CHAPTER 1

INTRODUCTION

This chapter gives a small introduction to the study and why the study is important. it also explains the objetive of the project 1.1 Introduction to the study Indian textile industry is one of the leading textile industries in the world It mainly depends upon the textile manufacturing and export. The opening up of the economy gave much needed thrust to the Indian textile industry which was now successfully become one of the largest in the world. It also plays a major role in the development of the economy Indian exporters grow stronger each year in their achievements, skills and proficiency, while international buyers get superior solutions for their garment imports. The main advantage to Indian mill lies not only in low wage cost but also in fact that the Indian Farmers are Competitive producers of cotton .Indian plants were also less capital intensive used older generation machine tools and adequate foundries . This led lower capital cost. Indias apparel exports grew at a CAGR of 6 per cent from INR 382 billion in FY06 to INR 511 billion in FY11. The growth in exports can be attributed to shifting of the apparel manufacturing base from the developed countries like the US and the EU to the low cost countries like China, Vietnam, India, Bangladesh and many others. Multi Fibre Agreement phase-out at the end of 2004 also helped India to increase its exports. The project is conducted at Shahi Exports Pvt Ltd., Bangalore. SEPL is one of the largest apparel industry in India.The company has achieved a tremendous growth during its short period. The headquarters of the company is situated at Faridabad. There are various units in Bangalore handling woven garments and knitted garments. The success of company lies on responsibility with freedom to work and it is transferred to every individual with a collective teamwork. Quality systems are strictly adhered in the garment processing department and embroidery department. Timely Deliverance is given utmost important at Shahi Exports Private Limited. 1.2 Objectives of the study The objective of the study is to know the importance of ordering cost in a garment exporting company using variance analysis. It helps in determining the favourable and un favourable position enjoyed by the company The objective of the study can be summarized as follows:
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To conduct an organizational study (General) To compare the cost sheet and order completion report for particular orders To shows variance analysis for particular orders

1.3 Significance of the study Order Costing helps the management in carrying out its functions. This has been supported with effective use of ERP system by company across order procurement to shipping. The Enterprise Resource planning technique used is just in time (JIT). The turn around time (TAT) followed by the organization is 45 working days. To incorporate these, the system developed is named MOVEX, which controls the entire marketing, production and sales of the organization. The system rotates around, the knowledge of deficient raw materials as thread, packing trims and sewing trims etc, the line of orders from several customers, requirement of raw materials as per the order, updating of inventory etcThe daily MIS (Management Information System) and OCR (Order Completion Report) are also generated via this system. Variance analysis helps maintain control over a project's expenses by monitoring planned versus actual costs. Effective variance analysis can help a company spot trends, issues, opportunities and threats to short-term or long-term success. Variance analysis is important to assist with managing budgets by controlling budgeted versus actual costs. Relationships between pairs of variables might also be identified when performing variance analysis. Positive and negative correlations are important in business planning. A variance provides the yardstick to measure the fairness of the standard, allowing management to redirect its effort and to make reasonable adjustments. 1.4 Chapter scheme This report covers several topics such as: Chapter 1: Introduction Chapter 2: Industry and Company profile Chapter 3: Importance of order costing Chapter 4:Research Methodology Chapter 5: Findings and conclusion

Chapter 2 Industrial and Company Profile This chapter includes detail of textile industry, global and current scenario of textile industry. A study on the industry has been very useful in knowing and understanding the growing economy. Potters Five Force Model is also used to analyse the apparel industry. This chapter completes the detailed study of the organization from its birth. It as well covers the business strategies used and competitive strengths which keeps the company distinct from other companies.

