the use of a
stripping column. The oil is boiled by steam, and the lighter
hexane floats upward. As it condenses, it too is collected.

Refining the oil

The oil is next refined to remove colour, odor, and bitterness.
Refining consists of heating the oil to between 40 and 85 C
and mixing an alkaline substance such as sodium hydroxide or
sodium carbonate with it. Oils are also degummed at this time
by treating them with water heated to between 85 and 95 C
steam, or water with acid. The gums, most of which are
phosphatides, precipitate out, and the dregs are removed by
centrifuge. Oil that will be heated (for use in cooking) is then
bleached by filtering it through fullers earth, activated carbon,
or activated clays that absorb certain pigmented material from
the oil. By contrast, oil that will undergo refrigeration (because
it is intended for salad dressing, for example) is winterized

rapidly chilled and filtered to remove waxes. This procedure

ensures that the oil will not partially solidify in the refrigerator.
Finally, the oil is deodorized. In this process, steam is passed
over hot oil in a vacuum at between 225 and 250 C, thus
allowing the volatile taste and odor components to distil from
the oil. Typically, citric acid at 1% is also added to oil after
deodorization to inactivate trace metals that might promote
oxidation within the oil and hence shorten its shelf-life.

By-products/waste
The most obvious by-product of the oil-making process is oil
seed cake. Most kinds of seed cake are used to make animal
feed and low-grade fertilizer; others are simply disposed of.

Quality control
The seeds used to make oil are inspected and graded after
harvest, and the fat content of the incoming seeds is measured.
For the best oil, the seeds should not be stored at all, or for only
a very short time, since storage increases the chance of
deterioration due to mould, loss of nutrients and rancidity.
Quality of seeds very much depends on infrastructure (silos)
available for the proper storage conditions. The seeds should be

stored in well-ventilated warehouses with a constantly

maintained low temperature and humidity. Pests should be
eradicated, and mould growth should be kept to a minimum.
Seeds to be stored must have a low moisture content (around
10%), or they should be dried until they reach this level (dryer
seeds are less likely to encourage the growth of mould).
Processed oil should be consistent in all aspects such as colour,
taste and viscosity. In addition, the oil should be free of
impurities and meet the demands placed upon it for use in
cooking.
Before being filled, the bottles that hold the oil are cleaned and
electronically inspected for foreign material. To prevent
oxidation of the oil (and therefore its tendency to go rancid),
the inert (non-reactive) gas nitrogen is used to fill up the space
remaining at the top of the bottle.

4.2

Conversion Factors from Raw Material

The following figure illustrates the average processing

conditions in the EU for seeds with an oil content of 44%.

Sunflower seed processing into Oil, with conversion factors.

Clean Sunflower
Seed
(1,420 kg.)

Cooking
drying

Drying
9% moisture
(1,370 kg)

(Preprocessing)

Granulating
Flaking (2)

PRESSING

Meal

Grinding

Cooling

Pressure
Extracted
meal (640
kg)

SOLVENT
EXTRACTION

Oil

Clarification

Crude Oil
(350 kg)

Refined oil
(330 kg)

Meal

Crude Oil
(425 kg)

Coolin
g

Solvent

extracted
me
(560 kg)

(1) Shelling is optional. When carried out, only one half

of the shells can be removed, which implies a loss in
weight of 10%
(2) Granulating or flaking is optional.

