COST SHEET

ANALYSIS : DABUR
INDIA, LTD.

AJAY ABRAHAM
F12004
NEHA SARA KURIAN
F12043
 Acknowledgement
We are thankful to Prof. Victor Louis Anthuvan for giving us an opportunity to
prepare a cost sheet and analyze it. This has been very helpful for us in
understanding concepts like break even analysis, marginal costing and its practical
implications in business. This project would not have been successful without his
continuous guidance and theoretical inputs.
 Objective of the Report

The objective of the report is to study the balance sheet of a manufacturing

company and carry out the following:

 Prepare Cost Sheet

 Analyze the cost sheet
 Apply the concepts of marginal costing and CVP analysis

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

Dabur At-a-Glance

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

COSTING
Costing is the technique of ascertaining cost.
A cost sheet is a statement of cost prepared at given interval of time showing
various elements of cost of a product produced, or service rendered during a
particular period. This statement gives details about total cost and cost per unit at
different stages of production.

Important components of cost are:

a) Prime Cost = Direct material cost + Direct labour cost

b) Works Cost = Prime cost + Factory overheads.
c) Cost of production = Works cost + Office & Administrative
overheads.
d) Total Cost (Cost of sales) = Cost of production + Selling &
Distribution overheads.

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

We have assumed the following for the preparation of cost sheet

 Rent has been assumed to be factory rent
 Insurance has been taken on building
 We assume that the land is used only for factory purpose.
 As the company has variant products, the selling price per unit cannot be
estimated.So all the calculation of sales has been limites to sales in rupees.

ANALYSIS OF COST SHEET

 Freight and forwarding charges form about 12.018% of selling and

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

Factory OH as a % of Direct labour 65.25

Administrative OH as a % of works cost 11.14

Selling OH as a % of Cost of production 29.71

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

MARGINAL COSTING

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

The technique of marginal costing involves:

 Differentiation between fixed cost and variable cost
 Ascertainment of marginal costs
 Ascertaining the effect on profit due to changes in volume i.e cost volume
profit analysis.
Tools of marginal costing:
 Contribution
 P/V Ratio
 Break even point
 Margin of safety

FIXED COSTS Rs.in crore

Depreciation on Building 727

Depreciation Plant & Machinery 2118

Depreciation lease on land 10

Rates And Taxes 348

Depreciation Vehicle 196

Depreciation furniture & fixtures 170

Depreciation computer 275

R&D 368

Auditor's Remuneration 76

General Expenses 9201

Security 446

Insurance 286

Director's Fee 2192

Telephone and Fax 355

Legal and Professional 2159

Repair and Maintenance Building 281

Processing charges 2098

Other Repairs 678

Rent 2132

Advertisement 39019

Total Fixed costs 63135

VARIABLE COST

Repairs To Machinery 423

Direct Labour 18000

Raw Material 77335

Primary Packing Material 50071

Power and Fuel 4239

Stores and Spares 1172

Excise Duty 3099

Sales tax 289

Freight and forwarding 6287

Travel and Conveyance 3007

Commission and Discount 3166

Total Variable costs 167088

Total Cost 230223

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

Fixed cost as a % of Total Cost 27.423

Variable cost as a % of Total Cost 72.575

 Major part of the expense is variable cost accounting to 27.423% while only
27.423% is fixed cost. That means if variable cost per unit is controlled to
some extent then cost can be controlled. Though fixed cost seems to be low
when compared to variable cost it is also an indication that company has
invested well in fixed assets as 27.423% is a comparably high value.
 The company has invested a considerable amount in advertisement and
publicity which accounts to around 63.13% of fixed cost
 Expense on raw materials and primary packing material together constitutes
76.25% of variable cost. This depends mainly on the market demands as
well the capacity of production.
Particulars Formula Calculation Result
Break Even
Sales(in Fixed cost/(P/V
Rs.Crores) ratio) 129336.24
(Contribution /
P/V ratio Sales )*100 3737.91/16910.06 0.48815
Actual Sales -
Margin of safety BEP(Rs) 16910.06-3032.036 197100.76
Margin of safety (Margin of Safety
Ratio /Actual Sales)*100 13878.02/16910.06 60.38

Calculation of Marginal Costing Tools

Working Notes

Sales 326437
Fixed Cost 63135
Variable Cost 167088
Contribution 159349
P/V Ratio 0.488146258
Suppose the company expects a profit of Rs. 150000 crores for the next financial
year
Column1 Column2
Desired Profit 150000
P/V Ratio 0.488146258
Fixed Cost 63135

Desired sales 436621.1899

ANALYSIS OF MARGINAL COSTING

 Margin of safety is an advantage to the company. It indicted the extra profit

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