IES MANAGEMENT COLLEGE AND RESEARCH CENTRE Cost Analysis Of Parle-G 1 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE CERTIFICATE This is to certify that project titled Cost sheet analysis of Parle-G has been submitted by our group towards partial fulfillment of Costing project and has been carried out under the guidance of Prof. Jayesh Jain at IES MCRC. The matter presented in this report has not been submitted for any other purpose in this institute. GUIDE: Prof. Jayesh Jain PLACE: Mumbai DATE: 2nd September, 2008 2 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE
DECLARATION We hereby declare that this report submitted in partial fulfillment of the requirement of the project to IES Management College is our original work. We further certify that we have no objection and grant the rights to IES Management College to publish our report if they deem fit in journals/ magazines and newspapers without our permission. Place : Mumbai Date : 2nd September,2008 Names : Reena Panjwani – 71 YogeshKumar Periwal – 78 Tejashree Phal – 79 Shreyas Phansekar – 80 Krupa Rachh – 81
Sumeet Sasmal – 87 Class : PGDM B 3 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE TABLE OF CONTENTS SR. NO CONTENT PAGE NO. 1 Objectives of the study 6 2 Introduction to Indian Biscuit Industry 7 3 Introduction to Parle Industry 8 4 Introduction to Parle-G 9 5 SWOT Analysis 10 6 Cost Sheet of Parle-G 13 7 Analysis of the Cost Sheet 14 8 Innovation in Parle 19 9 Bibliography 20 4 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE ACKNOWLEDGEMENT We would like to express our profound gratitude towards Prof.
Jayesh Jain for his able guidance and keen interest in the successful completion of this project. We also take the opportunity to thank all those people who have given their valuable time and support to successfully complete the project. 5 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE OBJECTIVES The major objectives of the study are as follows : ?To study the SWOT analysis of Parle – G so as to make an internal and external assessment of Parle – G so that core capabilities and competencies of Parle – G is understood. ?To make a detailed list of the ingredients involved in the manufacturing of Parle – G. Make a Cost sheet of Parle –G and show the detailed list of various direct and indirect expenses involved in the manufacturing of Parle – G. ?To get a detailed understanding of how the costs to various products of the same company are allocated. INTRODUCTION 6 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE INDIAN BISCUIT INDUSTRY India Biscuits Industry is the largest among all the food industries. India is the third largest producer of biscuits after USA and China. The Rs 4,500-crore Indian biscuits market has grown at 12-14 per cent year-on-year. Britannia is highest selling in terms of alue followed by Parle and ITC. Britannia and Parle together command a 75-78% market share which three years ago was 82% before the entry of ITC. Biscuit industry in India in the organized sector produces around 60% of the total production, the balance 40% being contributed by the unorganized bakeries. The three major brands are – Britannia, Parle, ITC. There are other brands also like Priyagold, Cremica, Dukes, Anmol, Priya, etc besides various regional and state brands. There are different types of biscuits like Glucose ,Marie , Cream, Crackers , Milk and many others. 7 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE
PARLE PRODUCTS PVT. LTD. Parle Products Pvt. Ltd. Is a US $ 450 million conglomerate started in India in 1929. The company commands a 40 per cent market share in the Rs 4,000 crore biscuit markets in India. It has been India’s largest manufacturer of biscuits and confectionery, for almost 80 years. Makers of the world’s largest selling biscuit, Parle-G, and a host of other very popular brands, the Parle name symbolizes quality, nutrition and great taste. Many of the Parle products – biscuits or confectioneries, are market leaders in their category.
With a 40% share of the total biscuit market and a 15% share of the total confectionary market in India, Parle has grown to become a multi-million dollar company. Apart from the factories in Mumbai and Bangalore Parle also has factories in Bahadurgarh in Haryana and Neemrana in Rajasthan, which are the largest biscuit and confectionery plants in the country. Additionally, Parle Products also has 7 manufacturing units and 51 manufacturing units on contract. Parle has various biscuits to its kitty like Parle-G, Krackjack, Monaco, Kreams , Hide and Seek , Parle Marie ,and many more and many weets like Melody , Mango bite, Poppins , Kismi Toffee , etc and also various snacks like Musst bites, Sixer , Cheeslings,etc. Parle biscuits and confectionaries are fast gaining acceptance in international markets also such as, Middle East, Africa, South East Asia and the more sophisticated economies like U. S. A. , UK, Canada, Australia and New Zealand now relish Parle products. PARLE –G 8 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE World’s Largest Selling Biscuit For over 65 years, Parle G has been a part of the lives of every Indian. From the snow apped mountains in the north to the sultry towns in the south, from frenetic cities to laid back villages, Parle G has nourished, strengthened and delighted millions. Filled with the goodness of milk and wheat, Parle G is not just a treat for the taste buds, but a source of strength for both body and mind. Tear over a packet of Parle G to experience what has nourished Generations of Indians since last sixty five years, making it truly Hindustan Ki Taakat. Various people have various reasons to consume it, some consume it for the value it offers while others consume it for sheer taste, For some it is a meal substitute for others it s a tasty healthy nourishing snack. Patronised by millions for all this qualities, it is much more than just a biscuit brand. Little wonder than why is it the Largest selling Biscuit brand in the World. Parle – G is the flagship brand of the company. In terms of volume it is the largest selling biscuit in the world. ORG figures show Parle-G enjoys a 69 percent share in the Glucose biscuit market, pegged at close to 2. 7 lakhs tonnes a year. This is a dominant lead over its closest competitor Britannia Tiger, which has a 24 percent market share. It contributes more than 50 per cent to the company’s total turnover.
