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Packing Material Cost

CAS - 09 - Rules - Cost Accounting Standards - CAS - 09 - CAS - 9 The following is the COST ACCOUNTING STANDARD - (CAS - 9) issued by the Council of The Institute of Cost and Works Accountants of India on "". In this Standard, the standard portions have been set in bold italic type. This standard should be read in the context of the background material which has been set in normal type. 1. Introduction 1.1 This standard deals with the principles and methods of determining the . 1.2 Thi .....

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d be applied to cost statements, which require classification, measurement, assignment, presentation and disclosure of 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 .....

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ution channel or any other unit in relation to which costs are ascertained.] 3[4.4 Direct Employee Cost: The cost of employees which can be attributed to a Cost Object in an economically feasible way] 4.5 Direct Expenses: Expenses relating to manufacture of a product or rendering a service, which can be identified or linked with the cost object other than direct material or direct employee cost4. Examples of Direct Expenses are royalties charged on production, job charges, hire charges for use o .....

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ndary packing u Transportation cost u Warehousing cost u Cost of delivering the products to customers etc. u Clearing and forwarding charges u Cost of mending or replacing packing materials at distribution point. 4.8 Finance Costs: Costs incurred by an enterprise in connection with the borrowing of funds. This will include interest and commitment charges on bank borrowings, other short term and long term borrowings, amortisation of discounts or premium related to borrowings, amortisation of anci .....

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y the customer. 4.10 Marketing overheads: Marketing Overheads comprises selling overheads and distribution overheads. 4.11 Packing Materials: Materials used to hold, identify, describe, store, protect, display, transport, promote and make the product marketable and communicate with the consumer. 9[4.11.1 DEFECTIVES: Packing materials that do not meet quality standards. This may include reworks or rejects.] 10[4.11.1.1 REWORKS: Defectives which can be brought up to the standards by putting in add .....

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ion 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 .....

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Jars for holding wrapped chocolates, Cartons containing packs of biscuits. 4.12 Packing Material Development Cost: Cost of evaluation of packing material such as pilot test, field test, consumer research, feedback, and final evaluation cost. 13[4.13 Production overheads: Indirect costs involved in the production process or in rendering service.] The terms Production Overheads, Factory Overheads, Works Overheads and Manufacturing Overheads denote the same meaning and are used interchangeably. Pr .....

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re used as scale of reference to compare the actual costs with the standard cost with a view to determine the variances, if any, and analyse the causes of variances and take proper measure to control them. Standard costs are also used for estimation. 5. Principles of Measurement 5.1 Principle of valuation of receipts of packing material: 5.1.1 The packing material receipts should be valued at purchase price including duties and taxes, freight inwards, insurance, and other expenditure directly at .....

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d 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 .....

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ccounting in conformity with generally accepted accounting principles. 5.1.7 Any demurrage, detention charges or penalty levied by the transport agency or any authority shall not form part of the cost of packing materials. 5.1.8 Any Subsidy/Grant/Incentive or any such payment received/receivable with respect to packing material shall be reduced for ascertainment of the cost to which such amounts are related. 5.2 Principle of valuation of issue of packing material Issues shall be valued using app .....

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the computation of cost shall be as per CAS 4. 5.5 Where packing materials are accounted at standard cost, the price variances related to such materials shall be treated as part of and the portion of usage variances due to normal reasons shall be treated as part of . Usage variances due to abnormal reasons shall be treated as part of abnormal cost. 5.6 The normal loss arising from the issue or consumption of packing materials shall be included in the packing materials cost. 5.7 Any abnormal cost .....

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ed on the basis of quantity consumed or similar measures like technical estimates. 6.3 The of reusable packing shall be assigned to the cost object taking into 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 .....

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