Costing Assignment 3

On

Laxmi Soap Factory

Submitted to

Prof. Govind Shinde

Submitted by

Name: Sanket Deepak Aiya

MMS- 1st year Sem II

Division: B

Roll No: 60

Index

S. R. No Topic

1 Objective of Study

2 Company Profile

3 Products

4 Data Analysis & Cost Sheet

5 Findings

6 Suggestions

7 Conclusion

Objective of Study

The following are the main objectives to be that are assessed and brought into consideration in assessing the cost structure of the company.

1. To assess the cost structure of the company.

2. To know how the company is performing in the long run.

3. To determine the exact profit structure of the company and know how it maintains the stock and other working capital requirements.

Company Profile:

Laxmi Soap Factory was established in the year 1959. But for the Ranglani family, the roots of soap manufacturing are traceable to the year 1921. Sheth Thakurdas Ranglani was based in Karachi when he initially started a soap-manufacturing unit . After partition, Thakurdas migrated to India and started a manufacturing unit in the year 1948.

Having worked hard, Sheth Thakurdas looked around and fixed his site in Pune and as a result Laxmi Soap Factory was setup in the year 1959. Sheth Thakurdas passed away in 1981 but the company still continues to flourish. To establish themselves in the competitive local market, it was necessary to introduce a product which would speak for its own quality. A number of experiments were conducted by Shri Ramchand Thakurdas Ranglani and the fruitful outcome was "Foaran". This brand was introduced to the consumers in 1973.

This partnership firm under the guidance of Mr. Girish Ranglani, Mrs.K. Ranglani and Shri Ramchand T. Ranglani have managed to conquer a segment of the market in Maharashtra, Gujarat and Karnataka and exports to 42 Countries namely Malaysia, Dubai, Somalia, Angola, Tunisia, Abidjan, Burkina Faso, Panama, United Kingdom, New york(USA), Fiji, Ecuador (Latin America), Loma, Congo. Laxmi Soap Factory operates on the principle of appointing stockists agents in all towns and cities. The policy is to aim at smaller profit and larger turnover. Retail outlets and Door to Door selling methods are not used. Though sales staff is employed to supervise, book orders and conduct promotion campaigns.

The company manufactures Laundry Detergent, Detergent Cake, Detergent Powder / Dish Scouring bar and Toilet Soap / Laundry Soap / Multipurpose Soap and Essance Sticks (Agarbatti) also have their own Sulfonation plant. The company intends to go in for the manufacture of toilet soaps. As Mr.Girish puts it, "Ambitious plans are on the anvil inspite of stiff competition from all types of manufacturers, big and small."

Products

To cater to the high demanding market we have worked towards producing a number chemicals for cleaning. The chemicals are specially formulated to give the most effective results. Following are the products:

- Detergent Powder

- Toilet Soap

- Detergent Cake

- Laundry Soap

- Multi Purpose Soap

- Dish Scouring

- Bar Ramas Detergent Cake

- Abhirup Essence Stick (Agarbatti)

Infrastructure

We have been a renowned industry and from the start have aimed at producing better products everyday. The success to our dynamic specialized team who put in all the effort to achieve a better quality. Our technical lab provides proper work facilities, to make the products of world class standards. The latest science techniques are utilized to formulate our products for effective use. Different blending machines are used for the betterment of our products.

Team

Our industry has its own specialized team of lab technicians to manufacture all our products. The quality procedure involved in formulating various compositions are effective. The team has knowledge in all kinds to help produce products which are environmental friendly.

Quality

We produce good quality products. The products have been specially formulated to give the desired results. Our quality is tested by special technicians to avoid any shortcomings, and the product can be used to maximum efficiency. Not only this all products are eco-friendly and biodegradable and pose no threat to environment.

Packaging

For packed convenience of clients we have packaging facilities for easy transport and delivery of products. The products are sealed properly to avoid any leakage thus ensuring the safety of products.

Research Development

Our team of research associates is continuously involved in improving and developing the products. They are continuously researching to formulate all our products. Latest researchers are used to improve the products. Organized testing of the chemicals is conducted before the final product reaches the cleaning agents. The chemicals are tested for its biodegradability to avoid hazards.

Clientele

We aim at giving our customers the satisfaction of associating with the best in the industry. We supply a wide range of clients with our products. Our clients lists include various houses, industries, hotels and motels.

Why Us?

Our company has been a reliable source producing different household products. The reason for us being appreciated in the market are:

- Innovative and quality products- International standards quality- Relevant industry experience to produce good quality products

