process costing lafarge

8/13/2019 process costing lafarge

1/23

INTERNATIONAL ACCOUNTING PROGRAM (IAP)University of Syiah Kuala

Assignment Cover Sheet InternalAn Assignment cover sheet needs to be included with eahassignment. Please om!lete all "etails learl#$

If you are submitting the assignment on paper, please staple this sheet to the front of each assignment. If you are submittingthe assignment online, please ensure this cover sheet is included at the start of your document. (This is preferable to a

separate attachment.

Name: Student ID1. Geubrina Ria Andarint 11011030400112. Husnul Akhir 11011030400053. err!anda "ratama 110110304000#4. Rahmi Nabila 110110304000$5. Rid%k! &aulana 1101103040004

!ourse code and title" IAP%&&'MANAGEMENT ACCOUNTING

School" MASTER O USINESS (ACCOUNTANC*) #rogram !ode"

!ourse !oordinator" C+t A,rianan"ra- A$M+l#ag+s"in Tutor" $

%ay, Time, &ocation of &ecture" Thursday, '.)$'*., +oom

Assignment number" Assignment ./ %ue date"-ednesday march /th'*

Title:lafarge cement manufacturing

+rther In,ormation/

I declare that the work contained in this assignment is my own, except where acknowledgement of sources is made.

Signed: Date:

%ate received from student Assessment-gra"e Assessed by"

+ecorded" %ispatched (if applicable"


2/23

Lafarge Cement Manufacturing

0arch /th '*

#repared by "1eubrina +ia Andarint

2usnul A3hir4erryanda #ratama #utra

+ahmi 5abila+id63y 0aulana

ii


3/23

E0e+tive S+mmar#

Lafarge is the world co-leader in this sector. In 2011, the Cement Business accounted for

65% of the rou!"s turno#er. $he reliailit& of a !roducer 's deli#eries and the (ualit& of ourcement and su!!ort ser#ices are also factors influencing a cement !roducer's com!etiti#eness.

)ccordingl&, the rou! stri#es to deli#er consistent cement (ualit& o#er time, to maintain a high

standard and (ualit& of su!!ort ser#ice and to offer s!ecial-!ur!ose cements to set oursel#esa!art from our com!etitors.

$he Lafarge com!an& decision-ma*ing ased on a decentrali+ed s&stem, com!an&

Lafarge has alwa&s gi#en !riorit& to efficienc& so with full rights to e#er& local chief eecuti#e is

e!ected decisions can e made (uic*l& and ma*es a com!an& a large and ra!id res!onse.

e ha#e de#elo!ed significant e!ertise in cement manufacturing through our e!erience

of o!erating numerous cement !roduction facilities worldwide for o#er 15 &ears. $his e!ertisehas een formall& documented and is !assed on #ia our $echnical Centers, which em!lo& o#er

600 engineers and technicians worldwide. e stri#e to share our collecti#e *nowledge

throughout the rou! to im!ro#e our asset utili+ation, lower our !roduction costs, and increase

the !roduct efficienc&. $hrough this culture of *nowledge-sharing, we also endea#or todisseminate est !roduction !ractices and em!lo& enchmar*ing tools worldwide to dri#e

su!erior !erformance and unloc* continuous o!erating im!ro#ements.

$he cement industr& is highl& com!etiti#e in our ma/or mar*ets. ome countries or

regions are more e!osed during certain !eriods than others due to factors such as the strengthof demand, mar*et access, and raw material reser#es.merging mar*ets re!resent a!!roimatel&

0% of the worldwide mar*et, for most of the remainder. e ha#e sustantial o!erations in man&

of these mar*ets, along with other multinational cement com!anies and local cement !roducers.

i


4/23

Contents

ii


5/23

Intro"+tionManufacturing costs are accumulated in processing departments uses a process costing

system. A processing department is any location in the organization where work is performed on

a product and where materials, labor, and overhead costs are added to the product.

Process costing is used in situations where homogeneous products or services are

produced on a continuous basis. Costs flow through the manufacturing accounts in basically the

same way in a process costing system as in a joborder costing system. !owever, costs are

accumulated by department rather than by job in process costing. "n process costing, the

e#uivalent units of production must be determined for each cost category in each department.

$nder the weightedaverage method, the e#uivalent units of production e#uals the number of

units transferred out to the ne%t department or to finished goods plus the e#uivalent units in

ending work in process inventory. &he e#uivalent units in ending inventory e#uals the product of

the number of partially completed units in ending work in process inventory and their percentage

of completion with respect to the specific cost category.

&his report is made to analyze how a process costing system design used in a

manufacturing or a company who offer goods. !owever we provided only a process costing

using weighted average method. As in the report we rendered 'afarge Cement Manufacturing as

an e%ample in this writing. "t is e%pected that this report can help the readers to get more

knowledge and understanding generally or even better as a comprehensive learning.

