COST VOLUME PROFIT ANALYSIS OF AMS SPICES AND FOOD

PRODUCTS PVT. LTD. MANJERI, KERALA

BY
NOUFAL HABEEB N
REG.NO. 47510631036

SCHOOL OF MANAGEMENT STUDIES

SURYA GROUP OF INSTITUTIONS
Vikravandi – 605 652

A PROJECT REPORT
Submitted to the
FACULTY OF MANAGEMENT STUDIES
ANNA UNIVERSITY
CHENNAI – 600 025

In partial fulfillment of the requirements

for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

JUNE 2012
 DATE:

BONAFIDE CERTIFICATE

Certified that this project report titled “COST VOLUME PROFIT ANALYSIS
OF AMS SPICES AND FOOD PRODCTS PVT. LTD.” is the bonafide work of
NOUFAL HABEEB N (REG.NO. 47510631036) who carried out the project under my
supervision. Certified further, that to the best of my knowledge the work reported here in
does not form part of any other project report or dissertation on the basis of which a degree
or award was conferred on an earlier occasion on this or any other candidate.

INTERNAL GUIDE DEAN

Project Report submitted for viva voce held on_____________

INTERNAL EXAMINER EXTERNAL EXAMINER

 DECLARATION

I hereby state that the Project Report titled “COST VOLUME PROFIT
ANALYSIS OF AMS SPICES AND FOOD PRODCTS PVT. LTD.” Submitted in
partial fulfillment of the degree of MASTER OF BUSINESS ADMINISTRATION is an
original work done entirely by me and is based entirely on my own observations. It has not
previously formed the basis for the award of any other degree, diploma, fellowship or any
other similar title. The facts presented here are true to the best of my knowledge.

Place:
Date: NOUFAL HABEEB N (REG NO.47510631036)
 ACKNOWLEDGEMENT

I take this privilege to express a few words of gratitude and respect to all those who
helped me in completion of project.

I would like to express my heartfelt gratitude to our beloved Chairman Dr. P.

GAUTHAMA SIGAMANI, Surya Educational Trust who enabled me to complete this
project..

I am thankful to Mr. P. SAMPATH KUMAR, The Dean, School of Management

Studies for his valuable suggestion, assistance and his sincere guidance as my Internal
Guide to successfully complete my project.

I thank Mr. SUNIL KUMAR: (Accountant), AMS SPICES AND FOOD

PRODCTS PVT. LTD. for helping and guiding me throughout the project.

I express my sincere thanks to Project Study Coordinator, Mr. S. BALAJI,

Assistant Professor, all Teaching & Non Teaching Staff of School of Management Studies
for their continuous monitoring and assessment.

I take immense pleasure to thank all inspiring spirits behind the success of the
project.

NOUFAL HABEEB N
 LIST OF CONTENTS
CHAPTER NO. TITLE PAGE
NO.
CHAPTER 1 INTRODUCTION

1.1 INTRODUCTION ABOUT THE PROJECT 1

1.1.2 NEED FOR THE STUDY 3
1.1.3 OBJECTIVES OF THE STUDY 4
1.1.4 SCOPE OF THE STUDY 5
1.2 COMPANY PROFILE
1.2.1 INDUSTRY PROFILE 6
1.2.2 COMPANY PROFILE 16
1.2.3 PRODUCTS 20
1.2.4 ORGANIZATIONAL CHART 23
1.3 REVIEW OF LITERATURE 24

CHAPTER 2 MAIN THEME OF THE PROJECT REPORT

2.1 RESEARACH METHODOLOGY 35

2.1.1 RESEARCH DESIGN 35

2.1.2 LIMITATIONS OF THE STUDY 39
2.2 DATA ANALYSIS AND INTERPRETATION
2.3 TABLES 45
2.4 FIGURES 45
CHAPTER 3 RESULTS, DISCUSSION AND CONCLUSION

3.1 FINDINGS 57

3.2 SUGGESTIONS 58
3.3 CONCLUSION 59
APPENDIX
BIBLIOGRAPHY
 LIST OF TABLES

TABLE NO TABLES PAGE NO.

2.3.1 45
BREAK EVEN SALES
2.3.2 MARGIN OF SAFETY 49

2.3.3 PROFIT VOLUME RATIO 52

2.3.4 OPERATING LEVERAGE 56
 LIST OF FIGURES

FIGURE NO FIGURES PAGE NO.

2.4.1 45
BREAK EVEN SALES
2.4.2 MARGIN OF SAFETY 49

2.4.3 PROFIT VOLUME RATIO 52

2.4.4 OPERATING LEVERAGE 56
 ABSTRACT

The study “Cost Volume Profit Analysis ” taken of AMS SPICES AND FOOD
PRODUCTS PVT. LTD . The primary objective of the study is to study the Cost Volume
Profit Analysis of AMS SPICES AND FOOD PRODUCTS . This is an analytical research
where secondary data are used for analysis for 2007 -2011. Financial statements are taken
after an in depth study on review of literature. For the study five years financial statements
are taken . The tools used in the study,

1. Break Even Analysis .

Break Even Point
Profit Volume ratio
Margin of Safety
2. Operating Leverage.

This study also helps to understand the sales, profit and operating leverage of AMS
SP ICES AND FOOD PRODUCTS PVT.LTD .
 1.1 INTRODUCTION

Cost Volume Profit analysis shows the relationship among the various
ingredients of profit planning, namely, unit sale price, variable cost, sales volume, sales
mix and the fixed cost. Cost Volume Profit (CVP) analysis general y defined as a planning
tool by which managers can evaluate the effect of a change(s) in price, volume, variable
cost or fixed cost on profit. Additionally, CVP analysis is the basis for understanding
contribution margin pricing, related short run decisions, target costing and transfer pricing.
In the marginal costing varies directly with the volume of production or output . In net
effects, if volume is changed, variable cost varies as per the changes in volume . In this
case, selling price remains fixed, fixed remains fixed and then there is a change in profit .

Cost Volume Profit analysis is a logical extension of Marginal costing. It is

based on the same principles of classifying the operating expenses into fixed and variable.
Now-a-days it has become a powerful instrument in the hands of policy makers to
maximum profit.
Earning of maximum profit is the ultimate goal of almost all business
undertaking. The most important factors influencing the earning of profit is the volume of
production.
Profit depends on a large number of factors, most important of which are the
cost of manufacturing and the volume of sales, volume of sales depends upon the volume
of production and market factors which turns in related to cost .

