Activity based cost approch at HAL Nasik division-Indian Institute of Management Banglore.: Banglore.

Abstract

HINDUSTAN AERONAUTICS LIMITED was formed in 1940, to produce a select class of aviation products. The company has made a beginning in international export program by utilizing its core competence - Manufacture of aviation parts. The company has re-oriented itself to be competitive and customer oriented. HAL Nasik division was formed to manufacture MiG series of aircraft with Russian collaboration. The division manufactures airframe, assembles the engine and integrates accessories and avionics to produce complete aircraft, tests and then delivers to the customer. It manufactures around 25,000 detail parts/assemblies and 8000 standard parts. Economic liberalization policy adopted by the Government of India has forced competition in and HAL now has to compete with global suppliers. The falling order book position of HAL has also prompted HAL to look for customers other than the Armed Forces and in the process utilize the excess capacity available. The prospect for supply of aviation standard components for the various missiles and launch vehicles productionised by DRDO has broadened the scope of HAL. The crash of the erstwhile Soviet Union into small federal states has given HAL a business opportunity in the military aviation sector for supply of spares and components. These factors have necessitated HAL to look into its costing policies, which it has followed over the years, and modify the same to suit the present business scenario. The major objectives of the project include 1. The study of the existing costing system and analyze appropriation of overheads. 2. Evaluating the existing system to establish whether the costs are reliable and accurate. 3. To explore the feasibility of introducing a new costing system using ABC by using the existing framework.