COST VOLUME PROFIT ANALYSIS

INDUSTRIAL PROFILE
.
The first organization attempt in providing safe milk to customers was made by military dairy forms. With objectives of supplying milk to the British troops in India. The next attempt with the organized dairying was in Bombay city by the British government, to improve the city milk supply. In fact Mr.R.A. Pepperell, the secretary of the milk marketing board of England, in a press meeting in 1944, stated that the sewage of London this necessitated the Government intervention in the year 1945, which led establishment of the Bombay milk scheme and a private firm owned by Mr. Polson, located at Anand 400 Kms North Of Bombay, to supply milk to the scheme. To opening up the attractive market of Bombay, to the milk producers of Kaira District, provided the stimulus to increase their production shortly after India became independent, the Government of Bombay realized that the prevailing system of milk contractors, traded and the private Polson dairy were the farmers of Kaira district. Co-operative milk union (Popularly known as AMUL) started with a modest collection of 250 liters of milk per day in 1948, with village milk producers society. AMUL has grown to a size where it today handles some 8, 50,000 liters and more of milk a day in the peak season. The Kairas co-operative society has got the membership of some 36, 00,000 farmers, and pays nearly Rs.100 crores to its farmer members for the milk supplied by them. The co-operative society owns a dairy, which processes dairy products in competition with private industry under the brand name AMUL The leading national brand name in dairy products surprising through it may seem, it was the Kairas cooperative which disproved the myth spread by the multinational that baby food and condensed milk could not be made in India and therefore had to be imported, taking this as a challenge and making both products successfully from buffalo milk. In the above structure the role of the Government is to supervise, to guide, to encourage, disciplining the co-operative societies when the need arises. The Anand pattern combines the power of the people with professional management in a vertical integrated structure, which establishes a direct link between the producers and customers. This co-operative structured in Kaira was in other districts of Gujarat and all the district unions so framed were federated in to the Gujarat co-operative milk marketing federation. The entire structure is owned and operated by farmer elected members, who in turn employ professionals to manage the day today functions of the co-operatives. The structure enables a blend of modern technology with traditional diary framing without causing any financial burden on the state exchequer. Today, the Gujarat Co-operative milk marketing federation has a total membership of over 22 lakhs farmers, with a turnover of about Rs.270 crores a year. When the Prime minister, Sir.Lal Bahadur shastri visited Kaira District in1964, he compared the AMUL co-operative with the other government milk Schemes set up all over the country and decided that the (AMUL) Anand Pattern should be replicated nationally. Thus, the national Diary Development Board (NDDB) was set up in 1965 with a mandate to adopt Anand Pattern throughout India. It was however

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found that every state (except Gujarat) had a Diary development corporation managing over 100 government milk schemes located in town and cities, all of the which were running under loss. There was resistance to the creation of farmer owned organization and the states were not willing to commit funds for dairy development for the creation of Anand. Mean while, in the latter half of the 60s; surplus conserved milk solids were piling up in most of the European Countries. The NDDB saw this opportunity and used it to go generated funds to finance replication of Anand. The programmed of NDDB formulated to meet this objective was called Operation Flood and the Government of Indian approved the Programmed in 1969. Thus, Operation Flood was launched in1970 with funds generated from the sale of gifted milk powder and butter oil from the world flood programmed to replicate Anand pattern in the country. The Programmed has continued to grow, with funds generated from gifted dairy commodities received from the European Economic Community and funds provided by World Bank. The progress of Operation Flood is illustrated in exhibit (1 to 8). The Anand pattern has now been implicated in milk sheds covering 242 districts. Nearly 150 lakhs milk producers are members of these co-operatives and received sum of over Rs.850 crores as payment for the sale of milk to their co-operative during 1986-87. Most of these products are small and marginal farmers or landless laborers, 21% have no land, another 66% are small marginal farmers having less than four hectares of land, and over 70% of the families have only two milk animals or less. The establishment of a co-operative structure as a ready and regularly buyers of milk has generally improved prices to farmers. For example, the average price paid by the Delhi Mother Dairy to the state co-operative federations has increased from Rs.230 to Rs 4015 per Kg. of mixed milk (6.05%fat, 9.90% SNF) between the year 1980 and 1986 (as it has not been possible for the government to permit an increase in the sale price of milk) With the expansion of Operation Flood and increase coverage by the co-operatives, the private trade is now required to compete with the co-operative and has therefore been prevent from unduly exploiting the milk producer. The collective interest of the state co-operative structure has been established by the farmers and is an alternative to the exploitative trading marketing system. It has been established that the Anand pattern can be replicated outside Gujarat and survive in from competition. The co-operative have also established their credibility in the production and marketing of a range of milk products under their respective brand names in different packaging to suit the consumers. Realized the benefits of the Anand pattern, the Government has asked NDDB to extend the co-operative system to restructure production and marketing systems of many other primary products as oil seeds, fruit, vegetables, fisheries distribution etc.

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ANAND PATTERN MILK CO-OPERATIVES:

The basic unit in the Anand pattern is the village milk product co-operatives, a voluntary association of milk collection. All the village milk cooperatives in a district are the members of their district cooperative milk union. Every producers, milk is tested and paid for, on the basis of the quality of the milk. Usually the morning milk is paid for in the evening and the evening milk is paid for the next morning. The village societies also market nutritionally balanced compound clarified produced by the cattle feed plant owned and operated by the district level unions. The union also operates the network of veterinary services to provide routine and emergency services for animal health care. The village societies elect the board of directors of centralized facilities of the union. This is the responsible for the board of the day to day activities. A manager Director, who report to the elected chairman and the Board of Directors, professionally manages each union. The dairy owned by a union, usually has milk-drying plant to convert the seasonal surplus into milk powder and other conserved products. With the help of the drying plant, the union is able to ensure that milk products get 80% to90% of the lean season price even in the flues season. This has enabled the farmers to get 20% to 40% higher prices than what would have got if they were not a part of the co-operative systems. The middlemen have usually been paying only 50% to 60% of the lean season price in the flush season. Bulk of the out-of-pocket expenditure on the milk production is the purchase of cattle feed concentrates like oil cake, cottonseeds etc., owned and operated by the co-operative is able to provide naturally balanced cattle feed at price 20% to 30% over the price of the traditional feeds. The milk collection from the village is usually sent to the co-operative dairy through trucks hired by the co-operative dairy, tries to market the bulk of its liquid milk and converts the surplus milk into products. Professional managers employed by the co-operative ensure, that they get the best return for their produce.

