INTRODUCTION

This research is mainly done to find out the cost-volume-profit and its impact on the overall
performance of KSE ltd at irinjalakuda, Thrissur. The study determine the breakeven point and
output level required achieving a target operating income by using equation, contribution
margin and graph method. The study helps to know how cost and sales volumes have affected
the profitability of the company.

Cost volume profit analysis is the method for understanding the relationship between revenue,
cost and sales volume. In alternative words, CVP analysis the techniques wont to determine
the extent of operational activity required to avoid losses, reach targeted profit, set up future
operations, pick enlargement or contraction plans, monitor organizational performance and
analyse operational risk as they choose appropriate cost structure to help in the decision-making
process to sustain the firm

The study on cost-volume-profit analysis will surely help the management for taking various
decision regarding making or buy product, introduce a new product or not, accept an order or
not, change the method of production or not etc. in the future. Through this study, we can
analyse and maintain a good relationship between cost-volume-profit. The financial tool which
is used for analysing the data is break-even analysis and contribution margin analysis.

KSE ltd at Thrissur is a manufacturing factory producing KS cattle feed, jersey copra cake, KS
mineral mixture and milk products and core of amount the company is dealing for the
production and sale of these products. So breakeven and cost-volume-profit analysis is vital for
this company in order to analyse the role of production cost and volume to the company’s net
income and operating income. Break-even analysis helps the company to determine a target
sale in order to avoid loss. Thereby the investors wouldn’t have to suffer loss of their
investment. And after achieving this break-even, cost-volume-profit analysis helps the
company to determine whether the cost-volume-profit relationship are at an appropriate level
or not. If not, it helps the company to decide any changes that have to be made in cost or in
volume in order to maximize the profit. So it also helps in the decision making of the company
for increasing its profit. So both these breakeven and cost-volume-profit analysis have a vital
role in a company’s financial growth

1
INDUSTRY SCENARIO; FOOD INDUSTRY

Food process sector is indispensable for the general development of associate economy because
it provides an important linkage and natural process between agriculture and trade. It helps to
diversify and modify farming; enhance the financial gain of farmers; produce markets for
export of agro foods also as generate larger employment opportunities. Through the presence
of such industries, a wider range of food products could be sold and distributed to distant
locations. The term 'food method' is principally outlined as a process of import addition to the
agricultural or husbandry turn out by varied strategies like grading, sorting and packaging. In
different words, it's a method of producing and protective food substances in a good manner
with a read to boost their shelf life; improve quality additionally as make them functionally
more useful. It covers the spectrum of products from sub-sectors comprising agriculture,
horticulture, plantation, animal husbandry and fisheries.

Food process trade is one in all the biggest trade in the Asian nation and is graded fifth in terms
of production, consumption and export. Earlier, the food method was principally confined to
food preservation, packaging and transportation, which mainly involved salting, curdling,
drying, pickling, etc. However, over the years, with rising new markets and technologies, the
arena has widened its scope. It has started manufacturing several new things like ready-to-eat
food, beverages, processed and frozen fruit and vegetable products, marine and meat products,
etc. It else includes the institution of post-harvest infrastructure for methodology of varied food
things like cold storage facilities, food parks, packaging centres, added centres, irradiation
facilities and modernised shambles.

The food process sector contains 2 segments- Primary processed foods and added food.
Primary phase contains packaged fruit and vegetables, milk, flour, rice, spices etc. and
constitutes around sixty-two in price terms of the processed foods. Value-added phase includes
processed fruits and vegetables, juices, jam & jelly etc. and holds around thirty-eight the share
within the total processed food. In an emerging country like India, where growth with equity
is a primary policy thrust, the optimum development of the food processing sector will
contribute significantly in tackling several developmental considerations like disguised state in
agriculture, rural economic condition, food security, food inflation, improved nutrition,
prevention of wastage of food etc. By serving as a bridge between agriculture and producing
and by coping with a basic would like of all Indian voters – the assured offer of healthy and
cheap food at all locations in the country, this sector has the potential to be a major driver in

2
India ‘s growth in the coming years. In fact, the food process sector has been growing quicker
than the agriculture sector. The food process trade includes various cluster of firms concerned
within the process of merchandise like fish, meat, milk, crops and water. It includes numerous
tiny & Medium Enterprises (SMEs) worldwide and additionally a number of the biggest firms
within the world. Many of those firms deliver merchandise on to customers, while others
specialize in Business-to-Business activities (ingredients, commodity markets). Some firms
directly participate in all told areas of food production, from farming activities through to final
production and retail. Others square measure focused additional at the highest finish of the
assembly chain or get through goods markets. In fact, Food processing is one of the world ‘s
largest industries from the perspective of the number of companies involved in the sector, as
well as in terms of its total economic value

GLOBAL FOOD PROCESSING INDUSTRY

The Global Processed Food Industry is valued at US $ 3.2 trillion and accounts for over 3/4th
of global food sales. Despite the large size of the industry, only 6% of the processed food is
traded the world over as compared to bulk agricultural commodities where 16% of produce is
traded. Growth of the sector has been the highest in developed economies, especially across
Western Europe, North America, Japan and Australia. USA is the single largest consumer of
processed food and accounts for 31% of global sales.

The food processing sector has seen substantial growth in developing economies with increase
in GDP, per capita income and the resultant changes in lifestyle. Organized retailing and
availability of better processing technologies too have contributed to the accelerated growth of
the sector. The food processing industry is characterized by intense competition, with the most
reliable firms performing well by focusing on efficiency in terms of fast processing and
distribution. The global economic recession had less effect on the food processing industry
than other industries due to rising demand for pre-packaged food. The industry is becoming
increasingly automated, and is therefore seeing labour costs decline. The advantages of food
processing include greater food consistency, longer shelf life, removal of toxins, reduction of
food borne diseases and cheaper food. The global fresh meat market is expected to produce
300 million tons by 2015. A rising global population and extensive urbanization are driving
forces for the market. Asia-Pacific demand is growing in tandem with disposable incomes and
meat consumption. Asia-Pacific leads the food processing industry in terms of market share.

3
Market growth in countries in Eastern Europe and Asia-Pacific continues as developing
countries enjoy a more favourable economic climate, with larger disposable incomes and
improved living standards. Demand for food that is light on preparation time continues to grow
in developed countries. Germany, The US, France and Austria are among the major exporters
of food processing machinery while the US, the UK, Germany and France lead in importing.
China ‘s processed food industry is expected to continue showing close to 35% yearly growth
from 2010 through 2013, mainly due to higher standards of living and improved economic
conditions. China ‘s processed food market was left relatively unscathed by the economic
downturn. Growth will continue to be lead by meat processing, with a forecast yearly growth
of more than 15% for the next few years.

Other leading food market segments in China are dairy products and ready meals. Growth will
likely continue as China ‘s 25% rate of processed food production catches up with the average
80% rate in developed nations such as the US. The main driving force behind the global food
industry is technological innovation, which concentrates on satisfying consumer demand for
more tastes and easy-to prepare foods. Companies are focusing on innovation to boost profits,
with 60% of large companies and over 40% of medium sized enterprises investing in process
and product innovation. Over 99% of the EU food and beverage industry is comprised of small-
and-medium-sized enterprises.

Danish, French and Greek food processing companies dedicate a sizeable part of their profit to
research and development, while other countries such as Austria, Hungary and the Czech
Republic lag further behind. The main aims of research and development within the food
processing industry are better quality food, enhanced taste, cheaper prices and greater
convenience. Other industries recruited in the process include nanotechnology, biotechnology
and other advanced information technology fields. Companies cut production costs by:
reducing waste; employing effective manufacturing techniques used in other industries;
optimizing automation to cut back on labor costs; and finding ways to cut down on input
materials such as energy

4
FOOD PROCESSING INDUSTRY IN INDIA

The Indian food process business stands at $135 billion and is calculable to grow with a CAGR
of ten per cent to achieve $200 billion by 2015. The food processing industry contributed 7%
to India ‘s GDP. The business employs around thirteen million employees directly and
concerning thirty-five million indirectly.

The industry is divided into different sectors specifically, milk and allied product, meat and
poultry, seafood, work and confectionery, vegetables and fruits grain, pulses and oilseeds
merchandise, alcoholic and non-alcoholic products, and packaged foods. The classification
isn't distinct as several processed product overlap completely different segments. India ranks
No. 1 in the world in production of Milk (Fresh, whole, buffalo), Pulses, Ginger, Chick Peas,
Bananas Guavas, Papayas and Mangoes. Further, India ranks No. 2 within the world in
production of Rice, Wheat, Potatoes, Garlic, Cashew fruity, Groundnuts, Dry Onion, Green
Peas, Pumpkins, Gourds, and cauliflowers. With the massive production base, Republic of
India will simply become the leading food provider to the globe and at an equivalent time
serving its Brobdingnag an growing domestic market with over a billion people. 15 Investments
in the registered food processing units have been growing in recent years. In 2007-08 the fixed
capital of registered food processing units has increased by 18.93% over the previous year.