Management has no control over the market. In order to achieve certain

level of profitability, it has to exercise control and management of costs, mainly variable
cost. This because fixed cost is a non -controllable cost.
It helps to find out the profitability of a product, department of division is to
have a better product mix for profit planning and to maximize the profit a concern.
 1.1.2 NEED FOR THE STUDY
 The study is carried out to analyze the financial performance.

 The study helps company to identify growth opportunity.

 It can be helpful for the management to apply various financial tools such as
Financial Leverage an d Profit Volume Ratio.

 It will be helpful to management for decision making.

 1.1.3 OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE


To study the Cost Volume Profit analysis and its impact on AMS SPICES
AND FOOD PRODUCTS Pvt.Ltd.Manjeri, Kerala.

SECONDARY OBJECTIVE


To find out the break -even - point for the products of AMS SPICES AND
FOOD PRODUCTS Pvt.Ltd.


To understand the level of sales needed to achieve a desired profit


To identify the margin of safety and its significance in AMS SPICES AND FOOD
PRODUCTS Pvt.Ltd


To analyze the degree of operating leverage of AMS SPICES AND FOOD
PRODUCTS Pvt.Ltd.
 1.1.4 SCOPE OF THE STUDY

This study is performed by using the financial statement of AMS SPICES

AND FOOD PRODUCTS Pvt.Ltd. This would be useful for company to take new strategy
to compete in the market by adopting various controlling techniques in the process of
manufacturing.
This study was conducted only on overall cost volume profit analysis and
not on each and every variables. This study helps to forecast profit fairly and accurately as
it is essential to know the relationship between profits and costs.

This study assists in evaluation of performance for the purpose of control

and also assists in formulating policies by showing the effect of different price structure on
costs and profits.
This study predetermines the overhead rates that are related to a selected
volume of production.
 1.2.1 INDUSTRY PROFILE

GROWTH OF FOOD INDUSTRIES IN INDIA

India is the world's second largest producer of food next to China, and has
the potential of being the biggest with the food and agricultural sector. The total food
production in India is likely to double in the next ten years and there is an opportunity for
large investments in food and food processing technologies, skills and equipment,
especially in areas of Canning, Dairy and Food Processing, Specialty Processing,
Packaging, Frozen Food/Refrigeration and Thermo Processing. Fruits & Vegetables,
Fisheries, Milk & Milk Products, Meat & Poultry, Packaged/Convenience Foods, Alcoholic
Beverages & Soft Drinks and Grains are important sub - sectors of the food processing
industry. Health food and health food supplements are another rapidly rising segment of
this industry which is gaining vast popularity amongst the healthconscious.

India is one of the world’s major food producers but accounts for less than
1.5 per cent of international food trade . This indicates vast scope for both investors and
exporters. Food exports in 1998 stood at US $5.8 billion whereas the world total was US
$438 billion. The Indian food industries sales turnover is Rs 140,000crore (1crore = 10
million) annually as at the start of year 2000.

The industry has the highest number of plants approved by the US Food and
Drug Administration (FDA) outside the USA

India's food processing sector covers fruit and vegetables; meat and poultry; milk and milk
products, alcoholic beverages, fisheries, plantation, grain processing and other consumer
product groups like confectionery, chocolates and cocoa products, Soya - based products,
mineral water, high protein foods etc . We cover an exhaustive database of an array of
suppliers, manufacturers, exporters and importers widely dealing in sectors like the - Food
Industry, Dairy processing, Indian beverage industry etc. We also cover sectors like dairy
plants, canning, bottling plants, packaging industries, process machinery etc.

The most promising sub - sectors includes -Soft - drink bottling,

Confectionery manufacture, Fishing, aquaculture, Grain -milling and grain - based
products, Meat and poultry processing, Alcoholic beverages, Milk processing, Tomato
paste, Fast -food, Ready- to - eat breakfast cereals, Food additives, flavors’etc.

India is the second largest producer of food and holds the potential to be the
biggest on global food and agriculture canvas, according to a Corporate Catalyst India
(CCI) survey. The food industry in India comprises the food production industry and the
food processing industry. The food processing industry is one of the largest in India – it is
ranked fifth in terms of production, consumption, export and expected growth.

Food processing involves any type of value addition to agricultural or

horticultural produce and also includes processes such as grading, sorting, and packaging
which enhance shelf life of food products. The food processing industry provides vital
linkages and synergies between industry and agriculture. The Food Processing Industry
sector in India is one of the largest in terms of production, consumption, export and growth
prospects. The government has accorded it a high priority, with a number of fiscal reliefs
and incentives, to encourage commercialization and value addition to agricultural produce,
for minimizing pre/post harvest wastage, generating employment and export growth
The food processing sector is highly fragmented industry, it widely
comprises of the following sub -segments: Fruits & vegetables, Meat & poultry, Dairy,
Marine products, grains and consumer foods (that includes packaged food, beverages and
packaged drinking water) etc. A number of entrepreneurs in this industry are small in terms
of their production and operations, and are largely concentrate d in the unorganized
segment. This segment accounts for more than 70% of the output in terms of volume and
50% in terms of value. Though the organized sector seems comparatively small, it is
growing at a much faster place.
 Indian food processing industry is widely recognized as a 'sunrise industry'
having huge potential for uplifting agricultural economy, creation of large scale processed
food manufacturing and food chain facilities, and the resultant generation of employment
and export earnings . The industry is estimated to be worth around US $ 67 billion and
employing about 13 million people directly and about 35 million people indirectly. The
food processing sector in India is geared to meet the international standards. Food Safety
and Standards Authority of India has the mandate to develop standards and also to
harmonize the same with International Standards consistent with food hygiene and food
safety requirement and to the conditions of India's food industry.

Two nodal agencies, Agricultural & Processed food products Export

Development Authority (APEDA) and Marine Products Export Development Authority
(MPEDA), were formed for promoting exports from India. MPEDA is responsible for
overseeing all fish and fishery product exports; APEDA, on the other hand, holds
responsibility for the exports of other processed food products.

Packaged / Convenience Foods

Consumer food industry mainly consists of ready to eat and ready to cook
products, salted snacks, chips, pasta products, cocoa based products, bakery products,
biscuits, soft drinks etc.

There are around 60,000 bakeries, several pasta food units and 20,000
traditional food units and in India. The bakery industry is among the few processed foods
segments whose production has been increasing consistently in the country in the last few
years. Products of bakery include bread, biscuits, pastries, cakes, buns, Rusk etc. This
activity is mostly concentrated in the unorganized sector. Bread and biscuits constitute the
largest segment of consumer foods with annual production of around 4.00 million tones.
Bread manufacturing is reserved for the small -scale sector. Out of the total production of
bread, 40% is produced in the organized sector and remaining 60% in the unorganized
sector, in the production of biscuits the share of unorganized sector is about 80%.
Indian Food Processing Industry
Size of the Industry
 Largest producer of milk in the world - 105 million tones per annum.
 India is the largest in the livestock population about 485 million tones per annum.

