Case 2: Application of Costing to Indigenous Business Unit in Hubli City A case study of Digital Photo Shop *Prof. Mahesh Bendigeri **Mr.Santosh Banni ***Mr. Kashappagouda
An attempt has been made by students of Sem II of 2012-14 batch to align classroom teaching into practical world. It is first of its find to bridge the gap between academic learning with pratical knowledge by taking up mini project and trying to apply the concept of cost sheet to local business units. Mr. Santosh Banni and Mr. Kashappagouda of Sem II class had identified Digital Photo Shop for the purpose of this study. The name of this shop is Shivanand Digital Photos & Videos, Bhairidevarakopp, Hubli. Brief Profile of Shivanand Digital Photos & Videos: It is a sole proprietorship concern, started in the year 14th Nov 2011 by Mr. Jagadish Pujar. It is located in Bhairidevarakoppa, Hubli. The initial investment was Rs. 100000, in addition to camera, video camera and 2 computers. Mr. Jagadish is an SSLC passout. Before he start up this venture he had some initial training in his uncle shop and later on got an idea of setting up his own business. He has two people working under him as his assistant. Purpose of the Study: The main purpose of this study is to understand the costing model applied in the digital photo shop and the method adopted in ascertain the cost per photo print. Most of us feel that the cost of printing the photo depend on some rough estimate or based on competitor price printing. But after conducting this mini project it was found that even digital photo shop business people will apply rough estimate of concept of cost sheet in ascertaining the cost of printing the photo. Cost Sheet: Cost sheet is a statement, which shows various components of total cost of a product/service. It classifies and analyses the components of cost of a product. It is a statement which shows per unit cost in addition to Total Cost. Selling price is ascertained with the help of cost sheet. The details of total cost presented in the form of a statement is termed as Cost sheet.
Data collection and Analysis Following is the information collected from owner of Shivanand Digital Photos with respect to component of cost sheet. The information is collected for only one month time. Based on this the analysis was done to determine the most appropriate way of ascertain the cost per print. Even though he has not maintained formal system of accounting. Yet the information provided by him is taken as basis for preparation of cost sheet.
Cost Sheet for Printing Digital Photo. Particulars
Amount
Direct Materials Cartridges Memory card Photo card sheet Direct Wages Direct Expenses
4000 copies in a month. Total Cost per print 3750 0.93
1200 1250 1250
Prime Cost
Factory Overhead Salary of Two assistant Machine repairs Current Bill Rent of shop Other Expenses
3750
0.93
5600
1.40
9350 350
2.33 0.08
9700 200
2.41 0.05
9900 10100 20000
2.46 2.54 5.00
2500 500 600 1500 500 Works Cost
Administative Overhead Receipt & Bill Book Stationery Cost of Production Selling & Distrubution Overhead Plastic Bag for Packing Travelling expense Total Cost Profit Sales Amt charges for printing per photo copy
200 150
50 150
Analysis: From the analysis of Cost sheet it is found that total cost incurred for printing 4000 copies is Rs. 9900, were as total revenue from sales would be Rs. 20000, considering Rs. 5 as selling price per printing copy. Profit per photo is Rs. 2.54. This shows that business like digital photo shop can also make reasonable profit by working on cost structure. Conclusion: From this study it is found that we can apply the concept of cost sheet to indigenous business unit and ascertain the probable cost of a given product/ service. We conclude that small business unit can also make huge amount of profit if cost are properly accounted for.