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1.1 INTRODUCTION
Marginal costing as a technique of costing is applied on the basis of behaviour of cost
items. On analysing the behaviour of costs in relation to changes in volume of output, it can
be divided into fixed costs and variable costs and variable costs.
Fixed costs are those costs which remain fixed or constant at any level of activity or
upto a given range of activity. These costs do not change with changes in the volume or level
of activity within the limits of plant capacity. The fixed cost in total remains to be the same.
These are period costs such as rent, insurance, wages of skilled workers etc.
Variable costs is that part of the total cost which tends to vary directly with variation
in the volume of output. It varies on direct proportion to the volume of production. It varies in
total, but cost per unit remains to be the same. It can also be called as marginal cost or
product cost. Cost of materials, cost of labour etc form variable cost.
Semi-variable cost is that part of the total cost which is partly fixed and partly
variable. It varies at certain levels and remains fixed at other levels of activity. Supervisor’s
salary, advertising charges, telephone charges, etc are semi-variable in nature.
In marginal costing, the costs are divided only into fixed and variable and an attempt
is made to study their effect on profit of changes in the volume and type of output. It is a
technique of costing which helps the management in decision making.
ICMA England, defines marginal costing as “the ascertainment of marginal costs and
of the effect on profits of changes in the volume or type of output by differentiating between
fixed costs and variable costs.”
Techniques of costing are the different methods and ways of analysing and presenting costs
for the purpose of decision making. Marginal costing acts as a technique which helps the
management in taking decisions.
DIVISION OF COST
in marginal costing, the costs are divided into fixed cost and variable cost.
CHARGES ON PRODUCT
The variable costs are charged to the costs of the products or process.
Fixed costs are treated as period costs and are charged to Profit and Loss Account for the
period for which they are incurred.
VALUATION OF STOCK
The stock of finished goods and work-in-progress are valued at marginal costs only.
PRICE DETERMINATION
Price are determined on the basis of marginal costs by adding ‘contribution’ which includes
fixed cost and profit.
PROFIT PLANNING
A business concern exist with the objective of making profit, and profit are yard stick of its
success. Profit planning is therefore a part of operation planning. Marginal costing assist
profit planning through calculation of contribution ratio.
Business concern may have plan to expand or contract the level of activity depending upon
the prevailing market condition. Marginal costing is very useful for taking such decisions by
enabling management to compare the contribution at different levels of activity.
A company, which has a variety product line, can employ marginal costing in order to
determine the most the most profitable sales mix from a number for selected alternatives.
Pricing is very difficult problem and the basic problem involved in pricing matching of
demand and supply. Marginal costing is sometimes used to determine prices.
PROFIT PLANNING
This project was mainly conducted to know how the profit is planned through
marginal costing of Kerala Agro Industries Corporation Ltd (KAICO), Fort, and Trivandrum.
The study is based on the relevant data and materials given from the organization.
RESEARCH DESIGN
PRIMARY DATA
Primary sources are original sources from which the researcher directly
collects. Data that have not been previously collected for the purpose of this study data are
obtained through discussions with accountants and employees in finance department of
Kerala Agro Industries Corporation Ltd.
SECONDARY DATA
Contribution
Profit/Volume Ratio
Break-Even Point
Margin of Safety
The project was conducted at Kerala Agro Industries Corporation Ltd for a
period of three month from January to March 2020.
Time period is the major limitation regarding the work and hence in-depth study was
not possible. Financial constraints are also reflected in the study.
Being an outsider the perception and perspective maybe different.
The study is based on the published reports and accounts as such any error in account
may reflect the study.
Data used for analysis is secondary data.
LITERATURE REVIEW
Kohler’s Dictionary of Accountants states that the. Marginal costing is the doctrine
of assigning marginal or variable costs to an activity, department or product. It
consists with the doctrine of absorption costing which makes no distinction between
fixed and variable cost.
Institute of cost works Accountants of India was examined the marginal costs as
the amount at any given value of output by which aggregate costs are charged .if the
volume of output is increased or decreased by one unit.
DR. Joseph (1996) states the marginal costing is a technique of determining the
amount of change in aggregate cost due to an increase of one unit over the existing
level of production.
Institute of Cost and Management Accounting (1996) states that costs which
accrues in relation to the passage of time and which within certain output or turn over
limits, tends to be unaffected by fluctuations in the volume of output or turn over.