 It is second largest producer of fruits & vegetables which accounts for 150 million
tons per annum.
 Geographical distribution
 Delhi, Mumbai, Kolkata, Gujarat, Hyderabad, Pune, all the major cities in the
country
 Output per annum
 The Indian food industry sales turnover is Rs 140,000crore annually as at the start
of year 2000.
 Percentage in world market
 The value of the Indian food industry has increased from Rs. 3 .09 trillion in 1993
-94 to Rs. 3.99 trillion in 2000 -01.
 Market Capitalization
 The country’s GDP growth rate had increase from 3 .5 % in 2002 -03 to 9 % in
2006 - 07
 The Indian agriculture sector has come a long way since the time of independence.
With the emergence of green revolution, India agricultural Industries have
transformed itself from a country of shortages to a land of surpluses. With the rapid
growth of the Indian economy, a shift is also being seen in the consumption pattern
of the country, from cereals to m ore varied and nutritious diet of fruit and
vegetables, milk, fish, meat and poultry products. All these efforts have resulted in
the development of a sunrise industry namely the Food Processing Industries.
  In Jul y 1988, The Ministry of Food Processing Industries (MFPI) was set up to
give an impetus to development of food processing sector in India. The Ministry
formulates and implements the policies & plans for the food processing industries
according to the overall national priorities and objectives. It acts as a catalyst for
bringing in greater investment into the sector while guiding and helping the industry
and even creating a conducive environment for healthy growth of the food
processing industry.

Total contribution to the economy/ sales

 The Indian Food Processing Industry with its vast potential has emerged as one of
the major driver of economic growth and development.

Domestic and Export Share

 In 2014, the Exports of agricultural products from India are expected to cross
around US $ 22 billion mark and would account for 5 % of the world’s agriculture
exports, Even the Exports of floriculture, fresh fruits and vegetables, processed
fruits and vegetables, animal products, other processed foods and cereals rose to US
$ 7891 .8 million in 2008 - 09 from US $ 7877. 07 million in 2007 - 08, according
to the Agricultural and Processed Food Products Export Development Authority
(APEDA).

 Moreover, Indian Food Processing Industry has exported schedule products,

floriculture and seeds, fruits and vegetables, processed fruits and vegetables,
livestock products, other processed foods and cereals worth US $ 6. 53 billion from
2009 -2010, according to APEDA

.
Top leading Companies
 ITC Limited
 Parle Products Pvt .Ltd.
 Agro Tech Foods
 Amul
 Cadbury India Ltd.
 PepsiCo India Holdings
 Nestle India Pvt .Ltd.
 Britannia Industries Ltd.
 Hindustan Lever Limited
 Milk food
 MTR Foods Limited
 Godrej Industries Limited
 Gits Food Products Pvt . Ltd.
 Dabur India Ltd.
 Hindustan Unilever Pvt.Ltd.
 Conagra Foods
 Nissin Foods
 Walmart
 Venky's
SWOT ANALYSIS OF FOOD – PROCESSING INDUSTRY

Strengths

 Abundant availability of raw material

 Priority sector status for agro -processing given by the central Government

 Vast network of manufacturing facilities all over the country

 Vast domestic market

Weaknesses

 Low availability of adequate infrastructural facilities

 Lack of adequate quality control and testing methods as per international standards

 Inefficient supply chain due to a large number of intermediaries

 High requirement of working capital.
 Inadequately developed linkages between R&D labs and industry.

Opportunities

 Large crop and material base offering a vast potential for agro processing activities

 Setting of SEZ/AEZ and food parks for providing added incentive to develop
Greenfield projects
 Rising income levels and changing consumption patterns
 Favorable demographic profile and changing lifestyles
 Integration of development in contemporary technologies such as electronics,
material science, bio -technology etc. offer vast scope for rapid improvement and
progress
 Opening of global markets
T h re a t s

 Affordability and cultural preferences of fresh food

 High inventory carrying cost
 High taxation
 High packaging

ADVANTAGE OF FOOD PROCESSING IN INDIA

 India is one of the largest food producers in the world

 India has diverse agro - climatic conditions and has a large and diverse raw material
base suitable for food processing companies
 India is looking for investment in infrastructure, packaging and marketing
 India has huge scientific and research talent pool
 Well developed infrastructure and distribution network
 Rapid urbanization, increased literacy, changing life st yle, increased number of
women in workforce, rising per capita income - leading to rapid growth and new
opportunities in food and beverages sector
 50 per cent of household expenditure by Indians is on food items
 Strategic geographic location (proximity of India to markets in Europe and Far
East, South East and West Asia).
India's Position in World's Production

 Largest producer of milk in the world (105 million tones per annum).
 Largest livestock population (485 million tones per annum).
 Second largest producer of fruits & vegetables (150 million tones per annum).
 Third largest producer of food grain (230 million tones per annum).

 Third largest producer of fish (7 million tones per annum).

 52% cultivable land compared to 11% world average.
 All 15 major climates in the world exist in India.
 46 out of 60 soil types exist in India.
 20 agric - climatic region

Food industries in Kerala

Kerala regarded as Gods own country. Kerala has a big resource of raw
materials for foods processing. Kerala has a big export market base and also has a huge
domestic consumer market base. According to IRS 2001 survey Kerala has the highest
consumption of confectionary items as compared to the metropolitan cities in India. To exploit
this potential, the state Govt. has come up with a plan to setup food parks at Adoor and Palai
and herbal park at Wayanad, a biotechnology park at Thiruvananthapuram and use a food park
at Adoor . All these plans were presented to pure various potential investors during seminar at
a global investors meet.
 1.2.2 COMPANY PROFILE

A.M.S. SPICES AND FOOD PRODUCTS (P) LTD. started its working at
Manjeri on 6th May 2001 in the brand name of SUPERNOVA. Working with the aim of
selling quality goods to consumer at reasonable price has today made Supernova a well
known brand in the Malabar area of Kerala state.

The goal of Supernova was designed on recognition that quality goods only
be sustained in market. Curry powder are prepared after very carefully cleaning and drying
the best raw materials directly purchased from production centers of different places of In
dia. The Curry powders are prepared by observing all provisions of PFA Act and have no
mixture of any artificial ingredients in it. Therefore quality and taste of Supernova products
are distinct from other curry powders. The company, which has produced some items in
curry powder at first, is now producing and distributing a wide range of products including
the pickles.