DAIRY INDUSTRY IN KARNATAKA:

In June 1974, an integrated project was launched in Karnataka to restructured and reconcile the dairy industry on the co-operative principles and laid foundation for new World Bank aided dairy development projects in 1975. Initially the project covered 8 southern districts of Karnataka dairy Development Corporation was set up to implement the project. The multi level activities were set up with Dairy coT.JOHN INSTITUTE OF TECHNOLOGY Page 3

COST VOLUME PROFIT ANALYSIS operative societies at gross root levels, milk union at the middle level as an apex body vested with the dairy development activities continued under operation Flood-II, the activities were extended to cover the entire state except coastal Taluks of Uttar Karnataka district. The process of dairy development continued in the second phase from 1984, KMF come in to existence. In May 1984, as a successor to KDDC after the closure of operation Flood-II dairy development activities continued under Flood-II with 700 professionals. While the IDC is Government of India Company, the NDDB is a registered society. NDDB, apart from providing services for the implementation of operation Flood also provides the applied research and development support to the projects. In Karnataka on June 4th, 1975 four Milk Unions were started in Bangalore, Mysore, Tumkur and Hassan, Karnataka Dairy Development Corporation (KDDC) got re-named as Karnataka Milk Federation and the Mysore Corporative Milk Producers Societies Union Ltd in to Mysore-Chamarajanagar District Coop Milk Producers Societies Union Ltd MARKET SHARE OF NANDINI MILK: The market share of Nandini milk is shown as follows: 1. Nandini Milk- 75% (MYMUL Market Share in Mysore Dist. Is 53%) 2. Private milk- 25% Though it was registered on 30th March 1977, it was handed over to the Union in 1987 Dairy development in Mysore District: The Mysore dairy, which was taken up by Mysore milk union on 1st June 1987, has an installed capacity of 60 TLPS. This was extended to 100 TLPS. It was future extended up to 100 TLPD during operation flood, Second in Hansur with 30TLPD and recently in Kollegal was established with 30 TLPD capacities.

KMF/MYMUL Ltd., as structured on co-operative principle consists of three Levels namely, 1. Village level- Diary Co-operative Society. 2. District level- Milk Union of Districts. 3. State level The Federation of Milk union. The structure of MYMUL is functional in nature. The managing committee takes all the decisions, which consists of managing director and functional Department heads.

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COST VOLUME PROFIT ANALYSIS When we look at the organization chart, we find that the structure is in line with various heads of the functional department reporting to the chairman and managing director. Objectives: Karnataka Milk Federation is a co operative apex in the body in the state of the Karnataka for the representing Dairy Farmers Organization and also implementing Diary development activities the following objectives. 1. 2. 3. 4. 5. Providing assured and remunerative market for the entire Milk Producers. Providing hygienic Milk to urban consumers. To build village level Institutions in Co-operative sector to manage the dairy activities. To ensure Milk Production for self-employment at village level, preventing migration to urban area, introducing cash economy and opportunity for regular income. The philosophy of Dairy Development is to eliminate middle men and organize institutions to be owned managed by the Milk Producers themselves, Achieving Economies of scale to ensure maximum return to the Milk producers, at the same time , providing whole some milk at lowest possible price to Urban Consumers. Inspiring rural people for Milk production as an added occupation along with agriculture. Providing self-employment for rural folk and making them stable by providing financial assistance. To provide mobile veterinary and emergency services for animals of rural areas. Providing regular market for milk producers throughout the year.

6. 7. 8. 9.

The complex network of Co-Operative Organization should build a bridge between millions of consumers and milk producers. Of the other side to achieve a Socio Economic Revolution within the state. Location: Mysore Dairy is located within the city limit of Mysore at Siddhartha Layout on T.Narasipura Road, a few km from heart of the city. The Mysore dairy has been built in the area of 10.25 acres of land, the building is worth Rs.51.42 Lakhs. Government of Karnataka has taken golden step to make the farmers involved in dairy development activities and increased their income level and standard of living.

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COMPANY PROFILE.
A. BACKGROUND AND INCEPTION OF THE COMPANY. UNDER the World Bank aided Karnataka dairy development projects, the activities on development were taken to in the year 1975. The Mysore co-op milk producers societies union ltd; was established on 23-11-1976, having the jurisdiction extended to the entire Mysore district and five taluks of Mandy district. The union undertook the work of organization of milk cooperatives in AMUL, pattern with main objective of socio-economic reformation of the rural areas through dairying as main subsidiary occupation.

1. Milk Producers Co-Operative Societies: (MPCS)

These MPCS are in every village consisting of 50 and above members with the Rs.10 share and Re.1 advance, to each of them. Among members 8 Directors are elected, in that two seats are reserved (For SC, Or ST) candidates and another for a lady candidate. Out of these 8 directors one is elected to be a president. In Mysore District 803 societies are registered and properly functioning.

2. District Level Milk Union: (DMU)

The federation is named as Karnataka Milk Federation. The president of the DMU is elected and he is the supreme authority. Once in three years union election is held to select a chairman, where board of directors constitute of a chairman and one MD of the union, one KMF representative, one NDDB representative, one representative from registrar of co-operative society and one from the department of Animal husbandry

Main functions of the union:

To provide remunerative market for the milk produced by the rural farmers. First aid facilities the society level. Emergency visits to treat the animals on a nominal fee to be collected from producers. Cross breeding facility through artificial insemination service. Technical guidance and supply of root slips or seeds for fodder cultivation the member of the co-op societies. Page 6

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COST VOLUME PROFIT ANALYSIS Effective supervision of extension services through field execution on the union. Supply of balance 3 cattle feed to the farmers of the co-op societies at subsidiary rates. Intensive co-op programs to the women members of the dairy co-op societies through development program.

