Project - CVP Analysis

Cost Volume Profit analysis at BAMUL
Executive Summary
The Bangalore Milk Union Ltd., (Bamul) was established during 1975 under Operation Flood II
by keeping “Amul” as its Role Model. At present Bamul has Bangalore Urban, Bangalore Rural
& Ramanagaram Districts of Karnataka State as its area of operation for Milk Procurement and
selling Milk in part of Bruhath Bangalore Mahanagara Palika (BBMP) area. Since its inception
the Union is constantly striving further for dairy development and marketing activities in its milk
shed area.
The strategy of Bangalore Milk Union is “Procure More, Sell More & Serve More” and reaping
the benefits of economies of scale. In order to realize this strategy, the Union has implemented
the following projects so that more and more milk can be procured and processed. This will help
us to serve our producer members by passing on the maximum benefits; we are consciously
adopting the growth-oriented strategy of helping our producers to grow by ourselves growing
constantly.
CVP analysis is a system used for checking how changes in the volume of production affect the
costs and thus the profits. It is an expanded form of break-even analysis, which simply identifies
the breakeven point. CVP analysis is somewhat simplified and relies on some assumptions that
do not hold in reality, meaning it is best used for simple "big picture" analysis rather than
detailed examination.
Breakeven analysis takes account of the fact that production incurs both fixed and variable costs.
Fixed costs include machinery, factory real estate and, to some extent, marketing. Variable costs
include labor and raw materials; more of these resources are used as more products are made.
The break-even point is calculated as the fixed costs divided by the contribution per unit. The
contribution per unit is the price the company sells the product at, minus the specific variable
costs associated with producing that individual unit.
CVP Analysis at Bamul Focuses mainly on Factors Like Sales, Net profit ,Break even sales , P/V
ratio ,Margin of safety and Variations in variable costs Break even Sales and the Margin of
safety are the important Factors in Cost Control which is the main objective of the Company.
The Data collected is Secondary Data by interaction with Finance Manager and Balance sheet of
the Last 5 years.
The main Limitation the study is Study is conducted for the period of 10
weeks. This is not sufficient to Collect All the data.
The study Reveals facts that net Profit of the company is highest in the year
2006 and Low in the year 2009. And Variation in the other factors Like breakeven sales which is
decreasing and P/V Ratio is also decreasing
BNMIT School Of Management Studies Page 1

1) INDUSTRY PROFILE
1.1) Milk Industry in India

The highest milk producer in the entire globe – India boasts of that status. India is otherwise
known as the ‘Oyster’ of the global dairy industry, with opportunities galore to the entrepreneurs
globally. Anyone might want to capitalize on the largest and fastest growing milk and milk
products' market. The dairy industry in India has been witnessing rapid growth. The liberalized
economy provides more opportunities for MNCs and foreign investors to release the full
potential of this industry.
The main aim of the Indian dairy industry is only to better manage the national resources to
enhance milk production and upgrade milk processing using innovative technologies.
1.2) Potential for investment in the dairy industry

Some areas of Indian dairy industry can be toned up by the evocation of differentiated
technologies and equipment from overseas. These include:
1. Raw milk handling: The raw milk handling needs to be elevated in terms of
physicochemical and microbiological properties of the milk in a combined manner. The
use of clarification and bactofugation in raw milk processing can aid better the quality of
the milk products.
2. Milk processing: Better operational ratios are required to amend the yields and abridge
wastage, lessen fat/protein losses during processing, control production costs, save
energy and broaden shelf life. The adoption of GMP (Good Manufacturing Practices) and
HACCP (Hazard Analysis Critical Control Points) would help produce milk products
adapting to the international standards.
3. Packaging: Another area that can be improved is the range of packing machines for the
manufacture of butter, cheese and alike. Better packaging can assist in retaining the
nutritive value of products packed and thus broaden the shelf life. A cold chain
distribution system is required for proper storage and transfer of dairy products.
4. Value-added products: There's vast scope for value-added products like desserts,
puddings, custards, sauces, mousse, stirred yoghurt, nectars and sherbets to capture the
dairy market in India.
The Indian dairy industry has aimed at better management of the national resources to enhance
milk production and upgrade milk processing involving new innovative technologies.
Multinational dairy giants can also make their foray in the Indian dairy market in this
challenging scenario and create a win-win situation for both.

1.3) India's Milk Product Mix
Fluid Milk 46.0%

Ghee 27.5%
Butter 6.5%
Curd 7.0%
Khoa (Partially Dehydrated Condensed Milk) 6.5%
Milk Powders, including IMF 3.5%
Paneer & Chhana (Cottage Cheese) 2.0%
Others, including Cream, Ice Cream 1.0%
Table 1 - India's Milk Product Mix
1.4) Dairy Industry Profile, Facts and Figures

• Human population: 953 million (70 million dairy farmers)
• Milk production : 74.3 million tonnes (203.5 million lpd)
• Average annual growth rate (1995-2000): 5.6%
• Per capita milk availability: 214 g/day or 78 kg/year
• Milch animals: 57 million cows; 39 million buffaloes
• Milk yield per breedable bovine in-milk: 1,250 kg
• Cattle feed production (organized sector): 1.5 million tonnes
• Turnover of veterinary pharmaceuticals: Rs. 550 crores
• Dairy plants throughput: 20 mlpd
• Throughput as percentage of total milk output: 10
• Value of output of milk group (1994-95)*: Rs. 50,051 crores
1.5) Overview of the Indian Dairy Sector

• The country is the largest milk producer all over the world, around 100 million MT
• Value of output amounted to Rs. 1179 billion (in 2004-05) (Approximately equals
combined output of paddy and wheat!!)
• 1/5thof the world bovine population
• Milch animals (45% indigenous cattle, 55 % buffaloes, and 10% cross bred cows)
• Immensely low productivity, around 1000 kg/year (world average 2038 kg/year)
• Large no. of unproductive animals, low genetic potency, poor nutrition and lack of
services are the main factors for the low productivity
• There are different regions – developed, average, below average (eastern states of Orissa,
Bihar and NE region) in the dairy industry.
1.6) Milk Industry in Karnataka

The dairy industry in Karnataka is booming. The Karnataka Milk Federation (KMF), the
second largest government-run cooperative milk federation in the country after Gujarat
Cooperative Milk Marketing Federation, is spearheading the campaign by procuring lakhs of
litres milk from in and around Karnataka on daily basis.
The boom has taken place after the price of milk was increased by Rs 3 a litre in the state. Of
late KMF has witnessed growth in its production. After it increased procurement price (varies
from Rs. 2.50 to 3.50 per litre in different areas) the production is upbeat. Thousands of
farmers from across the state flock to pour more milk to the federation.
Last March, KMF witnessed all time low production: 31 lakh litres milk production per day.
But just after three months KMF regained its momentum by producing 41,80,000 litres milk
per day. According to industry experts, this is all time record compared to the last highest
milk production of 40.41 lakh litres per day in June 2009. The federation has more than 22
lakh farmer members attached to 10,600 milk cooperative societies across Karnataka.
Besides, it has 13 Milk Unions throughout the state that procure milk from Primary Dairy
Cooperative Societies (DCS) and distribute milk to the consumers in various urban and rural
markets in Karnataka.
Almost every district in Karnataka has milk producing co-operatives. The milk is collected
from farmers, processed and sold in the market by the brand of Nandini. Even milk giant
Amul purchases some 50,000 litres per day from KMF. The federation was able to achieve
the historic target because of price rise and government support. KMF managing director

A.S. Premanath said: 'We are exporting milk not only to the neighbouring states but even to
Singapore.
Karnataka Milk Federation (KMF) is the largest cooperative dairy Federation in South India,
owned and managed by milk producers of Karnataka State. KMF has over 2 million milk
producers in over 10500 Dairy Cooperative Societies at village level, functioning under 13
District Cooperative Milk Unions in Karnataka State. The mission of the federation is to
usher rural prosperity through dairy development. During the last four decades of cooperative
dairy development by KMF, the dairy industry in Karnataka has progressed from a situation
of milk-scarcity to that of milk-surplus.
2) Company Profile
2.1) Back ground and Inception Of the company

