On cost charges in Workshops

 On cost charges in Workshops

• Source: Click for 6th chapter of I.R. Rolling Stock Code

• Meaning: 

1. The expenditure which cannot be directly allocated to the product or service and

2.  can only be apportioned on some logical basis

• Another name is Overheads

• On Cost charges - 3 types

1. Shop On Cost (SOC)  - comprising Labor and Materials

2. General On Cost (GOC - comprising Labor and Materials

3. Administrative On Costs (AOC) .  Also called as Proforma On Cost (POC)

• On costs are always expressed and levied as a percentage of Direct labour including incentive Bonus and overtime paid in that work order.

•  Annual Budgeting is required. 

• Shop On cost and General On cost need to be charged to all types of works executed at the workshop irrespective of their nature.

• Quarterly Review: 

1. A review of efficiency of overhead percentages should be made quarterly with reference to total actual expenditure incurred vis-à-vis that recovered at the overhead percentages.

2. A comparison of these actual overheads with recoveries made through estimated percentages will reflect over/under charges for the month under different overheads

3. If these are found unduly large, the percentages are revised without waiting for the Annual On cost Budget so as to minimize the difference between the actual and the predetermined percentage.

4. The Under / Over charges at the end of the year should be less than 5% so as to make On cost budget realistic and the same must be cleared through the final Heads before the end of the Financial Year.

5. Senior scale/JA grade executive officer in charge of Production Control Organization should review the trend of on-cost budget every quarter, jointly with workshop Accounts Officer

6. The outcome of this review in the form of management summary shall bring to the knowledge of Chief Workshop Manager for the management review and ‘on-cost’ control exercise

Shop On Cost (SOC)

• All on cost incurred within a Shop or Section.  Examples are 

1. Wages, overtime etc. of Shop apprentices, JEs, unskilled labour. 

2. Leave pay, idle time, sick hurt and holiday pay, travelling allowances and arrear pay, and pay allowed to men on volunteer duty or part-taking in sports.

3. Shop scrap (credit)

4. Stationery and forms

5. Defective and spoilt work, in the case of experimental work

6. Power chargers, whether electric pneumatic, gas or hydraulic which can be directly allocated to shops.

7. Wages of operators of automatic machines, not otherwise allocated

8. Wages, overtime etc. of men employed on mechanical transport in the shop

9. Wages, overtime etc. of all general labour in shops including those employed on transport.

10. Hammer driving in shops

11. Small differences between muster rolls and time sheets

12. Consumable stores (Lubrication oil, waste, sponges, etc.)

13. Charges for coal and coke in the smithies

14. Lighting charges in shops

15. Fine creditable to works

16. Suspension allowances

17. Wages etc. of shop messengers

18. Working expenses of crane and shunting engines, lorries, autotrucks, traversers etc.

19. Small tools for shop use

General On Cost (GOC)

•  Denotes all On cost charges common with more than one Shop. Examples are:

1. Wages and allowances of staff of Yard shop

2. Wages & allowances of Workshop apprentices not attached to shops. 

3. Freight charges .

4. Electrical power.

5. Hydraulic and pneumatic power and gas

6. Replacement of articles stolen or lost

7. Expenditure on apprentices’ school and hostel

8. Working expenses of crane and shunting engines, lorries, auto trucks, traversers etc.,

9. Working expenses of central works pumping plant.

10. Experimental work

11. Water charges

12. Sanitary arrangements

13. Messengers’ wages, uniforms etc.

14. Consumable stores for general use

15. Maintenance of mess rooms

16. Yard lighting.

Administrative On Cost  or Proforma On Cost

•  Charged  -   percentage of direct labour  - to RSP works and all works done for outsiders. 

• Profit will also be charged for work done for outsiders.

• To  make competitive, GM can waive whole charges or reduce with concurrence of PFA. 

 

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WGR in Workshop Accounts

WGR - Workshop General Register

                       Shri Uday Kiran Bora, PS to PFA/SCR, 

Mobile: 9242323381

 

·         A Workshop has number of shops viz. Lathe, Assembly, Saw mill, Smithy etc.,

 ·         A work order is an authority issued by Production Control Office to initiate any work in a shop.