B. NATURE OF THE BUSINESS CARRIED: The nature of Mysore milk union is that procuring the milk from society and that milk is bring through tankers for various centers. Those, which are near & convenient to various societies.

The unions process the milk & market in urban area through by various agents. The union providing service to milk producers technical inputs like veterinary services seeds, fodders etc., & also by giving training to farmers 7 also induction program. The union providing various products to market like toned milk, along with curd, ghee, Peda also providing. This is the nature & business carried of the MYMUL.

C. VISION, MISSION, AND QUALITY POLICY:

VISION: The vision of the MYMUL has to provide good quality milk to the consumers at reasonable price. To create unity of workers for providing a better service to consumers of milk, to help in social and economic development of the country and get reliability in world class market.

MISSION:
MYMUL is committed to provide maximum possible price for milk supplied by its members & provide necessary inputs to enhance milk production while ensuring economics viability of the union & its also committed to provide quality milk operative dairy industry in the country.

QUALITY POLICY: MYMUL is committed to producers welfare through customers delight my adopting continuous improvement and hygienic milk and milk products. T.JOHN INSTITUTE OF TECHNOLOGY Page 7

COST VOLUME PROFIT ANALYSIS VALUES: HONESTY DISCIPLINE QUALITY COST CONTROL CO-OPERATION TEAM SPIRIT MUTUAL RESPECT

SERVICE MOTIVE

A. PRODUCT/ SERVICE PROFILE:

Production is considered to be crucial in any industrial organization. Production is the process by which raw materials and inputs are converted in to finished goods. The product dairy purchases milk from co-operative milk societies. In turn these societies directly collect milk from villages and supply the same to the dairy. The dairy is having FLUSH SEASON, which usually starts from other. And ends in February . And march. The lean season of the dairy starts usually in the month of March, April, and ends in September.

PRODUCT PROFILE:

MYMUL milk union manufactures the following products... Toned milk, standardized milk, full creamed milk, double toned milk, homogeneous standard milk, curds, ghee, Peda, Mysore pak, Lassi, Masala majjige, flavouredmilk.

NANDINI TONED MILK: Karnatakas most favorite milk Nandini toned milk, containing 3.1% fat and 8.5%SNF. Available in 500 ML and 1 liter packs. NANDINI FULL CREAM MILK: T.JOHN INSTITUTE OF TECHNOLOGY Page 8

COST VOLUME PROFIT ANALYSIS Full milk contains 6.1 fat and 9 SNF. Rich creamer and tasted milk, ideal for preparing homemade sweets and savories. Available in 500 ml packs. Nandini homogenized toned milk is pure milk, which is homogenized and pasteurized consistent rights thought, it gives more cup of tea or coffee and is easily digestible. Available in 500 ml packs. NANDINI CURD: Nandini curd made from pure milk, it is thick and delicious. Giving you all goodness of homemade curds. Available in 200 Grams and 50 Grams sachet. NANDINI STANDARDISED MILK: This milk containing 4.6 % fat and 8.5% SNF available in 500 ml pack. NANDINI DOUBLE TONED MILK: Nandini double toned milk contains 1.6 % fat and 9% SNF available in 500 ml. NANDINI GHEE: This is made from pure butter, delicious flavor, hygienically manufactured and packed in a special pack to remain goodness of pure ghee. Available in 200, 500, and 100 mls sachets and 15 kgs tins. NANDINI PEDA: This is made from delicious treat for the family. Made from pure milk, store at room temperature approximately 7 days. Available in 50 Grams for pack containing 10 pieces each. MYSORE PAK: Fresh and tasty, Nandini Mysore pak is made from high quality Bengal gram, Nandini ghee and cane sugar. It is delicious way to relish a sweet movement. Available in 250 and 500 Grams. SWEET LASSI: Sterilized flavored milk nutritious and healthy milk and on all season wholesome drink available in different flavor. BADAM BURFI: This is delicious treat for the family made from pure milk. Store at room temperature.

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COST VOLUME PROFIT ANALYSIS B. AREA OF OPERATION: Mysore- Chamarajanagar district co-operative milk producers union limited registered under the Karnataka co-operative act has been commissioned in the year 1980. The dairy receives milk in cans with temperature of 27C to 30c from village co-operatives located in the district of Mysore and Chamarajanagar district. And in tanker with temperature of 5 C to 6 C from the three chilling centers located at Hunsur, Kollegal and Chamarajanagar towns. Also the dairy receives milk with temperature of 5 C to 6 C in tankers from 27 Bulk Milk Coolers. These bulk milk coolers have been installed to maintain the quality of raw milk and also to reduce the intake of energy intensives raw materials. As on date the per day quantity of milk received through cans directly from dairy co-operatives, tankers from chilling centers and tankers from bulk milk coolers is as follows: In cans from village dairy co-operatives 54500 Kgs In tankers from chilling centers 112500 Kgs In tankers from bulk milk coolers 51000Kgs C. OWNERSHIP PATTERN: MYMUL is a co-operative institution. Farmers are the real owners as well as the shareholders of the co-operative union. Farmers are entitles to receive the dividends from the co-operative union. Pattern of Co-operative sector in Milk Industry: Primary Union District Union State federation

D. COMPETITOR INFORMATION: The major competitors of the MYMUL are as follows: Jersey Dodla Arogya Fresh Milk Loose vendors Gomatha Thirumala Page 10

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COST VOLUME PROFIT ANALYSIS Swastika

Dodla: Plant at Nellore. Available of raw material at cheaper rate. Sale in union jurisdiction 18TLPD (30TLPD in city). Commission ranges from 80-95 paise. Quality perception thick and long shelf life. Flexible distribution - retailers or anyone willing to sell. Returns will be accepted. Payment cash and carry or which collecting empty on return trip. Channel members are playing critical role on boosting the sales. Packing is attractive with multicolour pricing on sachets. Consumer perceives that milk is good for making curds.