The Bangalore Milk Union Ltd., (Bamul) was established during 1975 under Operation
Flood II by keeping “Amul” as its Roll Model. At present Bamul has Bangalore Urban,
Bangalore Rural & Ramanagaram Districts of Karnataka State as its area of operation for
Milk Procurement and selling Milk in part of Bruhath Bangalore Mahanagara Palika (BBMP)
area. Since its inception the Union is constantly striving further for dairy development and
marketing activities in its milk shed area.
OBJECTIVES
• To organize Dairy Co-operative Societies at Village level and dissemination of
information like good dairy animal husbandry and breeding practices & Clean Milk
Production through Extension Services.
• To provide assured market & remunerative price for the milk produced by the farmer
members of the co-operative societies.
• To provide technical input services like veterinary services, artificial insemination,
supply of balanced cattle feed & Fodder seed materials etc., to milk producers.
• To facilitate rural development by providing opportunities for self-employment at
village level, thereby preventing migration to urban areas, introducing cash economy
& opportunity for steady income.
• To provide quality Milk and milk products to urban consumers at competitive prices.
BACKGROUND
On January 1st 1958 a pilot scheme to cater the Bangalore Milk Market, Department of Animal
Husbandry, Government of Karnataka was started Milk processing facilities & Veterinary
Hospitals at National Dairy Research Institute (NDRI). Later in 1962, The Bangalore Milk
Supply Scheme came into existence as an independent body. With the great efforts by the then

Hon’ble Minister for Revenue & Dairying, Government of Mysore Sri M V Krishnappa, A joint
venture of UNICEF, Government of India & Government of Mysore was dedicated Bangalore
Dairy to the people of Karnataka State on 23rd January 1965 by the then Hon’ble Prime Minister
Late Sri Lal Bahadhur Shastriji. The Bangalore Dairy scattering over an area of 52 Acres of
land, the Dairy had an initial capacity to process 50,000 liters of milk per day. Bangalore Dairy
underwent a structural change in December 1975, handed over to Karnataka Dairy Development
Corporation (KDDC). Rural Milk Scheme of Mysore, Hassan & Kudige Districts was started
under Operation Flood-II and then transferred to Karnataka Milk Federation (KMF) in May 1984
as a successor of KDDC. To cater to the growing demand for milk by the consumers of
Bangalore City, the capacity was increased to 1.5 lakh liters per day under the Operation Flood-
II during 1981 and later increased to 3.5 lakh liters per day under Operation Flood-III during
1994.
As per the policies of the National Dairy Development Board (NDDB), Bangalore Dairy was
handed over to Bangalore Milk Union Ltd., (Bamul) on 1st September 1988. The Union is
capable of processing the entire milk procured, by timely implementation of several
infrastructure projects like commissioning of New Mega Dairy state-of-the-art technology with a
processing Capacity of 6.0 Lakh liters per day, new chilling centers, renovation of product block
etc.,
The milk shed area of Bamul comprises of 2611 revenue villages. As of now the Union has
organized 1803 Dairy Co-operative Societies (DCS) in 2,225 villages, thereby covering 85 % of
the total villages in these two districts. In these DCSs, there are 3,31,544 milk producer
members. Among them 105804 members are women and 59,235 members belong to Schedule
Caste and Schedule Tribes.
The philosophy of this co-operative milk producers’ organization is to eliminate middlemen and
organize institutions owned and managed by milk producers, by employing professionals.
Achieve economies of scale of rural milk producers by ensuring maximum returns and at the
same time providing wholesome milk at reasonable price to urban consumers. Ultimately, the
complex network of co-operative organization should build a strong bridge between masses of
rural producers and millions of urban consumers & achieve a socio-economic revolution in the
village community.

Bamul has been registered under MMPO by Central Registration Authority. Today, the Union
has become the biggest Milk Co-operative Union in Southern India. Bamul has been certified
for ISO 22000:2005 & ISO 9001-2000 for quality management and Food Safety Systems.
2.2) Nature Of business Carried
MILK PROCUREMENT
The Milk produced by 89789 farmers at village level will be collected every day morning
and Evening at DCS. Under Clean Milk Production programme, to maintain the freshness
& quality of the milk 85 Bulk Milk Coolers covering 376 DCS of Total Capacity
1,45,000 Lts were installed at DCS level. During the year the Unions daily average milk
procurement is 8.29 Lakh Kgs, which works out to be 485 kgs per day per DCS. The milk
procurement has increased by 13.59 % when compared to the last year.
Graph 1 – Avg.Milk Procurement (Kgs per Day)
Bamul is offering the most remunerative milk procurement price to member producers. The
operational efficiency is reflected on procurement prices paid to the member producers. The
average milk procurement price paid during the year was Rs. 14.24 for every Kg of Milk
supplied to the Union. Which is 80% of total cost of production.
Graph 2 – Break up structure of Expenses at Bamul
Milk collected at DCS will be transported to Chilling Centers, through 94 Milk Procurement Can
Routes, by traveling 16,416 KM’s every day. 23 Bulk Milk Cooler (BMC) Routes are also in
operation, which collects milk from 85 BMC centers of 376 DCS directly transported to
Bangalore Dairy through insulated tankers.

LIQUID MILK MARKETING
The Bangalore Milk Union is marketing milk and milk products in the brand name of “Nandini”
through 1090 retailers, 39 Franchisee Outlets, 25 Milk Parlors, 19 Whole sale Dealers, 14
Transporter Cum Distributors being served by 214 distribution routes. The key success factor of
Bamul in becoming a market leader is the narrow price spread maintained between purchase &
sales, marketing higher volumes of milk. The volume of sales plays a critical role in determining
costs. Hence, the market strategy of Bangalore Milk Union is to regard selling of market milk as
its core marketing activity and to concentrate its efforts in this direction to increase the volume of
milk sales. The impressive growth in the sale of milk by Bamul over the years is due to the
persistent efforts to maintain timely supply, maintaining quality and attending to the complaints
of consumers and agents with prompt follow-up action.
Graph 3– Total Milk Sales
Bamul is also organizing Consumer Awareness Programme as a part of Market Development to

create awareness of “Nandini” Milk through personal contacts, Door to Door campaigns,
Organizational Meetings, School Children Mega Dairy Plant visit etc., are conducting regularly.
2.3)Vision , Mission and Quality Policy
Vision
• To march forward with a missionary zeal which will make KMF a trailblazer of
exemplary performance and achievements beckoning other Milk Federations in the
country in pursuit of total emulation of its good deeds.
• To ensure prosperity of the rural Milk producers who are ultimate owners of the
Federation.
• To promote producer oriented viable cooperative society to impart an impetus to the rural
income, dairy productivity and rural employment.
• To abridge the gap between price of milk procurement and sale price.
• To develop business acumen in marketing and trading disciplines so as to serve
consumers with quality milk, give a fillip to the income of milk producers.
• To compete with MNCs and Private Dairies with better quality of milk and milk products
and in the process sustain invincibility of cooperatives.
Mission
Heralding economic, social and cultural prosperity in the lives of our milk
producer members by promoting vibrant, self-sustaining and holistic cooperative dairy
development in Karnataka State.
Quality Policy and Objectives

KMF is a Cooperative Apex Body in the State of Karnataka
representing organisations of milk producers' and implementing
alround dairy development activities to achieve the following
objectives:
• To ensure assured and remunerative market round the year
for the milk produced by the farmer members.
• To make available quality milk and other premier dairy products to urban consumers.
• To build & develop village level institutions as cooperative model units to manage the
dairy activities.
• To ensure provision of inputs for milk production, processing facilities and dissemination
of know how.
• To facilitate rural development by providing opportunities for self employment at village
level, preventing migration to urban areas,introducing cash economy and opportunity for
a sustained income.
The philosophy of dairy development is to eliminate middlemen and organise institutions to be
owned and managed by the milk producers themselves, employing professionals. To sum it up,
every activity of KMF revolves around meeting one basic objective: 'Achieve economies of scale
to ensure maximum returns to the milk producers, at the same time facilitate wholesome milk at
reasonable price to urban consumers'. Ultimately, the complex network of cooperative
organisation should build a bridge between masses of rural producers and millions of urban
consumers and in the process achieve a socio-economic revolution in every hinterland of the
State.
2.4)Products Profile
1) nandini Toned Milk