2.1 Industrial Profile

2.1.1 Textile industry The textile industry is primarily concerned with the production of yarn, and cloth and the subsequent design or manufacture of clothing and their distribution. The raw material may be natural or synthetic using products of the chemical industry. The main steps in the production of textile are producing the fiber, preparing it, converting it to yarn, converting yarn to cloth, and then finishing the textile. This textile is then taken to the manufacturer and makes apparel out of it. This is a labour-intensive, low wage industry and a dynamic, innovative sector, depending on which market segments focuses upon. In the high-quality fashion market, the industry is characterized by modern technology, relatively well-paid workers and designers and a high degree of flexibility. The competitive advantage of firms in this market segment is related to the ability to produce designs that capture tastes and preferences, and even better influence such tastes and preferences in addition to cost effectiveness The textile industry grew during the industrial revolution in the 18th Century as mass production of yarn and cloth became a mainstream industry.

2.1.2 Current Global scenario of textile industry Global trade in textiles and apparel is projected to be US$ 980 Billion by 2015 from its current level of US$ 577 Billion. At current level, the industry represents about 6 % of the
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entire world exports. The apparel trade is growing at @ 8% and textiles @ 5%. Worldwide, designer wear is estimated to be a $35-billion industry with a 9% growth rate. Development in textile and clothing industry has direct impact on apparel based fashion. United States and European Union markets dominate the global textile and clothing trade accounting for 64% of clothing and 39% of textile market, and imports about 30% of garments, mainly from developing countries. Over a period of time, many changes have taken place in the world

scenario, which influenced to a great extent the fashion scenario of the globe. Some of these significant changes are varying preferences of use of fibre types, innovative trends in fibre production, shift of production bases from developed countries to developing countries, and quota abolition. The textile & clothing trade has been growing at a faster rate than its production in the developed countries. In order to meet their ever increasing requirement for home consumption, developed countries have been relocating their production bases or resorted to outsourcing from developing countries. Significant proportion of this relocation of business has been to Asia due to its significant labour cost advantage. This also influenced the consumption pattern and fashion scenario in the developing countries The success of exporting countries would now depend on their domestic policies, quality of infrastructure, efficiency level of production and delivery systems, and how fast these countries restructure the textile & clothing sector to meet the Global standards Figure:2.1 Relocation of global textile industry in response to changing situation

Source:changing scenario of global industry

Most analysts conclude that China and India will come to dominate world trade in textiles and clothing; market shares for China alone has been estimated at 50 per cent or more. Although China is likely to become the 'supplier of choice', experts feel that other developing economies, particularly, India would also benefit as the overseas importers would try to mitigate their risk of sourcing from only one country The removal of MFA (Multi-Fiber Arrangement) quotas has affect the geographic distribution of businesses and industrial production 2.1.3 Regulations: The Multi Fibre Arrangement (MFA) governed the world trade in textiles and garments from 1974 through 2004, imposing quotas on the developing countries so that it could export to developed countries. It expired on 1 January 2005. At the General Agreement on Tariffs and Trade (GATT) Uruguay Round, it was decided to bring the textile trade under the jurisdiction of the World Trade Organization. The Agreement on Textiles and Clothing provided for the gradual dismantling of the quotas that existed under the MFA AEPC(Apparel Export Promotion Counil) is the official body of apparel exporters in India that provides invaluable assistance to Indian exporters as well as importers/international buyers who choose India as their preferred sourcing destination for garments. It was in cooperated in 1978. There are certain national and international standards and regulations that need to be complied with to ensure quality, safety and sustainability. 2.1.4 Indian Textile Industry: Indian Textile Industry is one of the leading textile industries in the world. It contributes 14% to Indian industrial production, 4% to the GDP and around 17% to the total export earnings and it is the largest foreign exchange earning sector in the country. Traditionally it was largely unorganized industry even a few years back, but now the scenario has drastically

changed after the economic liberalization of Indian economy in 1991. Textile Industry has gone through various stages from a historical perspective. Even customers are now more of quality concern than price concern with the increase in standard of living. The industry provides direct employment to over 35 million people and is the second largest provider of employment after agriculture. It not only generates jobs in its own industry, but also opens up scopes for the other ancillary sectors.