Loose Milk Sale: Market share is next to Nandini. Loose milk from crude and local cattle reamers. Sale in union jurisdiction 140 TLPD. Majority of the milk is heavily adulterated and no uniform quality. Sales from 50ml and above. Major consumers are low- income group segments, road ride teashops and sweet neat stalls. Flexible payment system.

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COST VOLUME PROFIT ANALYSIS E. INFRASTRUCTURE FACILITIES: Infrastructure facilities in MYMUL are in this way.

MILK PROCUREMENT: Milk collection from farmers. Dairy co-operative society Bulk milk products.

TRANSPORTATION; They have procurement group contract vehicles. EG; Milk tanker

MILK PROCESSING: Raw milk reception dock Cream separators Milk pastures Stored tanks Electronic milk tester and milk scan. PACKING: Milk packing machine Curd packing machine Lassi, Masala majjige packing machine Flavored milk packing machine Ghee packing machine

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COST VOLUME PROFIT ANALYSIS ENGINEERING: Reformation equipments Boiler equipment Effluent treatment plants Electronic generation

MARKETING: Distribution network Agents Parlors Depots Franchise

DISTRIBUTION TRANSPORT: Trucks Auto Mobile Van

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COST VOLUME PROFIT ANALYSIS

A. Work Flow model:

Manufacturing, packaging & storing of paste sized Milk:

Receiving Milk from Farmers

Grading

Sampling

Weighting

Testing

Pre-Heating (35 C)

Filtering / Clarification

Cooling (5C or below)

Standardization

Bottling /Packing

Storage (5 C or below)

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B. Achievements and Awards:

MYMUL has not got many awards from the state and the central government: ISO certificate 9001-2008 2nd prize from national energy conservation board 2003-2005 1st prize from state energy conservation board 1st prize in grand maintain during Rajasthasava.

A. Future growth & prospectus:

1. Milk procurement enhance activities like introduction of new societies formation of BMCs (bulk milk coolers) providing, training on various production enhancement activities, clean milk production, good animal husbandry.

2. Marketing:
Allotting more agencies opening new parlors and depot, conducting various comparative like children drawing Competition, then arranging dairy visits for school, college children consumers and farmers.

3. Dairy plant:
Expansion of processing capacity, installation of new equipment, making processing and packing facilities at chilling centers.

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McKensys 7S Frame work:

The respected consulted from Mekinsey and company developed the 7s framework for management analysis. The outstanding feature of the 7s medal is the mckinsey consults in their studies of many companies have tasted it extensively. Thus, theory and practice seem to support each other in the study of management. The 7s are strategy, structure, system, staff, skill, and style, shared value

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COST VOLUME PROFIT ANALYSIS 1. STRATEGY:

Strategy is a systematic action and allocations of achieve company aims. It is the determination of purpose and the basic long objective of an enterprise and the adoption of course of action and allocation of resource necessary to achieve these aims. The MYMUL strategy is to make available balanced cattle food at reasonable price to improve the productivity of milk, and training the personnel for best utilization of skills. The main aim is to supply fresh pure quality of milk with reasonable price. It is also trying to improve its position in the mind of customers by following up and attending any complaints in more compensated way and union is trying to give their best.

OBJECTIVES OF MYMUL: Is to provide pure and fresh milk and to provide marketing facilities to the rural milk producers at reasonable price. 1. Providing hygienic milk to urban customers. 2. To build village level institution in co-operative sector. 3. Providing assured and remunerative marked for all the milk produced by the farmer member. 4. Preventing migration to urban areas.

2. STRUCTURE: Organization structure and authority and responsibility relationship are including in the structure. The grouping of activities and people into departments. Organization struct6ure in MYMUL can be viewed as established pattern of relationship among the components of organization. The organization structure in MYMUL well planned the function and organizations are brought to the notice of the employee. The authority and responsibility are properly assigned and therefore the rest is carried on smoothly.

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COST VOLUME PROFIT ANALYSIS Organization diagram;

BOARD DIRECTOR

OF

PRESIDENT

MANAGING DIRECTOR

ADMIN OFFICERS

FINANCEOFFICERS

MANAGER DAIRY

MARKETING HEAD

MANAGER PROCUREMENT

MIS OFFICER

DISTRIBUTI - ON WING DY.MGR.PLANT DY.MGR.QUALITY

DY. MGR PROCURE MENT

DY.MGR. PROCUREMENT

DEPUTY MGR. INPUT

In MYMUL an organization chart is used which is graphical portrayed of various position in the organization and of the formal authority relationship among them. The chart in MYMUL shows the position. It provides to understand what is his position in the structure is.

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COST VOLUME PROFIT ANALYSIS MYMUL HAVE THE VARIOUS DEPARTMENTS:

1. 2. 3. 4. 5. 6.

Administrative department. Finance department. Procurement department. Storage department. Purchasing department. Marketing department.

Different department of this organization: Procurement and input department:

Department structure Manager p& 1

Deputy Manager (AGA)

Deputy Manager (procurement)

Deputy Manager (Feed fodders

Assistant Manager

Asst.officer.

Asst. Manager Assist officer Assist Manager.

Extension officer.