Fig-1 nandini Toned Milk
Karnataka's most favorite milk, Nandini Toned Milk. Fresh and Pure milk containing 3.0% fat
and 8.5% SNF. Available in 500ml and 1ltr & 6 Ltr packs. Better to use within a day from the
date of pack.
2) nandini Homogenised COW Milk
Nandini Homogenized Milk is pure milk containing 3.5% Fat & 8.5% SNF. Which is
homogenized and pasteurized. Consistent right through, it gives you more cups of tea or coffee
and is easily digestible. Available in 500 ml packets.
3) nandini Full Cream Milk
Fig-2 nandini Full cream Milk
Nandini Full Cream Milk. Containing 6% Fat and 9 % SNF. A rich, creamier and tastier milk,
Ideal for preparing home-made sweets & savouries. Available in 500ml and 1ltr packs. Apart
from the Milk, the different Milk Products are Curds, Butter, Ghee, Peda, Paneer, Set Curds &
Spiced Butter Milk are also sold.
Graph-4 Full Cream Milk sales
4) nandini Curd
Fig-3 nandini Curd
Nandini Curd made from pure milk. It's thick and delicious. Giving you all the goodness of
homemade curds. Available in 200 gms and 500 grms & 1 Kg packs. Nandini Butter Rich,
smooth and delicious. Nandini Butter is made out of fresh pasteurized cream. Rich taste, smooth
texture and the rich purity of cow's milk, makes any preparation a delicious treat. Available in
100 gms, 200 gms and 500gms cartons both salted and unsalted.
5) nandini Ghee
Fig-4 nandini Ghee
A taste of purity. Nandini Ghee, made from pure butter. It is fresh and pure with a delicious
flavour. Hygienically manufactured and packed in a special pack to retain the goodness of pure
ghee. Shelf life of 6 months at ambient temperatures. Available in 200ml, 500ml, 1000ml
sachets & 15.0 kg tins.

6) nandini Butter
Fig-5 nandini Butter
Rich, smooth and delicious. Nandini Butter is made out of fresh pasturised cream. Rich taste,
smooth texture and the rich purity of cow's milk, makes any preparation a delicious treat.
Available in 100 gms (salted), 200 gms and 500gms cartons both salted and unsalted.
7) nandini Butter Milk
Fig-6 Nandini Butter Milk
Nandini spiced Butter Milk is a refreshing health drink. It is made from quality curds and is
blended with fresh green chillies, green coriander leaves, asafoetida and fresh ginger. Nandini
spiced butter promotes health and easy digestion. It is available in 200ml packs and is priced at
most competitive rates, so that it is affordable to all sections of people.

8) nandini Peda
No matter what you are celebrating! Made from pure milk, Nandini Peda is a delicious treat for
the family. Store at room temperature approximately 7 days. Available in 250gms pack
containing 10 pieces each.
2.5 Area Of operation
Main Dairy
i. Milk Processing capacity was 60,000 Liters per day (LPD) at the time of establishment of
the dairy on 23rd January 1965.
ii. Milk Processing capacity was expanded to 1.5 lakh LPD on 1st February 1981.
iii. Milk Processing capacity was expanded to 3.5 lakh LPD during 1994.
iv. Milk Condensing plant 3 Metric Tons per day.
v. Spray Drying plant 5 Metric Tons per day.
vi. Milk Processing capacity of 6,00,000 Liters per day (LPD) fully automated Mega Dairy
started functioning from 17th December 2000.
vii. Converted the old building as a Product Block during 2002.
a. Anekal Chilling Center
i. Anekal Chilling Center was started on 12th September 1964 with a milk chilling capacity
of 20,000 LPD.
ii. Later the milk chilling capacity was expanded to 60,000 LPD on 28th February 1999.
a. Byrapatna Chilling Center
i. Byrapatna Chilling Center was started on 19th May 1962 with a milk chilling capacity of
20,000 LPD.
ii. Later the milk chilling capacity was expanded to 60,000 LPD
a. Doddaballapur Chilling Center
i. Doddaballapur Chilling Center was started on 5th January 1967 with a milk chilling
capacity of 20,000 LPD.
ii. Later the milk chilling capacity was expanded to 60,000 LPD
a. Vijayapura Chilling Center

i. Vijayapura CC was established on 1st February 1995 with a milk chilling capacity of 1
lakh LPD.
a. Solur Chilling Center
i. Solur Chilling Center was established on 31st January 1999 with a milk chilling capacity
of 60,000 LPD.
f. Hoskote Chilling Center
i. Hoskote Chilling Center was commissioned on 29th March 2000 with a milk chilling
capacity of 1.5 lakh LPD.
h. Kanakapura Chilling Center
i. Kanakapura Chilling Center was commissioned on 1st October 2004 with milk chilling
capacity of 60,000 LPD.
2.5 ) Infrastructural Facilities.
INFRASTRUCTURE DEVELOPMENT:
The strategy of Bangalore Milk Union is “Procure More, Sell More & Serve More” and reaping
the benefits of economies of scale. In order to realize this strategy, the Union has implemented
the following projects so that more and more milk can be procured and processed. This will help
us to serve our producer members by passing on the maximum benefits, we are consciously
adopting the growth-oriented strategy of helping our producers to grow by ourselves growing
constantly.
Mega Dairy with a capacity to process 6
lakh litres of milk per day expandable to 10
llpd has been built by investing Rs. 38.70
crores obtained as term loan from National

Dairy Development Board. The Mega Dairy, has latest state-of-the-art technological facilities in
dairy processing
Fig-7 Bangalore Dairy
and the Union will have the ability to manufacture milk and milk products to world class
standards.
Although Bamul sets standards for its products for better serve to customers, it was not possible
to keep the standards stability due to manual operations. In designing mega dairy, Bamul
looked towards an automated system that would allow it to achieve consistent quality parameters
for each product. Energy and manpower would also be more effectively optimised and
controlled and all plant equipment would be integrated.
NEW Projects:
Bamul has planned to convert Hosakote Chilling Center into a 2.0.LLPD Capacity Dairy with an
investment of Rs.2427.00 Lakh and a New Product Block at Bangalore Dairy Premises with an
investment of Rs. 2033.00 Lakhs by the end of 2010.
Bamul has SEVEN Chilling Centers geographically located around Bangalore and 85 Bulk Milk
Coolers at DCS Level. Milk Product Block within the campus to manufacture Butter, Ghee,
Peda, Flavoured Milk, Spiced Butter Milk, Paneer, Set Curds etc.
FINANCE
The Union had an approximate turnover of Rs. 508.24 crores in the year 2008-09 as against Rs.
452.05 Crores for the year 2007-08. Union has earned a approximate Net profit of Rs. 1.59
Crores for the year 2008-09 as against Rs. 3.44 Crores during 2007-08. This decline in Net
Profit is due to increase in Milk Procurement Price to Milk Producers.
Graph-5 Share Capital

Graph-6 Annual Turn-over
Graph-7 Net Profits
TECHNICAL INPUT SERVICES:

Bangalore Milk Union is providing various Technical Input & Extension Services to the milk
producer members & their Dairy animals through ELEVEN Camp Offices situated in each Taluk
i.e., Anekal, Bangalore Head Office (Bangalore South), Yelahanka (Bangalore North),
Channapattana, Devanahalli, Doddaballapura, Hosakote, Kanakapura, Solur (Magadi),
Nelamangala & Ramanagara. From these camps the Technical Input services like Weekly
Mobile Veterinary Service, Emergency Veterinary Service, Artificial Insemination Service,
Periodical Vaccinations, Balanced Cattle Feed Sales, Mineral Mixture Sales, Fodder
development and Fodder Seed Production, Clean Milk Production practices, Extension Services
for Cattle Feeding, breeding, insurance and milk production etc., will be carried over.
ANIMAL HEALTH AND OTHER ACTIVITIES
ANIMAL HEALTH
The Union is taking special care to promote the health of the cattle of member milk producers.
Veterinary facilities have been extended to all the DCS. Mobile veterinary routes, emergency
veterinary routes, Health camps, vaccination against foot & mouth disease and thaileriosis
diseases, etc., are being regularly done. Regularly Deworming is also done for the cattle. There
is also a backup of First Aid Services to needy DCS’s.
Particulars 2005-06 2006-07 2007-08 2008-09 2009-10

MVR Cases Treated 151221 43761
Health Camp cases Treated 81545 128174 149565 166198 118307
Emergency Cases Treated 68616 63818 70735 70420 74773
F& M Vaccination 468461 377654 430431 373107 352176
Rakshavac 20052 13675 13395 18094 26227

Table-2 Animal Health
ARTIFICIAL INSEMINATION
Artificial Insemination (AI) has been the main functional tool in dictating this upsurge of
development of Dairying in Bamul. Farmers have taken up cross-breeding from way back in
1962. The Union has surveyed and appropriately located AI centers based on cattle population.
It is also popularized the idea of cluster AI centers and replace the Single AI centers in a phased
manner. The use of progeny tested semen from “Nandini Sperm Station” is also giving a further
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Particulars
353 251 259 259
No. of Single AI
Centers 320 248
1,88,768 1,66,614 1,27,320 1,11,536 1,12,740 1,16,002

No. of AI Done
52 64 89 94 96 101
No. of Cluster AI
Centers
96,760 1,38,895 1,69,950 1,69,185 1,92,207 1,97,645
No. of AI Done
2,85,528 3,05,509 2,97,270 2,80,721 3,04,947 313647
Total AI Done
boost to the breeding activities.
Table-3 Artificial Insemination
To reduce infertility in cattle, a frontal attack has been continuously attempted by conducting
Special Infertility Camps under the expert guidance and by the use of infertility connected drugs.
During 1999-2000, a Vertical Silo of 10,000 liter capacity for storing Liquid Nitrogen has been
installed under TMDD program in collaboration with National Dairy Development Board and
Karnataka Milk Federation. In addition this facility is being used for supplying liquid nitrogen to
neighboring Unions and also to Department of Animal Husbandry. This has helped in protecting
the quality of semen straws, thereby considerably increasing the probability of conception during
artificial insemination of cattle.

CATTLE FEED & FODDER DEVELOPMNET
The Union is implementing several programs to increase milk production and also to reduce the
cost of milk production in the milk shed area. Balanced cattle feed is being procured from the
Cattle Feed Plants of KMF for distribution among member producers.
Fodder seeds are distributed to member producers at subsidized rates. In addition to this,
technical advice, Silage Demonstrations, Azzolla Demonstrations and Straw Treatment
Demonstrations are also being conducted at DCS level. Chaff Cutters are supplied at subsidized
rates.
Cattle Feed Sales:
2004- 2005- 2006- 2007- 2008- 2009-

Particulars 05 06 07 08 09 10
CF Sales 20380 28515 29813 33359 37691 40529

(in MT’s)
Table-4 Cattle feed sales
A Seed Processing plant was commissioned at Rajankunte by investing Rs. 41 lakhs. The Union
is catering to the Seed production needs of many Unions in Karnataka and also of Southern
India.
YASHASVINI HEALTH INSURANCE:
Yashasvini Health Insurance Scheme was muted by Government of Karnataka during the year
2001-02. This scheme was implemented by Coperative department, Members of Co-operative
Societies and their family members are the beneficiaries of this scheme. The annual premium is
Rs. 120/- per beneficiary. All major hospitals are adopted for this scheme, all types of surgery

will be covered under this health scheme. Bangalore Milk union has covered 1.50 Lakh
beneficiaries under this scheme by contributing Rs 30/- towards premium per beneficiary.
CATTLE INSURANCE:
Bangalore Milk Union is providing Insurance Coverage to the Dairy animals in collaboration
with United India Insurance Ltd., 40,238 animals are covered under this Insurance. The annual
premium is 2.22% of the value of the animal. 50% of the annual premium of Rs. 122.99 Lakh
was borne by bamul.
IN THIS MILLENNIUM
We want to become not only the largest Union, but also become one amongst the best-run milk
unions in the country. The Union is aware of the challenges of the new private entrants, who are
mainly thriving on unfair trade practices. They procure milk at least cost, without bothering
about the welfare of the producers and without extending any technical inputs for improving
milk production. They market milk by resorting to unhealthy and unethical practices deceiving
the unsuspecting consumers. The Union wants to counter this in a positive manner by trying to
improve its efficiency of operation and market promotion. It wants to become well trenched in
the market as market leader. It wants to follow the strategy of cost-competitiveness, which is
hard to match by the competitors.
2.6 Organization Structure
Fig-8 Organization Structure at Bamul

2.7 Work Flow Model
Fig-9 Work Flow model at BAMUL
2.8 Competitors Information

List of Major Competitors
1) Gokul Dairy Farm Bangalore.

2) Heritage Foods (India) Ltd Bangalore.
2.10) PROGRESS AND ACHIEVEMENT OF THE UNION SINCE ITS

INCEPTION
1. Establishment of the Union:
• Bangalore Co-operative Milk Producers’ Societies Union Ltd. was established on 16th
November 1976.
• After the bifurcation of the above Union, into two separate union for Bangalore
Districts (Urban and Rural) and Kolar District, Bangalore Urban and Rural District
Co-operative Milk Producers’ Societies Union Ltd. (BAMUL) on 23rd March 1987.
• Bangalore Dairy was took over by BAMUL on 1st September 1988.
• Bangalore Mega Dairy started functioning on 17th December 2000
• MMPO-1992 Registration No 42/R.MMPO/93
• Bangalore Dairy ISO 22000-2005 & ISO 9001-2000 Certified by Standard Australia
International (SAI) Global Ltd., a reputed Australian based company during 2006.

3) The McKinsey 7S Framework
Fig – 10 McKinsey 7S Framework
The Seven Elements:

The McKinsey 7S model involves seven interdependent factors which are categorized as either
“hard” or “soft” elements:
Hard Elements Soft Elements

Strategy Shared Values

Structure Skills
Systems Style
Staff
Table-5 Hard and Soft elements of Mckinsey 7s Framework
Strategy:
• To serve as an instrument of the national to achieve self reliance in the

design, development and Quality Production of NANDINI Products to
meet the customer’s changing and growing needs with special emphasis
on military requirements.
• In fulfillment as this objectives, the company shall regard itself
fundamentally responsible design and developments, relying however on such relevant
facilities as are available in other National institution but always holding itself basically
responsible for the growth.
• To conduct its business economically and efficiently that it contribute its
due share to the National Efforts to active self reliance and self generating economy.
• Towards this end to develop, maintain an organization which will rapidly
respond to and adopt the changing Matrix as socio economic relationship and where in a
climate as growing technical competence. Self discipline, mutual understanding deep
commitment and sense of belongingness will be fostered and each employee will be
encouraged to grow with accordance to his potential for the furtherance as organizational
goals.
System:
BAMUL Follows following Systems
1) Computerized Information system
2) Milk Quality Testing System
3) Automatic Packaging System
4) Codex System
The stores Department in BAMUL follow the Codex system

(Coded Control System). A card is maintained for each item and a number is allotted. The card is
attached to each article consists of amount balance, date of issue, purchase etc. this is later
recorded in separate ledger book. The inventories are of different kind ranging from mechanical,
spares, packing items to animal drugs etc.
This department has the following services:
• It tries to maintain maximum and minimum level of inventory
• Ordinary and locally available commodities are maintained at Minimum possible level.
Staffing:
Kind Of staff Number Of personnel

Finance Manager 1
Assistant Manager 5
Accounts Officer 1
Accounts Assistant Grade -1 7
Marketing , Production and Testing 220
Table -6 Kind of Staff

The staff deals with the various personnel policies followed by the organization. Below are given
the personnel policies followed by the organization.
Personnel policies:
There are around 240 employees working. There are various policies followed. The
Administrative department forms the policies.
Recruitment and Selection:

Due to registration, termination, retirement and transfers the concerned
department head will give the manpower requirements along with the job
description. The manpower sourcing is done through advertisement, manpower, consultant, and
employment exchanges and personnel reference.