Food process business in Republic of India is more and more seen as a possible supply for
driving the agricultural economy because it brings action between business and agriculture. A
developed food process business is anticipated to guide increase in farm gate costs translating
into inflated rural incomes, scale back wastages, ensure value addition, promote crop
diversification, generate employment opportunities as well as export earnings. With such an
oversized and varied production base let alone low personnel value and trendy technology, the
Indian food processing sector is poised for growth, if the advantages are leveraged optimally.
The growth is driven by the actual fact that the central government has given a priority standing
to any or all agro-processing businesses.

Government incentives in the field of mega food parks, cold chain and exports benefits are also
playing an important role in promoting food processing. The major challenges are investments
at completely different points of the availability and worth chain, proper research, farm and lab
connectivity, up-gradation of technology, increase in farm holding, skill and manpower
coaching, backend and front-end integration and cold chain integration. The opportunities
within the food process business are Brobdingnag again. However, there's a necessity to boost

5
technology and productivity to be competitive globally. As the economy grows, the food
process business can provide larger opportunities to the new still because the existing players.
India has the second-largest cultivable land of 161 million hectares and has the very best area
beneath irrigation. Next to China, India ranks second largest food producer in the world and
has the potential to immerse the biggest with its food and agricultural sector. India accounts for
fewer than one.5% of international food trade despite being one sixteen of the globe ‘s major
food producers, that indicates vast potential for each investors and exporters.

Food industry has an important role in linking farmers and consumers within the domestic and
international market The Ministry of Food Process Industries is creating all efforts to encourage
investments across the worth chain. The business engages roughly 1.85 mn individuals in
around 39,748 registered units with mounted capital of $ 32.75 bn and combination output of
around $ 158.69 bn. Major industries constituting the food process business are grains, sugar,
edible oils, beverages and farm product.

The key sub-segments of the Food Processing industry in India are Dairy, Fruits & Vegetables,
Poultry & Meat processing, Fisheries, Food retail etc.

Key facts:

311.71 mn tones of horticulture crop production in 2017-18

Milk production of 176.3 mn tones during 2017-18 with per capita availability of milk at a
level of 375 grams per day in 2017-18

Egg production of around 95.2 bn during 2017-18

Total fish production was 12.6 mn tones during 2017-18

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 THEORYTICAL CONCEPTS

COST-VOLUME-PROFIT ANALYSIS; MEANING AND DEFINITION

The cost volume profit analysis, normally stated as CVP, maybe a planning process that
management uses to predict the long run volume of activity, costs incurred, sales made, and
profits received. In different words, it’s a mathematical equation that computes however
changes in costs and sales can have an effect on financial gain in future periods.

The CVP analysis determines all cost as either variable or fixed. Fixed cost are expenses that
don’t fluctuate directly with the volume of units produced. These cost-effectively remain
constant. An example of a fixed cost is rent. It doesn’t matter what percentage of units the
production line produces. The rent expense will always be the same.

Variable cost, on the other hand, change with the levels of production. These costs include
materials and labour that go into each unit produced. For example, a car factory would classify
tire costs as a variable cost. Every car that's created should have 4 tires. The more units
produced, the more tire costs increase.

The CVP analysis uses these two costs to plot out production levels and therefore the financial
gain related to every level. As production levels increase, the fixed costs become a smaller
percentage of total income while variable costs remain a constant percentage. Cost accountants
and management analyse these trends in an effort to predict what costs, sales, and profits the
company will have in the future. They also use cost volume profit analysis to calculate the
break-even point in production processes and sales. The break-even point is drawn on the CVP
graph where the sales, fixed costs, and variable costs’ lines all intersect. This is a key construct
as a result of it shows management that the revenue from a project are ready to cover all the
prices related to it. Using a variation of the CVP, management can calculate the break-even
point in profits, units, and even dollars.

Cost Volume Profit Analysis explains the behaviour of profits in response to a change in cost
and volume. In other words, it is an analysis presenting the impact of cost and volume on
profits. Hesier wrote “The most significant single factor profit planning with of the common
business is that the link between the amount of business, value and profit”. The CVP
relationship is a very important tool used for the profit designing of a business.

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Elements of CVP analysis

The three elements included in CVP analysis are:

1) Cost, which implies the expenses concerned in manufacturing or selling a product or

service.
2) Volume, which implies the number of units produced in the case of a physical product,
or the amount of service sold.
3) Profit, which implies the difference between the sales price of a product or service
minus the cost to manufacture or provide it.

ASSUMPTION OF CVP ANALYSIS

 All costs, including production, administrative, and overhead costs, can be identified as
either fixed or variable.
 The selling price per unit is constant.
 Changes in activity are the factors that affect costs.
 All units produced are sold

OBJECTIVES OF CVP ANALYSIS

 To forecast the profit accurately.

 To determine margin of safety
 To determine breakeven point
 To help management in determining the pricing policies.
 To evaluate the performance of the business
 To facilitate the preparation of flexible budgets.
 To achieve the cost control and cost reduction
 To help management in making decision such as make or buy, shutdown or not,
introduce a new product or not, accept an order or not, change the method of production
or not, etc.

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ADVANTAGES OF CVP ANALYSIS

 Cost-volume-profit analysis is useful in profit planning, cost control and decision-

making.
 It helps to making flexible budgets which indicate cost and profit at various levels of
activities.
 It helps to determine the maximum sales volume required to avoid losses.
 It helps to determine the sales volume at which the profit goal of the firm will be
achieved.
 It helps management to find the most profitable combination of costs and volume.
 It helps in evaluating the effect of change in selling price on profitability.
 It provides a means for assessing the profitability of each product so that the optimum
product mix may be determined.
 The study of cost-volume relationship is necessary in order to know the amount of
overhead costs which could be charged to product costs at various levels of operation.
 It helps in evaluating the performance of an organisation for the purpose of control.

IMPORTANCE OF CVP ANALYSIS

The CVP analysis is useful to management as it provides an insight into the effects and inter-
relationship of factors, which influence the profits of the organization. The relationship
between cost, volume and profit makes up the profit structure of a firm. Hence, the CVP
relationship becomes important for budgeting and profit planning.

As a starting point in profit planning, it helps to find the maximum sales volume to avoid losses
and the sales volume at which the profit goal of the firm will be achieved. As an ultimate goal,
it helps management to find the most profitable combination of costs and volume.

A dynamic management, therefore, need of CVP analysis is to forecast and monitor the
implication of its short-run decisions about fixed costs, sales volume and sales price for its
profit plans on a continuous basis.

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LIMITATION OF C-V-P ANALYSIS

 It is very difficult or impossible to separate costs into fixed and variable.

 It assumes that fixed cost remain fixed for any level of production. But actually it will
remain fixed only up to a certain level of activity.
 It assumes that variable costs vary in different proportion to volume of production. But
the variable cost need not necessarily vary in direct proportion of output.
 The assumption that only one product is produced or that sales mix remains constant is
difficult to find in actual life.
 When a number of the products are manufactured, separate break-even charts may be
prepared for individual products. This necessitates the apportionment of fixed costs on
an arbitrary basis.
 The assumption that selling price remains constant is not valid.
 Break-even analysis completely ignores the capital employed in business.
 It has limited application in long-range planning.
 It ignores marketing aspects and effect of government policies etc. which are necessary
for decision making.

COMPONENTS OF CVP ANALYSIS

 MARGINAL COSTING
 CONTRIBUTION
 PROFIT VOLUME RATIO
 BREAKEVEN ANALYSIS
 MARGIN OF SAFETY

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MARGINAL COSTING

Marginal cost is the extra cost of manufacturing a further unit. IMA London defines monetary
value as “the quantity at any given volume of output by that mixture prices square measure
modified if the quantity of output is enhanced or bated by one unit”. Thus, the marginal cost is
the amount by which total cost changes when there is a change in output by one unit.

Marginal Costing is a technique whereby marginal costs are ascertained. In this technique of
costing only variable costs charged to cost units, while fixed costs are written off against a fund
called contribution. IMA, London wrote Marginal Costing is “the ascertainment, by
differentiating between fixed costs and variable costs, of marginal cost and the effect on profit
of changes in volume or type of output”. In the words of J. Batty, “marginal costing is a
technique of cost accounting, which pays attention to the behaviour of costs with changes in
the volume of output”.

Sales = Variable costs + fixed cost ± Profit/Loss

OR Sales – Variable costs = fixed cost ± Profit/Loss

CONTRIBUTION (C)

Contribution is a very important concept in marginal costing. It is the basis of decision-making

and control. It is the profit in marginal costing. it refers to excess of sales over variable cost. It
is not the final profit. It is the marginal profit. Contribution also known as ‘contribution margin’
or ‘gross margin’. It covers fixed cost and profit. If contribution is more than the fixed cost,
there is a profit. If contribution is less than the fixed cost, there is a loss.

Contribution(C) = Sales(S) – Variable Cost (VC)

PROFIT VOLUME RATIO

The Profit-volume ratio, which is also called the ‘contribution ratio’ or ‘marginal ratio profit-
volume ratio indicates the relationship between contribution and sales and is usually expressed
in percentage. The magnitude relation shows the quantity of contribution per rupee of sales.
Since, within the short, fixed cost does not change, the profit-volume ratio also measures the
rate of change of profit due to change in the volume of sales.