Duties and responsibilities of P &I:

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1. DCs supervision. 2. Extension officers will be visiting once in month to DCs and supervise the accounts and they will guide the MC. Members for development of DCs. 3. Providing input activities to milk producers through DCs at right time. 4. Proper transportation of milk from DCs to dairy. 5. Transport vehicle arrangements are the responsibility. 6. Proper utilization of funds under govt. scheme. The manager of p& I is charge of their activities assisted by extension officers veterinary officers, artificial insemination and agriculture officers. 1. As the first step of this programmer starts with surrey of the villages by extension officers. The main function and responsibility of primary level dairy co-operative areto purchase the milk offered by the members twice a day (morning and evening) 2. To make regular payment for the milk received on the basis of fat % arrived on testing. 3. Top arrange for the dispatch of the union in time. 4. Sale of cattle to the members. 5. Mediator facility to provide information and services to the members extended by the union such as fodder demonstration programme, training, milk production inputs etc., 6. It should help the producers for making cattle insurance. In the union payment for the producers is given by the society once in week. The milk is procured from the village in contract vehicles, which goes to the society at schedule time and gives empty cans for next collection and trunk sheets or details of previous collection and gets filled milk cans. The technical in input programmed of the union mainly covers the following activities. 1. 2. 3. 4. Animal health care. Artificial insemination Feeds and fodder development Extensive services.

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COST VOLUME PROFIT ANALYSIS MARKETING DEPARTMENTS: The structure of marketing department of MYMUL is as follows.

Managing director

General Manager

Marketing manager

Marketing superintendent

Marketing assistant

Marketing can be considered as the heart of any production, because it acts as a link between consumers and producers. Therefore future of any organization involved in production of product lies in its marketing dept. it is very necessary to achieve the organization objective . Without marketing of manufactured products, there is no value for that manufactured product. The union of selling 117915 LPD to the consumers of Mysore. There is marketing section headed by marketing officers. Under the control of deputy manager milk is being sold through distribution routes by appointing agents of other institution or at milk parlors. T.JOHN INSTITUTE OF TECHNOLOGY Page 21

COST VOLUME PROFIT ANALYSIS

As per the indents given by the agents of other institution of parlors milk will be dispatched at scheduled time to the market in morning and evening sessions. The milk parlors located at Mysore, & Hansur have been given to the private traders to run under annual contracts as per terms and conditions of union. Further, the Marketing section also attends to the complaints made by public regarding spoilage, breaking of rackets etc; and make arrangement for replacement after through verification.

ACCOUNTS DEPARTMENT: FINANCE is the lifeblood of any organization. Finance mainly focuses on wealth maximization. It mainly focuses minimizing the cost and maximizing the profit.

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COST VOLUME PROFIT ANALYSIS FINANCE DEPT. STRUCTURE;

MANAGING DIRECTOR

MANAGER (FINANCE)

DEPUTY MANAGER (finance).

ACCOUNTS OFFICER.

ASST. MANAGER.(FINANCE)

ACCOUNTS SUPDT.

Account Assistant

Acct assit

Acc assit

Acct assit

This is the key functional area of the union. All the aspects of accounting and monitoring of work of this division are carried out under the control of accounts officers. It helps the control of accounts officers It helps the management to consider liability of project to generate adequate surplus not only to cover the department. Surviving to obtain a satisfactory internal rate of return in the finance management. This department is headed by Dy. Manager (Finance /Accounts) it maintains subsidiary and trading accounts. The book of accounts maintained by the accounts department in the office are purchase register books. Accounts departments also perform various disbursements of wages and salaries. The maintenance of investment records a supplying of all types of accounting and financial information to the management.

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COST VOLUME PROFIT ANALYSIS PURCHASE AND STORES DEPARTMENTS:

The main function of the purchase department is to conclude the purchase of material and stores, plant and machinery, stationeries and supplies etc; the head of the purchase department select the best source of supply, negotiates the terms of purchase, place orders, follows up orders, receives supply to materials together with invoices from suppliers and check them against the purchase orders and certifies the invoices for payments and performs such other tasks as are related to its function. And also include purchase of dairy co-operative societies materials.

ADMINISTRATIVE DEPARTMENTS

PERSONNEL/ADMINISTRATIVE DEPARTMENT.

MANAGING DIRECTOR

GENERAL MANAGER /DEPUTY MANAGER

PERSONNEL ADMINISTRATOR.
Personnel and administrative department of MYMUL is well equipped with qualified and experienced personnel manager. He is administering this dept. with the guidelines of the president, managing director and general manager/deputy manager. The personnel manager manages the overall functions of the dept. MYMUL also procure the manual workers through contract basis on their piecework system. The following are the functional areas of personnel management/administration in MYMUL. T.JOHN INSTITUTE OF TECHNOLOGY Page 24

COST VOLUME PROFIT ANALYSIS 1. Organizational planning and development. 2. Staffing and employment. 3. Training and development. 4. Compensation, wage and salary administration. 5. Motivation and incentives 6. Employee records. The assistant managers who sees day to-day affairs of the dept. heads the administrative dept. he is accountable for the affairs of the administrative dept. is mainly concerned with the recruitment, promotion providing salaries, provident fund etc; to various employees working in the organization.

3.

SYSTEM;

System refers to procedure and processes such as information system, manufacturing processes, budgeting and control processes.

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FLOW CHART OF HANDLING MILK;

Raw milk reception Standardization

Chilling

Storage of raw milk

Cream Separation

Homogenization Pasteurization

Cold storage

Packing

Selling of milk Dispatch

Apart from production and selling of milk MYMUL also producers products such as cream, butter, lassie, Mysore pak, ghee, curd, Masala majjige, Peda, flavored milk by use of following equipments. Reception Processing section P/F machine Cream tank Page 26

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COST VOLUME PROFIT ANALYSIS Boiler DG room and sub station Air compressor room Refrigeration Product section Workshop equipment.

4. STAFF:

The people in the organization are very dedicated and towards the improvement of the organization. The skill levels of the workers are work oriented and they are specialized in their respective fieldwork. Staff refers to people in the enterprise and their socialization in to organizational culture. The staff in MYMUL has good relationship with each other. The staff is well qualified and suited for their respective jobs. They are satisfied with their work, which is reflected by the non-stoppage of any work in MYMUL. The maximization number of staff approved is 302 workers for the union. At present there are 250 workers working in MYMUL. 5. SKILL;

Skills refer to the distinctive capabilities of an enterprise. The MYMUL possesses variety in the procurement of milk and production of milk and milk products, which is reflected by the quality assurance test taken by the union during procurement of milk and also by the variety products produced by the union. The union has good skilled human resource, which is very improvement in the achievement of organization. The company has skilled manpower. The company is capable of processing milk fresh and pure will before the time schedule and other expectations of the customers. The company is satisfying the customers through its qualities milk and milk products. Examples: For recruiting and selecting the manpower required by the production dept. the criteria would be B. Tech (dairy technology) and B.E. for maintenance of boilers who have capabilities to handle the functioning of work smoothly.

