MANAGEMENT ACCOUNTING AND CONTROL

SYSTEM

COST ANALYSIS
OF
SUGANDA AND CO
SUBMITTED BY:
JOANNA FERNANDES (4NM15MBA63)
KAVYA K SHETTY (4NM15MBA69)
MEGHA BALLAL (4NM15MBA83)
NEHA RAI (4NY15MBA03)
RACHITA (4NY15MBA27)
RAMYASHREE (4NY15MBA31)

SUBMITTED TO:
Prof Rakesh Shetty
Assistant Professor

JUSTICE K S HEGDE INSTITUTE

OF MANAGEMENT
NITTE

DATE: 18/10/2016

INTRODUCTION
Incense sticks are also known as Agarbatties and are a way of offering prayers to God in
some religions; they contain biotic material which releases fragrance when burnt. Incense
sticks are not only used as a fragrance stick to offer prayers to God but it has many other uses
to it as well, they are used to overpower any foul odour, it also acts as a mosquito repellent
because of the smoke it generates when burnt. One incense stick can spread fragrance up to
15 minutes that is the time taken for it to burn completely depending upon the quality and
size of the stick. Many manufacturers have come up with different variants of incense sticks
which include fragrances of jasmine, sandalwood, rose, lavender and etc. incense sticks are
also obtainable in other forms such as dashang (sticky paste or powder deep cones and Dhup tablets,
etc.).

As the incense stick business is doing quite well, we as a team decided to be a part of this
business by setting up our own incense manufacturing firm. Our company name is named
Suganda and Co. and our products are named after our company too.
Our target market based on geographic segmentation is focused on the regions of Mangalore
and Udupi. All age group people are under our target market except for children below the
age of 10 years. Based on psychographic segmentation people with medium level income
come under our target market. The retailers of incense sticks are also part of our target
market.

Calculation of Cost under Absorption costing

Cost sheet of Suganda Company

Units Produced (in Kg)
700
Particulars
Units Cost Per unit Amount (Rs.)
Direct Material
700 220.00 154000
Direct Labour
700
28.00
19600
Direct expeces
700
10.00
7000
Prime Cost
700 258.00 180600
Factory Overhead
Rent
700
5.71
4000
Power
700
4.00
2500
Supervisor salary
700
21.43
15000
Depreciation
700
14.29
10000
Insurance
700
11.89
8325
Works Cost
700 315.32 220425
Administrative Overhead
Salary of accountant
700
21.43
15000
Depreciation
700
11.43
8000
Telephone expenses
700
3.43
2400
Miscellaneous Expenses
700
2.43
1700
COGS
700 354.04 247525
Selling and Distribution Overhead
Salesmen salary
700
17.14
12000
Advertisement
700
35.71
25000
Carriage Outward
700
14.00
9800
TC
700 406.89
37000
Profit
700
73.11 284600
Sale
700 480.00 321600

1000
Units Cost Per unit Amount (Rs.)
1000
220.00 220000
1000
28.00
28000
1000
10.00
10000
1000
258.00 258000

1200
Units Cost Per unit Amount (Rs.)
1200 220.00 264000
1200
28.00 33600
1200
10.00 12000
1200 258.00 309600

1000
1000
1000
1000
1000
1000

4.00
4000
4.00
4000
15.00
15000
10.00
10000
8.33
8325
299.33 299325.00

1200
1200
1200
1200
1200
1200

3.33
4000
4.00
4800
12.50 15000
8.33 10000
6.94
8325
293.10 351725.00

1000
1000
1000
1000
1000

15.00
8.00
3.00
2.00
327.33

15000
8000
3000
2000
327325

1200
1200
1200
1200
1200

12.50
6.67
2.83
1.83
316.94

15000
8000
3400
2200
380325

1000
1000
1000
1000
1000
1000

12.00
25.00
14.00
378.33
101.68
480.00

12000
25000
14000
37000
447800
484800

1200
1200
1200
1200
1200
1200

10.00
20.83
14.00
347.77
132.23
480.00

12000
25000
16800
37000
539000
576000

Note:
We fixed the selling price at Rs.480 per Kg, which covers our cost and earns
profit.

Calculation of Total Fixed cost and Total Variable cost

Particulars
Variable Expenses
Direct Material
Dircet labour
Direct expenses
Power
Telephone expenses
Miscellaneous Expenses
Carriage outward
Total

Cost Per Unit Amount(Rs) Cost Per Unit Amount(Rs) Cost Per Unit Amount(Rs)

Fixed Expenses
Rent
Supervisor salary
Depreciation Machinery
Insurance
Salary of accountant
Depreciation on office equipement
Salesmen salary
Telephone expenses
Miscellaneous Expenses
Advertisement
Total

220.00
28.00
10.00
4.00
2.00
1.00
14.00
279.00

154000
19600
7000
2500
1400
700
9800
195000

220.00
28.00
10.00
4.00
2.00
1.00
14.00
279.00

220000
28000
10000
4000
2000
1000
14000
279000

220.00
28.00
10.00
4.00
2.00
1.00
14.00
279.00

264000
33600
12000
4800
2400
1200
16800
334800

5.71
21.43
14.29
11.89
21.43
11.43
17.14
1.43
1.43
35.71
141.89

4000
15000
10000
8325
15000
8000
12000
1000
1000
25000
99325

4.00
15.00
10.00
8.33
15.00
8.00
12.00
1.00
1.00
25
99.33

4000
15000
10000
8325
15000
8000
12000
1000
1000
25000.00
99325

3.33
12.50
8.33
6.94
12.50
6.67
10.00
0.83
0.83
21
82.77

4000
15000
10000
8325
15000
8000
12000
1000
1000
25000
99325

Note:
Telephone and Miscellaneous expenses are semi variable expenses.

Calculation of Contribution

Particulars

700
Cost Per
Unit

Marginal Cost Sheet

1000
Amount(Rs)
Cost Per Amount(Rs)
Unit

1200
Cost Per
Unit

Amount(Rs)

Sales
(-)variable cost
Contribution
(-)Fixed cost
Profit

480.00
279.00
201.00
141.89
59.11

321600
195000
126600
99325
27275

480.00
279.00
201.00
82.77
118.23

576000
334800
241200
99325
141875

480.00
279.00
201.00
99.33
101.68

484800
279000
205800
99325
106475

Calculation of Profit Volume Ratio

Particulars

Sales
Contribution
PVR=

Cost
Amount(Rs) Cost
Per
Per
Unit
Unit
480
321600
480
201
126600
201
0.41875
0.41875

Contribution /
Sales

Calculation of Break-Even Points

In amounts
BEP = Fixed cost / PVR
99325 / 0.41875
Rs.237194

In Units
BEP = Fixed cost / Contribution per unit
99325 / 201
494 Units

Amount(Rs) Cost
Per
Unit
484800
480
205800
201
0.41875

Amount(Rs)

576000
241200

Calculation of Margin of Safety

In amounts
Margin of Safety = Actual Sales Breakeven Sales
576000 237194
Rs.338806

In Units
Margin of Safety = Actual Sales Breakeven Sales
1200-494
706 units

Conclusion:
Our industry Suganda and Co which produces incense stick. We are planning to
produce packets of 20 grams. We have estimated cost for 3months of 2017. We have to
produce minimum of 494 Kgs to recover our cost and if we produce more than 494 Kgs we
will earn profit in first month.