It is influenced by sales and variable or monetary value. If the sale value will increase while
not a corresponding increase in monetary value, the contribution increases and the profit-

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volume ratio improves. Similarly, if the marginal cost is reduced with sale price remaining the
same profit-volume ratio improves.

The advantages of profit-volume ratio are that it can be used to measure the profitability of
each product, or group of them, separately so that the necessity for continuance of such
products can be examined. It may also be used to measure the profitability of each production
centre, process or operation. A high profit-volume ratio indicates high profitability and low
profit-volume ratio indicates low profitability

pv ratio= contribution / sales *100

BREAKEVEN ANALYSIS

Break-even analysis is that the most generally used technique of price volume profit analysis.
It establishes the relationship between cost and profit with sales volume. It is a method of
presenting and studying the interrelationship among cost, volume of sales and profit at various
levels of activity. The term break-even analysis is taken in slender additionally as broad sense.
In a narrow sense, it is the process of finding the breakeven point (BEP). BEP is the point at
which total sales revenue is equal to total cost. It is the point of no profits no loss. In its broad
sense, it means a system of analysis, which used to determine the probable profit at different
levels of activity. It shows the behaviour of cost and profit at varying levels of activity.

Car Heyel defines breakeven analysis as “a method for studying the relationship among sales
revenue, fixed cost and variable expenses as to determine the minimum volume at which
production so can be profitable”

MARGIN OF SAFETY

The management may be interested in knowing the extent to which the sales is above the BEP.
This is called ‘margin of safety’. It is the excess of actual or present sales over the BEP sales.
It refers to the amount by which sales revenue can fall before a loss incurred. It indicates the
strength or weakness of an enterprise. A high margin of safety indicates the soundness of the
business. It may be expressed in unit, sales revenue or as a percentage of sales.

Margin of safety = present Sales value – BEP Sales value

If it is to be expressed as a percentage of sales, the following formula is used:

Margin of Safety = Actual sales - BEP Sales X 100 /Actual sales

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INTRODUCTION ABOUT THE COMPANY
Kerala Solvent Extractions Limited now known as KSE Limited is one of the largest
manufacturers of compound cattle feed in the country. KSE Limited was registered in 1963
and started production in its Solvent Extraction Plant in 1972 in Kakkathuruthy road,
Irinjalakuda with a capacity of 40 MTs per day. It was the first solvent extraction plant in
Kerala spread over 15 acres.

KSE Limited is a public limited company with around 4500 shareholders. The shares are listed
in Bombay Stock Exchange (BSE). kse ltd is the largest manufacturer of compound cattle feed
in private sector in the India. The last 3 decades have seen KSE emerging as a leader in solvent
extraction and ready mixed cattle feed in the country. Today the company commands the
expertise, resources and infrastructure to manufacture a variety of farm animal introduce high
volumes, copra oil from copra oil cake and refined edible oil.

The company operates through 3 segments, which include animal feed division, oil cake
processing division and dairy division. It is dairy division consists of milk and milk products,
including ice cream. It offers ice cream under the brand, VESTA. The company is also engaged
in the field of milk procurement, processing and marketing of liquid milk and milk products.
Its milk products include KS Milk, KS Ghee and KS curd. VESTA Ice Cream has become
popular in many districts in Kerala. Its cattle feed products include KS supreme pellet, KS
Delux plus pellet and KS super.

Driven by a commitment to high standards of quality, KSE has not only won client confidence
however additionally national recognition through many awards and accolades. With modern
manufacturing facilities spread over three states, KSE caters to the vast belt stretching across
Southern India. Since present days, KSE has endeavoured to produce its product to customers
through an in-depth network of dealers and retailers, that kind a dedicated force behind the
success of KSE. It could be a matter of pride that KSE is a unit name these days. With a
powerful commitment to Customers and products quality and being cost-competitive, KSE
stands poised to fulfil new challenges.

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VITAL STATISTICS

Company name KSE Limited

Type Public company

industry Food

Founded 25 September

Headquarters Irinjalakuda
Thrissur district
Kerala

Traded as BSE: 519421

NSE: KSE

Products Cattle feed, edible oil and dairy products

Key people A.P George (managing director)

Revenue Rs. 1,049.23crore

Net income Rs. 15.61core

Number of employees 810

website www.kselimited.com

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VISION

The company endeavour to require care of leadership through quality product, explore new
avenues in development and commercialism create a stronger bond between the management,
workforce, dealers and customers, contribute to social development and rural upliftment, and
constantly strive for excellence in all spheres of our activities.

MISSION

To maintain market leadership.

To minimize the cost incurring in the production process.

To maintain the product quality

To be competitive in all markets.

To be compliment to all global quality standards

To maintain the top position in the industry.

To utilize the new technological changes for the advantage of the corporate.

OBJECTIVES OF THE COMPANY

The memorandum of association of the company list out all objectives for which the company
is registered the most important three objectives are

To produce, manufacture, extract, purchase, refine, prepare import-export, sell and usually to
deal in oil from seeds and different oil-bearing materials to hold on business of the refine the
hydrogenation therefrom and of trades connected there within

To acquire correct established, operate and maintain oil mills, extraction plants, ghee plants
and workshops.

To purchase, manufacture, sell or otherwise deal in oil cakes, washing soaps, toilet Soaps and
other products

15
HISTORY OF THE COMPANY

It was in 1963 Kerala Solvent Extraction Limited now known as KSE Limited entered the
solvent extraction industry, setting up the very first solvent extraction plant in Kerala. Although
Kerala produces eightieth of total coconut created in country, massive a part of it had been sold
to different states as coconut itself and that they were earning sensible profit once mills in
Kerala wasn't able to get enough copra for their daily needs. When refining industry in different
components of the country was thriving, in Kerala it had been troubled. So the understood the
need for modernization of their mills. At that time Dr. P.S. Loknath committee setup to review
the practicability of beginning new industries in Kerala, suggested the institution of 3 solvent
extraction plants and one amongst them in Thrissur district. The oil mill homeowners in and
around Irinjalakuda, who were thinking in similar lines saw the chance and took the initiative
to determine a solvent extraction unit, thus was KSE Limited born.

On the road to success, there have been several hurdles. Initially, the mobilization of capital
displays the best challenge. The future looked grim. But determination and optimism paid off.
Thus on twenty-five September 1963 the Kerala Solvent Extraction restricted was registered
as a public Ltd. The solvent extraction plant went on stream in 1972 and in 1976 a brand new
plant was originated to manufacture prepared mixed animal feed, that was pioneering step.
Since then there was no looking back.

The last 3 decades are seen KSE rising because the leader in solvent extraction and prepared
mixed animal feed put in the country. And through these years of consolidation and
diversification, KSE has created a distinct segment for itself. Today KSE commands the
resources, experience and infrastructure to manufacture a selection of farm animal feed, in high
volumes, oil from feed, and refined edible oil.

KSE had computerized its operations way back. In the year 1999, KSE went on to upgrade its
electronic data processing setup more. A custom created ERP code was developed for its units
and head workplace through M/S. RR Software Private Ltd, Cochin and online computerization
was fully implemented at all its plants. Being custom created for KSE code, with SQL RDBMS,
face on visual basic and Windows NT OS, seamlessly had integrated all functions of the
organization like fa, Inventory Billing, Payroll, PPC, MIS, and Share Accounting etc.

The Head workplace at Irinjalakuda has two servers and forty nodes running the appliance
different units, in all, have about 8 severs and about 50 nodes.

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Their latest plant at Vedagiri, Kottayam features a processed management blend, size
reduction, batching, and pellet cooling and aspiring systems. from a single unit, solvent
extraction plant, KSE has grown in to a multi-unit, multi-product organization. Infrastructure
for growth has perpetually been viewed as a priority at KSE. With modem manufacturing
facilities spread over three states, KSE caters to a vast bet stretching across south India. With
a strong commitment to customers and product quality and being cost competitive KSE, stand
poised to meet new challenges. The company came into existence with a awfully modest
objective to assist the solvent extraction millers through solvent extraction method achieving
an equivalent with exceptional success. KSE over the year expanded considerable having
ventured into other growth areas.

The very new area in which KSE Limited has entered into diary sector the field includes the
procurement, processing, marketing of liquid milk and milk products, KS milk, KS curd, KS
buttermilk etc. have already popular in Thrissur, Emakulum, Malapuram, Alappuzha districts.
KSE Limited has already launched Vesta brand ice cream on August 2002, which has been
well accepted in the market matching one in the cattle field industry. KSE having two
production plant with processing capacity of 100 tons per year the company has also a chemical
oil refining plant of 20 tons per day. In 1996 KSE Limited has listed in stock exchange of
Bombay, madras and Kochi. Currently the company is having an annual turnover of around
900crores.

GROWTH CHRONICLE OF KSE

1963

Registered as a company named Kerala Solvent Extraction Limited

1972

The company started production in Irinjalakuda with a Solvent Extraction Plant with a
capability of forty MTs per day

1976

A new plant was originated in Irinjalakuda to supply 50MTs of prepared -mixed cattle feed.

1979

production capability of cattle feed plant in Irinjalakuda redoubled to sixty MTs per day.

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1980

Solvent Extraction Plant capability in Irinjalakuda redoubled to sixty MTs per day.