6. STYLE:

Style refers to the way the management behaves and collectively spends time to achieve organizational goal.

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COST VOLUME PROFIT ANALYSIS In MYMUL also have future planning for marketing divisions as well as for marketing of products? Dairy is moving towards attaining future plans; management of MYMUL has provided some intimated figures for attaining goals and objectives in future. FUTURE PLANNING OF MYMUL:

Planning refers to deciding in advance what to do, how to do, when to do and who is to do it. Planning is simply a rational approach to accomplish an objective. It bridges gap from where we are to where we want to go. Planning focuses on the future direction, values and sense of purpose, basis objectives tell the directions of growth, planning provides unifying decisions making framework and facilities integration of efforts. Planning enables the organization to time its business with the environment and establish a profitable relationship with the environment. MYMUL also have future planning for marketing divisions as well as for marketing of products. Dairy is moving towards attaining future plans; management of MYMUL has provided some intimated figures for attaining goals and objectives in future.

7. SHARED VALUES: Shared value or super ordinate goals refers to a set of value and aspiration that goes beyond the conventional formal statement objective. There are fundamental ideas around which business is built. In MYMUL every employee is dedicated to the achievement of the organizational goals. The employees work hard to see that good quality products are produces in the union.

Company also takes the valuable guidance and suggestions from the employees and customers. By this the company can know what the requirements of customers are. The company believes that the business success is combined effort of the employees and management. So, the shared value is an element, which ensures the success of implementing the strategy.

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5. SWOT ANALYSIS OF THE COMPANY

STRENGTHS:

1. Two lakhs farmer members. 2. 815 milk producers co-operative societies. 3. Transportation vehicles. 4. Easy communication channel. 5. Milk producers elect their own administrative body. 6. ISO 9001-2000 Certificate. 7. Good name in the market. 8. Well managed.

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WEAKNESSES:

1. Political interference 2. Wide spread operating areas.

OPPORTUNITIES:

1. Good board. 2. Different verities of milk for different categories of people. 3. Tapping loose milk sales. THREATS:

1. Wide brand competition 2. Workers inefficiency. 3. Increased local loose milk sales.

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ANALYSIS OF FINANCIAL STATEMENT OF MYSORE CHAMARAJANAGAR DIST CO-OP MILK UNION Profit and loss account of Mysore Milk Union

Mar 11 (in rs)

TRADING ACCOUNT Sales Account Cost of Sales Opening Stock ADD: Purchases Account LESS: Closing Stock Direct Expenses GROSS PROFIT INCOME STATEMENT Indirect Incomes Indirect Expenses PROFIT BEFORE TAX LESS: Income Tax NET PROFIT 23,953,549 283,382,971 80,780,007 25,615,141 5,51,64,886 18,205,829 2,627,506,632 17,738,184 2,627,974,277 164,998,324 34,02,09,430 3,133,182,030

Mar 10 (in rs)

2,269,821,411 16,705,638 1,846,730,761 18,529,417 1,844,906,982 130,600,571 29,43,13,858 30,224,699 242,348,346 82,190,211 26,059,941 5,61,30,270

Source: annual report of Mysore Milk Union 2010-11 Interpretation:

A sale has increased from 226 cores to 313crores in the year 2010-11. Gross profit increased from 29.4 crores to 34 crores in the year 2010-11. Net profit has been decreased from 5.61 crores to 5.51 crores in the year 2010-11.

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Balance sheet of MYMUL Particulars

Sources of funds: Capital accounts Loans / liabilities Current liabilities Profit and loss account Total Application of fund: Fixed assets Investments Current assets Total 260587644 126371278 493604624 880563546 250159222 19619212 269301339 539079773 Amount (in rs) Mar11 385646834 152028450 226274343 116613919 880563546 Amount (in rs) Mar10 285606827 70278651 96235854 86958441 539079773

Interpretation:
Capital account is increased from 28.5 crores to 38.5 crores in the year 2010-11. Investment is increased from 1 crores to 12 crores in the year 2010-11. Current assets are increased from 26.9 crores to 49.3 crores in the year 2010-11.

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LEARNING EXPERIENCE:
Just as an unknown frontier is looked upon with much anxiety, so researcher has set afoot into the citadel of milk processing industry, MYMUL. At the end of a months training at the organization, researcher can safely say that he got acquainted with the minute details of the manner in which raw milk is processed and made available to all in need. To define in short, my experience at the MYMUL plant can be narrowed down to witnessing what was written about as the motto of MYMUL, that is witnessing how QUALITY EXCELLENCE IS REACHED FROM COWS TO CONSUMERS.

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PART B INTRODUCTION COST VOLUME PROFIT ANALYSIS

Cost Volume Profit is a planning tool which is extremely useful in predicting sales and profit levels given a certain cost structure. Traditionally cost volume profit analysis has been applied largely to manufacturing enterprises which have a which have tangible product base (e.g. furniture). However the concept itself is applicable to service enterprises such as banking, Insurance and other financial service industries. THE BASIC COST VOLUME PROFIT MODEL As mentioned earlier, Cost Volume Profit analysis or Break Even analysis as it is often commonly called, is largely in the manufacturing sector. According to Horngren and Foster(1991), the basic Cost Volume Profit model has the following underlying assumptions. 1. The behavior of costs revenue is linear . 2. Selling price are constant. 3. All cost can be divided in to their fixed and variable elements. 4. Total fixed cost remain constant. 5. Total variable cost are proportional to volume. 6. Prices of production inputs (e.g. materials) are constant. 7. Efficiency and productivity are constant. 8. The analysis covers a single product or a constant sales mix. 9. Revenue and costs are being compared over a single volume base (e.g. units). 10. Volume is not only drivers of cost.