Figuer 2.2 : Indian Textile Industry Growth

Source: 2.1.5 Current Scenario in India India earns about 27% of its total foreign exchange through textile exports, which plays major role in the economy of the country. Indian textile industry largely depends upon the textile manufacturing and export. India is the world's 2nd largest cotton producing country, after China. The fundamental strength of this industry flows from its strong production base of wide range of fibers, yarns from natural fibers like cotton, jute, silk and wool to synthetic, man-made fibers like polyester, viscose, nylon and acrylic. There is no limit on foreign direct investment in the textile industry and hence 100% direct investment can be done by the foreign capitalists in the Indian textile industry. Foreign Investments done in the Indian
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Textile Industry through the automatic route offers a hassle-free way of investing. These investments are not required to be approved by the government or the apex bank of India, RBI. Still the sector is not attracting much and the FDI has seen almost remained constant, but the future still looks bright as India has good scope of becoming the global textile and apparel sourcing center in future. Table 2.1 Foreign Direct Investments in India

In the year 2011 the foreign direct investment as higher than rest of the years 2.1.6 Indian Textile export The Indian textiles industry contributes substantially to Indias exports earnings. Indias textile products, including handlooms and handicrafts, are exported to more than a hundred countries. However, the USA and the EU, account for about two-third of Indias textiles exports. The recent downtrend in the EU and US economy has impacted the Indian textile exports too but the governments initiative to promote export helped to revive the situation. The textile and clothing industry is expecting government to come up with some effective measures providing growth to the sector in the upcoming Union Budget 2012-13. The government has announced various schemes to encourage the investments in the textile industry like National Textile Policy (NTP), Scheme for Integrated Textile Parks (SITP), Technology Up gradation Fund Scheme (TUFS), Export Promotion Capital Goods (EPCG), Duty Entitlement Pass Book Scheme (DEPB) etc.

Figuer 2.3 Market share of textile companies in India

In this major share is held by Grasim Industries ltd with 66% Analysis of industry: Porter's five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. Three of Porter's five forces refer to competition from external sources. The remaining are internal threats. Here textile industry is analyzed using Porters five forces Figure 2.5: Porters five forces analysis on textile industry

Bargaining power of customers (demand scenario)

Global textile & clothing industry is currently pegged at around US$ 440 bn. US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market. With the dismantling of quotas, global textile trade is expected to grow to US$ 650 bn by 2010 (5 year CAGR of 10%). Although China is likely to become the 'supplier of choice', other low cost producers like India would also benefit as the overseas importers would try to mitigate their risk of sourcing from only one country. The two-fold increase in global textile trade is also likely to drive India's exports growth. India's textile export (at US$ 15 bn in 2005) is expected to grow to US$ 40 bn, capturing a market share of close to 8% by 2010. India, in particular, is likely to benefit from the rising demand in the home textiles and apparels segment, wherein it has competitive edge against its neighbor. Bargaining power of suppliers (supply scenario)

India is the third largest producer of cotton in the world after China and US and has the largest area under cultivation. Cotton, a key raw material in the textile and garment industry, accounts for about 30% of the fabric cost and 13% of the garment cost. India has an abundant supply of locally grown long staple cotton, which lends it a cost advantage in the home textile and apparels segments. Moreover, low cotton prices due to a bumper cotton crop would enable India to lower its production cost and sustain pricing pressure. Further, efforts on improving the yield per hectare would ensure higher productivity and production, thereby providing the much-needed security of raw-material supply to textile producers. India also enjoys a significant lead in terms of labour cost per hour Threat of new entrants Smaller players who cannot venture into the global markets are flooding the domestic markets with excess supply, thus weakening the pricing scenario. Home textiles (Welspun and Alok Industries) or branded apparels (Raymond), new capex and consolidation with international players is also not likely to safeguard margins for the larger players, unless they can tap a significant pie of the overseas markets.