Manufacturing is the production of goods for use or sale using labor and machines, tools,

chemical and biological processing, or formulation. "t refers to a range of human activity,

from handicraft to high tech, but is most commonly applied to industrial production, in

which raw materials are transformed into finished goods on a large scale. (uch finished goods

may be used for manufacturing other, more comple% products, such as aircraft household

appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell

them to end users, the costumers.

'afarge Company is one of a big trusted old manufacturing who has been making cement

for all the costumers around the world since )*++. &he company has been recognized as theworlds largest cement manufacturer. -or over a century and a half, 'afarge, the world number

one in building materials, has been helping to shape the everyday surroundings of millions of

men and women. &hroughout the world, the 'afarge roup carries out its business with the same

high standards and the same #uality of e%pertise, respecting people and the environment.

'


6/23

/e use process costing and weighted average as the specific. 'afarge manufactures thousands or

millions of units of product in a given period of time.

/hether the products may be sold in small or large #uantities. Product costs must be transferred

from -inished oods to Cost of oods (old as sales are made. "t is appropriate for the company

which produces a continuous mass of like units through series of operations or process. Also an

order does not affect the production process and a standardization of the process and product

e%ists. &hese are the reasons why we choose this system. &he weightedaverage processcosting

method assigns the average e#uivalent unit cost of all work done to date 01egardless of when it

was done2 to e#uivalent units completed and transferred out, and to e#uivalent units in ending

inventory. &he weightedaverage cost is simply the average of various e#uivalent unit costs

entering the work in process account.

"n the cost there are flow accounts Appear as a constants accounts roomates is concisely

described in this paragraph. &ransferredin costs or previous department costs are costs "ncurredin a previous department that are Carried forward as part of the products cost as it moves to a

subse#uent department. &hat means, costs move with the units when they are transferred to a new

department. (o, computations of the department of cement grinding and storage costs must

include transferredin costs, additional direct materials costs and conversion costs added in the

department of cement grinding and storage.

/e split the /ork in Process account into /ork in Process cement grinding and storage,

&ransferredin cement grinding and storage, /ork in Process cement grinding and storage,

3irect Materials and /ork in Process cement grinding and storage, conversion costs. &he

journal entries would contain this detail, though the underlying reasoning and techni#ues would

be unaffected. And the other departments also have the same kind or journal with proper

adjustment needed.


7/23

Com!an# !ro,ile

'afarge (.A. is a 'imited 'iability Company 0(oci4t4 Anonyme2 incorporated in -rance

under -rench law. /e produce and sell building materials 5 cement, aggregates and readymi%

concrete principally 5 worldwide,mostl& under the 3Lafarge4 rand name. ur !roducts are

used to uild and reno#ate residential, commercial and !ulic wor*s throughout the world.

Based on sales, we are the world leader in uilding materials. Based on internal and eternal

research, we are elie#ed to e the world leader in the cement mar*et.

&he rou! generated 15,27 million euro in sales, and !osted a current o!erating

income 8as defined in ection 7.2 8)ccounting !olicies and definitions99 of 2,1 million euro

and net income, rou! share of 5: million euro. )t &ear-end 2011, its assets totaled

70,1 million euro and the rou! em!lo&ed a!!roimatel& 6,000 !eo!le in 67 countries.i

History and development of the Group

/e began operating in -rance around )*++ when 6osephAuguste Pavin de 'afarge set up a lime

operation in 'e &eil 0Ard7che2, in the 8alley of the 1h9ne. &hrough sustained internal growth

and numerous ac#uisitions of lime and cement companies throughout -rance, we became

-rance:s largest cement producer by the late );+? whenwe su!!lied lime for construction of the ue+ Canal, which was the !relude to our

e!ansion in the ;editerranean Basin. /efurther e%panded internationally, in particularin Asia,

with our first operations in China and "ndia in the nineties. &hrough the purchase of the @ritish

cement company @lue Circle "ndustries plc 0@lue CircleB2 in


8/23

"n


9/23

The materials

+aw materials used in the manufacture of cement are limestone, silica sand, clay and iron sand and some

additional material such as poo6olan and gypsum. Total needs raw material used for producing cement

follows"

'. &imestone is used as much as 9 :';.

&imestone is the main source mempumyai o8ide formula !a!


10/23

). Iron sand is used as much as 9 ';.

Iron sand has a chemical formula 7e


11/23

/


12/23

SYSTEM DESIGS ! "#O$ESS $OSTIG

"rocess costingis an accounting methodology that traces and accumulatesdirect costs,

and allocates indirect costsof a manufacturing process. Costs are assigned to products, usually in

a large batch, which might include an entire months production. Eventually, costs have to be

allocated to individual units of product. "t assigns average costs to each unit, and is the opposite

e%treme of6ob costingwhich attempts to measure individual costs of production of each unit.

