The Study of Cost Analysis at Ravindra and Company Ltd

Research Article Volume 6 Issue No. 6

The Study of Cost Analysis at Ravindra and Company Ltd Kamthana Bidar Mohd Shakeel Ahmed1, Jyoti Ainapur2 Student1, Assistant professor2 Department of MBA Guru Nanak Dev Engineering College, Bidar, Karnataka, India [email protected], [email protected]

Abstract: India is the fourth major manufacturer of spirit in the world, and the second biggest in Asia. Although the alcohol manufacture from stuffy is also practiced in India but on a very limited level. Distillery positions as the top most manufacturing among the list of 17 heavily polluting manufacturing recognized by ministry of environment and forests, Govt of India. Cost accounting is the modern concept of accounting as a tool of management. It is concerned with all such accounting information that is useful to management. In other words the term cost accounting is applied to the provision of accounting information for management activities such as decision making. Planning, & controlling etc. Marginal costing is a technique of costing. It is special technique used for analysis and interpreting cost data for the purpose of assessing the profitability of products, departments and cost centres. The present research is to analyze the how are costs varying from cost 3 years data which will helps to know which particular cost is increasing or decreasing which is to be controlled.

INTRODUCTION maximized by minimized the costs. Thus, better cost Ravindra & Company is a public ltd. Company incorporated analysis is one of primary activities of any firm. under the Company’s act 1956 on 5th April 1975. The Company’s unit is situated at mallik mirzapur village which is OBJECTIVE OF THE STUDY: about 13km away from bidar towards side. The Company  To study and interpret the cost statement of Ravindra started its production in 1979. The main production of the & Company ltd. Company is rectified spirit, denatured spirit and Indian made  To understand cost management of this Company. liquors. In 1979 the Company its production with the capacity  To study and interpret financial statements of of 4.5kl of rectified spirit out of molasses. Govt of Karnataka Ravindra and co. ltd. had given license to produce 4.5kl/day only during 1979. The unit is considered to be well managed and organized one. The SCOPE OF THE STUDY: unit commands a lot of respect in the circles of rectified spirit  The scope of the study is to identify the cost of manufactures. control to have better control over various costs of production, and decisions regarding cost management INTRODUCTION OF COST ANALYSIS / COST operating nature. ACCOUNTING  Then, it is an attempt is to identify the various costs  Cost” in a simple words, means the overall expenses. of production of ravindra & Company ltd Cost is defined as the amount of expenditure incurred on  And to find out the manner in which they manage the a given thing. Therefore it is that which is given or costs. sacrificed to obtain something. A cost is prepared to have efficient use of funds and for the understanding SOURCES OF DATA COLLECTION; objective as efficiently as possible. 1. PRIMARY DATA:  Cost analysis is a recent development it is the branch of  Primary data were collected through the discussion financial accounting. It maintains the records unit wise, with all over the staff of the accounting dept / or job wise, process wise department wise. At the end, we executives. can easily control or help in reduction of costs. 2. SECONDARY DATA  Cost analysis is the process choosing among alternative  Secondary data is available from the previous annual courses of action. It is the managerial decision making report, the inventory register and monthly financial process. The manager chooses that course of action, statements of the Company. which he considers as the most effective for achieving goals and solving problems. TECHNIQUE OF DATA ANALYSIS:  Cost accounting is an important aspect of business MARGINAL COST: decision making. A firm not adhering to cost efficiency Marginal cost is the variable cost of one unit of a production practices may end up not making much profit is the total or a service. In short, marginal cost (MC) is a cost that is cost while revenue maximization remain an important avoided if the unit was not produced or provided. Marginal activity of firm at the same time profit can also be

International Journal of Engineering Science and Computing, June 2016 7745 http://ijesc.org/ cost is the amount at any given volume of output is either sales increased or decreased.  P/V Ratio = fixed cost + profit The marginal cost means” marginal cost = prime sales cost + variable overhead / OR, marginal cost = total cost –  P/V Ratio = change in contribution fixed cost. change in sales  P/V Ratio = change in profit or loss PROFIT VOLUME RATIO: change in sales The profit volume ( P/V ) is also known as  P/V Ratio = fixed cost contribution ratio or marginal ratio. It is the ratio of BEP sales contribution to sales. P/V ratio is very important in decision making. It can be used for the calculation of BEP and in LIMITATIONS: problem regarding profit sales relationship may be expressed  Detailed the data was not available for analysis the in percentages. cost facts and figures, as it was a confidential in  P/V Ratio = contribution nature. sales  The given data is of Ravindra & Company Ltd.  P/V Ratio = sales – variable cost