Threat of substitutes

Low cost producing countries like Pakistan and Bangladesh (labour cost 50% cheaper) are also posing a threat to India's exports demand. Infact, players like Arvind Mills have already started feeling the pinch as overseas buyers have started shifting to 'alternative sources', thus impacting their incremental volume off-takes. Competitive rivalry

India's logistic disadvantage due to its geographical location can give it a major thumbsdown in global trade. The country is distant from major markets as compared to its global competitors like Mexico, Turkey and China, which are located in relatively close vicinity to major global markets of US, Europe and Japan. As a result, high cost of shipments and longer lead-time coupled with lack of infrastructure facility may prove to be major hindrances.

Indian textile sector is in a good phase to trigger and encourage developments in the overall domestic textile industry. The prospect of the textiles industry seems to be bright in all aspects. As such government places all its trust in this sector for its strong employment creation capability, more precisely in the garments manufacturing side. Lowering tax burdens on companies will play an important part in cutting down production costs and boosting competitiveness, increasing ability to tap high-volume orders from the global market. Modernization will enable companies provide quality and volume solutions which is in constant demand by international buyers. With more emphasis on product having longer cycles than those average apparels, the home textiles manufacturing is more protected than its apparel counterparts. Those wishing to reap the benefits of opportunities have to show good preparatory dispositions as well as willingness to stay on the forefront of the global competition game.

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2.2 Company Profile

2.2.1 Shahi Export Pvt Ltd Shahi Export Pvt Ltd (SEPL) is a garment exporting company that spins multi colored dreams. The company has achieved a tremendous growth during its short period. Shahi Exports Private Limited is mainly recognized for its excellence in quality product range, service, and reliability. They have one of Indias most organized garment manufacturing facilities in Delhi and Bangalore. The company is a pioneer in the manufacture and export of ready to wear garments in India. The entire Shahi organization works on a single ERP system, which unifies all the departments working. This not only makes the company best but also gives the superiority of efficient functioning. The success of the company is bringing the latest trends in the markets coupled with our in-depth study and shopping and creates line for a particular brand and to bring the newness in the ever changing fashion world. The managing director of Shahi is Mr.Harish Ahuja

2.2.2 Area of operation The area of operation of Shahi exports are both in national and international and also in regional i.e Faridabad in Delhi, Tripura, Bangalore, & Salemand in international level it exports its product to USA & Europe. The company is an EOU (export-oriented unit) i.e. they only export their product. The company in the Banargatta road has a turnover of 400 crore. It has almost 50 units in Bangalore itself. Unit 12 is in Banargatta Road and the corporate office of this operation is situated at Sarjapur Main road (unit-7). The headquarters of the company is situated at Faridabad.

2.2.3 History Shahi Exports Private ltd started its operations way back in 1974. But its ideas are what make it young. The manufacturing activities at Bangalore were started in the year 1989 and the knit division started during 2001.The company is engaged in manufacturing different types of ready to wear garments and is exporting to leading shopping chains all over the world. Shahi stands vertically integrated has one of the largest manufacturers and exporters in India offering ready to wear garments for women, men, and children. Their Bangalore
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operations began on 1 July 1988 with 250 associates and 104 machines. Expanded by 50 times in 22 years and presently has 17 integrated state of art production center with 7500 machine and 12000 employees manufacturing capacity of more than 2 billion garments per month. The corporate office of this operation is situated at Sarjapur Main road (unit-7).

2.2.4 Vision Mission and Product profile

Vision statement: Be the most preferred global supplier of quality apparels at a competitive price and to create the best work place with sense of belongingness and commitment. Strive to be a reliable and consistent learning organization with a commitment to improve and excel

Mission statement: Be the global best in bringing delight to human life by wearing dreams of fashion and feeling of comfort.

