ABOUT GLOBAL COMMUNICATIONS

Global Communication Ltd. (GCL), manufacturers of Telephone Exchanges, had been
incorporated in the early 90s and has since grown rapidly. Today it is considered as one
of the largest Telecom Company in the country. Till only a few months back, being the
only manufacturer of such products, GCL was enjoying monopoly and huge Gross Profit
Margins to its credit. Costing was hence not thought to be important, except to facilitate
statutory Financial Audits. However, the Telecom revolution changed the scenario in no
time, with more business houses venturing into Exchange production. Sensing
competition, the management had been quick to hire the services of Mr. Ravi Shankar in
order to help implement a relevant Costing System for its plant located at Kanpur. The
system was to be such, so as to fulfil the requirements of Material and Expenses Control,
facilitate Statutory Audit, help in Pricing Decisions and provide for the day-to-day
requirements of Excise, etc. Since the variable cost component within the production
process was quite high a Standard Costing System was thought off to be most
appropriate.