CONCLUSION

By investigating the process of converting Sunflower seeds into

oil of RUCHI SOYA INDUSTRIES LTD. I came to know that

Refined

Oil
(410
kg)

Shell
s
(100
kg)

for making any product, the raw material has to go from some
processes and after completing all the processes, the raw
material become the useable product. So the very first stage of
oil industry is cleaning the sunflower seeds in the Cleaning
Process then the output of cleaning process will transfer to the
next process called Grinding Process. In the Grinding process,
the sunflower seeds will grind totally and the output of the
Grinding Process will again transfer to the next process called
Pressing Process. In the Pressing process, the sunflower seeds
will hardly press and by pressing the sunflower seeds very
hardly, sunflower oil was produced and sunflower cake is also
produced and that sunflower cake is known as by-product and
that by-product will sell in the market at some cost and the
output of Pressing process will transfer to the next process
called Refining Process. In the Refining Process, the Sunflower
oil is refined and then again that refined oil will transfer to the
next process for packing. In the packing process, the refined oil
is packed and then it will transfer to the Godown for selling and
distributing the oil in the market. So, this is the process of oil
industry for converting the sunflower seeds into Refined Edible
oil.

5.

SIMPLE

PRATICAL

PROCESS

PROBLEM

OF

ON
OIL

MANUFACTURING COMPANY

The following details are extracted from the costing records of

an Oil Refinery for the week ended September 30
Purchase of 500 tons of Sunflower seeds for Rs. 2, 00,000.

Cost of Labour

Crushing Plant
Rs.
2,500

Refining Plant
Rs.
1,000

Finished
Rs.
1,500

Electric Power

600

360

240

Sundry Material

100

2,000

NIL

Repairs to Machinery & Plant

280

330

140

Steam

600

450

450

Factory Expenses

1,320

660

220

Cost of Casks
300 Tons of Crude Oil was produced. 250 Tons of Oil was
produced by Refining process.248 Tons of Refined Oil was
finished for delivery. Sunflower sack sold Rs. 400.
175 Tons of Sunflower seeds residue sold Rs. 11,000.Loss in
weight in Crushing 25 Tons.
45 Tons by-product was obtained from Refining Process
valued at Rs. 6,750.
You are required to show the accounts in respect of each of the
following stages of manufacture for the purpose of arriving at

7,500

the cost per ton of each process and also the total cost per ton of
finished oil.

Dr.

Sunflower Crushing Process A/c

Cr.
Particulars
To Purchase
Raw Material

Tons
of 500

Rs.
2,00,000

Particulars
Tons
By Sale of 175
copra residue

Rate
62.86

Rs.
11,000

To Cost of Labour

2,500

By Loss
Weight

To Electric Power

600

To
Material

Sundry

100

To Repairs to
Machinery & Plant

280

To Steam

600

To
Factory
Expenses

1320

500

Rate
400

2,05,000

in 25

By Sunflower 300
Sack sold

By
Output
transferred to
Refining
Process

400

646.67

500

1,94,000

2,05,000

Dr.

Refining Process A/c

Cr.

Particulars
Tons
To Sunflower 300
Crushing
Process
A/c
transfer

To Cost
Labour

To
Power

of

Electric

Rate
Rs.
Particulars
Tons
646.67 1,94,000 By by-product 45
(sale)

1,000

360

To
Sundry
Material

2,000

To Repairs to
Machinery
&
Plant

330

To Steam

450

To
Factory
Expenses

660

By
Abnormal 5
Loss

By
Output
Transferred
to 250
Finished Process
A/c

Rate
150

Rs.
6,750

753.14 37,661

753.14 1,88,248

300

1,98,800

Dr.

300

1,98,000

Finished Process A/c

Cr.

Particulars
Tons
To Refining 250
Process A/c

To Cost
Labour

of

Rate
753.14

Rs.
1,88,284

Particulars
Tons
By Abnormal 2
Loss

1,500

By
Output
transfer
to 248
Finished Stock
A/c

To
Electric
Power

240

To Repairs to
Machinery &
Plant

140

Rate
763.34

Rs.
1,527

763.34

1,89,307

To Steam

450

To
Factory
Expenses

220

250

1,90,834

Dr.

250

1,90,834

Finished Stock A/c

Cr.