Skills:
Bamul mainly Focus on Following Key Skills
1) Employee Training Program
2)Production Planning
3) Marketing and Sales.
These are the distinctive competencies that are present in the organization it is the design and
development of products quality and service or viability of product. The employees in this
organization also have all the distinctive skills that are required for the undertakings of research
and development activities. The KMF is improving the employee’s skills and techniques through
motivating them and giving proper training to them also through giving proper working
condition.
Style:
a) Karnataka Milk Federation has top to bottom or top down style system.
b) The style of organization is authoritarian. It means management cadre
follows authoritative.
The indicators of the style are:
• Follows rules and orders
• Reliable and dependable
Shared Values:
The core or fundamental values that are widely share in the organization and

serve as guidelines that are important, these values have great meaning
because they focus attention and provide broader since of purpose.
The values of the organizations are:
1) Customer Satisfaction
2) Commitment to total quality
3) Cost and time consciousness
4) Innovative and creative
5) Trust and team spirit
6) Respect for individually
7) Integrity
4) Financial statement Analysis.
BANGALORE URBAN, BANGALORE RURAL & RAMANGARA DISTRICT MILK PRODUCERS SOCIETIES
UNION LTD.
BALANCE SHEET AS ON 31st March
2009-10 2008-09 2007-08 2006-07 2005-06
PARTICULARS AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
SOURCES OF FUNDS
1278940 1175000 1158170 1156510 1157110

PAID UP SHARE CAPITAL 00 00 00 00 00
NOMINAL MEMBERSHIP 320900 305600 290100 272800 259400
SHARE SUSPENSE 838030 958800 959800 963030 768336
2488319 2203223 2066697 1701151 1675672

RESERVES & SURPLUS 88 07 31 33 34
2316554 2821817 3290340 3461183 3438457

LOAN LIABILITY 60 60 26 84 91
4487532 3135397 4092523 2949730 2754803

CURRENT LIABILITIES PROVISIONS 60 78 13 54 59
4645899 5290646 6712792 6847905 4086051

PROFIT & LOSS A/C 7 4 5 8 4
GRAND TOTAL 1104752 9877147 1129150 9965724 9444926

635 08 895 58 33
APPLICATION OF FUNDS
5478500 5679007 5745676 5600164 5616916

FIXED ASSETS 47 94 11 65 99
2083936 1979224
WORK IN PROGRESS 2796794 1041455 3104237 2 3
1523634 2157768
DEFERRED REVENUE EXPENDITURE 0 1 5681528 7575371 7400951
1822915 1822915 1717315 1267315 1117315

INVESTMENTS 2 2 2 2 2
5841123 6087490 6005265 6011043 6000580

SUB TOTAL (2)
32 82 28 51 46
CURRENT ASSETS-LOANS-ADVANCES
6337770 9878565 1131709 6639268 6936887

INVENTORY 5 3 97 0 0
1058264 7153509 7892956 9282971 8190680

SUNDRY DEBTORS 08 9 4 2 6
3017769 1656079 2932424 1854963 1469642

CASH & BANK BALANCES 56 14 34 32 65
1337422 1643457 2378403 3116312 2464971

LOANS & ADVANCES 3 9 1 6 1
1890102 1896262 1823561 1893694 1717173

SERVICE DEPOSITS 8 8 4 6 3
1738398
OTHERS 2 7639753 1261728 649311 4373203
5206403 3789656 5286243 3954681 3444345

A+B+C+D+E+F: SUB TOTAL(70)
03 26 67 07 88
1104752 9877147 1129150 9965724 9444926

GRAND TOTAL(2+4)
635 08 895 58 33
4487532 3135397 4092523 2949730 2754803

CURRENT LIABILITIES PROVISIONS 60 78 13 54 59
5206403 3789656 5286243 3954681 3444345

CURRENT ASSETS-LOANS-ADVANCES 03 26 67 07 88

7188704 6542584 1193720 1004950 6895422
WORKING CAPITAL 3 8 54 53 9
BANGALORE URBAN, BANGALORE RURAL & RAMANGARA DISTRICT MILK PRODUCERS SOCIETIES
UNION LTD.
MANUFACTURING- PROFIT & LOSS A/C FOR THE

YEAR
2009-10 2008-09 2007-08 2006-07 2005-06
PARTICULARS AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
MANUFACTURING : DIRECT EXPENSES
6158900 7440507 3083929 2997142 1331904

OPENING STOCK 2 5 4 6 31
1377820 1398104 1394592 1146258

OPENING STOCK-P&I 7 7 8 5 8243635
4099411 3769669 3332557 2880669 2758110

PURCHASES 445 336 451 262 358
3979207 3236931 2514730 2150970 2277675

PURCHASES-P&I 38 30 30 44 10
PROCUREMENT TRANS CONTRACT 1363189 1270637 1219638 1353456 1603195

EXP. 38 75 46 84 30
4422025 4039795 3641448 3437356 3884829

PROCESSING & CONVERSION EXP 28 65 64 86 21
5151220 4712791 4114924 3616281 3676114

SUB TOTAL-1
859 928 412 687 385
PROFIT & LOSS A/C : EXPENSES
2920327 2600273 2742978 1983444 1914745

STAFF EXPENSES 05 38 41 00 42
8246448 4384272 6375312 4320927 3147363

ADMINISTRATIVE EXPENSES 9 2 4 7 1
RATES &TAXES 2782736 2840694 1306881 1685707 5223033
7769650 6804227 6041340 5635989 7499219

SELLING & DISTRIBUTION 5 5 1 5 9
1954006 1761692 2113819 2193461 2523268

INTEREST & BANK CHARGES 6 8 9 0 4

5564441 5510354 3896480 2320995 3152334
PROCUREMENT & INPUT EXPENSES 6 7 7 4 3
4469257 4358805 4178683 3817098 3721927

DEPRECIATION 0 3 1 4 6
5748534 4910615 5016610 3829148 3971387

SUB TOTAL -2
87 57 83 27 08
5726074 5203853 4616585 3999196 4073253

EXPENSES TOTAL -(1+2)
345 484 496 513 092
SALES INCOME
5277613 4772405 4268688 3745223 3802055

SALES 491 713 335 706 899
3857494 3211500 2519691 2136828 2354024

SALES -P&I 11 63 35 73 55
1750505 6158900 7440507 3083929 2997142

CLOSING STOCK 4 2 5 4 7
1591950 1377820 1398104 1394592 1146258

CLOSING STOCK-P&I 8 7 7 8 5
5696787 5168922 4609043 4003691 4078892

SUB TOTAL -3
464 985 592 801 365
OTHER INCOME
2717772 2579612 2335600 1504250 1348031

OTHER INCOME 3 7 5 6 7
2129280 1309879
OTHER INCOME-P&I 3 4 6446123 3157182 3988214
INTEREST ON DEPOSITS & STAFF 1166032

LOANS 7565379 3 7473433 6505871 5820969
GRANTS 1183231 2901998 4646064 3547358 6802079
5721913 5345724 4192162 2825291 3009157

SUB TOTAL - 4
6 2 5 7 9
5754006 5222380 4650965 4031944 4108983

INCOME TOTAL -(3+4)
600 227 217 717 944
5455666 4561310 4941191 3874101 4027779

GROSS PROFIT- (1-3)
05 57 80 14 80

2793225 1852674 3437972 3274820 3573085

NET PROFIT -
5 3 1 4 2
Financial parameters Analysis.
Particulars 2010 2009

Net Profit ( Rs) 27932255 18526743
Sales (Rs) 5277613491 4772405713
P/V Ratio 13.33 15.25
Table-7 Financial Parameters

Net Profit: - Net Profit of the Company in the year 2010 is 27932255, and the net profit of the
company in the year 2009 is 18526743. Net Profit of the Company is increased Compared to
year 2009. This shows good financial health of the company.
Sales: - Sales of the Company in the year 2010 is 5277613491 and Sales of the company in the
year 2009 is 4772405713. Sales of the company have increased compare to the year 2009. This
shows Customer base of the company has increased
P/V Ratio:-P/V Ratio of the Company in the year 2010 is 13.33. And P/V ratio of the company
in the year 2009 is 15.25 P/V Ratio of the company has decreased compare to year 2009.