Values:

Customer delight Integrates and ethics Respecting people and relationships Nurturing human talent Continuous improvement

Quality objectives:

Delivering quality product on time Increasing productivity Continuous improvement Employees development

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Product profile: Shahi Exports is one of the largest manufacturer / exporter in India offering ready to wear garments for ladies, men and children. Shahi Exports prides itself on its knitwear. Shahis work line is as vast as the organization. It covers mens and boys shirts-casual, mens shirts formal, ladies and girls blouses, dresses, men and ladies bottoms etc. Table 2.2 product range and fabric range of shahi The Product Range T-Shirts Tailored Collar Polo Shirts Turtle Neck Mock Neck Jackets Tanks Lingerie Loungewear Golf wear Sleep wear etc Tee Embroidered Tops Strap Tank Top Vest Printed Fabric Glowing Night Print Sheer Jersey Skirt The Fabric Range Single Jersey Pique Sheer Jersey Interlock Waffle Ottoman Flat Back Rib Engineering Striper Mini-Jacquards Full Jacquards Jacquards Velour Acrylic Wool Circular woolen knits Spun Filament Cotton Fleece Polyester Polar Fleece Double Mercerized Single Mercerized Indigo dyed Knits

2.2.5 Customers Information: Shahi Exports Pvt Ltd has customers who are the leading shopping chains , with head offices at Europe and USA , whose retail outlets are spread all over the world .As garment manufacturing is a fashion lead industry , the customer requirements are continuously getting changed. The uniqueness with versatility and competitive prices are the demanding
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factors .Depending upon the needs of the customers, the market is segmented as Premium wear, Fashion Business and mass retailing. Approximately 10 to 15% is targeted for premium wear, 40 to 50 % for fashion business and remaining for mass retailing. Each manager in marketing department is allotted a combination of these segments, which are supported by their merchandiser. Some of the customers of unit 12 are:

Table 2.3: The Major Markets and Customers of SHAHI EUROPE USA Abercrombie and Fitch May & Co Gas DHC Enzo H&M Liabel Arrow Jeans Cutter & Buck House Dillards Lorenzo Gap Burberry Wall-Mart Canada US Polo Armani Hollister Rinaldi Tommy Hilfiger 2.2.6 Competitors Information A rivalry of two or more businesses that target the same customers. Business competition tends to result in increased efficiency as firms attempt to reduce expenses. The competitors in the regional boundary are K. Mohan private limited, Bangalore Gokaldas exports private limited, Bangalore
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Adlers Metro

Matrina Kasstadt Daks

Bombay rayon private limited, Mumbai Orient craft private limited, Gurguon Richa Industries, Gurguon Eastman Exports, Tamil Nadu Texport, Mumbai

2.2.7 Manpower structure The SEPL workforce consisted of committed and highly skilled people. People are motivated to excel and trained in different disciplines of garment manufacturing. A training section is separately set up to enable workers to meet shahi stringent requirements .The Company has ensured all systems are in place to make sure that everybody works in a good environment. Textile factorys are labor intensive and it is important that they are well looked after. Shahi has invested in a dedicated personnel management division to take care of its labor. Labor problems get a kind ear and are followed up on a priority basis. Shahi Export Pvt Ltd adheres to international labor legislation .It aims at providing conducive environment for employees to protect ,promote and support their families in their best way possible .Strict compliance with anti-child labor law is ensured . Best Employee award are given for overall discipline attendance and productivity. Employees have access to crche and given adequate leave during pregnancy .Full-fledged ambulance is provided with a doctor always stand by. Awareness programs are conducted for employees on health, hygiene and nutrients related topics Safety measures are given high importance. Fire fighters are on high alert at all times. Every floor is equipped with right firefighting equipment. Evacuation boards are put on all floors along with photograph of firefighting personnel. The company organizes fire drills to keep employee alert in case of emergencies 2.2.8 ERP System The entire Shahi organization works on a single ERP system, which unifies all the departments working. This not only makes the company best but also gives the superiority of efficient functioning.ERP System implemented by shahi is "MOVEX" which is the latest and connects all the supply chain starting from yarn till the shipment and monitor to meet
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the delivery schedules. This will help the company to typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company and also helps in synchronizing the business activities like sales, delivery, billing, production, inventory management, quality management, and human resources management.

