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MANAGEMENT ACCOUNTING

PROJECT REPORT ON COST


ANALYSIS ON SETUP OF A NEW
ATM MACHINE FOR ‘STATE BANK
OF INDIA’

SUBMITTED TO: SUBMITTED BY: (SECTION A)


Dr Ritesh Srivastava Sandeep Yadav
Karnika Ghildiyal
ACKNOWLEDMENT
We take this opportunity to express our profound
sense of gratitude and respect to all those who
helped us throughout this endeavor.
We owe our regards to Prof. Dr Ritesh
Srivastava, IILM-GSM, Greater Noida, for his
cooperation and valuable support and for giving us
the opportunity to undertake this project and
providing the necessary infrastructure.
We would like to express our heartfelt thanks to
Minto and Bisender for helping us in various
printouts of the project.
Our heartiest thanks to Mr. Shailender Girdher,
Mr. Ajay Verma and Mr.Pradeep Vats,
Mr.Suresh Bansal for their cooperation and help
wherever it was required.
Last but not the least, we owe our overwhelming
gratitude to our families and friends who gave
us constant support and motivation to continue
with this endeavor.
CONTENTS

Introduction………………………….
……………………….. 4

Objectives…………...
………………………………………… 5

Requirements for an ATM business………….…....


6

Cost sheet……………..
……………………………………….8

Analysis of the cost sheet


……………………………..10

SWOT Analysis of an ATM business………………15


INTRODUCTION
As financial technology improves at an ever-
increasing rate, there is less and less need for
individuals to carry large amounts of cash to buy
things. In fact, it seems the younger generations
have moved to almost entirely electronic
transactions where no physical money is ever
used. However, in this world of credit and debit
cards, there will always be a need for good old-
fashioned cash. A smart businessman can make a
nice profit supplying cash to those who
underestimate the need for it by simply placing
and managing automated teller machines (or
ATMs).
Now, there are reasons why an ATM is considered
to be a good business deal. The reasons are:-

• no inventory to purchase or stock


• no store front or rental space needed
• guaranteed, fixed profit on each transaction
• scalable, i.e., you can start with one machine
and expand slowly (or quickly) as you earn
your profits
• low investment needed to start
• investment costs are usually returned within 1
year (six months or

OBJECTIVES
 To setup a new ATM machine under the small
scale industries category

 To ascertain the various costs that go into


starting such a business

 To spend within the limit of Rs. 5 crore to 10


crore.

 To prepare a cost sheet of all the costs to be


incurred

 To analyze the cost sheet and come to a


conclusion regarding the business
REQUIREMENTS FOR
AN ATM BUSINESS
Items Cost/Machi
ne (Rs.)
ATM (4 Machines) 4000000
Air Conditioners (6 300000
units)
UPS (4 units) 1,60,000
Stationery 30,000
3 Guards 2,52,000
(Rs.5000/month for 1
guard for day shift +
Rs.8000/month/guard
for 2 guards for night
shift)

Furnishing (Lighting, 4,50,000


Flooring, Laminates,
Signboard, Drop boxes,
Brochure holders)
Cleaner (Rs.500/month) 6000
Electricity
• Lighting (10 tube 89,425
lights – 10
units/day –
Rs.2.45/unit for 1 15,27,525
year)
• 6 Air conditioners 90,520
(225 units/day,
Rs.3.1/unit)
• 4 UPS (20
units/day,
Rs.3.1/unit)
Security Van 6,00,000
(Rs.50000/month)
Annual Maintenance 4,00,000
Contract (ATM)
Insurance Premium 7,30,000
(Rs.500/day for 4
machines)
Paper roll for account 3,84,000
balance receipts
(Rs.8000/month/machi
ne)
Websites promotion 10,00,000
Telephone charges 50,000
Internet charges 1,50,000