Process costing is usually a significant chapter.iv

Process costing is a type of operation costing which is used to ascertain the costof a

product at each process or stage of manufacture Costs are averaged over the units produced

during the periodI. Process costing is suitable for industries producing homogeneous products

and where production is a continuous flow. A process can be referred to as the subunit of an

organization specifically defined for cost collection purpose.

:
http://en.wikipedia.org/wiki/Direct_costhttp://en.wikipedia.org/wiki/Direct_costhttp://en.wikipedia.org/wiki/Indirect_costhttp://en.wikipedia.org/wiki/Job_costinghttp://en.wikipedia.org/wiki/Job_costinghttp://en.wikipedia.org/wiki/Costhttp://en.wikipedia.org/wiki/Direct_costhttp://en.wikipedia.org/wiki/Indirect_costhttp://en.wikipedia.org/wiki/Job_costinghttp://en.wikipedia.org/wiki/Cost


13/23

There are several steps of producing cements in &afarge company"

1. Extraction of Raw Materials

&he raw materials re#uired to manufacture cement are limestone and clay. 1ocks e%tracted from

the #uarry are routed to the nearby cement plant on a conveyor belt. Each #uarry is subject to a

rehabilitation plan adapted to its situation, including promotion of local biodiversity 0animal and

plant species2, creation of a touristic and environmental park, residential or agricultural

redevelopment, etc.

&he minerals from the #uarry are routed to the grinding plant where they undergo initial milling

before being reduced to a fine powder. &he raw materials 0*


14/23

composition similar to that of limestone and clay. $sing these alternatives helps preserve natural

resources.

&he raw mi% is fed into a preheating tower at *


15/23

. !ac"aging and Shi#ment

&he cement is stored in silos before being delivered in bulk using tanker trucks or packaged into

G+Gkg bags and stacked on pallets. 8arious means of transport may be used according to the

local infrastructure and topography. &he use of transportation methods with a low carbonfootprint 0in particular river or rail2 is given preference wherever possible. (ince the market for

construction materials is a local market, transportation distances are relatively short.

''


16/23

/e provide 'afarge company "ndonesia:s production cost reports based on the weightedaverage

method in the following tables.)

"h!si'al (nits &aterials )*n+ersi*n )*sts

?eginning wor3 in process inventory *,

Started during period /,

Total units to account for ',,

?eginning wor3 in process inventory *, ',

Started and completed , , ,

@nding wor3 in process inventory , , >,

Total units accounted for ',, /, >:,

Total costs (' /), :,

@Auivalent units ( /, >:,

Unit costs ('B( C./ C.: C'.

%irect materials C/),

%irect labor ',

0anufacturing overhead *),!osts for period ',)),

?eginning wor3 in process in inventory ',

Total costs to account for ',=,

-or3 in process beginning of month

?eginning costs C',

%irect materials

!onversion costs (', 8 C '. ',

Total costs to process beginning units >',

Started and completed (, 8 C ./ ',*,

Total costs transferred out ',>:>,

@nding wor3 in process inventory

0aterials (, 8 C .: C'>),

!onversion costs (>, 8 C '. /,

Total costs ending wor3 in process

Inventory *=,

Total costs accounted for C',=,

(nits '*st 'al'ulati*n

)*sts t* a''*unt ,*r

)*sts a''*unted ,*r

(nits -* A''*unt .*r

./R -H &/N-H /. AN(AR 2013

(nits A''*unted .*r

A.ARG )&N- IND/NSIA

D"AR-&N- /. &A-RIAS GRINDING AND .IRING

)/S- /. "R/D()-I/N R"/R-

ui+alent (nits

'The amount is based on our assumption'


17/23


?eginning wor3 in process inventory ',>:>,Started during period :,

Total units to account for ,*>,

?eginning wor3 in process inventory ',>:>, ',

Started and completed , , ,

@nding wor3 in process inventory *, *, :,

Total units accounted for ,*>, :, >:,

Total costs (' , =,@Auivalent units ( :, >:,

Unit costs ('B( C'.=/ C.> C'.*

%irect materials C,

%irect labor >,

0anufacturing overhead *,

!osts for period ',,

?eginning wor3 in process in inventory ,

Total costs to account for ,,


?eginning costs C,

%irect materials

!onversion costs (', 8 C '.* '*,**

Total costs to process beginning units >/,**

Started and completed (, 8 C '.=/ =:,=)

Total costs transferred out ',>),>)/


0aterials (*, 8 C .> C>,)/'!onversion costs (:, 8 C '.* ',::


Inventory **,**

Total costs accounted for C',=/,

(nits A''*unted .*r



)*sts a''*unted ,*r

./R -H &/N-H /. AN(AR 2013

A.ARG )&N- IND/NSIA

D"AR-&N- /. )&N- GRINDING AND S-/RAG

)/S- /. "R/D()-I/N R"/R-

(nits -* A''*unt .*rui+alent (nits

'*


18/23


?eginning wor3 in process inventory ',>),>)/

Started during period :,

Total units to account for ,,>)/

?eginning wor3 in process inventory ',>),>)/ ',*,

Started and completed *:, *:, *:,

@nding wor3 in process inventory ', ', ,

Total units accounted for ,',>)/ ):, ',/:,

Total costs (' ), )*,@Auivalent units ( ):, ',/:,

Unit costs ('B( C'./ C.:* C.)