2.2.9 Strengths of Shahi exports over other exporters Shahi is an organization of noble culture with competent human resources. Multiproduct expertise and continues process improvement, committed to delight customers by consistently delivering high quality product on time. At shahi care is taken to ensure only the finest garments get through. The shahi manufacturing facility in cooperates comprehensive testing at each stage. Starting with an in house laboratory for fool proof material testing. The company ensure to use flaw less raw materials matching standards are used every time. The quality control department comprises one of the best teams in the country. The systems are developed based on the research and stringent buyer requirement and arrived at a standard Shahi quality system. All units follow stringent quality procedures with every shipment undergoing inspection by an in-house final statistical audit team. Quality systems are strictly adhered in the garment processing department and embroidery department. Timely Deliverance are given utmost important at shahi .In order to meet high quality parameters all fine yarn is purchased from reputed mills .An in-house facility then inspects 100% fabric in the production centers .The production centers redefined excellence in their sphere .Professionally qualified textile engineers handle the entire fabric sourcing and quality control activities. Shahi export pvt ltd has embedded and improved on a unique set of value over years. Customer satisfaction is desired at any cost. The total quality management approach result in constant improvement. Its an organization that follows continuous waste reduction and achieve customer satisfaction by delivering quality products with lean system. And also efforts are directed at protecting the environment. The plants are environment friendly with an effluent treatment plants at all the processing unit. The organization is also geared for community building with a difference. The company has accomplished and environment riddled with creative challenges

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2.2.10 Management Structure The management follows a centric way of approach in their structure. The management structure is very simple and easily understood as they dont believe in complicating the communication. Every instruction starts and ends with the Director. The director is placed as the nucleus of the organization as every piece of information passes through him. The several departments that rotates around him are Human Resources, Business Intelligence, TPM (Total productivity maintenance) , organizational development, MR, PPE(Pre

production execution), Production, Central Planning, Marketing and sourcing, Purchase. Every department has itself linked with the director directly or indirectly. Every department is headed by a management staff who reports to a Manager and then the manager reports to the Group manager and the next level of hierarchy is the Director. The line managers have group meetings in which the issues concerned with the employees and company are presented to the managers which would be addressed to the Director while the General body is conducted

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Figure : Management Structure

Director SEPL Senior Management level Business Intelligence Purchase Production Central Planning Sales Marketing & Research Quality Management

Human Resources

Junior Management Level

Staffs & Supervisors

Labourers

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Figure : Departments of Shahi

Source: Quality Manual of Shahi

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2.2.11 Department and its function 1. Marketing & Sourcing department includes Sample Development, Merchandising ,Sourcing of Fabric, and getting yarns converted into fabrics. From the basics of purchase to the realization of the final product is organized and supervised by this department. It also involves itself in research and development of products and related stuffs. Shahi Exports pvt ltd does B2B marketing. 2. Production department includes Cutting and Sorting, Sewing, Finishing, Washing,

Embroidery, Printing and Quality Assurance. The final product is always the hard work of this department. They have to decide a lot of things as the raw materials to be used, their quality and quantity, their variance etc. which will then result in the final outcome. There are two types of productions involved In house and out house. In house is again dissolved as job works and employment. Outhouse involves sending some part works to other companies when the jobs are more than the production capacity. 3. Planning department includes Central planning section. Planning involves decision making of every department and their functions. They also help in the functions of the departments apart from the central planning of the growth of the company. They are a part of the HR at many times. Central planning department helps in approval of the order and costing of the order. It allocates the cost to the factory. A chart is prepared after the order clarity meeting to transfer the information related to the order made by the buyer. It includes: Quantity to be produced Process to be adopted Trims Delivery date Production cut date

Central planning department follows up with the factory till the completion of the order. It needs to keep in touch with every department like cutting, washing, production etc.

