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Acknowledgement We are thankful to Prof. Victor Louis Anthuvan for giving us an opportunity to prepare a cost sheet and analyze it. This has been very helpful for us in understanding concepts like break even analysis, marginal costing and its practical implications in business. This project would not have been successful without his continuous guidance and theoretical inputs.

Objective of the Report

The objective of the report is to study the balance sheet of a manufacturing company and carry out the following: Prepare Cost Sheet Analyze the cost sheet Apply the concepts of marginal costing and CVP analysis

To achieve this purpose we have chosen Dabur India Ltd. and studied its annual report 2012-13.

Dabur At-a-Glance

Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status. The story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to the partners and stakeholders. Dabur India Ltd is considered as the leading consumer goods company in India with a turnover of Rs. 2834.11 Crore (FY09). The three major strategic business units (SBU) - Consumer Care Division (CCD), Consumer Health Division (CHD) and International Business Division (IBD). It has 17 ultra-modern manufacturing units spread around the globe. Products marketed in over 60 countries. Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over 2.8 million retail outlets all over India. The master brands are : Dabur-Ayurvedic healthcare products),Vatika -

Premium hair care, Hajmola - Tasty digestives, Ral - Fruit juices & beverages, Fem - Fairness bleaches & skin care products.

COSTING Costing is the technique of ascertaining cost. A cost sheet is a statement of cost prepared at given interval of time showing various elements of cost of a product produced, or service rendered during a particular period. This statement gives details about total cost and cost per unit at different stages of production. Important components of cost are: a) Prime Cost = Direct material cost + Direct labour cost b) Works Cost = Prime cost + Factory overheads. c) Cost of production = Works cost + Office & Administrative overheads. d) Total Cost (Cost of sales) = Cost of production + Selling & Distribution overheads.

From the balance sheet of Dabur India Ltd. as on 2011 and with the help of schedules to accounts and notes to schedules we have prepared the cost sheet.

We have assumed the following for the preparation of cost sheet Rent has been assumed to be factory rent Insurance has been taken on building We assume that the land is used only for factory purpose.

As the company has variant products, the selling price per unit cannot be estimated.So all the calculation of sales has been limites to sales in rupees.

ANALYSIS OF COST SHEET Freight and forwarding charges form about 12.018% of selling and distribution overhead. Advertisement expense constitutes about 74.589% i.e the company focuses more on advertisements. General expenses account to major portion of Administrative overhead which is 52.1%. Direct material constitutes 5.91% of the prime cost while Direct labour constitutes only 12.12 % The factory overhead consists mainly of power and fuel which is 36.08%. and followed by processing charges which is 17.86% . Depreciation forms the major part of the factory overhead which is 24.87% Rent paid for the building constitutes 12.07%. Profit margin is 32.049 % of net sales.

Factory OH as a % of Direct labour Administrative OH as a % of works cost Selling OH as a % of Cost of production

65.25 11.14 29.71

The total depreciation expense incurred during the year is Rs. 3496 crores out of which Rs. 2118 crore is towards plant and machinery and Rs.170 crore is only for office furniture and fixtures. Depreciation on Plant and machinery is 71.18% of depreciation on factory assets Overall deprecation constitute of 1.98 % of total cost of production.


Marginal costing is the ascertainment ,by differentiating between fixed cost and variable cost of marginal costs and of the effect on profit of changes in volume or type of output. It is not a system of ascertaining cost but a special technique which is concerned with the changes in costs resulting from the changes in volume or range of output.

The technique of marginal costing involves: Differentiation between fixed cost and variable cost Ascertainment of marginal costs Ascertaining the effect on profit due to changes in volume i.e cost volume profit analysis.

Tools of marginal costing: Contribution P/V Ratio Break even point Margin of safety

FIXED COSTS Depreciation on Building Depreciation Plant & Machinery Depreciation lease on land Rates And Taxes Depreciation Vehicle Depreciation furniture & fixtures Depreciation computer R&D Auditor's Remuneration General Expenses Security Insurance Director's Fee Telephone and Fax

Rs.in crore 727 2118 10 348 196 170 275 368 76 9201 446 286 2192 355

Legal and Professional Repair and Maintenance Building Processing charges Other Repairs Rent Advertisement Total Fixed costs VARIABLE COST Repairs To Machinery Direct Labour Raw Material Primary Packing Material Power and Fuel Stores and Spares Excise Duty Sales tax Freight and forwarding Travel and Conveyance Commission and Discount Total Variable costs

2159 281 2098 678 2132 39019 63135

423 18000 77335 50071 4239 1172 3099 289 6287 3007 3166 167088

Total Cost


All the expenses have been classified under two categories of cost: Fixed cost Variable cost

Fixed cost as a % of Total Cost Variable cost as a % of Total Cost

27.423 72.575

Major part of the expense is variable cost accounting to 27.423% while only 27.423% is fixed cost. That means if variable cost per unit is controlled to some extent then cost can be controlled. Though fixed cost seems to be low when compared to variable cost it is also an indication that company has invested well in fixed assets as 27.423% is a comparably high value. The company has invested a considerable amount in advertisement and publicity which accounts to around 63.13% of fixed cost Expense on raw materials and primary packing material together constitutes 76.25% of variable cost. This depends mainly on the market demands as well the capacity of production.

Particulars Break Even Sales(in Rs.Crores) P/V ratio Margin of safety Margin of safety Ratio

Formula Fixed cost/(P/V ratio) (Contribution / Sales )*100 Actual Sales BEP(Rs) (Margin of Safety /Actual Sales)*100



129336.24 3737.91/16910.06 16910.06-3032.036 13878.02/16910.06 0.48815 197100.76 60.38

Calculation of Marginal Costing Tools

Working Notes

Sales Fixed Cost Variable Cost Contribution P/V Ratio

326437 63135 167088 159349 0.488146258

Suppose the company expects a profit of Rs. 150000 crores for the next financial year Column1 Desired Profit P/V Ratio Fixed Cost Desired sales Column2 150000 0.488146258 63135 436621.1899

ANALYSIS OF MARGINAL COSTING Margin of safety is an advantage to the company. It indicted the extra profit the company earns over the breakeven point.Daburs MOS is 60.38% which is high. This means that the firm will earn profits even if there is a slight fall in production or sales.This also contributes to a high angle of incidence BEP sales is Rs. 129336.24 crores which is extremely low in comparison to current sales (Rs.326437 crores). BEP analysis will help the banker in appraisal of actual/projected performance of the borrower.It also acts a sensitivity analysis tool to judge the projected performance. For the company to reach a profit value of Rs.150000 it has to impove its sales by Rs.110184 crores.