The amiable labour management relationship has helped to grow a dedicated

labour culture in the company. The employer employee relationship is making more
emphatic by conducting regular family meeting and discussion classes. Today each and
every employee takes pride in as a worker of Supernova Company. The company which
started distribution in Malappuram district with two vehicles has now widened its
distribution all over Malabar with nine vehicles.

The company has also distribution network in Delhi, Gujarat etc. within this
period Supernova has also obtained KSSIA's 2003 -04 award for the best industrialist of the
district . In this year we obtain a special recognition award from Govt of India for the year
2006. The Supernova Company has continuously participated for 3 years in India
International Trader Fare (IITF) in Delhi.
Company has participated in the B2B meeting held at Cochin and also in
various other exhibitions. The new products such as White Pepper Powder, Ginger pickle,
Jam, Squash and concentrates etc. are also in the workshop of company’s R&D division.
The growth of our products depends by its good quality. The recognition from t he public
people is the best achievement of our firm. The Supernova has well established itself in the
market due to its high quality. The inspiration from this recognition has leaded the
company in the production of other products also. We can assure that we are vowed to care
in obtaining more and more good qualities for our products.

Location of the company

A.M.S SPICES AND FOOD PRODUCTS PVT LTD is located at Thadaparambha,

Manjeri of Malappuram district . The company is working on their land (15000 square feet
area). The company location is 2.5 km away from Manjeri town and 18 km far away from
Angadipuram railway station, 20 km from Calicut International Airport.

The company started in 2001 with the initial capital of RS.85,00,000.

The sources of fund for the capital were the proprietor taken the loan from the bank.
Competition for the company
In Kerala there are lots of companies producing the food items.
Eastern, Priyam, Nirapara, Double horses, Panda foods, Bismi products, Malayil food
products are the main competitors for the Supernova. The competition in between these
companies are going on in a high manner in the aspects of quality, price, quantity etc. the
people in the Malabar area are more literate people so they can identify the good and bad
products. In order to succeed in the competition Supernova provides good quality
products to the customers with a reasonable price.

Administration and management

A.M.S . SP ICES AND FOOD PRODUCTS (P) LTD has a sound
management system . All the management and control of the organization is under the
control of Mr. Mohammed Ali (Managing Director). There are mainly four departments in
the company namely Production, Finance, Marketing, HR . Each department has its own
duties and responsibilities.
Awards to Supernova

The company gets more awards for its valuable services to the customers.
Within this period Supernova has also obtained KSSIA„s 2003 - 04 award for the best
industrialist of the district. In this year we obtain a Special recognition Award from Govt .
of India for the year 2006. The Supernova company has continuously participated for 3
years in India International Trader Fare (IITF) in Delhi.

The company got a special recognition award of the Ministry of MSME of

Govt of India and Supernova got a special award from K.V.V.E.S of Manjeri unit. And a
Second Best Productivity Performance award by FACT M.K.K NAYAR MEMORIAL
PRODUCTIVITY AWARD 2006 -07.

Employees of the company

Employees are the back born of every organization. They are playing the
major role in the organization . Employees make the raw materials into the finished
products . For the best performance of the employees the employer should provide all
the facilities like good environment and welfare and medical facilities to them.
SUPERNOVA has been providing good kind of welfare and all other
facilities to their employees. Because of well management of human resources and welfare
facilities t he company achieving its aim and objectives. Under this more than eighty
people are working. There are fifty more employees working in the plant and twenty more
people working as office staff in the company. There are lots of marketing executives for
each region.
 1.2.3 PRODUCTS

The company, which has produced some items in curry powder at first, is
now producing and distributing a wide range of products including the pickles. The
amiable labour management relationship has helped to grow a dedicated labour culture in
the company. The growth of our products depends by its good quality.

The recognition from the public is the best achievement of our firm . The
Supernova has well established itself in the market due to its high quality. The inspiration
from this recognition has leaded the company in the production of other products also. We
can assure that we are vowed to care in obtaining more and more good qualities for our
products. The important products of the company are the following: -

Cut mango pickle

Gooseberry pickle

Mixed pickle

Ginger pickle

Bitter guard pickle

Green chill y pickle

Mango curry

Sambar powder

Chicken masala

Chill y powder

Turmeric powder

Meat masala

Pepper powder

Fish masala

Tender mango pickle
DEPARTMENT PROFILE
Supernova has the effort of a lot of efficient departments behind its
success in the food processing field. The main departments of Supernova are:


PRODUCTION DEPARTMENT

FINANCE DEPARTMENT

MARKETING DEPARTMENT

HUMAN RESOURCE DEPARTMENT

Sales promotion for the product

Company has very good sales promotion activities for increasing sales of the
products. The important one is advertisement. Advertisement is the key word to the
successful of the product in each and every company. It makes the knowledge about the
products and services.
Supernova used advertisement as to direct per assuasive communication to
target buyers and the public. It consists of all activities involved in presenting a group of
non personnel oral or verbal op enl y sponsored message regarding product and services or
idea
Different type of advertisement tools used by the company are print, bored
and casting. It includes the following: -

Magazine

News paper

Radio

TV

Outdoor displays

Advertisement copy includes broadly elements verbal and visual which are to be included
in the finished advertisement copy. Its main purpose is to attract attention, arose curiosity
and these by further reading. It presents message or appeal in gist at glance.
The main objective of the company through advertising is the following: -
 To support personnel selling
 For improving dealer relation
 To outer a new graphic market
 To reach product to the remote people
 For the introduction of new product into the market
 For building good will for the company
 1.2.4 ORGANISATION STRUCTURE

MANAGING DIRECTOR

DIRECTOR

FINANCE PRODUCTION HR MARKETING

MANAGER MANAGER MANAGER MANAGER

ACCOUTA HRD SALES

NT MANAGER
PLANT
PURCHASE SUPERVISOR
MANAGER
HR SALES
EXECUTIVE EXECUTIV
S

OFFICERS FOREMAN

WORKERS WORKERS
 1.3. REVIEW OF LITERATURE

The cost -volume -profit (CVP) analysis is a management accounting tool to

show the relationship between these ingredients of profit planning, it is one of the most
hallowed, and yet one of the simplest analytical tool in management accounting.

Cost -volume -profit (CVP) analysis as an important tool that provides the
management with useful information for managerial planning and decision -making. Profit
of a business firm is the results of interaction of many factors. Such factors influencing the
level of profits, the following are considered the key factors:

1. Selling price
2. Volume of sales
3. Variable costs on a per unit basis
4. Total fixed cost and
5. Sales mix

To do an effective job in planning and decision -making, the management

must have analyses which allow reasonably correct predictions of how profit will be
affected by a change in any one of these factors. Also, management needs an understanding
of how revenues, costs and volumes interact in providing profits. All these analysis and
information are provided by cost -volume -profit analysis.