COST SHEET
Particulars Total Cost
PRIME COST ------
+ Work Expenses:-
Depreciation:-
Machine (10%) 4000000
Air conditioner (10%) 300000
UPS (10%) 160000
Other expenses:-
Salary to watchman 2520000
Furnishing expenses 4500000
Paper roll for account balance 3840000
receipts(Rs.80000/month/mac
hine)
Salary to cleaner 60000
Electricity charges:-
6 Air conditioners (225 15,27,525
units/day @ Rs. 3.1/per unit )
4 UPS (20 units/day @ 90,520
Rs.3.1/- per unit)
Lighting (10 Tube lights- 89,425
10units/day @ Rs.2.45/unit)
Security Van 6000000
(Rs.500000/month)
WORKS COST 38454700
+ Office and Administration Expenses:-
Insurance Premium 7300000
Telephone charges 500000
Internet charges 1500000
Stationery 300000
OFFICE COST 48054700
+ Selling & Distribution Expenses:-
Websites promotion 10000000
Annual Maintenance Contract 100000
Security Van Charges 6000000
TOTAL COST 6,50,54,700
+ Profit 12000000
(Rs.3000000/machine)
SALES 7,70,54,700
ANALYSIS
With the idea of starting a business of ATM at a
place like Jagat Farm, Greater Noida, where the
average number of transactions is very high,
the proposal prepared by us shows an
estimated cost of Rs.6,50,54,700 for 4 ATMs.
Whereas, the State Bank of India is providing
us with Rs.77054700 on an average to meet
our expenses. Therefore, our approximated
profit comes out to be Rs.3000000 per ATM.
1. Profit as a % of sales = Profit x 100
Sales
= 3000000 x 100 = 11.6 %
25684900

Our expected net profit ratio is 11.6 %. It’s


above boundary line. Our company will
increase its net profit as we can’t operate at
just BEP (Break even point). The ideal
percentage for net profit ratio is 10%. We are
currently at safe level of 11.6%. It means that
we have demand of our product in market.

Cost-Volume Profit Analysis


2. Profit volume ratio (P/V Ratio) = Sales –
variable Cost x100
Sales
= 77054700-(2520000+
60000) x 100
77054700
= 96.65%

The difference between sales and marginal


cost, i.e. contribution, bears a relation to sales
and the ratio of contribution to sales remains
constant at all levels, as, the sales and
marginal costs vary directly with the number of
units sold or produced. The higher the P/V
Ratio better is for company prospects. We have
a very high P/V Ratio (96.65%), implying we
have better prospects.

3. Breakeven point (in Rs.)= Fixed Cost =


P/Ratio
4000000+300000+160000+4500000+384
0000+1527525+90520+89425+7300000+
500000+1500000+300000+10000000+10
00000+6000000
96.65%
= Rs. 58432177.9

BEP is the point at which cost and revenue are


equal: one has "broken even". Therefore has
not made a profit or a loss. After this level (Rs.
5843217.79) our firm will start earning profit.

4. Margin of Safety (MOS) = Actual Sales –


Sales at BEP
= Rs.77054700 –
Rs.58432177.9
= Rs.18622522.1

In break-even analysis, margin of safety is how


much output or sales level can fall before a
business reaches its break-even point
(BEP).Larger the margin of safety, more sound
is the position of the business in respect of
profit earning. Our MOS is Rs.18622522.1
which is higher from BEP. MOS has a direct
relation with profit.

SWOT ANALYSIS OF
AN ATM BUSINESS
STRENGTHS
• Video on demand
• In-built cameras in ATMs

• Provides timely access to network


resources
• Supports message traffic of variable length
• Provides higher transmission speeds
• Provides self-routing capabilities for
multiple traffic types
• Supports new data communications and
telecommunications applications
• Offers guaranteed network access for voice
and video applications
• Enables users to request a desired level
and quality of service
• Provides protection mechanisms against
network congestion conditions

WEAKNESS
• Threat of cross border ATM crimes like
debit card fraud
• Skimming and ATM scams, perpetrated in
many cases by highly mobile crime
syndicates
OPPORTUNITIES
Merchants receive three things when allowing
you to place an ATM in their business. One,
they will be offering an added convenience to
their customers. Two, they will save money on
credit card fees due to customers using cash,
and three, they will be able to profit from the
ATM by receiving a percentage of the
surcharge revenue without any of the expenses
or liabilities.

THREATS
1. Eavesdropping
Eavesdropping refers to the threat
that the attacker connects or taps into
the transmission media and gain
unauthorized access to the data. It is
one of the most common attacks to
the network. Since most ATM networks
are connected with optic cables, some
people might get the wrong
impression that is not so easy to tap a
ATM network.
2. Spoofing
Spoofing attack means that an
attacker tries to impersonate another
user’s identity and take advantages.
However, since a network will be
connected to many untrusted
networks via the Internet, it's
impossible to prevent a hacker from
getting this access permission or even
trace the people with this particular
access permission. ATM is being
implemented in public domain.