WelschG. (1976) says that a comprehensive profit planning and controlling or
budgeting is a systematic and formalised approach for starting and communicating the
firm’s expectation and accomplishing the planning and , coordination and control
responsibilities of management in such a way as to minimise the use of given
resources.
Horngren, Charles.T (1973) defines that from cost analysis point of view valuation
of inventory is a secondary objective of variable costing. Primary objective being the
segregation of cost between fixed and variable parts for providing information to
reflect cost volume profit relationships and facilitate management in decision making
and controlling.
T.Vijayakumar (2004) examined marginal costing is also known as direct costing or
variable costing. It has made a new entry in the field of accounting and is gaining
more acceptance gradually.
H.V.Jamb (2008) states that marginal costing is not a technique of costing. Rather it
is a distinct method of costing. It assumes that facilities are given and managers are in
position to influence only variable costs. It is a technique of recording and reporting
costs, which regards as product costs only those costs which directly tend to vary with
the volume of activity.
E.Harris (1994) proposed marginal costing provides vital information for making
business decision in both the private and public sectors of the economy. In order to
make these decisions, managers must be fully be aware the underlying concepts of
and of limitations.
Burch (1994) cost-volume profit analysis is a planning tool which is extremely useful
in predicting sales and profit levels given a certain cost structure.
Edna Gunderson (2009) conducted a study on cost volume profit analysis with the
objectives to identify the essential elements of cost volume profit analysis and to
show that the cost volume profit analysis helps in decision making. Break-even point
and contribution have been used to analyse the collected data. The findings are break-
even point can be calculated as either the minimum sales quantity or the minimum
revenue required to avoid a loss or profit. The cost volume profit model can also be
used to calculate target operating income. Managers also use cost volume profit
analysis to take other decisions, mainly strategic. Different choices can affect selling
prices, variable costs and fixed costs.
Village industries owned and run by rural households with very little capital
investment and a high level of manual labour; products include pickles, papad etc.
Small scale industry characterized by medium investment and semi-automation;
products include sugar, jute, cotton mills etc.
Large scale industry involving large investment and high level of automation,
products include sugar, jute, cotton mills etc.
made a comeback. It is the right time to engage in mass production of low cost jute or cotton
bags to replace plastic bags.
The agro industry helps in processing agricultural products such as field crops,
tree crops, livestock and fisheries and converting them to edible and other usable forms. The
private sector is yet to actualize the full potential of agro industries. The global market is
mammoth for sugar, coffee, tea and processed foods such as sauce, jelly, honey etc. the
market for processed meat, spices and fruits is equally gigantic. Only with mass production
coupled with modern technology and intensive marketing can the domestic market as well as
export market be exploited to the fullest extent. It is therefore imperative that food
manufactures understand the changing consumer preferences, technology with
modernization, innovation and incorporation of latest trends and technology in the entire food
chain as well as agro industries, the total production capacity of agro products in India and
the world is likely to double by the next decade.
India is the second largest producer of food in the world. Whether it is canned
food, processed food, food grains and dairy products, frozen food, fish, meat, poultry. The
Indian agro industries have a great potential, the significance and the growth of which will
never cease.
Sea fishing, aqua culture, milk products, meat and poultry are some of the agro
sectors that have shown marked growth over the years. Linkages between members of the
food supply chains and prevailing policies and business environments to take advantage of
the global market.
The processing level of the agro industry may be at the primary, secondary or
territory stage. In the case of hides and skins, India exports largely semi-processed items
whereas in coffee or tea, the exports are mostly in secondary stage by way of fully processed
bulk shipments without branding, packaging. Exports at the territory stage mean branding and
packaging the product that are ready for use by the consumer.
A few years ago, the companies struggled to sell packaged foods. But now it is
much easier to break into the Indian market because of young population, higher incomes,
new technologies and a growing middle class, estimated at 50 million households. An
average Indian spends 53 percentage of his or her income for food. The domestic market for
processed food is not only huge but it is fast in tandem with economy. It is estimated to be
worth 590 billion. Processed food manufacturing companies are required to be persistent and
must adapt products to the Indian cultural preferences.
Many big companies like ITC, HLL, Nestle entered the Indian market a long
time ago and have made a deep penetration in the market. From these success stories, we can
learn some lessons in order to capture the higher end of local market and get a fair export
market. The model is structured around the following:
OTHER SEGMENTS
Dairy product is another area where there is enormous potential. No doubt that
the country has made tremendous strides in the last 20 years in production and processing of
milk and milk products. But the fact remains that only 15 percentage of all the milk produced
are processed. Today, a large number of people suffer from diabetic and cardiac ailments and
availability of fat free milk, fat free curd and sugar free food is poor. A sample like soya milk
is not produced in adequate quantity.