Cost Volume Profit analysis expands the use of information provided by the Break Even analysis. A critical part of CVP analysis is the point where the total revenues equal to costs (both fixed and variable costs). At this breakeven point (BEP),a company will experience no income or loss. This BEP can be an initial examination that precedes more detailed CVP analysis. Cost Volume Profit analysis the same basic assumption as in breakeven analysis. The assumptions underlying CVP analysis are: The behavior of the both costs and revenues is linear throughout the relevant range of activity. This assumption precludes the concept of volume discounts on either purchase material or sales. Cost can be classified accurately as either fixed or variable. Changes in activity are the T.JOHN INSTITUTE OF TECHNOLOGY Page 34

COST VOLUME PROFIT ANALYSIS only factors that affect costs. All produced are sole (there is no ending finished goods inventory). When a company sells more than one type of products the sales mix (the ratio of each product to total sales) will remain constant. The components of Cost Volume Profit analysis are Level or Volume of activity Unit selling price Variable cost per unit Total fixed assets Sales mix Cost Volume Profit (CVP) in managerial economics is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-com decisions. Cost Volume Profit analysis expands the use of information provided by breakeven analysis.

A critical part of Cost Volume Profit analysis is the point where the total revenues equal to the total costs (both fixed and variable costs). Cost Volume Profit analysis is an analytical technique for studying the relationship between volume, fixed costs, variable costs prices and profits. The breakeven analysis is the most widely used form of CVP analysis. It provides information to management in most prcis manner it is an effective and report system. The break even analysis establishes a relationship between revenue and cost with respect to volume. It indicates the level of sales at which costs and revenues are in equilibrium point isd commonly known as the breakeven point. The breakeven point may be defined as that point of sales volume at which total revenue is equal to total cost. These are two approaches to compute the breakeven point is (i) formula approach & (ii) the chart approach.

Marginal Cost and Marginal Costing

The term Marginal Cost is the ascertain the amount of at any given volume if output by which aggregate costs are changed if the volume of output is increased or decreased by one unit. It is a variable cost of one unit of a product or a service i.e. a cost which would be avoided if that unit was produced or provided. Marginal costing is the ascertainment of marginal cost and the effect on profit of changes in volume or type of output by differentiating between fixed cost and variable cost. The concept of T.JOHN INSTITUTE OF TECHNOLOGY Page 35

COST VOLUME PROFIT ANALYSIS marginal costing is based on the behavior of costs that vary with the volume of output. It is also known as variable costing. Under marginal costing, prices are determined with reference to marginal cost and contribution margin. Profitability of the products or the company is determined with reference to their contribution margin. Meaning and concept of contribution In Marginal Costing costs are classified into fixed and variable costs. From this approach it is possible to identify the amount of contribution per product towards fixed overheads and profits. Contribution is the difference between sales and marginal or cost of sales. Contribution is a pool of amount from which total fixed costs will be deducted to arrive at the profit or loss. Formulae used in Marginal Costing and Contribution Sales = Variable cost + Fixed Cost + Profit Sales Variable cost = Contribution Fixed Cost + Profit = Contribution Therefore, Sales Variable Cost = Fixed Cost + Profit Contribution Fixed Cost = Contribution (4) (5) (1) (2) (3)

This fundamental marginal cost equation plays a vital role in profit projection and has a wider application in managerial decision making problems. The sales and variable cost vary directly with the number of units sold or produced. So, the difference between sales and variable cost. i.e. contribution, will bear a relation to sales and the ratio of contribution to sales remains constant at all levels. Advantages of Marginal Costing and Contribution It is simple to understand variable versus fixed cost concept. A useful short term survival costing technique particularly in very competitive environment or recessions where orders are accepted as long as it covers the marginal cost contributes towards fixed costs so that losses are kept to minimum. Its shows the relationship between cost, price and volume. Under or over absorption do not arise in marginal costing. Stock valuations are not distorted with present years fixed costs. Page 36

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COST VOLUME PROFIT ANALYSIS Its provide better information hence is a useful managerial decision making tool. It concentrates on the controllable aspects of business by separating fixed and variable costs. The effect of production and sales policies is more clearly seen and understood.

Limitation of Marginal Costing and Contribution Marginal Cost has its limitation since it makes use of historical data while decision by management relates costs to future events. It ignores fixed costs to products as if they are not important to production. Stock valuation under this of costing is not accepted by the Inland Revenue as it ignore the fixed cost element. It fails to recognize that in the long run, fixed costs may become variable. Its over simplified costs into fixed and variable as if it is so simply to demarcate them. It is not a good costing technique in the long run for pricing decision as it ignores fixed cost. In the long run, management must consider the total costs not only the variable portion. Difficulty to classify properly variable and fixed cost perfectly, hence stock valuation can be distorted if fixed cost is classified as variable.

Contribution Analysis and its application in Managerial Decision The analysis of the contribution per unit, each product makes towards fixed cost and profit leads to the preparation of statement showing the total contribution each product class has made towards the recovery of period costs. The concept of contribution helps in deciding breakeven point, profitability of products, departments etc. to perform the fallowing activities: Selecting the optimum product mix Sales mix for profit maximization Fixing selling prices under different circumstances such as trade depression, export sales, price discrimination etc. Key or limiting factor analysis Ranking the products based on profitability Profit planning Make or Buy decisions BEP and CVP analysis Accept or reject special orders Page 37

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COST VOLUME PROFIT ANALYSIS Continuing or discontinuing the product or operations.

