PACKING MATERIAL COST

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....rement and assignment of Packing Material Cost, for determination of the cost of product, and the presentation and disclosure in cost statements. 1.3 Packing Materials for the purpose of this standard are classified into primary and secondary packing materials. 2. Objective The objective of this standard is to bring uniformity and consistency in the principles and methods of determining the packing material cost with reasonable accuracy. 3. Scope This standard should be applied to cost statements, which require classification, measurement, assignment, presentation and disclosure of Packing Material Cost including those requiring attestation. 4. Definitions The following terms are being used in this standard with t....

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.... can be attributed to a cost object in an economically feasible way. 4.7 Distribution Overheads: Distribution overheads, also known as distribution costs, are the costs incurred in handling a product or service from the time it is ready for despatch or delivery until it reaches the ultimate consumer including the units receiving the product or service in an inter-unit transfer. For example: • Secondary packing • Transportation cost • Warehousing cost • Cost of delivering the products to customers etc. • Clearing and forwarding charges • Cost of mending or replacing packing materials at distribution point. 4.8 Imputed Costs: Notional cost....

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.... 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 and preserve the product for its use by the customer. For example: • Pharmaceutical industry: Insertions related to product, Foils for strips of tablets/ capsules, vials. • Industrial gases: Cylinders / bottles used for filling the gaseous products • Confectionary Industry: Butter paper and wrappers. 4.11.4 Reusable Packing Material: Packing materials that are used more th....

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....es incurred in selling the products or services. 4.15 Standard Cost: A predetermined cost of a product or service based on technical specifications and efficient operating conditions. Standard costs are 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 attributable ....

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....terial cost. Explanation: The date on which a transaction (whether for goods or services) is recognised in accounting 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 appropriate assumptions on cost flow. For example: First In First Out, Last In First Out, ....

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....cost object to the extent it is economically feasible. 6.2 Where the packing material costs are not directly traceable to the cost object, these may be assigned on the basis of quantity consumed or similar measures like technical estimates. 6.3 The packing material cost 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 this classification as....