1983

A production capacity of 120 MTS per day fully automatic new cattle feed plant started in
Irinjalakuda

1984

The Solvent Extraction Plant capability of Irinjalakuda enlarged to eighty MTs per day.

1987

Production capability of cattle Feed Plant in Irinjalakuda enlarged to one hundred eighty MTs
per day.

1988

New Cattle feed plant with a production capacity of 100 MTs per day started in
Swaminathapuram, Tamilnadu.

1989

Production capacity of Cattle Feed Plant in Swaminathapuram unit increased to120 MTs per
day. A new Solvent Extraction Plant commissioned at Swaminathapuram, Tamilnadu.

1990

Production capacity of Cattle Feed Plant in Swaminathapuram unit increased to150 MTs per
day. Introduction of KS Supreme pellets, by-pass protein cattle feed in the market.

1992

Cattle feed manufacturing begins in 3 party unit

1994

Production capacity of Cattle Feed Plant in Swaminathapuram unit increased to180 MTs per
day. A new feed supplement for cattle named as Keyes Fotintroduced. Company listed its
shares in stock exchanges of Cochin. Chennai and Mumbai

18
1995

Vegetable oil refining plant commissioned. KS SUPREME-sunflower oil launched. A new

Godown in Calicut opened.

1996

New cattle feed plant with a production capacity of 240 MTS per day started in Vedagiri,
Kottayam district. Company's name of Kerala Solvent Extraction Limited changed to "KSE
Limited"

1998

New cattle feed plant with a production capacity of 240 MTS per day started in Palakkad
district. As a Silver Jubilee gift company offered to the public, a children's park and information
centre.

1999

Company introduces new product KS deluxe plus the new pellet in HDPE bags of Kerala
market.

2000

Company started production and marketing of pasteurized Milk and Milk Products from
Konikkara and Thalayuthu dairy units. As per the offer to the public, company opened the KS
Park and Information Centre.

2002

Production capacity of Cattle Feed Plant in Irinjalakuda unit increased to 195 MTS per day.
Company's dairy product of ice cream named VESTA' launched.

2003

Production capacity of Cattle Feed Plant in Swaminathapuram unit increased to 195 MTS per
day. They started production in a leased plant at Edayar, Kalamassery

2004

Acquired land at Kinfra Park, Koratty for a new solvent extraction plant and aphysical oil
refining plant. ISO 9001:2008 Certification received.

19
2005

Production capacity of Cattle feed plant in Irinjalakuda increased to 210 MTS per day. They
purchased land at Mysore for a new plant.

2006

A new solvent extraction plant with a capacity of 200 TPD and a new physical oil refining
plant with a capacity of 100 TPD commissioned at Kinfra Park, Koratty. Solvent plant at
Irinjalakuda dismantled.

2008

Ice cream production unit commissioned at Thalayuthu, Tamilnadu

2009

Production capacity of cattle feed plant in Swaminathapuram unit increased to 200 MTS per
day Commissioned 500 TDP fully state of the Art German Technology Animal Feed Plant at
Irinjalakuda.

2010

lce-cream production units commissioned at Vedagiri, Kottayam.

2012

They Started production in a leased plant at Kochuveli, Trivandrum

2013

Feed Supplement named GORASAM introduced.

2014

Company disposes the property at Mysore. Cattle feed production capacity of old plant at
Irinjalakuda unit increased to 225 MTs per day.

2015

Cattle feed production capacity in Swaminathapuram unit increased to 225 MTs per day

2017

Windmill project inaugurated in Tamilnadu and production started on 25/03/2017

20
ORGANIZATION CHART

BOARD OF DIRECTOR

CHAIRMAN

MANAGING DIRECTOR

EXECUTIVE DIRECTOR

CHIEF GENERL CHIEF FINANCE OFFICER &

MANAGER COMPANY SECRETARY

Finance Personal Marketing Production Quality Purchase

department department control department
department department
department

EDP General store

DEPARTMENT
Boiler department

Electrical department

Maintenance department

Godown department

21
BOARD OF DIRECTORS

SL.NO NAME OF BOARD OF DIRECTOR POSITION

1 DR. JOSE PAUL THALIYATH CHAIRMAN

2 SRI. A P GEORGE MANAGING DIRECTOR

3 SRI. M P JACKSON EXECUTIVE DIRECTOR

4 SRI. P D ANTO DIRECTOR

5 DR. K.C VIJAYARAGHAVAN DIRECTOR

6 SRI. K PAUL FRANCIS DIRECTOR

7 SRI. T R REGHULAL DIRECTOR

8 SRI. JOESPH XAVIOUR INDEPENDENT DIRECTOR

9 MRS. SATHI A MENON INDEPENDENT DIRECTOR

10 SRI. PAUL JOHN INDEPENDENT DIRECTOR

11 SMT. MARYKUTTY VARGHESE INDEPENDENT DIRECTOR

ADMINISTRATIVE MANAGERS

1 SRI. M ANIL GENERAL MANAGER

2 SRI. R SANKARANARAYANAN CHIEF FINANCIAL OFFICER &

COMPANY SECRETARY

22
 SHARE CAPITAL PATTERN
% Of Share
Category No. Of Share Hold
Holding

Promoter’s Holding

Indian promoters 11,08,338 34.64

Sub total 11,08,338 34.64

Non-Promoter’s Holding
Banks _ _
Private corporate bodies 5,24,533 16.39
Indian public 15,37,179 48.03
NRIs/OCBs 29,950 0.94
Sub total 20,91,662 65.36
Grand total 32,00,000 100

AWARDS AND RECOGNITION

1) Kerala’s first solvent extraction plant.

2) No: 1 in processing coconut oil cake through solvent extraction in India.

3) Winner of S.E.A National Awards and State Productivity and Safety Awards
continuously for 14 Years.
4) First ranker in mixed cattle feed production in India.

5) Recognition from Animal Nutrition Society for contributions in cattle feed

manufacturing.
6) Kerala’s first export mixed cattle feed.

7) Tamilnadu productivity council safety award.

8) Kerala state Productivity Council Award 1996-97 to 2005-06.

9) Entrepreneur award from the college of veterinary and animal science

10) FACT MKK Nayar memorial productivity award

23
PRODUCT PROFILE

The main products marketed by KSE Ltd. is as follows

K.S Cattle Feed products

It includes six types. They are;

A. JERSEY COPRA CAKE: - Protein rich, tasty, de-oiled coconut cake.

B. KS DELUX PELLET: - The choice of caring farmers for better results.

C. KS DELUX PLUS PELLET: - It is for medium yielding cows has a crude protein

D. KS SUPREME PELLET: - A bypass protein feed with ISI mark specially made for
cattle superior germ plasam and high production potential.

E. KS PREMIUM PELLET: - It is an economical pellet for low yielders.

F. KS FORTE: -An invigorating feed supplement for cattle contains vitamin A, D &E

G. GORASAM

Dairy products

A. KS MILK
B. KS GHEE
C. KS CURD
D. KS BUTTER MILK
E. ICE CREAMS (VESTA)

RAW MATERIALS USING FOR CATTLE FEED PRODUCTION

1 Oiled Rice Bran
2 Deoiled Rice Bran
3 Cholam
4 Cotton Seed Cake
5 Rape Seed Cake
6 Ground Nut Cake
7 Maize
8 C N Cake Powder
9 Tamarind Powder

24
 10 Coffee Husk
11 Molasses
12 Salt
13 Vitamins & Minerals

CORPORATE SOCIAL RESPONSIBILITY

The CSR policy of KSE Limited incorporates the company's philosophy for giving back to
the society as a corporate citizen and lays down the guidelines and mechanism for
undertaking socially useful programs for the welfare and sustainable development of the
community at large. The main objective of the policy is to establish the basic principles and
the general framework of action for the management to undertake and fulfill its corporate
social responsibility. Under the policy, the company is committed to spend in every financial
at least 2% of its average net profits for the three immediately preceding financial years in
some of the identified activities.