Cost -volume -profit analysis is a systematic method of examining the

relationship between selling price, total sales revenue, volume of production, expenses and
profit . This analysis simplifies the real world conditions that a business enterprise is likely
to face. CVP analysis
can play an important role by providing the management with information
regarding financial result if a specified level of activity or volume fluctuates, information
on probable effects of changes in selling price and other variables.

CVP analysis focuses on prices, revenues, volume, costs, profits and sales
mix and on the inter-relationship between them during the short-run. The short-run is
generally considered a period of one year or less than one year during which the production
of a business enterprise cannot be increased and is limited to the available current operating
capacity of the enterprise . During the short - run, the capacity of the plant and machinery
cannot be increased (this is possible during the long -term only) and therefore, production
is limited in terms of available plant facilities. Similarly, it takes time to reduce the
capacity of plant and machinery and therefore, a business enterprise should operate during
the short -run relatively on a constant quantity of production resources. Besides, no
changes in cost and prices data can be generally made during the short -term as they might
have already been determined. During the short-run, however, some resources like
materials and unskilled labour can be increased at a short notice. Thus during the short -
inn, sales volume and short-run profitability can be the only vital area which may be found
uncertain. CVP analysis herein reveals the effect of changes in sales volume on the level of
profits. CVP analysis, in this way, is an integral part of financial planning and managerial
decision - making.

In CVP analysis, all expenses are classified into fixed and variable. Semi
-Variable expenses have to be divided into their fixed and variable elements. Total variable
costs are considered to be those costs that vary as the production volume changes. In a
factory, production volume is considered to be the number of units produced, but in a
governmental organization with no assembly process, the units produced might refer.

These steps are important prerequisites to any CVP analysis and a proper
understanding of them is essential for reliable conclusions. Based upon a knowledge of
fixed and variable cost elements and CVP analysis, it is possible to determine break -even
sales volume, to compute the sales needed to generate desired profits and to supply answers
to man y questions that arise It the course of management planning and decision - making.

TECHNIQUES OF CVP ANALYSIS

CVP analysis uses the following techniques or analyses while answering to

many questions in the area of managerial planning and decision -making:

(1) Contribution Margin Concept

(2) Break - Even Analysis
(3) Profit - Volume (P/V) Analysis

CONTRIBUTION MARGIN CONCEPT

Contribution margin concept indicates the profit potential of a business
enterprise and also highlights the relationship between cost, sales and profit. It is a highly
useful technique for planning and decision making by the management

Contribution margin is the excess of sales revenue over variable costs and
expenses. Under contribution margin concept, variable costs include all variable costs, i.e.
variable production costs and variable selling and administrative expenses, if any. From the
contribution margin, fixed costs and expenses are deducted giving finally operating income
or loss Contribution margin is thus used to recover/cover fixed costs. Once the fixed costs
are covered, any remaining contribution margin adds directly to the operating income of
the firm.

Contribution Margin Ratio (C/S ratio or P/V ratio)

The contribution margin can also be expressed in the form of a percentage.
The contribution margin ratio is also known as 'contribution to sales' (C/S) ratio or profit
-volume (P/V) ratio. This ratio denotes the percentage of each sales rupee available to
cover the fixed costs and to provide operating income to a firm. Once the contribution
margin is determined, it can be used to calculate the break -even - point in volume of units
or in total sales dollars. When a per unit contribution margin occurs below a firm's break-
even -point, it is a contribution to the reduction of fixed costs. Therefore, it is logical to
divide fixed costs by the contribution margin to determine how many units must be
produced to reach the break-even-point.

The P/V ratio is useful to the management in deciding whether to increase

sales volume) For example, if the P/V ratio of a business enterprise is large and the
enterprise is operating at less than 100% capacity, it will be advantageous tor (he firm to go
for increase in sales volume as net income will go up because of higher sales volume. On
the other hand, a firm with a small P/V ratio will not find profitable to have increase in
7
sales volume much profitable. Intact, enterprises having a lower PA ratio should aim at
reducing costs and expenses before thinking of increasing the sales volume.

The use of P/V ratio in specific analysis is based on the assumption that
except sales volume, other factors such as the unit selling price, percentage of variable cost
to sales, amount of fixed costs remain constant. If there are changes in any of these factors,
the effect of such change should be considered in making the analysis involving the P/V
ratio).
UNIT CONTRIBUTION MARGIN
Unit contribution margin or contribution margin on per unit basis is equally
useful as it also indicates the profit potential of a product or activity. The unit contribution
margin is the money available from sale of each unit to cover fixed costs and provide
profits to a firm.
While the P/V ratio is most useful when the increase or decrease in sales
volume is measured in terms of Rupees, the unit contribution margin is most useful when
increase or decrease m sales volume is measured in sales unit (quantities). If a business
firm has been able to cover fixed costs, the net income of t he firm will increase by unit
contribution margin multiplied by additional sales units.

BREAK -EVEN ANALYSIS

A break - even analysis is performed to identify the level of operations at

which the entity has covered all costs but has not yet earned any profit. The break -even
point identifies the volume of activity at which total revenues equal total costs. This is an
important point to the management because it represents a minimum acceptable level of
operations and it indicates that profitable operations can only result when the level of
activity exceeds the break - even point.

Break-even Analysis in Units

Break - even analysis utilizes the contribution margin approach to compute
net income, which splits zests into a fixed and variable classification. The break - even
point in units can be computed by dividing real fixed costs (F) by the contribution margin
provided by each unit.

Total fixed costs FC

Break-even in units = =
Contribution margin per unit S – VC
 The contribution margin per unit is sales price per unit (S)
less variable cost per unit (VC).

BREAK-EVEN CHARTS
A break -even chart is a graphical representation of the relationships between costs,
revenues and profits. It is developed by plotting the total cost curve and total revenue curve
on a piece of graph paper.

BREAK-EVEN ANALYSIS IN SALES RUPEES

The concept of the break - even point does not change when the analysis is
performed in sales rupees The break - even point merely identifies the amount of sales
rupees required to cover all costs but generates no profit.

Equation for Break -even point in Sales Rupees: One method of computing
break -even in sales rupees is to compute break -even in units and multiply the number of
units by the sales price per unit. However, sometimes it may not be convenient or efficient
because of the way the data is given to first compute the break - even point in units. The
break - even point in sales rupees equal to fixed costs divided by the contribution margin
ratio.