Particulars
Tons
To Finished 248
Process A/c

Rate
763.34

To Cost of
Casks

Rs.
1,89,307

Particulars
By Balance

Tons
248

6.1

Rs.
1,96,807

7,500
1,96,807

Rate
793.58

RESEARCH

Data Collection

PRIMARY DATA
COMMUNICATED WITH THE PERSON,
WHO IS DOING JOB IN RUCHI SOYA
INDUSTRIES LTD.

1,96,807

SECONDARY DATA
THE SECONDARY DATA HAS BEEN
COLLECTED

THROUGH

BOOKS

AND

INTERNET.

6.2

Questionaire
1. Shall we get by-product in Oil industry?
YES
NO
2. Is the process of all Oil industries same?
YES
NO
3. Are

they

facing

manufacturing Oil?
YES

problems

at

the

time

of

NO
4. What is the use of Process Account?

5. The Output of one process is transferred to

________________.
6. 6,500 kg of a product were manufactured in a
period. There is a normal loss of 20% of the weight
of material input. An abnormal gain of 4% of the
material input occurred in the period.
How many Kg of material (to the nearest kg) were
input to production in the period?
(a) 5,460
(b) 7,738
(c) 8,125
(d) 8,553
7. Costs incurred in a process totaled Rs. 61,600 for a
period. 22,000 units of finished product were
manufactured, of which 440 units were rejected.
This is the normal level of rejects for the process.
Rejected units are sold for Rs. 1.80 per unit. What
was the cost per unit of good output (to two decimal
points)
(a) 2.76
(b) 2.80
(c) 2.82
(d) 2.86

8. 1000 liters of oil was introduced and the normal loss

is 20%. So what will be the normal loss?
(a) 200 liters
(b) 150 liters

(c) 250 liters

(d) 100 liters
9. Normal Loss will come in __________ side of
Process Costing.
10. Abnormal Loss will come in ________ side of
Process Costing.
11. Abnormal Gain will come in ________ side of
Process Costing.
12. Normal Loss is equal to
(a) Normal Output - Actual Output
(b) Actual Output Normal Output
(c) Input x % of Normal Loss
(d) None of the above.

13. Normal Output is equal to

(a) Input Abnormal Loss
(b) Input Normal Loss
(c) Input Abnormal Gains
(d) None of the above
14. Unit cost is equal to
(a) Normal Cost Normal Output
(b) Total Cost Normal Output
(c) Normal Cost Total Output
(d) Total Cost Total Output
15. Popular

methods

for

calculating

Equivalent

production are
(a) FIFO
(b) Average Cost
(c) Both (a) and (b)
(d) Neither (a) nor (b)
16. In process costing what are equivalent units?
(a) Production output expressed as expected
performance.
(b) Production of Homogenous product.

(c) Notional whole units representing incomplete

work.
(d) Units produced in more than one process.
17. For which costing method is the concept of
Equivalent Units relevant?
(a) Batch costing.
(b) Process costing.
(c) Job costing.
(d) Service costing.
18. When Average method is used in Process Costing,
the opening inventory costs are:
(a) Kept separate from the costs of the new period.
(b) Added to new costs.
(c) Subtracted from the new costs.
(d) Averaged with other costs to arrive at total costs.
19. When FIFO method is used in Process Costing, the
Opening stock costs are:
(a) Kept separate from the costs of the new period.
(b) Added to new costs.
(c) Subtracted from the new costs.
(d) Averaged with other costs to arrive at total costs.

6.3

BIBLIOGRAPHY / WEBLIOGRAPHY

Through Internet:
http://www.ruchisoya.com/m_sunflower.htm
http://www.madehow.com/Volume-1/Cooking-Oil.html#b
http://www.fao.org/docrep/012/al375e/al375e.pdf

http://mu.ac.in/myweb_test/MCOM-Ac-%20Paper%20%20II.pdf
http://www.google.co.in/

Through Books:
Advanced Cost accounting book of TYB.COM

by

Ainapure
Advanced Cost accounting book of Mcom I
Ainapure

by