1) Construction of footpath cum handrail for public at a cost of 10 Lakhs

2) Contribution to Kargil Fund (5 Lakhs)

3) Contribution to Gujarat Earthquake Relief Fund (10 Lakhs)

4) Contribution to Bharatia Vidhya Bhavan School, Irinjalakuda (1 Lakhs)

5) Contribution to St. James Hospital, Chalakudy (3 Lakhs)

6) Contribution to Amala Cancer Centre Hospital and Research Centre, Thrissur (3 Lakhs)

7) Contribution to Chief Minister's Relief Fund (3 Lakhs)

8) Contribution to Unnai Warier Smarakakalanilayam, Irinjalakuda for construction

of class rooms (20,000)

9) Two dialysis machines& one medical RO plant for dialysis to Sacred Heart

10) 26 Nos. Hospital beds to the department of Pediatrics, Government Medical

11) Providing one dialysis machine to Santhosham Hospital, Udumalpet (6.10 Lakhs)

12) Mission Hospital, Pullur, Irinjalakuda (14.80 Lakhs) College Thrissur (0.55 Lakhs)

13) Providing bus to Pratheeksha Training Centre, irinjalakuda (14.53 Lakhs)

14) Utilities for inmates of Jeevajyothi old age home, Parappukkara (3.72 Lakhs)

25
15) Physiotherapy equipment’s to Alpha Palliative Care link Centre, Irinjalakuda

help cancer patients (1.50 Lakhs)

16) Construction and maintaince of modern children’s information Centre “KS park” in

irinjalakuda (80 Lakh)

17) Renovation work of public pond behind koodalmanikyam temple, irinjalakuda

(24.79 Lakh)

18) Reference book for the library of sahrdaya college of advanced studies, kodakara

(1.04lakh)

19) Distribute medicine through oncology department of govt. hospital, Thrissur to help

cancer patients (1.50 Lakh)

MAIN COMPETITIORS
 KERALA FEEDS LIMITED
 GODREJ ANIMAL FEEDS
 PRIMA FEED
 AGRO TECH FOODS
 SUNANDHINI
 AMUL
 UNCLE JOHN
 MILMA

26
SWOT ANALYSIS

STRENGTHS
 Excellent infrastructure for manufacturing products
 Fully computerized plant
 Good network of leadership
 Financial strength of the company
 Leadership in the market
 Reputation and brand image in the company
 Efficient employee-employer relationship
 Abundant availability of raw material
 Consistent quality of the product
 Over 38 years’ experience in the field

WEAKNESS

 Higher requirement of working capital

 Inadequately developed linkages between research organization and industry.
 Inadequate promotional activities for dairy products
 Seasonality of raw material
 Lack of adequate quality control and testing methods as per international level.
 Inefficient supply chain due to a large number of intermediaries
 Stagnant number of
 cattle population affect marketing growth

OPPORTUNITIES

 Expanding its distribution area

 Growing demand of its product
 Opening of global market
 Large crop and material base offering a vast potential for agro processing
Activities
 Favorable demographic profile and changing lifestyle
 Expand manufacturing units

27
  Integration of development in contemporary technologies such as electronics,
material science, bio-technology etc. offer vast scope for rapid improvement
and progress
 Financial strength of 80% of the company leads to better purchasing power

THREATS

 Affordability and cultural preference of fresh food

 High inventory carrying cost
 High taxation
 High packaging cost

28
 REVIEW OF LITERATURE
Ilhan Dalci (2005) has conducted "a study on Cost volume profit analysis" with the objectives
to know how traditional cost volume profit analysis create managers to make false decision
and also to create a comparison between activity based cost volume profit analysis and the
traditional cost volume profit analysis. The secondary data have been collected from various
sources like annual reports of the companies, journals, articles, publications and websites. The
study has found that under traditional cost volume profit analysis, costs are categorized strictly
as fixed or variable with respect to number of products produced and sold, but some costs that
are fixed with respect to the volume are not fixed with respect to other factors and due to this
traditional cost volume profit analysis may not generate accurate information. It has also been
identified that predicting total costs requires multiple cost factors such as number of output
produced, number of units sold at which will be covered by activity based cost volume profit
analysis. The study has concluded that traditional cost volume profit analysis includes only
volume based cost drivers whereas activity based cost volume profit analysis includes multiple
cost drivers which proves more accurate.

Rijal Madhav (2005), had conducted a research on "cost volume profit analysis tools to
measure the effectiveness of profit planning and control; A case study of NEBICO Private
Limited." He has entered his study to examine CVP analysis as a tool in the manufacturing
industry and to analyse the CVP and its impact in profit planning. It covers five years’ financial
statement. The major finding is The company's variable cost is in proportion than the fixed cost
in total cost amount, which contribute to a lower contribution margin. The company has a high
fixed cost Company has no plan to reduce cost. There is a lack of effective cost control
programs or techniques. The company has no effective inventory policy. The inventory
management, raw material handling and controlling system are not efficient and effective. The
board of directors is the main authority in price-fixing and it directly interferes to price of
biscuit and confectionery products. Nebico Pvt. Ltd. has not proper practice of segregating the
costs into fixed and variable or controllable and non-controllable. There is no proper
coordination among production, administration, distribution, inventory and sales department.

Shrestha Dharma (2006), had conducted a research entitled “Cost, Volume and Profit
Analysis of Commercial Bank: A Case Study of Himalayan Bank Limited”. This study
concerned to examine the practice of CVP analysis & its effectiveness in Commercial Bank, in
this study the secondary data had been used mostly and related other information had collected
by informal interview for segregating cost, Cost analysis, contribution margin analysis, P/V

29
ratio analysis & Break-Even analysis. The time period covered by this Research was six years
The major findings are CVP analysis has not practised yet. There is no Practice of segregating
cost into fixed and variable. The costs are roughly classified and that classification is not
scientific and appropriate. All the level of management is not involved in profit planning and
decision making of the Bank. There is no complete and comprehensive budgeting system. Lack
of the system of SWOT analysis. Liberalized policy of Government, skill manpower, good
management team, use of computer technology etc. are the strength of Bank were as unable to
provide service in rural area, market competition, conflict in Nation, Industries and Business
closed done are weakness and threat.

Ronald (2008) suggested CVP analysis is the technique which summarizes the effects of
changes in an organization’s volume of activity on its costs, revenue and profit. CVP analysis
can be extended to cover the effects on profit of changes in selling prices, service fees, costs,
income tax rates, and the organizations mix of products or services. In short CVP analysis
provides management with a comprehensive overview of the effects on revenue and costs of
all kinds of short-run financial changes. Although the word profit appears in the term, CVP
analysis is not confined to profit seeking enterprises. Managers in non-profit organizations also
routinely use CVP analysis to examine the effects of activity and other short-run changes on
revenue and costs.

Edna Gunderson (2009) conducted "a study on Cost Volume Profit Analysis” with the
objectives to identify the important elements of cost volume profit analysis and to show that
the cost volume profit analysis helps in decision making. Break-even point and contribution
are used to analyse the collected data. The findings are break-even point can be calculated as
either the minimum sales quantity or the minimum revenue required to avoid a loss or profit.
The cost volume profit model can also be used to calculate target operating income. Managers
also use cost volume profit analysis to take other decisions, mainly strategic. Different choices
can affect selling prices, variable costs and fixed costs. Therefore, the author has concluded by
suggesting that the cost volume profit model proves better in making managerial decisions

Georgiev (2014) studied the applying of Cost-Volume-Profit‟ Analysis within the hotel
business based on survey knowledge of upper-level hotels within the north-east region of
Balkan nation, research results indicate that analysts apply the CVP analysis to any or all
aspects of management accounting, that clearly speaks of its significance for generation of
information on hotel management. Taking into consideration the specifics of the hotel product

30
we tend to cannot however settle for as logical the results on the extent and frequency of
application of CVP analysis.

Jain (2010) a break-even analysis indicate the relationship between the costs and profits with
the sales volume. The sales volume that equates total revenue with connected costs and resulted
in neither profit nor loss is termed the breakeven volume. If all costs are assumed to be variable
with the sales volume, the BEP would be at zero sales. If all costs were fixed, profits would be
varying disproportionately with sales and the BEP would be at a point where sales revenue
total equalled fixed costs. BEP analysis is the most widely used technique of CVP analysis.
Breakeven analysis establishes the connection between revenues and costs with regard to
volume. It indicates the extent of sales at that total costs area unit up to total revenues. The term
breakeven analysis is interpreted in narrow as well as in broad sense. In its narrow sense, it is
concerned with finding out the break-even point. In its broad sense, it means a system of
analysis which is used to determine the probable profit at different levels of activity.

Rhan (2010) says that CVP analysis shows the link among the varied ingredients of profit
planning, namely, unit sales price, variable cost, sales volume, sales mix and fixed cost. Profit
designing maybe a perform of the terms of a unit of product, the variable cost of making and
selling the product, the volume of product units sold, and, within the case of multi-product
firms, sales mix and, finally the total fixed costs. The CVP analysis is a management
accounting tool to show the relationship between these ingredients of profit planning. The
entire gamut of profit planning is associated with CVP inter-relationships. A widely used
technique to review the CVP relationship is break-even analysis.

Prihadyanti (2011) This study states that “the Cost-volume-profit (CVP) analysis is a widely
used tool for managerial planning. The failure of CVP analysis to include value of capital into
a product's cost operate will result in underestimating a product's cost while overstating its
profitability. This paper proposes another variation of the CVP analytical model to incorporate
the value of capital on R&D investment and its risk level on strategic selections. The changed
CVP model provides a lot of helpful data to management as a result of it focuses on a lot of
specific kind of investment that has specific characteristics. The CVP model developed is a lot
of complicated, because it includes risk and uncertainty for the expected revenue, and specifies
the R&D expenditure as a percentage of total sales. However, the model still needs further
development.”

31
Trifan Anton (2011) Study Founded “on the distinction between variable costs and fixed costs,
the analysis of the relationship between the volume of activity, costs and profits is directed to
decision-making in order to guide an entity's management to obtain optimal results. It is known
that the models that individualize the development of the expenses at an entity's level represent
the basis of cost analysis. Then, given the fact that foresight imposes taken into account
fluctuations in an activity, the grouping of expenses into variable and fixed will be used for
forecasting management, for evaluating an entity's performance and for analyzing decisional
alternatives.”