5) SWOT ANALYSIS
Strengths
• Automated Computerized Plant
• Maximum Capacity Utilization
• Support & Encouragement by Management
• Electricity Express Feeder Line
• Efficient Boilers
• Automatic Correction Power Factor Unit
• Installation of Energy Meters.
• Regularly attending the customer
• NANDINI brand has got very good reputation all over India
• NANDINI good life milk has been exported to other countries such as Singapore,
Malaysia etc.
Weakness
• The company should pay its attention to its advertising and strategy though NANDINI
enjoys marketable share and should be ready to face competition.
• Non availability of Own Water Source
• Batch type of Powder Plant
• Excess man power.
• Lack of Awareness
Opportunities
• Monitoring the Processing & Packing
• Revision of Electricity Contract Demand
• Utilization of Treated Water
Rain Water Harvesting.

• Management of Steam & Cold Store Leakages
Threats
• Liberalization of Milk
industry.
• Irregular Power Shut Downs
6) Learning Experience
The main objective of undergoing this training is to get the practical exposure
of the functional department of the organization such as marketing, human
resources, production department etc… and how to know the theoretical
knowledge is practically applied in different departments of the organization
Experience:
The project work has given insights about the practical orientation of the
functions of the various departments of the company. The application of
theoretical concepts into business decisions in the organizations is the major
value addition from this work.
Cost Volume profit analysis is a very crucial issue for any company as
it determines the cost Control in the company which, if not managed at the
right levels would adversely affect the profitability position of the company.
The exposure in BAMUL has made clear how the current assets and liabilities are
managed effectively and at the same time ensure high profitability.
Apart from the subjective knowledge about the project, I
understood the aspects of delegation of authority, responsibility, co-ordination
and team work. I have gained all round view of management operations.

7) General Introduction.
7.1) Statement of problem :-
Study on Analysis of Cost Volume and profit of Bangalore Dairy

(BAMUL)
The Bangalore Milk Union Ltd., (Bamul) was established during 1975 under Operation Flood II
by keeping “Amul” as its Role Model. At present Bamul has Bangalore Urban, Bangalore Rural
& Ramanagaram Districts of Karnataka State as its area of operation for Milk Procurement and
selling Milk in part of Bruhath Bangalore Mahanagara Palika (BBMP) area. Since its inception
the Union is constantly striving further for dairy development and marketing activities in its milk
shed area. At Bangalore Dairy Cost of production has been varying Continuously over the year.
Thus It is required to study Reason for increase in cost of production. And suggest Cost control
Measures . To keep the cost of production under Control so as to fix Competitive Price in the
market.
7.2) Objectives Of the study:-
1. To ascertain Cost Volume profit of the Company for The past 4 years.
2. To know the Cost Structure Of the Company Related to Production

Department.
3. To know The Products value Produced by the Company.
4. To predict the Income and Growth Prospects of the Company.
7.3) Scope of the Study:-

The scope of this Project is to analyze Cost and Volume of different Components
Manufactured By the company.

The study of this project based on 4 years performance of the company from
2006-2010.
7.4) Methodology for the study:-

Research Methodology is a Systematic way for solving any research problem. It
studies the various steps that are generally adopted by the researcher in studying
research problem. The methodology Adopted for the study includes the following
steps
Detailed discussion with the officials and other personnel of financial departments
to obtain the clear picture about the working of department.
Study of various years annual reports to make comparison of the Company’s Cost
Volume and profit.
In the words of Heiser “ The Most Significant single Factor in profit planning of
average business is the relationship between the volume of business , costs and
profit. When volumes of output increases unit cost of production decreases, and
vice versa ; because the fixed cost remains unaffected . When Output Increases ,
the fixed Cost Per unit decreases. Therefore profit will be more, When sales price
remains Constant. Generally Costs may not change in direct proportion to the
volume . thus small change in volume will affect the profit.
The management is always interested in knowing that which
product or product mix is most profitable, what effect a change in volume of
output will have on the cost of production and profit etc. all these problems are
solved with the help of Cost-Volume-Profit analysis.
7.5) Limitations of study
1) The study is based on secondary data from the Annual reports of the company.
2) The data collected and interpreted may not reflect the true picture of the company.
3) Limitations of time i.e..the study are carried out for academic purpose for a limited span
of 8 weeks. The time constraint did not allow for the in depth study regarding the
performance of the company.
4) This study does not take in to account the sales mix analysis which is a part of the cost
volume profit analysis.
5) Inference are drawn based on the data collect the company where manufacturing of milk
is done.
6) Inferences based on the data collected by the company.
7) The information provided in financial statements is not an end itself and has no
meaningful conclusions can be drawn from these statements alone.

8) The CVP analysis is based on the past financial statements is not the indicators of the
future.
9) Since some facts and business secrets maintained strictly confidential , it is not possible
to collect all the information.
10) As it is an external study conclusion and suggestion are not ultimate and are based on
personal judgment and the ability of the researcher to understand the concept.
7.6) Tools for Data collection.

To know the cost Volume profit relationship, a study of the following is essential.
1) Marginal Cost formulae;
2) Break-even Analysis;
3) Profit Volume Ratio;
4) Profit graph;
5) Key factor;
The data have been collected from the Company’s published Annual Reports of 4 years.
Sources Of data:
Primary Data:
The primary data is the data, which is to be collected through Interviews like interaction with
the Finance executive and manager.
Secondary data:
The secondary data to study is Collected through the Records , Annual Reports, Company
News , Manuals of the Company and maintained by the Organizations.
Plan of analysis.
Analysis of data was done using the four years Financial statements. Cost Volume profits for
past 4 years were Compared and computed and graphs also Used for analysis.

Basic assumptions of CVP analysis.

A number of assumptions underlie cost-volume-profit (CVP) analysis: These cost volume profit
analysis assumptions are as follows:
1. Selling price is constant. The price of a product or service will not change as volume
changes.
2. Costs are linear and can be accurately divided into variable and fixed elements. The
variable element is constant per unit, and the fixed element is constant in total over the
relevant range.
3. In multi-product companies, the sales mix is constant.
4. In manufacturing companies, inventories do not change. The number of units produced
equals the number of units sold.
While some of these assumptions may be violated in practice, the violations are usually not
serious enough to call into question the basic validity of CVP analysis. For example, in most
multi-product companies, the sales mix is constant enough so that the result of CVP analysis are
reasonably valid.
Perhaps the greatest danger lies in relying on simple CVP analysis when a manager is
contemplating a large change in volume that lies outside of the relevant range. For example, a
manager might contemplate increasing the level of sales far beyond what the company has ever
experienced before. However, even in these situations a manager can adjust the model as we
have done in this chapter to take into account anticipated changes in selling price, fixed costs,
and the sales mix that would otherwise violate the cost volume profit assumptions.
7.7) Theoretical definitions for the data interpretation.
Marginal Cost equations.
Sales = variable cost + Fixed Cost
Sales- Variable Cost = Fixed Cost + Profit or Loss
Sales – Variable Cost = Contribution
Contribution = Fixed Cost + profit

