Cost Analysis On Cadbury India Ltd

CADBURY OVERVIEW
Cadbury India is a fully owned subsidy of Kraft Foods Inc. The combination of Kraft Foods and Cadbury creates a global powerhouse in snacks, confectionery and quick meals.

INTRODUCTION
In India, Cadbury began its operations in 1948 by importing chocolates. Cadbury India operates in four categories viz. chocolate confectionery, milk food drinks, candy and gum category. Cadbury enjoys a value market share of over 70% - the highest Cadbury brand share in the world! Manufacturing facilities at: 1) Thane, 2) Induri (Pune), 3) Malanpur (Gwalior), 4) Bangalore 5) Baddi (Himachal Pradesh)

Brand Portfolio
11 brands with more than $1 billion in revenue 70+ brands with more than $100 million in revenue

40+ brands over 100 years old

BRANDS
Chocolates Snacks

Beverages
Candy Gums

Some key Brand In INDIA

Objectives
Determine the fixed costs, variable costs and semivariable costs for the business. Identify the indirect costs (Overheads) for the business. Is the profit volume ratio high or low for your business? Examine the ratio critically. Prepare a standard cost sheet for your business using imaginary numbers. Prepare an activity based costing statement for your company using imaginary numbers.

'Fixed Cost'
A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs for Cadbury are:
Depreciation of factory machinery Office supervisors salary Rent Delivery vehicle insurance

Variable Cost
Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases. Variable costs for Cadbury are:
Wages of staff Commission paid

Semi-Variable Cost
A cost composed of a mixture of fixed and variable components. Costs are fixed for a set level of production or consumption, becoming variable after the level is exceeded. Semi-variable costs for Cadbury are: Electricity Maintenance cost

Indirect cost
Indirect costs represent the expenses of doing business that are not readily identified with a particular grant, contract, project function or activity, but are necessary for the general operation of the organization and the conduct of activities it performs. Indirect costs for Cadbury are: Salary of factory manager Insurance of factory premises Depreciation Maintenance costs Electricity Insurance

ApportionmentOverhead distribution summary

Production departments Particulars Material Direct labour Depreciation of factory machinery Rent Electricity Salary Insurance Maintenance cost Basis Direct Direct Asset value Floor area(sqft) Light points No. of employees Floor area(sqft) Maintenance hrs Total
1920000000

Service departments A B
940000000 980000000

90000000

60000000

30000000

15000000

3000000

4000000

3000000

2700000

2300000

4000000

1000000

1200000

800000

600000

400000

20000000

5500000

3500000

6500000

1800000

2700000

10000000

3000000

1500000

2500000

1600000

1400000

25000000

8000000

5000000

4000000

4000000

4000000

10000000

2500000

1800000

2000000

1300000

2400000

Total

2094000000

23000000

17000000

102320000 18800000 1012000000 0

Re-distribution of service depatment expenses

Production departments Particulars Total overheads A B A B A B Total Total 193200000 X 23000000 202400000 337320000 44976000 6746400 7.19616 1.079424 615497959 Y 17000000 303600000 449760000 67464000 8995200 10.79424 1.439232 Z 18800000 404800000 112440000 89952000 2248800 14.39232 0.359808 Service departments A B 1012000000 1023200000 -1012000000 101200000

224880000 -1124400000 -224880000 4497600 -35.9808 0.719616 22488000 -22488000 3.59808 -3.59808

848379591.6 630122448.7

Calculation of total cost

Particulars X Y Z

Direct material

1500000000 1800000000 2000000000

Direct labour

50000000

40000000

20000000

Overheads

615497959 848379591.6 630122448.7

Total cost

2165497959 2688379592 2650122449

Standard Cost sheet

A standard cost is the expected or budgeted cost of materials, labor, and manufacturing overhead required to produce one unit of product. A standard cost sheet calculates the total standard cost for one unit of product. It lists the standard costs for one unit of product for the following: Materials (Price standard Quantity standard) Labor (Price standard Quantity standard) Variable manufacturing overhead (Price standard Quantity standard) Fixed manufacturing overhead (Price standard Quantity standard)

Standard Cost sheet

Two reasons for adopting a standard cost system are: To improve planning and control: To facilitate product costing

Cost sheet
Particulars
Total Materials consumed:

Amount (In crores)

722 20 PRIME COST 742 8 750

Direct Labour

Factory Overheads:
Salary of factory manager+Depriciation of factory machinery, Electricity+OTHER

FACTORY COST/ WORKS COST

Office/administrative overheads
supervisor salary, rent, wages

1 751 3 754

COST OF PRODUCTION Selling & distribution overheads

Delivery vehicle insurance,comission paid

COST OF SALES
PROFIT SALES

228 982

P/V Ratio
P/V Ratio (Profit Volume Ratio) is the ratio of contribution to sales which indicates the contribution earned with respect to one rupee of sales. It also measures the rate of change of profit due to change in volume of sales. A high P/V Ratio indicates that a slight increase in sales without increase in fixed costs will result in higher profits. A low P/V ratio which indicates low profitability can be improved by increasing selling price, reducing marginal costs or selling products having high P/V ratio.

P/V Ratio
Profit-volume ratio:
2011 2012 9820000000

Sales

7840000000

Profit
P/V ratio

1820000000

2280000000

Change in profit*100/Change in sales

=23.23%

Activity-Based Costing - ABC'

An activity based costing (ABC) system recognizes the relationship between costs, activities and products, and through this relationship assigns indirect costs to products less arbitrarily than traditional methods. Identify and eliminate those products and services that are unprofitable and lower the prices of those that are overpriced Or identify and eliminate production or service processes that are ineffective and allocate processing concepts that lead to the very same product at a better yield

SURYA DEEPAK