%irect materials C),

%irect labor )/,

0anufacturing overhead *=,

!osts for period ',>,

?eginning wor3 in process in inventory ),

Total costs to account for ',/',


?eginning costs C),

%irect materials

!onversion costs (',*, 8 C .) *>,')

Total costs to process beginning units /:',')

Started and completed (*:, 8 C './ ):,)>)

Total costs transferred out ',':=,::


0aterials (', 8 C .:* C:*,***

!onversion costs (, 8 C .) ',/=


Inventory =,)'

Total costs accounted for C',:,

(nits A''*unted .*r



)*sts a''*unted ,*r

./R -H &/N-H /. AN(AR 2013

A.ARG )&N- IND/NSIA

D"AR-&N- /. "A)4AGING AND SHI"&N-

)/S- /. "R/D()-I/N R"/R-

(nits -* A''*unt .*rui+alent (nits

')


19/23

%ournalyze

GENERAL 1OURNAL.

DESCRIPTION DEBIT CREDIT

-or3 in #rocess$0aterial 1rinding and 7iring C/),

-or3 in #rocess$!ement 1rinding andStorage

C,

-or3 in #rocess$#ac3aging and Shipment C),

Accounts #ayable C',),

to record direct materials purchased andused

-or3 in #rocess$0aterial 1rinding and 7iring C:,


C=,

-or3 in #rocess$#ac3aging and Shipment C:>,

Darious Account C,>',

to record each department conversion costs

-or3 in #rocess$0aterial 1rinding and 7iring C',


C>,

-or3 in #rocess$#ac3aging and Shipment C)/,

Salaries C',:,

to record direct labor costs

The amount is adEusted from the previous assumption'


20/23

-or3 in #rocess$0aterial 1rinding and 7iring C*),


C*,

-or3 in #rocess$#ac3aging and Shipment C*=,

7actory overhead C',*,

to record manufacturing overhead applied

-or3 in #rocess$ !ement 1rinding andStorage

C',>:>,

-or3 in #rocess$ 0aterials 1rinding and7iring

C',>:>,

to record cost of goods completed andtransferred from !ement 1rinding and

Storage to #ac3aging and Shipment

-or3 in #rocess$#ac3aging and Shipment C',>),>)/


C',>),>)/

t* re'*rd '*st *, **ds '*m6leted andtrans,erred ,r*m )ement Grindin andSt*rae t* "a'kain and Shi6ment

7inished 1oods Inventory 7189158000

-or3 in #rocess$#ac3aging and Shipment 7189158000

t* re'*rd ,inished **ds balan'e

'>


21/23

Conl+sion

As the top manufacturer of building materials, 'afarge Cement "ndonesia plays a leading

role in the cement business. "ts performance is based on wellstructured businesses, a high level

of e%pertise and modern, ethical management. /hile consolidating its position on developed

markets, the roup has managed to successfully integrate its business into the markets of newly

emerging economies and continues to increase its industrial capacities. &he roup:s business

lines, evenly present throughout the world, make it ideally placed to seize growth opportunities.

=ur cement is made by crushing and grinding calcium carbonate 0limestone2, silica

0sand2, alumina and iron ore in appropriate proportions and heating the resulting mi%ture in a

kiln. -rom the making process produces clinkerB, which is then finely ground with gypsum to

make cement powder.

&he 'afarge Cement "ndonesia uses process costing system design since the

costs were directly allocated to a particular department. /hen the standardized goods result from

a se#uence of repetitive and continuous operations, it is useful to work out the cost of each

department. &hen because every unit produced may be assume to have involved the same amount

of work, costs for a period are charged to processes or operations, and unit costs are ascertained

by dividing process costs by the #uantity of output units produced.

'/


22/23

Re,erene List

':


23/23

ihttpDLLwww.lafarge.comLwpsLportalLGN1apportsfinanciersii'afarge historyiii Mehta, P.O. 0);*N2. Iatural pozzolansD (upplementary cementing materials in

concreteI. C)D )5++.

iv

6ae O. (him, 6oel . (iegel 0

process costing lafarge

Documents