The System of Cost Accounting followed in HAL is mainly 'Batch Costing', which is a variation of Job Costing and is mainly

designed to suit the work, carried out in HAL. Some Divisions of HAL have also Work Order Schemes suitable for Component Costing Batch Costing Batch costing is not normally seen as much of an advance on job costing. A batch is A group of similar articles which maintains its identity throughout one or more stages of production and is treated as a cost unit. Batch costing is a form of specific order costing; the attribution of costs to batches. Batch Costing System in HAL This system is followed in the case of manufacturing orders of aircraft, engines, equipments, etc.,. All the components, minor assemblies, sub-assemblies, etc., required for a batch of aircraft /engine/ equipment are manufactured on Batch Orders / Mass fabrication orders. Labour and Material costs are booked on the Batch Workorder / Mass fabrication orders. The components after manufacture will be moved to next assembly or credited to production stores and drawn when as and when required. The cost being held in Work In Progress. Individual workorders are issued for assembly, erection and testing. The cost of BOIs drawn at the stage of assembly is booked to these Workorders. The total cost for each aircraft/ engine / equipment will be derived by adding the following : The cost of all the components, minor assemblies, sub-assemblies, etc., relating to aircraft/ engine / equipment in a completed batch is determined by dividing the total cost recorded on the Batch workorder by the number of units produced in the batch. Cost recorded during assembly, erection and testing. Sundry Direct Charges if any Job Costing The basic costing method applicable where the work consists of separate contracts, jobs or batches, each of which is authorized by a special order or contract. It is used by a manufacturer who produces products as individual units or in distinct batches or jobs. A job is A customer order or task of relatively short duration and Job costing is A form of specific order costing; the attribution of cost to jobs. Job costing is applicable where work is undertaken to customers special requirements and each order is of comparatively short duration. In a job costing system, costs are assigned to a distinct unit, batch, or lot of a product or service. Steps involved in Job Costing identify the job that is the chosen cost object, identify the direct costs of the job, select the cost allocation bases to use for allocating indirect costs to the job, identify the indirect costs associated with each cost allocation base, compute the rate per unit of each cost allocation base used to allocate indirect costs to the job,

compute the indirect costs allocated to the job, and compute the total cost of the job by adding all direct and indirect costs assigned to the job. Job Costing System in HAL This system is followed in the case of manufacture of spares against manufacturing orders and repair / overhaul of aircraft, engines, equipments, etc.,. Individual workorders is issued for each Job. The work will be initiated at the shop floors through Job Cards Labour and Material costs are collected on the individual workorders and total cost of each job is ascertained. Required material for the subject Job will be drawn through a document called Material Requisition (MR). Relevant workorder number will be mentioned on MR. Material cost will be generated for the workorder. Labour hours booked by the Direct labour in Time Docket on relevant workorders will be processed and Hours will be costed with applicable MHR. After completion of the Job or on receipt of work completion certificate , Costing / BR section will generate the JOB Cost report for the subject order. A model format Job Cost Report of HAL is given below : Job Cost Report of HAL

Cost structure The cost structure of the products in HAL consists of the following elements : Material cost Labour cost Sundry Direct charges Deferred Revenue Expenditure (DRE) Capital facilities cost if any Warranty Profit

A model Cost structure of an Aircraft in HAL

Cost consciousness at HAL Major areas have been targeted for cost reduction in HAL is as follows : Reduction material cost Reduction in overhead expenses Reduction in actual hours compared to SMH Reduction in cycle time for production Ensuring uniform production Timely delivery to avoid Liquidated Damages Control on induction of additional manpower Reduction in Idle time Increase in efficiency

Increase in yield Inventory control