Fish and shrimp have good export potential but there is immense lack of cold
storage and modern processing facilities. For intense fish production is around 6 million
tonnes and the frozen storage capacity spread over 500 units is only one lakh tonnes.
a brand name. The government and the modern retailers are addressing these issues with the
new laws on packaging and labeling as well as greater investment in the supply chain.
India is the second largest producer of food in the world, whether it is canned
food, processed food, food grains, dairy products, frozen food, fish, meat, poultry the Indian
agro industry has a huge potential, the significance and the growth of which will never cease.
Sea fishing, aqua culture, milk and milk products, meat and poultry are some of the agro
sectors that have shown marked growth over the years.
They merely process the raw materials so that it can be preserved and transported at cheaper
cost. No new product is manufactured. For example: Rice mills, Dal mills etc.
Manufacture entirely new products. Finished products will be entirely different from original
raw materials. For example: Sugar factories, bakery, solvent extraction units, textile mills etc.
Industrial units which produce goods either for mechanization of agriculture or for increasing
productivity come under this type. For example: Agricultural implements, seed industries,
fertilizer and pesticide units etc.
Agro service centres are workshops and service centres which are engaged in repairing and
servicing of diesel engines, tractors and all types of farm equipments.
INDUSTRY DEVELOPMENTS
Over the last forty years, there has been significant change in the composition
of agricultural production. The global output of cereals, oil crops, sugar, vegetables, eggs and
meat has increased more than the global population, while global output of pulses has
declined relative to total population growth. While cereal production has increased faster than
the global population, it has failed to keep pace with historical production growth rate. The
opposite is true for oil seeds, which have exploded in population due to demand developing
countries. The production of meat and eggs have grown even faster than oil seeds due to the
increased standard of living.
also grow pulses, potatoes, sugarcane, oil seeds and such non-food items as cotton, tea,
coffee, rubber and jute. India is a fisheries giant as well. A total catch of about 3 million
metric tons annually ranks India among the world’s top 10 fishing nations.
In 2016, agriculture and allied sectors like forestry, animal husbandry and
fisheries accounted for 15.4% of the GDP with about 31% of the workforce in 2014. India
ranks first in the world with highest net cropped area followed by US and China. The
economic contribution of agriculture to India’s GDP is steadily declining with the country’s
broad-based economic growth. Still, agriculture is demographically the broadest economic
sector and plays a significant role in the overall socio-economic fabric of India.
Kerala, the state with network of azure backwaters, rivers and streams, boasts
of an agrarian economy. The abundance of water due to the 34 lakes and other small
streamlet, innumerable backwaters and water bodies and 44 rain-fed rivers flowing over the
terrain of the state and also the adequate annual rainfall of 3000mm received by this state
probably facilities agriculture to a great extent and hence the economy of the state is
denominated by agriculture.
The most essential or the staple crop is the rice or paddy. About 600 varieties
of rice are grown in the sprawling paddy fields of Kerala. In fact the Kuttanad region of the
district of Kerala is known as “The Rice Bowl Of The State” and enjoys a significant status in
the production of rice.
Next to rice is Tapioca and is cultivated mainly in the drier regions. Tapioca is
a major food of the Keralites. Besides production of the main crops, Kerala is also a major
producer of spices that form the cash crops of the state. Kerala produces 96% of the country’s
national output of pepper. The important spices are cardamom, cinnamon, clove, turmeric,
nutmeg and vanilla.
Other cash crops that constitute the agricultural sector includes tea, coffee,
cashew, pulses, areca nut, ginger and coconut. In fact, coconut provides the principal source
of income in Kerala-from coir industry to coconut shell. Cashew is also an essential cash
crop. Kerala also accounts for 91% of natural rubber production of the country. Kottayam
district has extensive areas producing and processing rubber. Apart from rubber, other
plantation crops like plantains or bananas also grown in plenty.
Food crops comprising rice, tapioca and pulses accounted for just 10.12% of
the total cropped area in 2017-18 while cash crops (cashew, rubber, pepper, coconut,
cardamom, tea and coffee) constituted 61.6%. The area under crops like rubber, coffee, tea
and cardamom was 27.3% of the total cropped area.