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4. Organization Development department includes Corporate HRD, Plant HRD, General Administration, and Training and Lean team. They are either known as HR or OD in the company. HR handles a wide arena of functions such as recruitment, employee relations, training, corporate planning, organizational development etc. HR though not reflected in the business process diagram represented above, it has got a very unique role. It handles a position next to Director and acts in his position in his absence. The department handles many roles from conducting employee relation activities to employee restriction decisions. Every department is in one way or the other supervised and entertained by this department. The employee relations and recruitment sections of HR are quite active and very commendable. 5. Business Intelligence department looks after Stores [Fabric, Central and auxiliary] and Costing. They study the market and prepare the present scenario of the market. They have the rights to say yes to any costing or purchase. The final word would be theirs as they decide the present occupancy of the market. Role of business intelligence department is to support the management for their decision making. It updates: The work centre rates. Cost of operation per department is assessed. Approval of cost sheet.

6. Purchase department includes Accessories and General purchase. Purchase department is responsible for the sourcing of trims and accessories except the fabric. It works same as the fabric sourcing department. Merchandisers will inform about the trims and accessories required with respect to the colour and size in the form of the sheet. Negotiations with various vendors are done. Costing is done by the department and cost sheet is prepared by the merchandiser. Assessing the required quantity is also done by the purchase department.

7. Total productivity maintenance( TPM) department includes Safety team. They put themselves in training the employees about the safety measures in connection with the
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company. They also implement the availability of safety equipments throughtout the company. Also, they are responsible for the timely updations of the safety equipments.This department is responsible for maintenance of the machinery and equipments. That involves: Maintenance of machine as per required style. Cleaning of machine by using tools as per SOP. Tightening of loose parts. Maintain oil level between high and low mark. Checking the machinery fitting and its parts. Adjusting the settings Checking the operation area

8. Pre production execution (PPE) department includes Industrial Engineering/PDV functions and Training. Preproduction department takes into consideration various changes that need to be adopted in the garment before final production are involved in carrying out ways of doing the work operations related to the garment. Deciding the number of operating lines and number of operations in the line. Number of running shifts required for making a definite number of pieces per day Various safety measures in case of man, machines and material.

2.2.12 SWOT Analysis SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a business venture. It involves specifying the objective of the business venture and identifying the objective. Identification of SWOTs is essential because subsequent steps in the process of planning for achievement of the selected objective may be derived from the SWOTs Strengths: characteristics of the business, which give it an advantage over others.

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6000 highly skilled and committed employees resulting in manageable and organized environment, training requirements would be lesser and only market and skill updating required.

New upgraded technology in production and embroidery so that the best product could be as per the market standards. It will allows best learning environment for employees

Provide quality products and services to their clients which will help them in creating goodwill among their customers

Weaknesses (or Limitations): are characteristics that place the team at a disadvantage relative to others Employee turnover is high in the past two years it is mainly due to low increments. It could be overcome by increasing the compensation accommodations and transportation at companys cost Restricted only to exporting and no retail sales within the region. So the company is not famous within the region. Opportunities: external chances to improve performance (e.g. make greater profits) in the environment. Be number one globally for that they are trying to promote more of exports Expanding their markets. They are opening various units in Bangalore, Thirupur and Delhi. A new unit in Shimoga, Bangalore, & Mysore is under construction. Employee number will be increases from 60000 to 80000. The production capacity will increased up to 400 thousand pieces per day in Karnataka alone.

Threats: external elements in the environment that could cause trouble for the business
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Political instability: The political environment in which the firm operates will have a significant impact on a company's international marketing activities. The greater the level of involvement in a foreign markets, the greater the need to monitor the political climate of the countries business is conducted. Changes in government often result in changes in policy and attitudes towards foreign business.

Competitors: A rivalry of two or more businesses that target the same customers. Business competition tends to result in increased efficiency as firms attempt to reduce expenses.