Fixed costs
Break-even point in sales Rupees =
Contribution margin ratio

For an amount of desired profit, the following formulae are used:

= Fixed costs + Desired Profit

Contribution Margin Ratio (C/S Ratio)

 By definition, the contribution margin ratio is the ratio of the contribution
margin to sales. The contribution margin is the sale price minus variable costs and the ratio
is computed by dividing contribution margin by the sales price.

ASSUMPTIONS IN BREAK-EVEN ANALYSIS

1. This is the same as assuming the variable expense per unit is constant. The total fixed
expenses, within a relevant range of volume, do not change as sales volume the
following are the important assumptions in break - even analysis and break - even
charts.
2. The total revenues of the enterprise change in direct proportion to changes in unit sales
volume. This is the same as assuming that the average selling price is constant.
3. All costs are classified as fixed and variables.
4. It is assumed that all other costs, such as mixed costs, can be broken in to fixed and
variable cost elements.

5. The total expenses can be separated into variable expenses and fixed expenses per year.

6. The total variable expenses vary in direct proportion to changes in sales volume
changes.

7. For a multi -product firm, the sales mix remain constant for all volume levels under
consideration.

8. Production volume and sales volume are equal; in other words, inventory changes do no
effect profit.

9. Inventory quantities remain unchanged during the year. The number of units in
beginning works -in -progress and finished goods equal to the number of units in these
ending inventories.
ADVANTAGES OF BREAK-EVEN ANALYSIS

1. Break - even analysis provides a useful tool in demonstrating the relationship and
interaction of cost, volume, and profit. If properly utilized, it aids in establishing realistic
profit objectives and operating budgets.

2. It provides management with distinctive insight into the economic characteristics

of its business, not only in terms of the fixed and variable expenses at varying sales
volumes, but also of the break - even relationship and its effect on the firm due to changes
in factors likely to have impact on the profit of a business enterprise .

3. The Manager can advantageously employ 'what if question to determine the

anticipated results from contemplated managerial decisions. The break -even process may
involve such planning questions as plant expansion, equipment modernization, change in
product mix or sales prices and the introduction of new product lines.

4. Management is often confronted with the decision to increase sales volume with an
optimistic view towards enhancing profit. Profit enhancing is a possibility, provided costs
are controlled within prescribed limits. The break - even technique can be an important tool
in establishing expenditure constraints and control by adequate supervision.

5. An important influence on profit is the product sales mix with variable gross
margins. The break even chart can highlight problem areas requiring corrective
management action.
DISADVANTAGES OF BREAK-EVEN ANALYSIS

1. Break - even analysis is not a remedy for all problems faced by a business firm. It
cannot be used usefully without a thorough understanding of its concept and limitations.

2. The break -even chart generally reflects a number of estimates and judgments, and
the resultant data developed and their implication can be misleading. For example,
measuring costs and sales volume at a particular output level may be an inaccurate method
of assessment, particularly when the volume approaches the break - even point, which can
change depending on operating circumstances.

3. Usually, the break - even is developed at a point that represents a static position.
Changes in relationship factors should be correctly and logically reflected in a revised chart
or a series of charts.
4. The improper understanding and usage of the charts can lead to inadequate
decision making, inaccurate planning assumptions and possibl y detrimental control
actions.
 2.1 RESERCH METHODOLOGY

Research Methodology is a way to systematically analysis the research

subject and it may be understood as a science of study how much research at done
scientifically. Research is common parlance refer to a research for knowledge. According
to Redman and Mary, research is defined as a "systematized effort to gain new knowledge"
Research methodology is a way to systematically solve the problem . It may be understood
as science of studying how research is done scientifically. The advanced learner's
dictionary lay down the meaning of research as a careful investigation of inquiry especially
through search for new facts in any branch of knowledge.

Research design is the conceptual structure within which the research is

conducted. A research is the arrangement of conditions for the collection and analysis of
data in a manner that aims to combine the relevance to the research purpose with economy
in procedures. Research constitutes the blue print for the collection. Measurement and
analysis of data, the research design used for this study is analytical and descriptive
research design.
 2.1.1 RESEARCH DESIGN

Research design is the conceptual structure within which research is

conducted. It constitutes the blue print for the collection, measurement and analysis of
data .the study aims at narration of existing facts and figures regarding financial position of
the company. So the research design adopted in the study has been descriptive in nature.

METHOD OF DATA COLLECTION

The data has been collected as below
PRIMARY DATA
The primary data has collected by observation and discussion with the finance
department.
SECONDARY DATA
Secondary data are collected from the company websites, journals, newspapers,
books and financial statements (2007 to 2011).
FINANCIAL TOOLS OF ANALYSIS
1. Break Even Point
2. PV Ratio
3. Margin Of Safety
4. Contribution
5. Operating Leverage.

BREAK EVEN ANALYSIS

The Break even analysis indicates at what level cost and revenue an in
equilibrium. It is a simple and easily understandable method of presenting to management
the effect of changes in volume on profit detailed analysis of breakeven data will reveal to
management the alternative decision which reduce or increase cost and which increase
sales and income. It is a device which portrays the effects of ant type of future planning by
evaluating alternative course of action.
BREAK EVEN POINT

Under this analysis at the Breakeven point profit being zero.

Contribution is equal to the fixed cost . If the actual volume of sales is higher than the
breakeven volume, there will be a profit.
Fixed Cost
Breakeven sales (in rupees) =
PV Ratio

MULTIPLE PRODUCTS IN BEP

There are multiple products with different has a direct effect on the fixed cost recovery and
total profits of the firm. Different products have different profits volume ratio because of
selling price and variable cost. The total profit depend to some extent upon the proportion
is the products are sold.

Fixed cost
Breakeven Sales = *100
Total Contribution

PROFIT VOLUME RATIO

PV Ratio = Sales- Variable Cost

*100
Sales

MARGIN OF SAFETY

This is the difference between the sales and the breakeven point. If the
distance is relatively short it indicates that a small drop in production or sales will reduces
profit considerably. If the distance is long it means that the business can still making profit
even after a serious drop in production. It is important that there should be a reasonable
margin of safety otherwise reduces the level of production may prove dangerous.
 Margin of safety = Sales- Break Even Sales

Margin of safety Ratio = margin of safety

*100
Sales

DEGREE OF OPERATING LEVERAGE

Operating leverage is determined by the firm's sales revenue and its earnings before
interest and tax (EBIT). The earnings before interest and taxes are called as operating profit
(EBIT). While financial leverage can be quite significant for the earning available to
ordinary shareholders.
Operating Leverage = Contribution

EBIT
2.1.2 LIMITATIONS

 For this analysis last five years financial statement alone taken.