Coconut occupies the largest area with 29.5% coverage followed by rubber
with 21.4%. Rice comes third with 7.3% of the total cropped area. An increase of 10.3%,
14.6% and 2.2% respectively has been recorded for the area under the food crops rice, pulses
and tapioca in 2017-18. Even though there is an increase in area under food crops in 2016-17,
there has been a decline from the 2015-16 levels. Except for rice, pulses, banana, turmeric,
tapioca and rubber, all other crops recorded a declining trend in area under cultivation. There
is no change in the area cultivated under coffee, tea and cardamom.
State of Kerala, for the production of farm equipment’s, Machinery and Implements required
for the development of agriculture in the State and to cater to the needs of the farming
community.
From the very inception, the Corporation has very proudly introduced Tractors
and Power Tillers for ploughing operations in the fields, overcoming the resistance from
public. The introduction of such machinery in agriculture has paved way for green revolution
in agriculture in the State. In addition, the Corporation is developing and implementing new
and innovative methods in the field of agriculture with the introduction of various machinery
and equipment’s like Threshers, Winnowers, Cultivators, Cage wheels, Ridgers, besides
trading of Tractors, Power Tillers, Pump sets and undertaking after sale service.
The following are the major objectives for which the corporation was
established:
The Corporation started its operations in 1968 in a modest way with its Head
Office at Thiruvananthapuram. The Corporation developed infrastructure facilities at all the
Revenue Districts of the State on a phased manner. During the course of its operations, the
Corporation has promoted two subsidiary Companies, M/s Kerala Agro Machinery
Corporation Ltd. (KAMCO) in 1972- engaged in production and marketing of agricultural
machinery, especially Power Tillers, Reapers etc. and M/s Meat Products of India Limited
(MPI) in 1973- engaged in production and marketing of meat and meat products.
Subsequently during 1987 as per the decision of the Government of Kerala, the subsidiary
status of these two Companies has been withdrawn and made them independent Companies.
Now these two Companies are working on profitable lines as independent Companies.
The Corporation is having 14 Districts Offices, one each in all the Revenue
Districts of the State, apart from its Central Marketing Office at Ernakulam, the industrial
capital of the State. Activities of the Corporation are concentrated mainly in rural areas with
need based operation in urban area also.
The Corporation has won the First Award of the National Productivity Council
during 2006-07 among state Agro Industries Corporations. The Corporation is at present
moving on a positive trend, in spite of all odds faced during the previous years.
at Sulthan Bathery, Wayanad. Steps are in the final stage for setting up of jack fruit
processing plant at Mala, Thrissur for processing value added products from jackfruit and
modern rice mill at Sulthan Bathery, Wayanad for processing the ethnic varieties of rice like
Jeerakasala and Gandhakasala.
As a part of diversifying the activities, the Corporation has entered into several
new ventures such as fabrication of agricultural implements, supply, installation and
commissioning of suitable systems for disposal of Municipal Solid Waste through latest
practices, infrastructural development activities, etc. Corporation is the accredited service
provider of Suchithwa Mission – Kerala, Implementing agency for infrastructure
development work under SC- ST Development Department, Total Solution Provider for
promotion of Hi-Tech cultivation in the State.
COMPANY PROFILE
CORPORATION LIMITED
KERALA
FORT P.O.
TRIVANDRUM
CANARA BANK
VISION
Connect with all the farmers “To reach out all the farmers in Kerala with the
object of improving their capability to enhance agricultural production of the county with
commitment to sustain ecology”.
MISSION
Arrange timely supply, installation ana maintenance of equipments for all types of
agriculture and allied activities for increasing productivity.
Supply, installations and commissioning equipment suitable for processing various
farm products produced in the state.
Arrange supply and periodical servicing of hand tools, small machines and special
equipments for employment generation among unemployed people.
Design, fabrication and installation of modern green houses, mist chambers, shade
houses etc. to promote floriculture in the state.
Supply all types of fertilizers and other agricultural inputs to promote production of
food crops and cash crops.
Promote the use of micro irrigation system for better economy and water
management.
Functions of service sector.
Formulate design and install mini drinking water supply scheme.
After sale service of agricultural machines.
Insurance and settlement of warranty claims.
Fabrication or repairs of agricultural equipments.
Training to farmers on modern agricultural machines and implements.
Agri-business and marketing network.
Implementation of centrally sponsored agriculture schemes.
Arranging finance for projects.
