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The Coca Cola company

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Coca-Cola is the most popular and biggest-selling soft drink in history, as well as the best-known product in the world. Created in Atlanta, Georgia, by Dr. John S. Pemberton, Coca-Cola was first offered as a fountain beverage by mixing Coca-Cola syrup with carbonated water. Coca-Cola was introduced in 1886, patented in 1887, registered as a trademark in 1893 and by 1895 it was being sold in every state and territory in the United States. In 1899, The Coca-Cola Company began franchised bottling operations in the United States. Coca-Cola might owe its origins to the United States, but its popularity has made it truly universal. Today, we can find Coca-Cola in virtually every part of the world. Coca-Cola Beverages Sri Lanka Ltd (CCBSL), located in Biyagama, is the only Coca-Cola bottling plant in Sri Lanka. It has 443 employees.

While it has been a partner in the Coca-Cola SABCO Group since 2004, its origins go back to 1955, when it was formed under the name Pure Beverages Co Ltd., through the acquisition of the Ceylon Fruit Drinks & Table Water Company. Its journey with Coca-Cola started in 1960, when a franchise agreement was signed with the Coca-Cola Export Corporation. In 1994, the operation was purchased by Freizer & Nieve Coca-Cola (Pty) Ltd, the Singapore-based anchor bottler. The company’s name changed to CCBSL in 1999, when it was acquired by The Coca-Cola Company. CCBSL produces and sells over 10-million unit cases of carbonated soft drinks (both still and sparkling) per annum.

It operates through a countrywide distributor network, consisting of about 128 distributors. CCBSL has notched up a number of successes, including the following: In November 2007, CCBSL entered the still beverage market with Minute Maid Orange. It was an instant success and just six months after it was launched had already notched a market share of 23%. Minute Maid Mango followed its popular sibling into the market in April 2009. Sri Lankans enjoy Coca-Cola, Coke Light, Fanta, Sprite, Lion, Minute Maid and Schweppes etc… Vision

“We will be the Best Coca-Cola bottler in the World”
The Best:
In sales volume; & in return on capital employed
Coca-Cola Bottler:
A consumer driven, customer oriented, manufacturer, sales & Distribution Company that markets the products & brands of The Coca-Cola Company. In the World:
We measure ourselves against the best Coca-Cola bottlers in the World. Purpose
To create value for everyone touched by our business by providing, with passion and focus, the right refreshment, at the right price, in the right place. Values
We will create an environment where our people are passionate about performance. This will be based on:
Integrity: Be honest, open & sincere
Individual Initiative: Take pro-active steps to drive performance Customer Value: Exceed customer expectations & add value to Customers’ businesses Teamwork: Work with & support colleagues to raise overall performance People Development: Realize employee potential through training & development Mutual Trust & Respect: Treat each other with respect & dignity, & earn trust Commitment: Be accountable & do as you say

COST OBJECTS OF COCA COLA COMPANY

These objectives are divided in to 2 parts.
CSD (Carbonate Soft Drinks)
Fruit juice
Coca cola
Minuit maid mango
Coke light
Minuit maid orange
Fanta
Minuit maid apple
Sprite
Minuit maid mix
Lion soda

Direct Labour
In the Coca Cola Company, direct labor cost is a part of payroll that specifically assigned to the manufacture of the product. So, we can say it is the cost of the work done by those workers who actually make the product on the production line. There are nearly 370 labours that are directly link with the production process. Direct Overheads

In the Coca Cola Company, main direct overhead is electricity. Then fuel, depreciation and Insurance etc. Indirect Expenses
The Coca Cola Company has various indirect expenses such as Security expenses, Audit fees, Consultation fees, Sanitary, Stationary etc.

COSTING SYSTEM
There are two types of costing systems. They are,
Job costing &
Process costing

Job Order Costing
Process Costing
1. Many different jobs are worked on during each period, with each job having different production requirements.
2. Costs are accumulated by individual job.
3. Job cost sheet is the key document controlling the accumulation of costs by a job.
4. Unit costs are computed by job on the job cost sheet.

1. A single product is produced either on continuous basis or for long periods. All units of product are identical.
2. Costs are accumulated by departments.
3. The department production report is the key document showing the accumulation and disposition of costs.
4. Unit costs are computed by department on the department production report.

COSTING SYSTEM OF THE COCA COLA COMPANY
Coca Cola Company use Process Costing method as their costing system. That means they allocate their manufacturing cost to products to determine an average cost per unit. It is used by company because they produce identical, mass and similar products.

The whole Coca Cola Company operates under a system called SAP (System Application Product). It links all the areas, departments of the company. It is a data management program which highly valuable for the finance side of the company.