 This study is confines only with cost volume profit analysis of AMS SPICES

AND FOOD PRODUCTS .

 Some data are not given because of confidential.

 Study based only on the secondary data available from annual reports.
 2.2 DATA ANALYSIS AND INTERPRETATION

BREAK EVEN POINT OF MARCH-2007:

Fixed Cost
Break even sales (in Rupees ) = PV Ratio

PV Ratio = Contribution / Sales* 100

Contribution = Sales – Variable Cost

Particulars Rs.

Sales : 41,760,979.59

Fixed cost:
Selling and other expenses : 6,898,217.18

Fixed Cost : 6,898,217.18

Variable Cost:
Consumption of Materials : 30,472,943.34

Variable Cost : 30,472,943.34

Contribution:
Sales : 41,760,979.59
(-) Variable Cost : 30,472,943.34

Contribution : 11,288,036.25

BREAK EVEN SALES

Break even sales = Fixed Cost/ PV Ratio : 6,898,217.18

27.03%

Break Even Sales : 25,520,596.30

The Break Even Sales for the year MARCH-2007 is Rs. 25,520,596.30

BREAK EVEN POINT OF MARCH-2008:

Fixed Cost
Break Even Sales (in Rupees) = PV Ratio

PV Ratio = Contribution / Sales* 100

Contribution = Sales – Variable Cost

Particulars Rs.

Sales : 57,351,783.26

Fixed cost:
Selling and other expenses : 8,187,873.13
Fixed Cost : 8,187,873.13

Variable Cost:
Consumption of Materials : 40,748,969.09
Variable Cost : 40,748,969.09

Contribution:
Sales : 57,351,783.26
(-) Variable Cost : 40,748,969.09

Contribution : 16,602,814.17

BREAK EVEN SALES

Break even sales = Fixed cost/ PV Ratio : 8,187,873.13

28.94%
Break Even Sales : 28,292,581.65

The Break Even Sales for the year MARCH-2008 is Rs. 28,292,581.65

BREAK EVEN POINT OF MARCH-2009:

Fixed Cost
Break even sales (in Rupees ) = PV Ratio

PV Ratio = Contribution / Sales* 100

Contribution = Sales – Variable Cost

Particulars Rs.

Sales : 76,839,874.88

Fixed cost:
Selling and other expenses : 12,927,325.71
Fixed cost : 12,927,325.71

Variable Cost:
Consumption of Materials : 57,391,254.65
Variable Cost : 57,391,254.65

Contribution:
Sales : 76,839,874.88
(-) Variable Cost : 57,391,254.65

Contribution : 19,448,620.23

BREAK EVEN SALES

Break even sales = Fixed Cost/ PV Ratio : 12,927,325.71

 25.31%

Break Even Sales : 51,075,960.92

The Break Even Sales for the year MARCH-2009 is Rs. 51,075,960.92

BREAK EVEN POINT OF MARCH-2010:

Fixed Cost
Break even sales (in Rupees) = PV Ratio

PV Ratio = Contribution / Sales* 100

Contribution = Sales – Variable Cost

Particulars Rs.

Sales : 97,619,705.02

Fixed cost:
Selling and other expenses : 18,216,410.50
Fixed Cost : 18,216,410.50

Variable Cost:
Consumption of Materials : 70,204,027.46
Variable Cost : 70,204,027.46

Contribution:
Sales : 97,619,705.02
(-) Variable Cost : 70,204,027.46

Contribution : 27,415,677.56

BREAK EVEN SALES

Break even sales = Fixed cost/ PV Ratio : 18,216,410.50
28.08%

Break Even Sales : 64,873,256.76

The Break Even Sales for the year MARCH-2010 is Rs. 64,873,256.76

BREAK EVEN POINT OF MARCH-2011:

Fixed Cost
Break even sales (in Rupees) = PV Ratio

PV Ratio = Contribution / Sales* 100

Contribution = Sales – Variable Cost

Particulars Rs.

Sales : 10,99,99,623.00

Fixed cost:
Selling and other expenses : 16,153,609.94
Fixed Cost : 16,153,609.94

Variable Cost:
Consumption of Materials : 86,209,960.28
Variable Cost : 86,209,960.28

Contribution:
Sales : 10,99,99,623.00
(-) Variable Cost : 86,209,960.28
 Contribution : 23,789,662.28

BREAK EVEN SALES

Break even sales = Fixed cost/ PV Ratio : 16,153,609.94

21.62%

Break Even Sales : 74,716,049.67

The Break Even Sales for the year MARCH-2011 is Rs. 74,716,049.67
 TABLE NO.2.3.1
BREAK EVEN POINT
S.NO YEAR BREAK EVEVN SALES

1 6222 65562502552

6 6222 62606521525

5 6220 51225022506

7 6212 27225652522

5 6211 27212270522

FIGURE NO.2.4.1
BREAK EVEN SALES
 INTERPRETATION

Break Even Point is increasing year by year up to 74716049. 67

The variable cost is also increasing.

So the sales volume is rapid y increasing.

Thus the volume of profit is also higher.

MARGIN OF SAFETY

MARGIN OF SAFETY MARCH-2007

Margin of safety = Sales – Break Even Sales

= 41,760,979.59-25,520,596.30
= 16,240,383.29

Margin of ratio = Margin of safety

*100
Sales

= 16,240,383.29
*100
41,760,979.59

=38.88 %

Margin of safety of March-2007 is 38.88 %

MARGIN OF SAFETY MARCH-2008

Margin of safety = Sales – Break Even Sales

= 57,351,783.26-28,292,581.65
= 29,059,201.61
Margin of ratio = Margin of safety
*100
Sales

= 29,059,201.61
*100
57,351,783.26

=50.66 %

Margin of safety of March-2008 is 50.66%

MARGIN OF SAFETY MARCH-2009

Margin of safety = Sales – Break Even Sales

= 76,839,874.88-51,075,960.92
= 25763913.96

Margin of ratio = Margin of safety

*100
Sales

= 25763913.96
*100
76,839,874.88

=35.52 %

Margin of safety of March-2009 is 35.52 %

MARGIN OF SAFETY MARCH-2010

Margin of safety = Sales – Break Even Sales

 = 97,619,705.02-64,873,256.76
= 32,746,448.26

Margin of ratio = Margin of safety

*100
Sales

= 32,746,448.26
*100
97,619,705.02

=33.54 %

Margin of safety of March-2010 is 33.54 %

MARGIN OF SAFETY MARCH-2011

Margin of safety = Sales – Break Even Sales

= 10, 99, 99,623.00-74,716,049.67
= 35,283,573.33

Margin of ratio = Margin of safety

*100
Sales

= 35,283,573.33
*100
10, 99, 99,623.00

=30.07 %

Margin of safety of March-2011 is 30.07 %

 TABLE NO.2.3.2
MARGIN OF SAFETY

S.NO. YEAR MARGIN OF SAFETY (%)