KAIC is the largest supplier of different kinds of equipment required for municipal
solid waste management, right from the collection point of waste to the point
processing. KAIC has also been marketing manure produced in processing.
Procurement and supply of agricultural machinery and equipment like tractors, tillers,
and pump sets etc and their repairs.
Fabrication and supply of paddy threshers and winnowers, storage bins, copra dryers,
implements and other attachments to tractors, tillers etc.
Promote hire purchase or direct sale of pump sets etc for irrigation, drinking water
project etc. design, supply and installation of sprinkler and drip irrigation equipments
etc.
Design, fabrication and supply of mist chambers, green houses, poly houses etc.
Procurement and distribution of neem cake, organic manure and fertilizers, coir pith
compost etc.
Conspi Academy Of Management Studies Trivandrum Page 20
Profit Planning at Kerala Agro Industries Corporation Ltd.
Prepare project for energy production and distribution using renewable energy
sources.
The corporation undertakes works of fabrication and maintenance of agricultural
machinery, engines and boats etc.
The corporation undertakes supply of hospital equipments to government
departments.
KAIC undertakes preparation of project report and project consultancy on total
sanitation program or project.
The Corporation has established a novel venture Agro Super Bazaar, the first
ever agricultural hypermarket in the State with the motto “All Agricultural Needs under One
Roof” in the ground floor of the Head Office building at Thiruvananthapuram. This Bazaar
show-cases all types of agricultural implements, machinery, value added products, inputs,
seedlings, dissemination of various technology etc. which would throw light on various items
of agricultural products/ inputs, the Corporation deal in so as to make the farmer public aware
of the modern trend in agriculture.
The main idea in setting up such units is to cater to the changed perception in
marketing of agricultural implements and also to create awareness about modern trends and
machineries. Items are displayed in a Super Market Model and customers no longer has to
toil out in busy local markets to purchase agricultural implements and inputs. The venture has
helped in creating interest among the public towards agriculture with the introduction of
simplified tools, implements and methodologies. The Technology Centre with Training Hall
has facility to demonstrate modern technology to farmers.
2) HIRING CENTRE
Centre, increased the popularization of mechanization in paddy field in order to improve the
productivity and profitability, set up necessary infrastructure for effective maintenance and
repair. Five Centre’s for excellence for Hiring Combine Harvesters has been set up at
Vaikom, Thiruvalla, Ambalapuzha, Thrissur and Palakkad, mainly concentrating the paddy
grown areas of Kuttanad, Thrissur and Palakkad.
Jackfruit is sweet in taste and also contains Vitamin A. Like any other fruit, it
is perishable in nature. It is grown in limited parts of India and hence its popularity is limited
to the growing regions only. It is heavy and bulky fruit and hence transportation is not very
easy and is costly as well. In Kerala, the production of Jackfruit has increased multifold
during the past few years.
However, ventures on value added products from Jackfruit have not gathered
sufficient momentum. Only few units are engaged in unorganized sector manufacturing jack
chips and jackfruit preserves. Identifying the opportunities existing in this sector KAIC is
setting up a jackfruit processing plant at Mala, Thrissur under the assistance from Rashtriya
Krishi Vikas Yojana.
Plant is setting up at our own land at Mala. Main production area would
occupy around 7000 sq. ft. technology for the production and canning shall be obtained from
CFTRI, KAU, NIIST, DFRL etc. The products envisaged in the project are canned jackfruit,
Jackfruit nectar, Jackfruit halwa, Jackfruit chip, value added products from Jackfruit seed,
Jackfruit pericarp, Sweet jackfruit papad, Jackfruit cake, Jackfruit sweet bar, Mango RTS,
Pineapple RTS etc. An effective supply chain mechanism will be established for the prompt
availability of the products. A strong dealer network will be formulated with dealers.
Products shall have to be sold with the help of retailers at many locations like cities/towns,
bus – stands, railways stations etc and through Agro Bazaars.
