Standard Costing Procedure And Cost Variance Analysis Of Glaxosmithkline Bangladesh Ltd

Internship Report

On

Standard Costing Procedure &

Cost Variance Analysis:

A Study on GlaxoSmithKline Bd. Ltd.

Submitted To

Mr. Syed Manzur Quader

Lecturer

Independent University, Bangladesh

Chittagong

Submitted By

TASBEER AKTAR ABEER

ID#0311022

Independent University, Bangladesh

Date of Submission: 10th September, 2007

Letter of Transmittal

Monday, September 10, 2007

To

Mr. Syed Manzur Quader

Lecturer,

Independent University, Bangladesh

Chittagong

Sub: Submission of Internship Report.

Dear Sir,

This is much to my delight that I am submitting herewith my internship report titled "Standard Costing Procedure and Cost Variance Analysis- A study on GlaxoSmithKline Bangladesh Limited".

As of my organization's requirement and supervisor's suggestions and guidance, I have tried my best to make this report meaningful. I believe and hope that you will find this report informative and insightful.

I, therefore, would like to request you to accept my report and oblige me with the honor of completing my internship. Any further clarification, if needed, regarding the report will be instantly responded.

Thank you,

Sincerely,

Tasbeer Aktar Abeer

ID# 0311022

Bachelor of Business Administration

Independent University, Bangladesh

Acknowledgement................................

I take the privilege to appreciate all of the individuals who have helped me to prepare this report during the last three months.

Firstly, I express my gratefulness to Almighty Allah who has made be able to pursue my study.

I would like to express my gratitude to Mr. Mohammad Alamgir, Manager, Human Resources Development(HRD), GlaxoSmithKline Bangladesh Ltd, for giving me the opportunity, appointment and lastly for his certification for the internship program that I had completed. I specially want to thank Mr. Omar Faruq and Mr. Mujibur Rahman, Finance and Accounts Department. Without their help it was impossible to complete the report properly.

I convey my gratitude to my honorable Supervisor, Mr. Syed Manzur Quader, Lecturer, School of Business, Independent University, Bangladesh, for his guidance and co-operation, which helped me immensely to prepare this report. He guided me in coordinating the whole report. He spent time to check the draft report and given his suggestions on different chapters of the report. Without his help, it would have been hard to come up with a comprehensive report.

My special thanks go to all of my friends and the people who were directly or indirectly supported and encouraged me during my internship program.

Executive Summary................................

The research is based on the standard Costing Procedure and Cost Variance Analysis of GlaxoSmithKline Bangladesh Ltd. The purpose of this research is to understand how the standard costs of different cost elements are being determined and how the cost variances between standard performance and actual performance are calculated. The other purpose of this research is also to determine the weaknesses of the standard costing procedure and cost variance analysis.

From the view point of function this was a descriptive research. The research was conducted on the basis of 'Survey Method' and 'Secondary Data Analysis'. Regarding Survey Method all collected Primary Data was the Qualitative Data and was collected by asking questions through interview and formal and informal discussion. No questionnaire was used for this purpose. Secondary data from different documents and article are also used in this research. The research was undertaken on the basis of non-probability sampling and the sample was chosen from the employee of GSK who are directly involved with importing.

From the exploration of the standard costing procedure of GlaxoSmithKline Bangladesh Ltd, it has been found that the company determines the standard cost of every product by calculating the standard cost of direct material, standard cost of direct labour and standard cost of overhead individually. The standard cost of direct material is comprised of standard cost of both the raw material and packing material. By multiplying the standard rate with the standard material quantity, standard cost of raw material and packing material can be calculated. Standard cost of direct labour is calculated by multiplying the standard labour hour (comprised of both the manufacturing standard hour and packing standard hour) and standard labour hour rate. Finally, to calculate the standard cost of overhead, the overhead costs are distributed to different departments say production department and service department which is called primary distribution and then the costs of service departments are redistributed to production departments which is called secondary distribution. From that, the variable and fixed overhead rate is calculated. By multiplying the rates with the standard labour hour of a product, the fixed and variable overhead can be got. At last, standard direct material cost, standard direct labour cost and standard overhead cost are added to get the total standard cost of a product.

In cost variance analysis, the deviation between standard cost and actual cost of a cost element is calculated.