Teodora Roupska (2012) This study explained that “The Cost-Volume-Profit (CVP) analysis
is a well-known Management Accounting tool applicable in industrial companies. It can be
applied successfully in agrarian companies, but it is necessary to identify fixed and variable
costs (in Bulgaria it isn’t done), made for raising animals or growing plants, because the
agrarian production is made from biological assets. The costs made for plants or animals are
different. Besides the same cost in the individual companies are able to be classified differently
depending on its particular manifestation. The “Cost-Volume-Profit” analysis can easily be
used to base agrarian companies’ management decisions as in the other companies – by
computing break-even point, by computing, margin of safety and etc. In our empirical study it
is possible to compute the break-even point in units in two versions. In the first the unit is an
animal and in the second – a kilogram of meat. The received results proved that to organizing
a profitable pig farm in Bulgaria it is necessary to have more than 898 animals”.

John Donald (2013), Suggested that the ability to categorize costs as either fixed or variable
and to estimate the fixed and variable components of mixed costs is important because it
enables the utilization of decision-making techniques like cost volume profit analysis (CVP
analysis). This is basically a short (or tactical) decision tool that shows the impact on profit of
changes in prices, prices and sales volume in units. We cannot estimate accurately the impact
of those changes unless we all know that prices area unit fastened and that area unit variable.
CVP analysis is sometimes called break-even anal sis because it allows the user to calculate a
break-even point. This is the extent of production and sales at that a product or service stops
losing cash and becomes profitable. At the break-even, point profit equals zero. Once we know
the break-even point we can assess the financial viability of a new product or analyse our
current operating performance.

32
Henry Osahon (2014) This study shows “the ability of a corporation to check the interactions
of economic variables during a kind of setting is very important in effective decision-making
and ultimately profitability and survival. This paper posits the use of Cost-Profit Volume
(CPV) analysis in this regard and applied it to the non-profit organization. Using a case study
approach, the study demonstrates practically the application of CVP framework to decision
problems. Thereafter, primary data were collected by means of questionnaire and analysed
using frequency percentage to investigate why cost/management accounting decision
frameworks in general are not popular among non-profit organizations in Nigeria. The
traditional technique of CVP analysis together with its assumptions and limitations were
addressed.

Gabriel Soares (2016) concluded the problem of reallocating productive resources to

maximize profit. Mostly the topic focuses on developing or improving the Cost-Volume-Profit
model to obtain solutions that provide an ideal mix of products before the data is given. In
particular, some algorithms are available for the problem. However, these proposals do not
consider the minimum number of units to be produced, and the reallocation of productive
resources for each product is a problem found in these studies. Bearing this in mind, a new
algorithmic program based on individual monetary revenue is planned. Computational results
indicate that the proposed method can be utilized as a decision support system.

Kavitha (2018) Based on the results, the researcher concludes management may use cost
volume, profitability analysis to calculate the profit yield by a given amount of selling goods.
The management may set the necessary sales level to earn the desired profit through the cost
volume profit analysis. After analyses of the various data related to Salem steel plant, the study
concluded that the cost volume, profitability analysis more or less depends upon the better
utilization of resources, cut-off expenses and goodwill and market share. Moreover, CVP
analysis was used to increase production capacity and use advanced technology to cut down
the cost of production and wage cost in order to increase the profitability, volume, not only
against the investment but also from the investor’s return point of view. Cost volume
profitability analysis is helpful to analyse the profitability position according to the cost and
sales volume not only Salem steel plant but also useful in every organization to prevent the
future risks of the business.

33
PROBLEM STATEMENT

The most significant single factor in the planning of the average business is the relationship
between the volume of business, its costs and profit. Through this study the analysis of Cost,
Volume and Profit has been done by using the technique of Contribution Margin Analysis, P/V
ratio, Breakeven Analysis and margin of safety. Techniques of ratio analysis and trend analysis
are used to know the current profitability and to predict the future trend on cost, revenue and
profit at KSE Ltd, Thrissur. The problem identified in the company is that the unawareness and
less priority given for the cost volume profit relationship. If cost, volume and profit are properly
managed, it helps the company to take managerial decisions effectively. Most manufacturing
industries are unaware of the extent to which cost-volume-profit analysis affect their various
decisions. Manufacturing industries are facing the problem of how to make use of the available
scarce resources in order to achieve the objective of profit maximization

OBJECTIVES OF THE STUDY

 To analyze the relationship between cost, volume and profit of KSE Ltd.
 To ascertain contribution and profit-volume ratio of KSE Ltd.
 To ascertain margin of safety of the company
 To give suggestion about the future trend on cost, profit and sales.

SCOPE OF THE STUDY

This study is performed by using the cost sheet and annual records of the KSE Ltd Irinjalakuda.
The analysis done in the cost sheet are Breakeven analysis, profit volume, etc., these
calculations cover the major areas like contribution margin, profit. This would be useful for
company to make 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 variable. This study helps to forecast profit
fairly and accurately as it is essential to know the relationship between profit 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 profit. The
study is also helpful for the managers to understand about the current profitability trend and to
predict the future trend in cost, volume and sales.

34
RESSEARCH METHODOLOGY
The science of method is termed as research methodology. It refers to process of conducting
the research. Research methodology not only described the steps involved in conducting the
research, but also justifies the choices of various methods, states the limitations of the research
and also bring out the presupposition and consequence and conducting the research. Research
methodology answers question like the why, what, how, when of conducting the research.

RESEARCH DESIGN
Research design is the strategy for the study and plan by which the strategy is to be carried out.
The study is analytical research because this study is primarily based on the internal records
and the annual records of the company. in analytical research, the researcher had to use facts
or information already available, and analyses these to make a critical evaluation on the
material

SOURCES OF DATA
only secondary data are used were used for data collection

Secondary data

The data which are originally collected but rather obtained from the published or unpublished
sources are known as secondary data. For this study secondary data are collected from

 Company websites
 Annual reports
 Journals and magazines

TOOL OF DATA ANALYSIS

 Breakeven analysis
 PV ratio
 Margin of safety
 Contribution
 Trend analysis

35
TOOL OF DATA PRESENTATION

 Chart
 Table

DURATION OF THE STUDY

Duration of the study is 28 days

PERIOD OF THE STUDY

Periods that covered by the study extended to five years 2014-2015 to 2018-2019

LIMITATIONS OF THE STUDY

 The study restricted to financial year from 2014-2015 to 2018-2019

 The analysis of the study based on past record of the organization
 The limitation of CVP analysis, breakeven analysis, are applicable here
 The study mainly depending on the secondary data so limitation of secondary data
is applicable here.

CHAPTER SCHEME

Chapter 1 – Introduction

Chapter 2 – Profile of the industry

Chapter 3 – Research design

Chapter 4 – Data analysis and interpretation

Chapter 5 – Summery of findings, conclusion and suggestion

36
Table 4.1: Fixed costs of the previous five years.
AMOUNT
YEAR (In lakhs)

2014-2015 6629.63

2015-2016 5130.91

2016-2017 6101.07

2017-2018 9582.57

2018-2019 6372.49

Chart 4.1: Fixed costs of the previous five years.

FIXED COST
12000

9582.57
10000

8000
6629.63 6372.49
6101.07
6000
5130.91

4000

2000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION

From the given table and chart, it can be interpreted that in the year 2015-2016, the fixed
cost is comparatively lower than other years. And the fixed cost is higher in the year 2017-
2018. There is a slight increase almost in every year compared to previous year and also
there is a decrease of fixed cost in the year 2018-2019 compared to 2017-2018.

37
Table 4.2: Variable cost of the previous five years.

AMOUNT
YEARS (lakhs)

2014-2015 80185.83

2015-2016 86834.47

2016-2017 97261.08

2017-2018 114391.12

2018-2019 114221.36

Chart 4.2: Variable cost of the previous five years.

VARIABLE COST
140000

114221.36
120000 114391.12

97261.08
100000
86834.47
80185.83
80000

60000

40000

20000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION
From the bar diagram, it can be interpreted that variable cost is higher in the year 2017-
2018. And a linear relation can be seen in variable cost, that it is increasing slightly from
the year 2014-2015 to 2018-2019. Since it is a manufacturing firm, manufacturing process
requires more money.

38
Table 4.3: Total costs of the previous five years.

AMOUNT
YEARS
(lakhs)
2014-2015 85984.91
2015-2016 91965.38
2016-2017 103362.15
2017-2018 123973.69
2018-2019 120593.85

Chart 4.3: Total costs of the previous five years.

TOTAL COST
140000
123973.69
120593.85
120000
103362.15
100000 91965.38
85984.91

80000

60000

40000

20000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION

The above chart represents the total costs. It consists of total fixed and variable cost for
the past five years. From the bar diagram, it can be interpreted that there is an increasing
trend in the total cost from the year 2014-2015 to 2017-2018. The company had spent high
cost in the year 2017-2018 and less cost had spent in the year 2014-2015

39
BREAKEVEN ANALYSIS

Table 4.4: Marginal cost statement during the year 2014-2015

Particulars Amount(lakhs)

Sales 89970.05
Less: variable cost 80185.83
Contribution 9784.22
Less: Fixed cost 6629.63
Add: other income 1208.82
Profit 4363.41

Calculation of profit volume (P/V) ratio.