Farmers being small and marginal do not have the capability to create
infrastructure facilities required for post-harvest management including value addition. The
Corporation has started a go down with modern facilities for storing of pepper at Waynad
District. It also offers the farmers a package of facilities required for post-harvest
management and value addition on pepper by production of “white pepper”.
a) TRADING PRODUCTS
Tractor & Implements
Power Tiller & Implements
Trailers
Paddy Threshers, Winnowers
Reapers & Combine Harvesters
Pretty & Para for Paddy Fields
Pump set & Accessories
Pipes & fittings
Water Tanks
Driers for Coconut, Areca nut, Spices
Copra Moisture Meter
Coconut Palm Climbing Device
Coconut & Areca nut Dehusker
Rain water Harvesting System
Sprinkler & drip Irrigation System
Sprayers of various types
Fogging Machines
Garden Implements & Tools
Green Houses and Mist Chambers
Sales Bunk & Sales Counters
Mobile Vending Unit
Waste Management - Equipments & Machinery
Organic Manure, Fertilizer & Pesticides
Nursery Plants, Medical Plants
Fire Fighting Equipments
Coir Ratt
Solar Lanterns, Solar Street Lights & Accessories
Hospital & Laboratory Equipments
Play Equipments
Furniture
Electronic Weighing Balances
Conspi Academy Of Management Studies Trivandrum Page 25
Profit Planning at Kerala Agro Industries Corporation Ltd.
Setting up and operation of waste management equipments and plans with Orgaver /
Wastepro Machine, Biogas plant, Incinerators, Shredder etc. for muncipal solid waste
management.
Preparation of project report for the establishment of suitable systems for the disposal
of municipal waste through latest practices. Supply of material handling equipments
and tools required for Municipal Solid Waste Management.
Procurement and supply of agricultural machinery and equipment such as Tractors,
Tillers, and Pump sets etc.
Fabrication and supply of paddy threshers, winnowers, Storage bins Copra dryers,
implements and other attachments to tractors, tillers etc.
Promote direct and hire purchase sale of pump sets for irrigation and drinking water
schemes etc.
Installation of lift irrigation, community irrigation drinking water project etc
Design, Supply and installation of sprinkler and drip irrigation etc.
Design, fabrication and supply of mist chambers, green houses, poly houses etc.
Procurement and distribution of agricultural inputs such as neem cake, organic
manure, and fertilizers, coir pith compost etc.
REGISTRATION
FUTURE PLANS
3.2.4 DEPARTMENTS
Assistant Regional
Manager Engineer
DATA ANALYSIS AND INTERPRETATION
Table showing the Contribution using the Sales and Variable Cost
INTERPRETATION:
In the above table, sales and variable cost is compared. It is clear that in the year 2016 the
firm showed a high contribution rate i.e, 1819.75 (in lakhs). In the year 2015 and 2017, we
can see a drastic fall in the contribution rate. Increased contribution is a sign of increased
profitability i.e, during the year 2019 and 2018, the firm is able to make maximum profit.
Ratio represents high profitability and a low P/V Ratio shows low profitability. It can also be
called as Contribution to Volume Ratio (C/V Ratio) or Contribution to Sales Ratio (C/S
Ratio). P/V Ratio can be improved by:
Contribution
P/V Ratio= Sales
×100
30.00%
25.00%
15.00%
10.00%
5.00%
0.00%
2015 2016 2017 2018 2019
INTERPRETATION:
In the year 2016 Profit/Volume Ratio is very high, this shows a high profitability during
2016. In the year 2015 Profit/Volume ratio is the least showing the low profitability of the
firm. The P/V ratio is comparatively less during the year 2017 and 2019 due to the low
contribution and this will have a greater effect on the profitability of the firm.
Break-even point is that point of sales volume at which total revenue is equal
to total cost. It is a point of no profit or no loss to a concern. It is that level of output which
evenly breaks the costs and revenues. At this point, contribution equals the fixed costs and
hence this point is also known as ‘Critical Point’ or ‘Equilibrium Point’. If sale is increased
beyond this level, there shall be profit and if it is decreased from this level, there shall be loss
to the organization.
Fixedcost
BEP= PV ratio
6000
5000
3000
2000
1000
0
2015 2016 2017 2018 2019
INTERPRETATION:
From the table it is found that the Break-even point is least in the year 2015 and high during
the year 2019. Reduced Break-even point is the most favourable situation for making profit.
Margin of safety is the excess of sales over break-even sales. It is the margin
or range at which the concern is safe from the point of view of profit. The size of margin of
safety measures the degree of profitability of an organization. The higher is the margin of
safety, the more is the profitability of the concern. A low margin indicates low profitability.
700
600
500
Margin of Safety (in lakhs)
400
300
200
100
0
2015 2016 2017 2018 2019
INTERPRETATION:
From the above table, 2015 has the highest margin of safety by comparing it with sales and
break-even point. While 2017 has the least margin of safety.