From the above equation we can understand that in order to earn the profit , the
contribution must be more than the Fixed cost.. To avoid any loss , the contribution must
be equal to fixed cost.
7.7.1) Contribution
Contribution is the difference between sales and marginal cost of sales. Contribution
enables to meet Fixed costs and add to the profit . Contribution is also known as gross
margin Fixed cost are covered by contribution; and the balance amount is an addition to
the net profit .
Marginal Cost = prime cost + Variable overhead.
Contribution = Sales – marginal cost.
Contribution = sales – variable cost.
Contribution = Fixed cost + Profit or loss
Profit = Contribution – fixed cost
Sales – variable cost = Fixed cost + Profit
Or
C = S-V
C= F+P
S-V = F+P
C= Contribution;
S= sales, V= Variable Cost
P= Profit, F= Fixed Cost

7.7.2) Break even analysis

In economics & business, specifically cost accounting, the break-even point (BEP) is the point
at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken
even". A profit or a loss has not been made, although opportunity costs have been paid, and
capital has received the risk-adjusted, expected return.
For example, if a business sells fewer than 200 tables each month, it will make a loss, if it sells
more, it will be a profit. With this information, the business managers will then need to see if
they expect to be able to make and sell 200 tables per month.
If they think they cannot sell that many, to ensure viability they could:
1. Try to reduce the fixed costs (by renegotiating rent for example, or keeping better control
of telephone bills or other costs)
2. Try to reduce variable costs (the price it pays for the tables by finding a new supplier)
3. Increase the selling price of their tables.
Any of these would reduce the breakeven point. In other words, the business would not need to
sell so many tables to make sure it could pay its fixed costs.
In the linear Cost-Volume-Profit Analysis model, the break-even point (in terms of Unit Sales
(X)) can be directly computed in terms of Total Revenue (TR) and Total Costs (TC) as:
Where:
• TFC is Total Fixed Costs,
• P is Unit Sale Price, and
• V is Unit Variable Cost.
The quantity is of interest in its own right, and is called the Unit Contribution Margin
(C): it is the marginal profit per unit, or alternatively the portion of each sale that contributes to
Fixed Costs. Thus the break-even point can be more simply computed as the point where Total
Contribution = Total Fixed Cost.

In currency units (sales proceeds) to reach break-even, one can use the above calculation and
multiply by Price, or equivalently use the Contribution Margin Ratio (Unit Contribution Margin
over Price) to compute it as:
R=C Where R is revenue generated C is cost incurred i.e. Fixed costs + Variable Costs or Q X
P(Price per unit)=FCT + Q X VC(Price per unit) Q X P - Q X VC=FC Q (P-VC)=FC or Break
Even Analysis
Q=FC/P-VC=Break Even
7.7.3) Margin of Safety

Margin of safety represents the strength of the business. It enables a business to know what the
exact amount it has gained or lost is and whether they are over or below the breakeven point.
Margin of safety = (current output - breakeven output)
Margin of safety% = (current output - breakeven output)/current output x 100
If P/V ratio is given then profit/ PV ratio = In unit Break Even = FC / (SP − VC)
Where FC is Fixed Cost, SP is Selling Price and VC is Variable Cost
7.7.4) Break Even Analysis chart
By inserting different prices into the formula, you will obtain a number of break even points, one
for each possible price charged. If the firm changes the selling price for its product, from $2 to
$2.30, in the example above, then it would have to sell only (1000/(2.3 - 0.6))= 589 units to
break even, rather than 715.

Graph-8 Break-even Analysis chart
To make the results clearer, they can be graphed. To do this, you draw the total cost curve (TC in
the diagram) which shows the total cost associated with each possible level of output, the fixed
cost curve (FC) which shows the costs that do not vary with output level, and finally the various
total revenue lines (R1, R2, and R3) which show the total amount of revenue received at each
output level, given the price you will be charging.
The break even points (A,B,C) are the points of intersection between the total cost curve (TC)
and a total revenue curve (R1, R2, or R3). The break even quantity at each selling price can be
read off the horizontal axis and the breakeven price at each selling price can be read off the
vertical axis. The total cost, total revenue, and fixed cost curves can each be constructed with
simple formulae. For example, the total revenue curve is simply the product of selling price
times quantity for each output quantity. The data used in these formulae come either from
accounting records or from various estimation techniques such as regression analysis.
The break-even point is one of the simplest yet least used analytical tools in management. It
helps to provide a dynamic view of the relationships between sales, costs and profits. A better
understanding of break-even, for example, is expressing break-even sales as a percentage of
actual sales—can give managers a chance to understand when to expect to break even (by
linking the percent to when in the week/month this percent of sales might occur).
The break-even point is a special case of Target Income Sales, where Target Income is 0
(breaking even).
Limitations of break even analysis

• Break-even analysis is only a supply side (i.e. costs only) analysis, as it tells you nothing
about what sales are actually likely to be for the product at these various prices.

• It assumes that fixed costs (FC) are constant. Although, this is true in the short run, an
increase in the scale of production is likely to cause fixed costs to rise.
• It assumes average variable costs are constant per unit of output, at least in the range of
likely quantities of sales. (i.e. linearity)
• It assumes that the quantity of goods produced is equal to the quantity of goods sold (i.e.,
there is no change in the quantity of goods held in inventory at the beginning of the
period and the quantity of goods held in inventory at the end of the period).
• In multi-product companies, it assumes that the relative proportions of each product sold
and produced are constant (i.e., the sales mix is constant).
8) Data Analysis and Interpretation.
8.1) P/V Ratio introduction

P/V Ratio is very important in decision making. It can be used for the Calculation of B.E.P and
in problems Regarding Profit and sales Relationship.
B.E.P = Fixed Cost
P/V Ratio
Fixed Cost =BEP X P/V Ratio.

Contribution = Sales X P/V Ratio

Variable Costs = Sales (1-P/V Ratio)
8.2) Contribution = Sales – Variable Cost

Years Sales Variable Costs Contribution

2010 5277613491 4701831189 575782302
2009 4772405713 4185978176 586427537
2008 4268688335 3659741003 608947332
2007 3745223706 3152459037 592764669
2006 3802055899 3204633348 597422551
Table 8 – Contribution from years 2006 to 2010

Graph showing the contribution.
Graph-9 Contribution
Interpretation
The graph clearly depicts the increasing trend of contribution level for the first 3 years this
suggests that increasing level of profitability of the company. And for next 2 years the
contribution is decreasing the company is losing the profitability. So in order to gain or maintain
the steady level of profit the company has only 2 choices
1) Increase the sales
2) Decrease the variable costs.

8.3) Break – Even Analysis
BEP = Fixed Cost

P/V Ratio
P/V Ratio = Contribution

Sales
Years Break-even sales

2010 4107140623
2009 3723251056
2008 3103456785
2007 2265434515
2006 2345673452
Table 9 - break even sales of the company

Graph showing breakeven sales.
Graph 10- Breakeven sales
Interpretation
The above graph depicts the break even sales of the company over the past 5
years. The break even sales achieved by the company is volatile this shows that
the company is not maintaining the constant sales level over the years and so the
company is striving hard to achieve the break even sales.
8.4) Profit Volume ratio.
P/V ratio is very important in decision making it can be used for the calculation of
B.E.P and in problems regarding the profit sales relationship.
P/V ratio = Fixed Cost

B.E.P

Years P/V ratio

2010 13.33
2009 15.25
2007 18.51
2006 24.72
2005 23.94
Table 10 – P/V Ratio of the company
Graph showing P/V Ratio

Graph -11 P/V Ratios
INTERPRETATION
The profit Volume ratio can be called as the mirror of the company as the higher
P/V ratio indicates higher profit and vice versa. The above graph depicts clearly
the decreasing ratio of the company says that the profit of the company has been
decreasing over the years. The company has enjoyed higher profit in 2006 when
compared to 2010.
8.5) Margin of safety
Margin of safety = Actual Sales – BEP Sales
Years Margin of safety

2010 1170472868
2009 1049154657
2008 1165231550
2007 1479789191
2006 1456382447
Table 11 – Margin
of safety

Graph showing Margin of safety
Graph-12 Margin of Safety
Interpretation
The margin of safety serve as a guide is a reliable indicator of the business

strength and soundness. The higher the margin higher is the soundness of
business. The above graph shows that margin of safety of the Company for past 5
years the company has enjoyed a higher profit margin in 2006 and in 2007.It has
been drastically decreased to very minimum level in 2009.

