COST AND MANAGEMENT

ACCOUNTING
PROJECT
ON
UNIT COSTING
OF

AMUL
COMPANY

Submitted by,
SWEETY I THAKKAR
Roll No 113 (B)

SEM 2

Enrollment No 157680592165
1

AMUL INDUSTRY
Amul ("priceless" in Sanskrit. The brand name "Amul," from the Sanskrit
"Amoolya," (meaning precious) formed in 1946, is a dairy cooperative in
India. It is a brand name managed by an apex cooperative organisation,
Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF).
The Gujarat Cooperative Milk Marketing Federation Ltd, Anand
(GCMMF) is the largest food products marketing organisation of India.
In 1997, Amul ice creams entered Mumbai followed by Chennai in 1998
and Kolkata and Delhi in 2002.
The portfolio consisted of impulse products like sticks, cones, cups as
well as take home packs and institutional/catering packs.
It achieved the No 1 position in the country. This position was achieved
in 2001 and it has continued to remain at the top.
Today the market share of Amul ice cream is 38% share against the 9%
market share of HLL (Kwality Walls), thus making it 4 times larger than
its closest competitor.
Not only has it grown at a phenomenal rate but has added a vast variety
of flavours to its ever growing range.
In January 2007, Amul introduced SUGAR FREE &ProLife Probiotic
Wellness Ice Cream, which was a first in India.
Amuls entry into ice creams is regarded as successful due to the large
market share it was able to capture within a short period of time due to
price differential, quality of products and of course the brand name.

ICE CREAM INDUSTRY IN INDIA

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 Industry Snapshot: Market Size - 1200 Crores

Ice Cream market is growing at 26%
Major players: Amul - Market Leader with share of 36%
HLL - Kwality Walls - 2nd biggest player
Mother Diary
Arun - Chennai Based Hatsun Agro Product

APPLICABILITY OF UNIT COSTING

The ability to calculate costs for a unit or measured amount of a product or
service is important in many aspects of budgeting and cost management. In the
open and distance learning sub-sector, unit costing is necessary for the
following tasks:
to determine appropriate fee levels (where cost recovery models are
used);
to compare costs of alternative ways of delivering a particular course;
to carry out an Activity-Based Cost analysis; and
to compare costs of an ODL institution with those for conventional
education.
Some activities, such as marking of assignments by contract tutor-markers,
are typically undertaken and paid for on a piece-work basis. Under such
circumstances, it is easy to identify the direct cost of each unit, as a fixed fee is
paid for each assignment marked. The problem is that other costs associated
with this activity are not included in the calculation. For example, the work
done by a tutor-marker is only part of a chain of activities, including:

recruiting and training tutor-markers,

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maintaining records of assignments received from students,

bundling these assignments for collection by tutor-markers,
maintaining records of marked assignments received from tutor-markers,
recording marks on the student's file or in a computerised database,
returning marked assignments to students
handling claims from tutor-markers and issuing payments.

The full cost of each marked assignment the measured unit of the service
provided by the institution should include the expenditure incurred for all of
these related activities.
A second problem can also arise when defining the unit to be measured.
For example, when we use the word student, what do we mean by this term?
Are we referring to individuals registered with our ODL institution, to the
number of enrolments for a particular subject or module, or to the number who
successfully complete the course? Where a particular course or programme lasts
more than one year, the issue becomes even less straightforward. For this
reason, we need to make very clear exactly what units and what costs we are
referring to in any discussion of unit costs.

STATEMENT SHOWING UNIT COSTING OF AMUL

INDUSTRY
PARTICULARS

AMOUNT

COST
PER UNIT
[CPU]

Opening stock
Raw material
Dry fruits
Milk
Flavours
Other ingredients
Sugar
Cup
Cutlery
Seasonal fruits
Waffle
Cocoa
Carriage inward
Raw material consumed
Direct expanse
Direct labour
PRIME COST
Factory overheads:
- Fixed cost:
Depreciation
Rent
Power
Insurance
Supervisor salary
- Variable cost:
Electricity running expance of machine

1000000
300000
250000
300000
350000
200000
250000
150000
100000
50000
100000
150000
184500
3384500
220000
530000
4134500

10
3
2.5
3
3.5
2
2.5
1.5
1
0.5
1
1.5
1.845
33.845
2.2
5.3
40.045

250000
100000
175000
150000
60000

2.5
1
1.75
1.5
0.6

905000

9.05

WORK COST
Office overheads employee cost
Other expenditure:
Computer
Telephone
Taxes
Carriage outward

5039500
1000000

50.395
10

120000
10000
40000
20000

10
0.1
0.4
0.2
5

COST OF PRODUCTION
Opening stock -Closing stock
Cost of goods sold
Selling and distribution expanses
Advertisement
Delivery vehicle
Petrol
Packaging rate
Cost of sales
PROFIT
SALES

6229500
6429500

62.295
64.295

400000
350000
175000
7405000

4
3.5
1.75
74.05

1851250
9256250

18.5
92.5625

COST SHEET ANALYSIS

The company is producing 100000 units of ice cream at Rs. 74.05 for
which the total cost incurred is
Rs. 7405000 and the total sales is Rs.
9256250 which implies that that the profit being made is Rs. 1851250.
The company is producing a single cup of ice cream at Rs. 92.5625 which
includes the cost of a cup ice cream at Rs. 74.05 which again implies that
the profit of Rs. 18.5125 is earned on a single unit of Amul ice cream.
Since the company is earning some percentage of profit above the cost, it
means a slight increase in the cost will not have too much of an effect on
the profit since there is a large margin of safety.
Since the company is earning some amount of profit, the business is
capable to expand and diversify over a period of time.
PVR = C/S = 2671750/9256250 = 28.86%
BEP (in Rs.) = FC/PVR = 2195000/28.86 =

Rs.760568.26

BEP (in units) = FC/C = 2195000/2.67175 = 821558.9 = 821559

MOS = Profit/PVR = 476750/28.86 = 16519.404

DETERMINATION OF SP
Amul Ice Cream has marked the selling price of their product roughly
20% above the cost price.
This implies that they are making a profit on each unit of output that is
sold.
These profits can be ploughed into the business again to create more
output.