 ·         A work order will be enclosed with Route card (process of operations), material required etc.

 ·         Job card will move along with physical work, on which the timings of staff worked on this work are noted.

 

·         Average Rate per hour =        Total wages paid (incl. Allowances)

§  Total no of hours worked in a month.

 

 ·         Necessity of Costing in Workshops: To know the output/outturn of any work and also to check whether the work is financially viable or not.  

Costs are divided into
Prime Costs (Direct Costs)	On Costs (Indirect costs)

 

 ·         Prime costs = direct labour costs + direct material costs

 ·         Oncosts = indirect labour costs + indirect material costs

 ·         Note: In workshops – Oncosts and in Productions it is overhead charges.

 

Calculation of cost for a work:

 

Material used for all works in a shop	Labour for all works in a shop
1. Stores from stores depot	1. Total labour cost = total no. Of hours * average rate per hour
2. Direct Purchases	2. Incentive cost based on job card
3. Received from other railways	3. Misc. Costs
4. Credits (Returned stores)
Total: Stores subledger of the shop (1+2+3+4)	Total: Labour subledger of the shop (1+2+3)
All shops added: Stores subledger of the workshop	All shops added: Labour subledger of the workshop.
Workshop General Register
Out Turn Statement Part – I	Out Turn Statement Part – II
Outlay adjustable during the month	Outlay on works in progress & completed works – awaiting acceptance by the concerned parties.

 ·         Parallelly Check Sheet is prepared from the summary of the stores subledgers and labour subledger to see that all the entries are entered in WGR.   

 ·         Workshop General Register: The totals of Stores subledger of the workshop and Labour subledger of the shop are noted in a register, shop wise and work order wise, for a month is called Workshop General Register.

 ·         Out Turn Statement: From workshop general register, the Out Turn Statement Part- I and Out Turn Statement Part-II are prepared. Out Turn Statement is prepared to check whether it is booked to proper heads of account or not.

 

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WMS - Workshop Manufacturing Suspense Budget

Click for PDF copy of the WMS Budget


WMS Specimen Budget for the year 2020-21 of XYZ Railway

SN	Debits	Inner column	Amount (Rs.)		SN	Credits	Inner column	Amount (Rs.)
A	Opening Balance as on 01.04.2020
	i) Works in Progress	15
	ii) Amount outstanding for realisation - scrap	5
	iii) Bills to be raised for completed works	10
	Total (i + ii + iii)	30	30
B	Debits during the year (2020-21)				E	Credits during the Year (2020 -21)
	i) Wages to Labour	120				i) To Works	35
	ii) Material -Stores suspense (Depots)	100				ii) To Stores Suspense	115
	iii) Materials - Direct purchases	75				iii) To Revenue Demands of Home Railway (Labour & Materials)	130
	iv) Materials - Adjustments	15				iv) To Revenue Demands of Foreign Railways (Labour & Materials	25
	v) Contracts	10				v) To RSP - Rolling Stock Programme	20
	vi) Energy charges (Electricity)	5				vi) To Deposit Works for outsiders	5
	Total ( i to vi )	325	325			Total ( i to vi)	330	330
C	Deduct for Issues from WMS to Services/Works - within the Demand (2020-21)				F	Deduct for Issues within the Demand		(-) 50
	i) Issues to Works	35
	ii) Issues to Stores Suspense	15
	Total ( i + ii )	50	(-) 50
D	Total Debits during the Year (2020-21)   B - C	325 - 50	275		G	Total Credits during the Year (2020-21)  E -F	330 - 50	280
					H	Closing Balance as on 31.03.2021
						i) Works in Progress	15
						ii) Amount outstanding for realisation	5
						Iii ) Bills to be raised for completed works	5
						Total ( i + ii + iii)	25	25
E	Grand Total ( Opening Balance + Total Debits during the Year)	30 + 275	305		I	Grand Total (Total Credits during the year + Closing Balance)	280 + 25	305

·         Budget Allotment required under WMS (Plan Head 7200 ) for XYZ Railway of the

 Year 2020-21 is Rs. 275 /- (Total Debits during the year under Sl.No. D).  

The Principle is Gross Budgeting.  Credits should be shown as footnotes under the

 Demands for Grants.