Table 12- Overview of sales, variable cost and fixed cost and
Margin of safety
Years Sales Variable Fixed Cost Margin of

Cost safety
2010 527761349 4701831189 547850047 1170472868
1
2009 477240571 4185978176 567900794 1049154657

3
2008 426868833 3659741003 574567611 1165231550

5
2007 374522370 3152459037 560016465 1479789191

6
2006 380205589 3204633348 561691699 1456382447

9

8.6) Sales from the year 2006 to 2010
Years Sales
2010 5277613491
2009 4772405713
2008 4268688335
2007 3745223706

2006 3802055899
Table 13 - Sales
Graph Showing Sales
Graph 13 – Sales
Interpretation
From the above chart it is observed sales have increased from 2007 to
2010. But sales has decreased in year 2007 when compared to year
2006.but overall company maintained increased trend in sales which
shows that company has succeeded in maintaining the customer base.

8.7) Variable Costs from the year 2006 – 2010
Year Variable Costs

2010 4701831189
2009 4185978176
2008 3659741003
2007 3152459037
2006 3204633348
Table 14 – Variable Costs

Graph Showing Variable Costs
Graph – 14 Variable costs
Interpretation
The variable costs of the company vary with no of units produced. The graph
shows increasing variable costs from 2006 to 2010.
8.8) Net Profit of the company

year Net profit

2010 27932255
2009 18526743
2008 34379721
2007 32748204
2006 35730852 Table-
15 Net
profits
Graph showing net Profits of the company

Graph-15 Net Profits Analysis of the Company
Interpretation
The graph shows that profitability of the company for last 5 years. It is observed
from the graph that the profitability of the company is highest in the year 2006.
And the profitability of the company is lower in the year 2009. Profit is the
important factor for the company to grow.
9) Findings
1) The sales of the company are increasing over a period of 5 years. Sales are
highest in the year 2010.
2) Profit level of the company is volatile. The profit is highest in the year 2006.
And the profit has been decreased and lowest in the year 2009. Again profit
level is high in the year 2010
3) Margin of safety has decreased compared to previous years.
4) P/V ratio of the company has decreased compared to previous years.
5) Variable costs of the company are increasing over the period from 2006 to
2010.
6) Break- even sales of the company were increasing over the period from 2006
to 2010.
7) All the departments in the company are computerized.

8) The debtors have been reduced over the years which indicate the improvement
in the paying capacity of the company.
9) Over all the status of the company in monetary terms has increased when
compared to earlier years.
10)Suggestions
1) Variances should be recorded on a continuous basis, may be weekly

,fortnightly or monthly
2) Reasons should be ascertained for variances of each of the above
3) Module wise / Department wise responsibility to be fixed to monitor

variances
4) Corrective / Remedial measured should be taken and same should be

reported to concerned.
5) Areas where cost to be controlled at all levels are to be fixed, because

costs can be controlled best at the point which they are incurred.
6) Review of costs to be controlled should be discussed in the meeting

regularly.
7) The sales should be increased by increasing the customer base.
8) The profits should be kept in check to maintain the stability.

Conclusion
Profitability analysis involves examining the relationship between revenues , Costs and profits.
Cost-Volume-Profit analysis , a traditional approach to profitability analysis , considers only
unit-level activity cost drivers. In CVP analysis , “volume refers to a single unit-level cost driver,
such as units sold , that is assumed to correlate with changes in revenues , costs and profits.
Because Cost-Volume-Profit analysis provides a framework for discussing planning issues and
organizing relevant data , it is widely used in early stages of planning to enhance their usefulness
, cost-Volume-Profit relationships are summarized in Graphs or in contribution income
statements that classify costs according to behavior (variable or fixed) and emphasize the
contribution margin that goes toward covering fixed cost and providing a profit. When applied to
a single product , service or event when a single cost driver drives costs , the use of a single
independent variable appears reasonable. Although CVP analysis is often used to develop an
understanding of the overall operation of an organization or business segment , accuracy
decreases as the scope of operations being analyzed increases.
A major limitation of cost-Volume-profit analysis and related Contribution

income statement is the use of a single unit-level activity cost driver. Even when multiple
products are considered. The CVP approach restates volume either in terms of an average unit or
in terms of a dollar of sales volume. This limitation can be addressed with a multi-level
contribution income statement that includes unit and non unit cost drivers. A multi-level
contribution income statement has several measures of contribution , one for each level of costs
that contributes to a higher level of costs and profits.

In developing multi-level contribution income statements , it is important to
remember that cost classification schemes should be designed to fit the organization and user
needs. While formatting issues can seem mundane and routine , format is important because the
way information is presented encourages certain types of questions while discouraging others.
Standards may be refixed taking past performance in to consideration and also industry average
productivity of the employees should be increased by boosting morale , in turn more production
can be achieved , which paves way for cost control in turn cost of production can be reduced
substitutes may be found out which leads to cost control and quality and quality improvement
.machines should be modernized optimum utilization of men, machinery ,Materials and Money
should be achieved.
BIBLIOGRAPHY
Sources
1) Cost and Financial Analysis : Shashi K.Gupta
2) Cost and Management Accounting: S.N.Maheshwari
3) Management Accounting : R.K.Sharma
Websites referred
1) www.indiadairy.com
2) www.Bamul.co.in
3) www.indiadairyasso.org

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Cost Volume Profit analysis at BAMUL

BNMIT School Of Management Studies Page 1

1.1) Milk Industry in India

1.2) Potential for investment in the dairy industry

BNMIT School Of Management Studies Page 2

1.3) India's Milk Product Mix

Fluid Milk 46.0%

Table 1 - India's Milk Product Mix

1.4) Dairy Industry Profile, Facts and Figures

1.5) Overview of the Indian Dairy Sector

BNMIT School Of Management Studies Page 3

1.6) Milk Industry in Karnataka

BNMIT School Of Management Studies Page 4

2.1) Back ground and Inception Of the company

BNMIT School Of Management Studies Page 5

BNMIT School Of Management Studies Page 6

2.2) Nature Of business Carried

Graph 1 – Avg.Milk Procurement (Kgs per Day)

supplied to the Union. Which is 80% of total cost of production.

Graph 2 – Break up structure of Expenses at Bamul

Bangalore Dairy through insulated tankers.

BNMIT School Of Management Studies Page 7

Graph 3– Total Milk Sales

Bamul is also organizing Consumer Awareness Programme as a part of Market Development to

2.3)Vision , Mission and Quality Policy

Quality Policy and Objectives

1) nandini Toned Milk

BNMIT School Of Management Studies Page 9

Fig-1 nandini Toned Milk

2) nandini Homogenised COW Milk

3) nandini Full Cream Milk

Fig-2 nandini Full cream Milk

Graph-4 Full Cream Milk sales

Fig-3 nandini Curd

Fig-4 nandini Ghee

BNMIT School Of Management Studies Page 11

Fig-5 nandini Butter

7) nandini Butter Milk

Fig-6 Nandini Butter Milk

BNMIT School Of Management Studies Page 12

2.5 Area Of operation

a. Anekal Chilling Center

BNMIT School Of Management Studies Page 13

h. Kanakapura Chilling Center

2.5 ) Infrastructural Facilities.

Mega Dairy with a capacity to process 6

lakh litres of milk per day expandable to 10

llpd has been built by investing Rs. 38.70

crores obtained as term loan from National

BNMIT School Of Management Studies Page 14

Fig-7 Bangalore Dairy

Graph-5 Share Capital

BNMIT School Of Management Studies Page 15

Graph-7 Net Profits

TECHNICAL INPUT SERVICES:

ANIMAL HEALTH AND OTHER ACTIVITIES

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10

BNMIT School Of Management Studies Page 16

Table-2 Animal Health

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

1,88,768 1,66,614 1,27,320 1,11,536 1,12,740 1,16,002

boost to the breeding activities.