1 2007 38.88

2 2008 50.66

3 2009 35.52

4 2010 33.54

5 2011 30.07

FIGURE NO.2.4.2
MARGIN OF SAFETY

INTERPRETATION

i. The analysis on margin of safety identified that there is a slight increase in

the year 2008 and after it shows a decreasing trend.
 ii . The sales level increases and also increases the level of profit .
PROFIT VOLUME RATIO

PV Ratio of March-2007:
Contribution / Sales * 100 : 11,288,039.25 *100

41,760,979.59

PV Ratio : 27.03%

The PV Ratio for the year Mach-2007 is 27.03%.

PV Ratio of March-2008:
Contribution / Sales * 100 : 16,602,814.17 *100

57,351,783.26

PV Ratio : 28.94%

The PV Ratio for the year Mach-2008 is 28.94%.

PV Ratio of March-2009:
Contribution / Sales * 100 : 19,448,620.23 *100

76,839,874.88

PV Ratio : 25.31%

The PV Ratio for the year Mach-2009 is 25.31%.

PV Ratio of March-2010:
Contribution / Sales * 100 :27,415,677.56 *100

97,619,705.02

PV Ratio : 28.08%

The PV Ratio for the year Mach-2010 is 28.08%.

PV Ratio of March-2011:
Contribution / Sales * 100 : 23,789,662.72 *100

10,99,623.00

PV Ratio : 21.62%

The PV Ratio for the year Mach-2011 is 21.62%.

 TABLE NO.2.3.3
PROFIT VOLUME RATIO

S.NO YEAR PV RATIO

1 6222 62525

6 6222 62507

5 6220 65551

7 6212 62522

5 6211 61526

FIGURE NO.2.4.3
PROFIT VOLUME RATIO
 INTERPRETATION

o The volume of profit is increasing in the year 2008 to 28. 94% and decreased in
the year 2009 to 25 .31% again it increased to 28.08%.

o The contribution of the sales is not constant .

OPERATING LEVERAGE

DEGREE OF OPERATING LEVERAGE FOR MARCH-2007

Operating Leverage = Contribution

EBIT

= 11,288,036.25

344,219.62

= 32.79%

The operating Leverage for the year of 2007 is 32.79%.

OPERATING LEVERAGE

DEGREE OF OPERATING LEVERAGE FOR MARCH-2008

Operating Leverage = Contribution

EBIT

= 16,602,819.17

352,590.35

= 47.08%

The operating Leverage for the year of 2008 is 47.08%.

OPERATING LEVERAGE

DEGREE OF OPERATING LEVERAGE FOR MARCH-2009

Operating Leverage = Contribution

EBIT

= 19,448,620.23

676,285.83

= 28.75%

The operating Leverage for the year of 2009 is 28.75%.

OPERATING LEVERAGE

DEGREE OF OPERATING LEVERAGE FOR MARCH-2010

Operating Leverage = Contribution

EBIT

= 27,415,677.56

1,762,473.25

= 15.55%

The operating Leverage for the year of 2010 is 15.55%.

OPERATING LEVERAGE

DEGREE OF OPERATING LEVERAGE FOR MARCH-2011

Operating Leverage = Contribution

EBIT

= 23,789,662.28

1,650,143.75

= 14.41%

The operating Leverage for the year of 2011 is 14.41%.

 TABLE NO.2.3.4
OPERATING LEVERAGE

S.NO. YEAR OPERATING LEVERAGE

1 2007 32.79%

2 2008 47.08%

3 2009 28.75%

4 2010 15.55%

5 2011 14.41%

FIGURE NO.2.4.4
OPERATING LEVERAGE
 INTERPRETATION

 The level of operation is decreasing from 2008 to 2011.

 The increase in the profit shows that the volume of income tax is increased.
 So the operating leverage is lesser .
FINDING 3.1

It is indicated that from the financial statements 41,760,975. 59, 57,315,783 .26,
76,839,874.88, 97,619,705 .02 and 10,99,99,623 .00 are the net sales for the year
2007,2008,2009,2010 and 2011 respectively.

It is found that 221,731.62, 236,098.35, 443,976. 83, 1,208,032 .25 and 1,104,989. 97 are
the net profit for the year 2007, 2008,2009,2010 and 2011 respectively.

It is inferred that 25,520,596 .30, 28,292,581.65, 51,075,960.93, 64,873,256 .76 and

74,716,049. 67 are the Break Even sales for the years 2007, 2008, 2009, 2010 and
2011 respectively.

It is inferred that from the above table 27 .03%, 28. 94%, 25. 31%, 28. 08% and 21 .62%
are the Profit Volume ratio for the years of 2007, 2008, 2009, 2010 and 2011
respectively.

It is found that 32 .79%, 47. 08%, 28. 75%, 15.55% and 14. 41% are the operating
leverage for the years of 2007, 2008, 2009, 2010 and 2011 respectivel y.
 3.2 SUGGESTIONS

The level of breakeven point is increased year by year from the analysis. The company is
not able to manage the breakeven point of the company. So it should take necessary steps in
cost of sales.

The level of profit volume ratio is in a variable manner, there is increase and decrease in
profit volume ration year by year. So the company should make high sales with reduced
cost to improve profit.

The fixed costs need to be reduced and cost control techniques can be adopted
which will increase the earnings.

The company can improve capital turnover in the way of sales at reasonable price.

The company can take necessary steps to invest certain amount into working capital. It will
very useful to maximize the profit .

Comparing the current assets and current liabilities there was a increase in the current asset
and also the in cu rrent liabilities, the company should manage to improve current asset and
decrease in liabilit y by increasing sales and high profit .
 3.3 CONCLUSION

The study makes evident that the overall performance of the company with
regard to profitability is average but still, the performance of the company can be
maximized through careful measures of cost control which will enhance the operating
efficiency of the company. The company can reduce their costs, thereby the sales get
increase due to their qu alit y and also the performance will be improved in future.

The financial statements shows a sign of sickness in future, the company has
to undergo an improvements in several areas of management in the near future, the
company has to take some precautions t o prevent the sickness, and if the company applies
recommendations of this study towards its management, the company will be back on to a
higher profitable position within short time.