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Chapter 3 Importance of Order Costing This chapter includes why order costing is important to an organisation. It also give the information about variance analysis 3.1 Order costing The system of order costing is used where production is not highly repetitive and in addition consists of distinct jobs so that the material and labor costs can be identified by order number. This method of costing is very common in clothing industry. The record keeping and cost assignment are more complex in a job order costing system, when a company sells many different products and services than when it has only a single product or service. Since the products are different, the costs are typically different. Consequently, cost records must be maintained for each distinct product or job.It enables to keep separate track of the costs of filling orders for particular styles, sizes, and colors of the item. A job order costing system requires more effort than a process costing system. Companies classify manufacturing costs into three broad categories :(1) direct materials, (2) direct labor, (3) manufacturing overhead Direct Material The material which becomes an integral part of a finished product and which can be conveniently assigned to specific physical unit is termed as direct material. It is also described as process material, prime cost material, production material, stores material, constructional material etc. Direct labour For conversion of materials into finished goods, human effort is needed and such human effort is called labor. The labour which actively and directly takes part in the production of a particular commodity is called direct labor. Direct labor costs are, therefore, specifically and conveniently traceable to specific products. Direct labor can also be described as process labor, productive labor, operating labor, etc. Overhead

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The term overhead includes indirect material, indirect labor and indirect expenses. Thus, all indirect costs are overheads. 3.2 Variance analysis A variance is the difference between an actual result and an expected result. The process by which the total difference between standard and actual results is analysed is known as variance analysis. When actual results are better than the expected results, we have a favourable variance (F). If, on the other hand, actual results are worse than expected results, we have an adverse (A).
3.2.1 Direct Material Cost Variance

Direct Material Cost Variance = Material Price Variance + Material Usage Variance OR Material Cost Variance = Standard material cost Actual material cost Standard material cost = Standard price per unit *Standard quantity of material Actual material cost = Actual price per unit *Actual quantity of material Material Price Variance = Actual quantity used * (Standard price Actual price) 3.2.2 Direct Labour Cost Variance Direct Labour Cost Variance = Standard labour cost Actual labour cost Standard labour cost = Standard time *Standard wage rate Actual labour cost = Actual time * Actual wage rate 1) Wage rate variance =Actual time*(Standard rate Actual rate) 2) Direct Labour Efficiency Variance = Standard wage rate * (Standard time Actual time) 3.2.3 Overhead Variance

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Overhead Variance = (Actual Variable Overhead - Standard Variable overhead)

3.2.4 Sales Value Variance

Sales Value Variance = Actual value of sales Budgeted value of sales Actual value of sales = Actual Quantity * Actual Selling Price) Budgeted value of sales= Budgeted Quantity * Budgeted Selling Price 1) Sales Price Variance = (Actual selling price Budgeted selling price) Actual quantity) 2) Sales volume variance = (Actual quantity Budgeted Quantity) Budgeted selling price

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Chapter4 Research Methodology This chapter explains the statement, objectives and time period, statistical tools used etc. 4.1 Introduction The project is conducted to study the importance of order costing in an export oriented industry (apparels) named Shahi Exports Pvt. Ltd. Arekere, Bangalore. 4.2 Statement of the problem: Costing is a specialized branch of accounting. It has been developed because of the limitation of financial accounts. A good costing system consists of the techniques, forms, and accounting records used to develop timely information about the cost of manufacturing specific products and of performing specific functions .Order costing is a method of costing which is most widely used in the manufacturing companies. This system in a manufacturing Company should serve two important managerial objectives

i. ii.

Costing helped to determine the per unit cost of each manufactured product Costing made it possible to provide manager with informations that will be useful in planning the future business operations and in controlling the cost 4.3 OBJECTIVE To conduct an organizational study (General) To compare the cost sheet and order completion report for particular orders To shows variance analysis for particular orders To analyse whether the deviation of actual from budgeted results are favourable or unfavourable using controlling ratios To make suggestions and controls, if required 4.4 RESEARCH METHEDOLOGY 4.5 Sources of data Secondary data: Secondary data are that data collected by a particular person from published or unpublished sources.

Secondary data were obtained from following sources.

Reference books
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Internet Journals

4.6 Data collection method Statitical tools for analysis: Bar diagram was used to represent the facts and figures. 4.7Time period of the study: 4.8 Limitations of the study

Order Completion Report is a system generated report based on the report submitted by other department of the co. so the limitations of secondary data do apply.

Cost accounting is a vast topic so all the variables are not included in the scope of study.

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