TMI BlogPacking Material CostX X X X Extracts X X X X X X X X Extracts X X X X ..... d be applied to cost statements, which require classification, measurement, assignment, presentation and disclosure of Packing Material Cost including those requiring attestation. Definitions 4. The following terms are being used in this standard with the meaning specified. 1 [ 4.1 Abnormal cost: An unusual or atypical cost whose occurrence is usually irregular and unexpected and/ or due to some abnormal situation of the production or operation .] For example : the cost of packing material which is rejected after issue due to abnormal causes such as misprinting, use of material of wrong specification etc. (net of realisable value) may be treated as abnormal cost. 4.2 Administrative Overheads: Cost of all activities relating to general management and administration of an organisation. Administrative overheads shall exclude any overhead relating to production, operations and marketing. 2 [ 4.3 Cost Object: This includes a product, service, cost centre, activity, sub-activity, project, contract, customer or distribution channel or any other unit in relation to which costs are ascertained. ] 3 [ 4.4 Direct Employee Cost: The cost of employees which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WORKS: Defectives which can be brought up to the standards by putting in additional resources .] Rework includes repairs, reconditioning and refurbishing. 11 [ 4.11.1.2 REJECTS: Defectives which cannot meet the quality standards even after putting in additional resources.] Rejects may be disposed off as waste or sold for salvage value or recycled in the production process. 4.11.2 PACKING MATERIAL COST: The cost of material of any nature used for the purpose of packing of a product. 4.11.3 PRIMARY PACKING MATERIAL: Packing material which is essential to hold the product and bring it to a condition in which it can be used by or sold to a customer. For example: u Pharmaceutical industry: Insertions related to product, Foils for strips of tablets/capsules, vials. u Industrial gases: Cylinders/ bottles used for filling the gaseous products u Confectionary Industry: Butter paper and wrappers. 4.11.4 REUSABLE PACKING MATERIAL: Packing materials that are used more than once to pack the product. 12 [ 4.11.5 SCRAP: Discarded packing material having some value in a few cases and which is usually either disposed of without further treatment or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly incurred in connection with the acquisition of Packing Material shall not form part of Packing Material Cost. 5.1.3 Self-manufactured packing materials shall be valued including direct material cost, direct employee cost, direct expenses, job charges, factory overheads including share of administrative overheads comprising factory management and administration and share of research and development cost incurred for development and improvement of existing process or product. 5.1.4 The valuation of captive consumption of packing materials shall be in accordance with paragraph 5 of Cost Accounting Standard 4. 5.1.5 Normal loss or spoilage of packing material prior to receipt in the factory shall be absorbed in the cost of balance materials net of amounts recoverable from suppliers, insurers, carriers or recoveries from disposal. 5.1.6 The forex component of imported packing material cost shall be converted at the rate on the date of the transaction. Any subsequent change in the exchange rate till payment or otherwise shall not form part of the packing material cost. Explanation : The date on which a transaction (whether for goods or services) is recognised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o account the number of times or the period over which it is expected to be reused. 6.4 Cost of primary packing materials shall form part of the cost of production. 6.5 Cost of secondary packing materials shall form part of distribution overheads. 7. Presentation 7.1 Packing Materials shall be classified as primary and secondary and within this classification as purchased - indigenous, imported and self-manufactured. 7.2 Where separate cost statements are prepared for packing costs, the cost of packing materials consumed shall be presented in terms of type of packing in which the materials are used (For example: Bale, Bag, Carton, Pallet). Such statements shall also include cost and quantitative information, wherever it is found material and quantifiable. 8. Disclosures 8.1 The cost statements shall disclose the following: 1. The basis of valuation of Packing Materials. 2. Where Packing Materials Cost is disclosed at standard cost, the price and usage variances. 16 [ 3. The cost and price of Packing Materials received from/supplied to related parties ] 4. Packing Materials cost incurred in foreign exchange. 5. Any Subsidy/Grant/Incen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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