Cost Sheet of Laxmi Soap Factory with Assumptions

Units FY 10 FY 11 FY 12

Cost AssumptionsRaw Material Volume Req

Acid Ml 105

105

105

Speciality chemicals Ml 10

10

10

Ordinary chemicals Ml 5

5

5

Perfumes Ml 10

10

10

Raw Material Price

Acid paise/ ml 7.7

8.8

9.2

Inflation % 14.3% 4.5%

Speciality chemicals paise/ ml 3.7

4.5

5.0

Inflation % 21.6% 11.1%

Ordinary chemicals paise/ ml 1.7

2.5

2.8

Inflation % 47.1% 12.0%

Perfumes paise/ ml 5.8

6.5

7.0

Inflation %   12.1% 7.7%

Packaging Cost

  Soaps INR/ unit 1.0

1.1

1.2

Inflation % 10% 9%Headcount

Manufacturing # 9

10

12

Marketing professionals # 2

2

3

Corporate employees # 1

1

1

Average Monthly Salary      

ManufacturingINR/ month

10,000

10,000

10,500

Marketing professionalsINR/ month

15,000

15,000

15,750

Corporate employeesINR/ month

16,000

16,000

16,800

% Hike 0.00% 5.00%

Bonus (% of Salary) 10.0% 12.0% 12.0%

Power Cost INR 65,000

80,000

100,000

% Inflation 23.1% 25.0%

Packaging Cost INR/ unit 1.0

1.1

1.2

  % Inflation

Ads as % of Sales % 5.0% 8.4% 7.2%

Ads Cost INR 298,368

655,367

689,355

Commissions as % of Sales % 5.0% 5.0% 5.0%

Commisions INR 300,000

388,125

480,000

Maintenance as % of Sales % 0.2% 0.2% 0.2%

Maintenance Cost INR 14,918

17,583

18,272

   

Insurance Premium INR 65,000

65,000

65,000

Revenue Assumptions Sales Price

INR/ packet

32

36

40

Inflation %   12.5% 11.1%

Sales Volume packets 187,500

215,625

240,000

Growth %   15.0% 11.3%

Revenue & Cost Build-up of Laxmi Soap Factory Soap:-

Units FY 10 Fy 11 FY 12Revenue Build-UP

Sales PriceINR/ packet

32

36

40

Sales Volume packets 187,500

215,625

240,000

Sales RevenueINR lakhs

60

78

96

TotalCost Build-Up

Raw Material Prices

Acidpaise/ ml 8 9 9

Speciality chemicalspaise/ ml 4 5 5

Ordinary chemicalspaise/ ml 2 3 3

Perfumespaise/ ml 6 7 7

Raw Material Volumes

Acid litres 19688 22641 25200Speciality chemicals litres 694 970 1200Ordinary chemicals litres 319 539 672Perfumes litres 1088 1402 1680Raw Material Cost

AcidINR Lakh 15.16 19.92 23.18

Speciality chemicalsINR Lakh 0.26 0.44 0.60

Ordinary chemicalsINR Lakh 0.05 0.13 0.19

PerfumesINR Lakh 0.63 0.91 1.18

TotalINR Lakh 16.10 21.41 25.15

Headcount

Manufacturing 9 10 12Marketing professionals 2 2 3Corporate employees 1 1 1

Average Monthly Salary

ManufacturingINR/ month 10000 10000 10500

Marketing professionalsINR/ month 15000 15000 15750

Corporate employeesINR/ month 16000 16000 16800

Bonus on Salary (% of Salary) 10% 12% 12%Employee Cost

Manufacturing 11.9 13.4 16.9Marketing professionals 4.0 4.0 6.4Corporate employees 2.1 2.2 2.3

Total 18.0 19.6 25.5

Power Cost

INR Lakh 0.65 0.8 1

Packaging Cost 1.875 2.371875 2.88

Advertising Costs 2.98 6.55 6.89

Commissions 3 3.88 4.80

Maintenance Costs 0.149 0.176 0.183

Insurance Premium 0.65 0.65 0.65Total Costs 43.361 55.461 67.097

Cost Sheet of Laxmi Soap Factory:-

Particulars FY 10 FY 11 FY 12Direct Material

Acid 15.16 19.92 23.18Speciality chemicals 0.26 0.44 0.60Ordinary chemicals 0.05 0.13 0.19Perfumes 0.63 0.91 1.18Total 16.10 21.41 25.15

Direct Labor 11.88 13.44 16.93Direct Expenses (Packaging) 1.88 2.37 2.88Prime Cost 29.86 37.22 44.96Production Overheads

Power 0.65 0.8 1Maintenance 0.149 0.176 0.183

Factory Cost 30.66 38.19 46.15

Findings

- The company is maintaining an optimum price level i.e. Rs. 32 and which is feasible for a local customer to afford the soap.

- Also the sales volume that is generated 240,000 by the company is meeting the demands of the customer and there is no too much WIP, as maintaining optimum stock levels.

- The company is adding an adequate expenditure on the packaging as well as on the maintenance of the machinery, though that is adding up the cost but at the same time it is bringing out the quality product in the long run with generating returns of 15%.

- The packaging cost of the company is low so as to keep the customers with the company and generate high profit as it is generating profit of 15% on each unit.

- The company is expecting increase in selling price of 12.5% on its product as to sustain in the long run.

Suggestions

The expenditure incurred by company on the research and development should be improvised and used at the maximum point to bring in more quality in the product.

As the company is performing well on the all the levels be it employee incentives or the benefits for the customer, it is doing good justice to all the factors of production.

Conclusion

The firm since a very long period is in this business and hence is very well aware of its competitors pricing and thus maintains optimum cost and selling price to sustain in the business. Thus we can say that the company is performing better and can sustain in the long run, by meeting its objectives as well as serving better to society.