P/V Ratio = contribution/sales*100

= 9784.22/89970.05*100

= 10.87%

Calculation of Breakeven point

BEP in Sales = Fixed cost*sales/contribution

= 6629.63*89970/9784.22

= 60962 lakhs

40
Table 4.5: Marginal cost statement during the year 2015-2016

Particulars Amount(lakhs)

Sales 92493.46
Less: variable cost 86834.47
Contribution 5658.99
Less: Fixed cost 5130.91
Add: other income 229.99

Profit 758.07

Calculation of profit volume (P/V) ratio.

P/V Ratio = contribution/sales*100

= 5658.99/92493.46*100

= 6.11%

Calculation of Breakeven point

BEP in Sales = Fixed cost*sales/contribution

= 5130.91*92493.46/5658.99

= 83862 lakh

41
Table 4.6: Marginal cost statement during the year 2016-2017

Particulars Amount(lakhs)

Sales 104724.53
Less: variable cost 97261.08
Contribution 7463.45
Less: Fixed cost 6101.07
Add: other income 199.25

Profit 1561.63

Calculation of profit volume (P/V) ratio.

P/V Ratio = contribution/sales*100

= 7463.45/104724.53*100

= 7.10%

Calculation of Breakeven point

BEP in Sales = Fixed cost*sales/contribution

= 6101.07*104724.53/7463.45

= 85608 lakhs

42
Table 4.7: Marginal cost statement during the year 2017-2018

Particulars Amount(lakhs)

Sales 130417.33
Less: variable cost 114391.12
Contribution 16026.21
Less: Fixed cost 9582.57
Add: other income 519.07

Profit 6962.71

Calculation of profit volume (P/V) ratio.

P/V Ratio = contribution/sales*100

=16026.21/130417.33*100

= 12.28%

Calculation of Breakeven point

BEP in Sales = Fixed cost*sales/contribution

= 9582.57*130417.33/16026.21

= 77980 lakhs

43
Table 4.8: Marginal cost statement during the year 2018-2019

Particulars Amount(lakhs)

Sales 120940.70
Less: variable cost 114221.36
Contribution 6719.34
Less: Fixed cost 6372.49
Add: other income 170.5

Profit 942.61

Calculation of profit volume (P/V) ratio.

P/V Ratio = contribution/sales*100

= 6719.34/120940.70*100

= 5.55%3

Calculation of Breakeven point

BEP in Sales = Fixed cost*sales/contribution

= 6372.49*120940.70/6719.34

= 114698 lakhs

44
Table 4.9: Contribution margin of the company

YEAR CONTRIBUTION (IN LAKHS)

2014-2015 9784.22
2015-2016 5658.99
2016-2017 7463.45
2017-2018 16026.21
2018-2019 6719.34

Chart 4.9: Contribution margin of the company

CONTRIBUTION
18000
16026.21
16000

14000

12000
9784.22
10000
7463.45
8000
6719.34
5658.99
6000

4000

2000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION

From the above table and chart, it can be interpreting that the contribution margin of the KSE
ltd was increasing from 2016-2017 to 2017-2018 and it has decreased to (6719.34 lakhs) in
the year 2018-2019.Higher contribution rate shows high rate of profit and the lower rate of
contribution shows lower rate of profit. The profit earned by the company was low in the year
2015-2016 when compared to other years and the higher profit was earned in 2017-2018.In
order to improve a company’s contribution margin they either need to reduce variable costs,
such as raw material and shipping expenses, or increase the price of their products and
services.

45
Table 4.10: Profit of the company.

YEAR PROFIT (IN

LAKHS)
2014-2015 4363.41

2015-2016 758.07

2016-2017 1561.63

2017-2018 6962.71

2018-2019 942.61

Chart 4.10: Profit of the company.

PROFIT
8000
6962.71
7000

6000

5000
4363.41
4000

3000

2000 1561.63
758.07 942.61
1000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION

The above table and chart shows the profit earned by the company. The highest profit earned
by the company was in 2017-2018, And the lowest profit earned by the company was in 2015-
2016. The company had higher revenue in the year 2017-2018 and the p/v ratio was also
higher.

46
Table 4.11: Comparison of P/V ratios of the previous five years.

YEAR P/V RATIO

2014-2015 10.8%

2015-2016 6.11%

2016-2017 7.10%

2017-2018 12.28%

2018-2019 5.55%

Chart 4.11: Comparison of P/V ratios of the previous five years.

PROFIT-VOLUME RATIO
14.00%
12.28%
12.00%
10.80%

10.00%

8.00%
7.10%
6.11% 5.55%
6.00%

4.00%

2.00%

0.00%
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION

From this graph, we can see that the lower p/v ratio is in the year 2015-2016 and the highest
p/v ratio is in the year 2017-2018. the reason for increasing the p/v ratio was increasing of
contribution margin. Contribution margin was higher in the year 2017-2018 when compared
to other years. And the contribution margin was lower in the year 2015-2016 as compared to
other years. So, we can interpret that the P/V ratio will be increased when the contribution
margin is higher and the P/V ratio will be decreased when the contribution margin is lower.

47
Table 4.12: Comparison of BEP IN SALES of the previous five years.

YEAR BEP IN SALES

(IN LAKHS)
2014-2015 60962

2015-2016 83862

2016-2017 85608

2017-2018 77980

2018-2019 114698

Chart 4.12: Comparison of BEP IN SALES of the previous five years.

BREAKEVEN POINT IN SALES

140000

120000 114698

100000
83862 85608
77980
80000
60962
60000

40000

20000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION

The above graph shows the (BEP IN SALES) of the previous five years. From this graph we
can see that the highest (BEP in sales) was in the year 2018-2019. The lowest (BEP in sales)
was in the year 2014-2015. Increase in sales and contribution is essential for stability of break-
even point.

48
CALCULATION OF MARGIN OF SAFETY OF KSE LTD, IRINJALAKUDA,
 Margin of safety in the year 2014-2015
Margin of safety = Actual sales –BEP sales

= 89970.05-60962

= 29008.05

 Margin of safety in the year 2015-2016

Margin of safety = Actual sales –BEP sales

=92493.46-83862

= 8631.46

 Margin of safety in the year 2016-2017

Margin of safety = Actual sales –BEP sales

= 104724.53-85608

= 19116.53

 Margin of safety in the year 2017-2018

Margin of safety = Actual sales –BEP sales

= 130417.33-77980

= 5283.38

 Margin of safety in the year 2018-2019

Margin of safety = Actual sales –BEP sales

= 120940.70-114698

= 6242

49
Table 4.13: Margin of safety in lakhs from the year 2014-2015 to 2018-2019.

MARGIN OF SAFETY
YEAR
(In lakhs)
2014-2015 29008.05
2015-2016 8631.46
2016-2017 19116.53
2017-2018 5283.38
2018-2019 6242

Chart 4.13: Margin of safety in lakhs from the year 2014-2015 to 2018-2019.

MARGIN OF SAFETY
35000

29008.05
30000

25000

20000 19116.53

15000

10000 8631.46
6242
5283.38
5000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION

In this graph, it has been interpreting that, in 2018-2019 the KSE Ltd had low margin of safety
comparing with previous year. Because of that, in this year company get low profit and in
2014-2015 and 2016-2017 the company had high margin of safety. Because of that in these
year company get high profit.

50
Table 4.14: comparative representation of breakeven sales, actual sales, total cost and
profit of KSE Ltd during the year 2014-2019. (In lakhs).

Year Sales BEP Total cost Profit

2014-2015 89970.05 60990.15 85984.91 4363.41

2015-2016 92493.46 83975.61 91965.38 758.07

2016-2017 104724.53 85930.56 103362.15 1561.63

2017-2018 130417.33 78033.95 123973.69 6962.71

2018-2019 120940.70 1148.19 120593.85 942.61

Chart 4.14: Comparative representation of BEP in sales, actual sales, sales, total cost
and profit of KSE Ltd.

COMPARATIVE REPRESENTATION OF SALES, BEP, TOTAL COST

AND PROFIT

942.61
120593.85
2018-2019
1148.19
120940.7

6962.71
123973.69
2017-2018
78033.95
130417.33

1561.63
103362.15
2016-2017
85930.56
104724.53

758.07
91965.38
2015-2016
83975.61
92493.46

4363.41
85984.91
2014-2015
60990.15
89970.05

0 20000 40000 60000 80000 100000 120000 140000

Profit Total cost BEP Sales

51
INTERPRETATION

From the above table and chart it has been identified that, in the year 2017-2018 the company
has high sales and high profit. From the year 2013-2014 to 2014-2015 there was a tendency
of increasing the profit. But in 2015-2016 profit was decreased because of the increase in the
total cost. In the year 2018-2019 the BEP sales was lower than compared to other years

TREND ANALYSIS

Trend analysis is a technique used in technical analysis that attempts to predict the future stock
price movements based on recently observed trend data. Trend analysis is based on the idea
that what has happened in the past gives traders an idea of what will happen in the future.
There are three main types of trends: short-, intermediate- and long-term.