REQUIREMENT OF CALCULATION OF P/V RATIO: PARTICULARS 2012 – 13 2013 – 14 2014 – 15 SALES 2793.70 2903.76 4722.76 LESS: VARIABLE COST 2044.91 2430.63 3858.50 CONTRIBUTION 748.09 472.97 864.26 LESS: FIXED COST 485.05 205.26 526.08 263.04 267.71 338.18 LESS: SELLING AND DISTRIBUTION 86.93 194.12 47.54 PROFIT 176.11 73.59 290.64

CALCULATION OF P/V RATIO; = 472.97 X 100 2903.76 IN THE YEAR OF 2012 – 13: P/V ratio = 16.29% Particular Rs in lacks. IN THE YEAR OF 2014 – 15: P/V ratio = Contribution Sales Particular Rs in lacks. = 748.09 X 100 2793.70 P/V ratio = Contribution P/V ratio = 26.78% Sales = 864.26 X 100 IN THE YEAR OF 2013 – 14: 4722.76 Particular Rs in lacks. P/V ratio = 18.3%

P/V ratio = Contribution Sales

International Journal of Engineering Science and Computing, June 2016 7746 http://ijesc.org/ P/V ratio

30.00% 26.78% 25.00%

20.00% 16.29% 18.30% 15.00% 10.00% P/V ratio 5.00% 0.00% 2012-13 2013-14 2014-15

INTERPRETATION: BEP (Sales) = 485.05_ The P/V ratio is increased in the year of 2012 – 13 because 26.78% of low variable cost, but in the next year 2013 – 14 the P/V =1811.24 / 2793.70 X 100 = ratio is reduced because of variable cost is increased in the 64.84% year of 2013 – 14. And in the next year 2014 – 15 the variable cost is again decreased so that the P/V is increased in the year of 2014 - 15. In the year of 2013 – 14: BEP (sales) = fixed expenses X 100 BREAK EVEN POINT (BEP): P/V Ratio Break even point (BEP) is that volume of output at BEP (Sales) = 205.26_ which total cost is equal to sales. It is a point of no profit and 16.29% no loss. This is the minimum point of production at which total cost is recovered and after this point, profit begins. = 1260.03 / 2903.76 X 100 = BEP in sales = actual sales – margin of safety. 43.40%  BEP Sales = fixed cost X selling price/ unit Contribution per unit In the year of 2014 – 15:  BEP Sales = fixed cost X sales value (total) BEP (sales) = fixed expenses X 100 Contribution (total) P/V Ratio  BEP Sales = fixed cost BEP (Sales) = 526.08_ P/V ratio 18.3% Calculation of BEP (sales); In the year of 2012 – 13: = 2874.75 / 4722.76 X 100 = 60.87% BEP (sales) = fixed expenses X 100 P/V Ratio

International Journal of Engineering Science and Computing, June 2016 7747 http://ijesc.org/ REPRESENTING BEP 70.00% 64.84% 60.87% 60.00%

50.00% 43.40% 40.00%

30.00%

20.00%

10.00%

0.00% 2012-13 2013-14 2014-15

INTERPRETATION: be interpreted that Company’s sales are increasing BEP indicates no profit no loss area the Company should continuously it shows that it is increasing profit. BEP sales to avoid loss. From the study it was found it could

CALCULATION OF WORKING CAPITAL; Working Capital = Current Assets – Current Liabilities. YEARS CURRENT ASSETS – CURRENT LIABILITIES = WORKING CAPITAL 2012 65203174.51 – 51676310.63 = 13526863.88 2013 85412448.93 – 48944195.07 = 36468253.86 2014 108653754.50 – 69821364.01 = 3883290.49

WORKING CAPITAL 40000000 36468253.86

30000000

20000000 13526863.88 WORKING CAPITAL 10000000 3883290.49

0 2011-12 2012-13 2013-14

INTERPRETATION: CONCLUSIONS: There is fluctuation in the working capital because increase The project report was studied on ‘’ Cost Analysis ‘’ with and decrease in current liabilities. reference to Ravindra and Co Ltd Bidar. By taking all the needful information collected by organization internal

International Journal of Engineering Science and Computing, June 2016 7748 http://ijesc.org/ records data and stored Company’s computer data in the overall study it was found that the major problem of this Company is using variable cost improperly, due to increased in expenditure, therefore the margin of safety is decreased and to effect on Company’s position {sound and unsound of the business}. And liabilities are increasing and the changes occurred in the working capital due to the changes in profit volume ratio. Company wants to properly utilize the fixed and variable cost in the production. Make some changes in production management for better utilization in the cost of production. Increase in sales price for more profit and safe the more margin of safety.

BIBLOGRAGHY:

1. Cost accounting Dr S.B. Baligar; published by ashok prakashan Twentieth revised & Enlarged Edition : 2012.

2. Cost accounting – pattanshetty and pallekar. Published by Vikas publishing house pvt ltd Edition : 2005.

2. Ravidra industry – annual reports.

3. Ravindra monthly statements and yearly financial statements.

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