There are some activities which carry out through the whole production process. They are, Quality Control

The company goes behind a highly standard quality which is required by the mother company The Coca Cola, Atlanta. In that case, the mother company franchise with their recommended material suppliers. In the production process they have nearly 40-60 people to concern about the quality of the product and in the production process. The company’s quality starts with the procurement. They highly concern about the quality of water which is mixing to the drink. They required taking water from the deep ground (Ground Water).

Purchasing

CCBSL purchase other materials except concentrate only from approved suppliers by The Coca Cola Company. Few are, Crown – Indian Oriental Container
Sugar – CZANIKO etc.

Then they come to the Process Set up which is with number of process.

OVERHEADS ALLOCATION METHOD OF THE COCA COLA COMPANY
Coca Cola Company has nearly 10 cost centers in its production department: This is their Primary Distribution. They allocate and apportion production overheads between those cost centers. They are, Operation Planning

Water Treatment
Production Line 1
Production Line 2
Production Line 3
Syrup room
Post Mix room
CO2 Plant
Quality Cost Center
Supply Chain Planning

There are other cost centers from other departments which do not directly contribute to the production. But the costs of those cost centers allocate apportionately with in the production cost centers. Those departments are,
Marketing Department

Sales Department
Supply Chain Department
Finance Department
HR Department
Public Affairs and Communication Department
Basis of apportion the overheads between cost centers
Basis of allocate the service departments overheads between production departments. (Ratios)

Opera. Planing
Water Treat.
Produc. Line 1
Produc. Line 2
Produc. Line 3
Syrup room
Post Mix room

STANDARD COSTING AND VARIANCE ANALYSIS

Standard Cost
Standard cost is an estimated or predetermined cost of performing an operation or producing a good or service, under normal conditions. Standard cost are used as target cost (or basis for comparison with the actual cost), and are developed from time and motion studies. They almost always vary from actual cost, because every situation has its share of unpredictable factors also called normal cost.

Actual Cost
Actual cost means the actual amount paid or incurred, as opposed to estimated cost or standard cost. In contracting, actual cost amount includes direct labour, direct material and other direct charges.

Variance Analysis
Cost Variance analysis is the process of calculating the difference between an incurred cost and an expected cost, investigating the reasons for the difference, reporting this information to management, and then taking corrective action to bring the incurred cost into closer alignment with the expected cost.

Direct Labour- Standard and Variance Analysis

Like in all other companies Coca Cola too practice Labour standards and variance analysis. First they set standard rates for both LRV and LEV. Later they compare actual with budgeted figures. According to what manager said, there should not be high negative balance because negative balances represent their inefficiencies at both budgeted balances and performances. And also it should not be too much positive (high favorable balance) which also reflects cheatings and problems with budgeted system. So according his opinion variance should be favorable but there should not be high gap.

Direct material total variance
Direct material total variance is the difference between the actual cost of actual number of units produced and its budgeted cost in terms of material. Direct material total variance can be divided into two components. They are The Direct Material price variance

The Direct material usage variance
Material Price Variance
It is the difference between the Standard cost and the actual cost for the actual quantity of material use or purchased. Material usage Variance
Direct material usage ( efficiency , quantity ) variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials used, valued at the standard cost per unit of material. It is one of the two components (the other is direct material price variance) of direct material total variance. Material total variance application to Coca Cola

Coca Cola Company is not in a position of controlling their material cost. That is due to the set standards by the Mother Coca Cola Company in Atlanta. The concentrate (Syrup) used by the Coca Cola is only provided by the coca cola company. So no matter how costly it is, buying the concentrate at any cost is a must. Coca Cola standers are higher than the ISO family standers. It is really expensive to keep up to those required standers. But still they are following those required standards. E.g. – Water that is used to mix with the syrup should only be ground water, not just any other water

METHODS OF RANKING INVESTMENT PROPOSALS.
The Coca Cola Company evaluate the attractiveness of an investment proposal, using methods such as average rate of return, internal rate of return (IRR), net present value (NPV), or payback period. They have positive Net Present Value. And their Payback Period is greater than the WACC (payback period > WACC). The Coca Cola Company has 5 years of rate of return which discounts all the future cash inflows to the outflow (IRR).

CONCLUSION
The coca cola company is currently one of the biggest and most recognized carbonate soft drinks brands in the world. To provide world best known product, The Coca Cola Company has employ the highest quality process and establish standards which guarantee the production to meet consumers high expectations each & every time they drink a bottle or a can of coke. This brand also performs well in the Sri Lankan market with a market share of 42%. The use of SAP (System Application Product) has made company’s accounting process much accurate. These were the information we could gather from The Coca Cola Company at Biyagama. All information was not disclosed but necessary information was given to us. Company’s members of the staff were customer friendly and devoted more than half an hour for our discussion.

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