Break Even Analysis

Meaning: Break even analysis refers to the ascertainment of level of operations where total revenue equals to total cost. It is an analysis used to determine the probable profit or loss at any level of operations. It is method of studying the relationship among sales revenue. Variable cost and fixed cost to determine the level of operation at which all the costs are equal to its sales revenue. It is NO LOSS NO PROFIT situation. This is an important technique used in profit planning and managerial decision making. Breakeven point is the volume of sales or production where there is neither profit nor loss. Thus, we can say that: Contribution = Fixed Cost at BEP Break Even Chart: Break even analysis is made through Graphical Charts. This chart shows fixed and variable cost and sales revenue so that profit or loss at any given level of production or sales can be ascertained. Construction of Breakeven Chart: The construction of Breakeven Chart involves the drawing of fixed cost of fixed cost line, total cost line and sales line as follows. Select a scale for production on horizontal axis and a scale for costs and sales on vertical axis. Plot fixed cost on vertical axis and draw fixed cost line passing through this point parallel to horizontal axis. Plot variable cost for some activity levels starting from the fixed cost line and join these points. This will given total cost line. Alternatively total cost at different levels, the points starting from horizontal axis and draw total cost line.

Assumptions of Breakeven Analysis: Breakeven analysis is only a supply side (i.e. Cost only) analysis as it tells you noting about what sales are actually likely to be for the product at these various prices. It assumes that Fixed cost are constant

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COST VOLUME PROFIT ANALYSIS 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 in 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). In breakeven charts, it is assumed that total cost and total revenue can be presented in a straight line, which is not possible in reality. When multiple products are there breakeven chart fails to depict the BEP.

Formulae used in Break Even Analysis Break Even Point in units = Fixed Cost Contribution per unit BEP Sales in Rs. = Fixed Cost PV Ratio BEP in Rs. = BEP = Breakeven units x Selling price per unit Fixed Cost / Sales variable cost

Profit Volume Ratio: Reveals the rate of contribution per product as a percentage of total turnover. It indicates the relationship of contribution to sales. It helps in knowing the profitability of the business. A fundamental property of marginal costing system is that Profit Volume Ratio remains constant at different levels of activity. A change is fixed cost does not affect the Profit Volume Ratio. The concept of Profit Volume Ratio helps in determining the following: Breakeven Point Profit at any Volume of Sales Sales volume required to earn a desired quantum of profit. Profitability of Products Processes of Departments

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COST VOLUME PROFIT ANALYSIS The contribution can be increased by increasing the sale price or by reduction of variable costs. Thus Profit Volume Ratio can be improved by the fallowing: Increasing Selling price Reducing Marginal costs by effectively utilizing men, machine, materials and other services. Selling more profitable products, thereby increasing the overall Profit Volume Ratio.

Formulae of PV Ratio P/V Ratio = Sales Variable cost Sales Contribution Sales

P/V Ratio = Change in Contribution Change in Sales

Change in Profit Change in Sales

P/V Ratio = I Variable Cost to Sales Ratio

Margin of Safety: It refers to the sales in excess of break even volume. It is calculated as the difference between sales or production units at the selected activity and the breakeven sales or production. The size of margin of safety is an extremely valuable guide to the strength of a business. If it is large, there can be substantial falling of sales may and yet a profit can be made. On the other hand, if margin is small, any loss of sales may be a serious matter. If margin of safety is unsatisfactory, possible steps to rectify the causes of management of commercial activities as listed below can be undertaken. Increasing the selling price, it may be possible for a company to have a higher margin of safety in order to strengthen the financial health of the business. It should be able to influence price, provided the is elastic. Otherwise the same quality will not sold. Reducing Fixed costs. Reducing Variable costs Substitution of existing product(S) by more profitable lines Increase in the volume of output T.JOHN INSTITUTE OF TECHNOLOGY Page 40

COST VOLUME PROFIT ANALYSIS Modernization of production facilities and the introduction of the most cost effectively technology.

Formulae of Margin of Safety Margin of Safety = Margin of Safety = Total Sales Break Even Sales Profit P/V Ratio Margin of Safety = Profit x Selling price per unit Selling price per unit variable cost per unit

Margin of Safety =

Margin of Sales Total Sales

x 100

Angle of Incidence: The angle which sales line makes with the total cost line is known as angle of incidence. It is an indicator of profitability above the BEP. If the margin of safety and Angle of incidence are considered and studied together, they will provide significance information to the management about the profitability. A high margin of safety with wider Angle of Incidence will represent the most profitable position of the business concern and vice versa. BEP in Multiple Product Situations: In real life, most of the firms turn out many products. The calculation of breakeven point in a multi-product firm follows the same pattern as in a single product firm. While the numerator will be the same fixed costs, the denominator will be weighted average contribution margin. The modified formula is as fallows

Break Even Point (in unit) = Fixed Cost Weighted average contribution Margin Per unit

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COST VOLUME PROFIT ANALYSIS One should always remember that weights are assigned in proportion to the relative sales of all products. It will be the contribution margin of each product multiplied by its quantity. Breakeven Point in Sales Revenue: Here also, numerator is the same fixed costs. The denominator will be weighted average contribution margin ratio which is also called weighted average P/V Ratio. The modified formula is as fallows. Breakeven Point (in Revenue) = Fixed Cost weighted average P/V Ratio

OBJECTIVE OF THE STUDY:

To indicate the priorities for the dishes: Milk, Ghee, Peda, Mysore Pak and other products with a view to maximize the profits. To identify the breakeven point (BEP) of sales and BEP in units per month for milk, Ghee, Mysore pak, Peda, Masala Majjige and Lassi.

SCOPE OF THE STUDY:

The cost volume profit analysis presented in the report is confined to MYMUL where multi products are manufactured. This report may be helpful to the accounts department and management department at Mysore Milk Dairy. In order know the cost of products and also to the break even analysis of actual and budgeted figures.

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METHODOLOGY:

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LIMITATIONS OF THE STUDY:

Time constrains: The major limitation of this project report move effective, with detail study. Limited information: Due to incompleteness and the provide information was completely relied on, there may be not 100% accuracy in this presentation. In MYMUL, no costing technique is followed and hence the available information regarding the cost accounting system practiced here, is presented in this report.

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