TREND LINE EQUATION

Y=a+bX

a= ∑y b= ∑xy
n ∑x2

52
TREND ANALYSIS ON TOTAL COST

Table 4.15: Trend analysis on total cost

YEAR Y X= x-2017 X2 XY

2015 85984.91 -2 4 -171969.82

2016 91965.38 -1 1 -91965.38

2017 103362.15 0 0 0

2018 123973.69 1 1 123973.69

2019 120593.85 2 4 241187.7

∑Y= 525879.98 ∑X2= 10 ∑XY=101226.19

y = a + bx

a= ∑y b= ∑xy

n ∑x2

= 525879.98 = 101226.19

5 10

a= 105175.996 b= 10122.619

53
Trend equation: - y =105175.996 + 10122.619 X

2020 = 105175.996 + 10122.619 (3) = 135543.85

2021 = 05175.996 + 10122.619 (4) = 145666.47

2022 = 105175.996 + 10122.619 (5) = 155789.09

2023 = 105175.996 + 10122.619 (6) = 165911.71

2024 = 105175.996 + 10122.619 (7) = 176034.32

Chart 4.15: Trend analysis on total cost

PROJECTED TOTAL COST

200000
176034.32
180000

160000 165911.71
155789.09
140000 145666.47
123973.69 135543.85
120000
120593.85

100000 103362.15

91965.38
80000
85984.91

60000

40000

20000

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

INTERPRETATION

It can be understandable that there is an increasing trend in the total costs of the company in
all years. The reason for the increasing trend of the total is that the company had increased
their production volume from year to year.

54
TREND ANALYSIS ON SALES

Table 4.16: Trend analysis on sales

YEAR Y X= x-2017 X2 XY

2015 89970.05 -2 4 -179940.1

2016 92493.46 -1 1 -92493.46

2017 104724.53 0 0 0

2018 130417.33 1 1 130417.33

2019 120940.70 2 4 241881.4

∑Y= 538546.07 ∑X2= 10 ∑XY=99865.17

y = a + bx

a= ∑y b= ∑xy

n ∑x2

= 538546.07 = 99865.17

5 10

a= 107709.214 b= 9986.517

55
Trend equation: - y =107709.214 + 9986.517 X

2020 = 107709.214 + 9986.517 (3) = 137668.76

2021 = 107709.214 + 9986.517 (4) = 147655.28

2022 = 107709.214 + 9986.517 (5) = 157641.79

2023 = 107709.214 + 9986.517 (6) = 167628.31

2024 = 107709.214 + 9986.517 (7) = 177614.83

Chart 4.16: Trend analysis on sales

PROJECTED SALES
200000

180000 177614.83
167628.31
160000
157641.79
147655.28
140000 130417.33 137668.76

120000 120940.7

100000 104724.53

92493.46
80000 89970.05

60000

40000

20000

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

INTERPRETATION

We can predict that there will be an increasing trend in the sales or revenue of the company in
coming years. Sales promotions activities generally create an immediate positive impact on
sales. The company had increased the production volume due to the high demand for the
products. It helps the company to improve the sales volume.

56
TREND ANALYSIS ON PROFIT

Table 4.17: Trend analysis on profit

YEAR Y X= x-2017 X2 XY

2015 4363.41 -2 4 -8726.82

2016 758.07 -1 1 -758.07

2017 1561.63 0 0 0

2018 6962.71 1 1 6962.71

2019 942.61 2 4 1885.22

∑Y= 14588.43 ∑X2= 10 ∑XY= -636.96

y = a + bx

a= ∑y b= ∑xy

n ∑x2

= 14588.43 = -636.96

5 10

a = 2917.686 b= -63.969

57
Trend equation: - y =2917.686 + -63.969 X

2020 = 2917.686 + -63.969 (3) =2726.59

2021 = 2917.686 + -63.969 (4) =2662.90

2022 = 2917.686 + -63.969 (5) =2599.20

2023 = 2917.686 + -63.969 (6) =2535.51

2024 = 2917.686 + -63.969 (7) =2471.81

Chart 4.17: Trend analysis on profit

PROJECTED PROFIT
8000

7000 6962.71

6000

5000

4363.41
4000

3000 2726.59 2599.2

2535.51
2662.9
2000 2471.81
1561.63
1000 942.61
758.07

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

INTERPRETATION

We can predict that the profit of the company will have an increasing trend in the future even
though the actual profit of the year 2015-2016 was decreased. But, the profit shows an
increasing trend from the very next year onwards. The exact reason is that the sales volume
of the company was increasing from year to year.

58
 5.1 FINDINGS

 Fixed cost

From this study it is identified that there was a sudden increase of fixed cost in
the year 2017-2018. The expenses like salaries, rent, insurance etc. were
increasing year by year, that leads to increase the fixed cost of the company.
however, in the year 2015-2016 fixed cost is lower compared to other years.

 Variable cost

The variable cost of the company was increasing in every year due to the
production volume increased by the firm. A linear relation can be seen in variable
cost that it was increasing slightly from the year 2014-2015 to 2018-2019. it found
that, the variable cost is one of the main factor to determine the profit of the
company. Because, variable cost of the company was increasing in every year but
the profit of the company was fluctuating. The profit margin of the company will
be increased when the sales volume exceeds variable cost. But, the profit margin
will be deceased when the sales are close to variable cost.

 Total cost

The total cost of the company has the increasing tendency, which means the
company was increasing its production volume year by year.

 Contribution

There is a strong relationship between contribution and profit. Higher contribution

rate shows high rate of profit and the lower rate of contribution shows lower rate
of profit. on this study profit of the company was increasing according to the
increase in contribution margin. So the financial position of the company is
showing a positive sign. If the company wants to improve the position of
contribution margin ratio, it should try to reduce variable cost by increasing sales
volume.

59
 P/V ratio

P/V ratio and the profit have a strong relationship. When the P/V ratio is high
it indicates high profit margin. A low P/V ratio indicate low profit margin. Here,
P/V ratio was higher in the year 2017-2018 and the profit margin was also higher
when compared to other years. P/V ratio was lower in the year 2015-2016 and the
profit of the company was also lower compared to other years

 Break-even sales

From this study we can see that the highest BEP in sales was in the year 2018-
2019. The lowest BEP in sales was in the year 2014-2015. Increase in sales and
contribution is essential for stability of break-even point.

 Margin of safety

A high margin of safety is the sign of prosperity of the business and a low
margin would indicate high fixed cost. High margin of safety indicates high profit
and the low margin of safety indicates low profit .in the year 2018-2019 the KSE
Ltd had low margin of safety comparing with previous year. Because of that, in
this year company get low profit and in 2014-2015 and 2016-2017 the company
had high margin of safety. Because of that in these year company get high profit

 Trend analysis
 Trend analysis on total cost shows the increasing trend in future. In the last
five years also, there was an increasing trend in the total cost. This was
because of the increase in the production volume. In future also company
will increase its production volume due to high demand in the market.
 Trend analysis on total sales also showing the increasing trend in future.
Which means the demand for the products of KSE ltd is very high. Sales
promotion activities of the company made a positive impact among their
customers.
 Trend analysis on profit has the increasing trend due to the increasing trend
on the sales volume of the company than its total cost.

60
5.2 CONCLUSION

Cost volume Profit Analysis is very important for a manufacturing company for
improving the cost control efficiently. The study analyzed the cost volume profit and its
impacts on overall performance of KSE Ltd. In addition to this, studied the break-even
sales, margin of safety, current profitability of the company. The study also tries to give
suggestions about the future trend on cost, profit and sales.

From the study, it has been find out that cost reduction by increasing sales is the only
solution to increase the profit of the firm. The company had high growth in the year
2014-2015 and 2017-2018. If they follow all the strategies, techniques and policies used
in those years for future, they can grow high. I hope that the company will pay serious
attention to my findings and suggestions. Company or management enables to predict
the profit as a wide range of volume and to determine the price of the products very
carefully. Through the analysis, the manager can easily take decision showing in this
report how utilization of available capacity will lead to increase in profit.

61
5.3 SUGGESTIONS

 In this study, the level of profit volume ratio is in a variable manner. There is an
increase and decrease in profit volume ratio year by year. So the company has to
adopt some measures to control. It like increase the sales, reducing the total cost
especially variable cost, improve inventory control system etc.

 If the company calculate CVP analysis, it will help them to take various decisions
regarding make or buy product, pricing policy, change the method of production or
not etc.

 Separate cost control department should be established for the effective

management of cost.

 The company has good profitability in the year 2014-2015 and 2017-2018. If the
company applies all the strategies and policies followed in these years for future,
they can maintain and improve high level of profit and return.

 The company has to give an attention to reduce the unwanted variable cost. If the
company could able to control the variable cost, breakeven sales can be
reduced. By lowering your break-even volume, the company can increase their
return on investment and potentially pursue new, more profitable business models.

 The company has good margin of safety in 2014-2015 and 2017-2018. High margin
of safety is the sign of prosperity of the business. The company must follow the
policies and strategies of these year to achieve a good margin of safety in future.
One of the most important ways to improve the margin of safety is
to improve marginal contribution per unit, which is possible by increasing the
selling price (if market conditions are favorable) and lowering the variable cost per
unit of the product. and another way to improve margin of safety is to increase sales
volume and lowering break even output

 Profits, sales and costs should be analyzed by preparing budgeting or planning with
actual performance within a periodic term such as monthly, quarterly, semi
quarterly, yearly etc. which will help to improve the profit planning and controlling
of the company

62
63