Parle G commands a good 65 per cent market share in the domestic biscuit market. The glucose biscuits category in India is estimated at Rs 15 billion. The Parle G brand faces competition from Britannia’s Tiger brand of biscuits. Parle-G’s consumer base is unique in the way it cuts across all age and income groups. SWOT ANALYSIS OF PARLE-G 9 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE STRENGTHS ?Easy Availability : Parle G is a product which is easily available everywhere, even at remotest places. It is one such biscuit which one can find at retail shops to malls and even at the paan-walas. Value for Money : The product is worth its price in terms of taste, quality and its purpose as glucose biscuit. The value-for-money positioning helps generate large sales volumes for Parle –G. ?Low and mid-range pricing segment : Parle G is a product available at lowest price ranging from Rs. 4-Rs. 6. This is based on our cultivated understanding of the Indian consumer psyche. This helps in attracting more customer base. Low pricing also helps Parle –G to gain edge over its competitors, which means that the biscuit market is highly price sensitive and if competitors increase price by even 50 paise, it ould be a huge loss of customers for the competitors. ?Nutritional Value Snack : Parle G is a glucose biscuit having high nutritional value. Per 100g it has 453 calories of energy and 6. 5g protein. Parle – G is often called as a source of strength for mind and body. ?In-house production : Parle G has its own in-house production units unlike ITC and Britannia who outsource their manufacturing. ?Consistency in Quality: Quality of Biscuits manufactured is consistent. There has been no compromise on quality even when the input prices have increased tremendously. Detailed Guidelines : The packs of Parle –G biscuits has a detailed note on how to tear the pack along the dotted lines which according to the consumers is very essential so that there is no breakage of biscuits like it happens with other brands. ?Economies of scale : Parle –G biscuits are manufactured on a very large scale as the demand is high which helps them to take advantage of economies of scale. Even the manufacturing units at many places around India help them to reduce their transportation cost. 10 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE Widely distributed network: The extensive distribution network built over years is a major strength of Parle-G. Parle –G is available to consumers, even in the most remote places and in the smallest of villages with a population of just 500. Parle has nearly 1,500 wholesalers, catering to 4,25,000 retail outlets directly or indirectly. A two hundred strong dedicated field force services these wholesalers & retailers. Additionally, there are 31 depots and C&F agents supplying goods to the wide distribution network. ?Unique Customer Base : Parle-G’s consumer base is unique in the way it cuts cross age groups, income groups and Sections. WEAKNESSES ?Less attractive Packaging : Parle-G has a very simple packaging cover since its inception. It needs to be more attractive and innovative with the changing time. ?Weak Coverage in Eastern India and Tamil Nadu: Distribution Channel of Parle -G is weak in eastern India and in Tamil Nadu. The Company must try to enhance its distribution in these areas. OPPORTUNITIES ?Promotion/Advertisement: Parle-G can use effective advertising strategies to promote the product. It can use big and famous personalities like its competitors
Britannia and ITC. 11 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE ?Distribution Networks: it should strengthen its distribution network in Tamil Nadu and South where it is weak because the southern side of India has a huge market for milk biscuits. THREATS ?Competition From other Market Players : Competiton from other Big and small players like Britannia and Priya Gold entering the market is a big threat to Parle G. Even ITC which has acquired a 7 % market share in the biscuits market within a short period of time. ?Change in Consumer Tastes and Preferences: The consumers tastes can also hange. They would prefer to have cream or flavored biscuits rather than having plain milk biscuits. People also might be health and diet conscious. ?Varies In Taste: Many consumers complain that Parle-G’s taste changes from place to place which is not liked by various consumers. Duplicate Market: Parle-G biscuit faces a lot of threat from duplicate biscuit market which sell biscuit at cheaper rates. 12 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE 13 COST SHEET OF PARLE-G PER BATCH PA RTICULARS Unit manufactured : 1 Unit sold : 1 DIRECT COST
Raw Materials Consumed Opening stock of raw materials (+) Purchases of RM (-)closing stock of RM Materials Consumed Direct labour/wages Direct cost/expenses PRIME COST INDIRECT COST (+) Factory/Works Overheads Indirect Labour Insurance of Plant Depreciation on Machinery Cost of Maintanence Other Factory Expenses Supervisor’s Salary GROSS FACTORY COST/GROSS WORKS COST FACTORY COST/WORKS COST (+) Office and Administrative Overheads Depreciation on office furniture Salary on Staff Office and General Expenses Electricity and Lightings Cost of Production of Goods Produced Opening Stock of Finished Goods -) Closing Stock of Finished Goods Cost of Production of Goods Sold / Cost of Goods Sold (+) Selling & Administrative Overheads Salary of Salesman carriage outward sales expenses COST OF SALES PROFITS SALES NOTE : Cost Sheet has been prepared for Parle-G , for Vile Parle Factory. IES MANAGEMENT COLLEGE AND RESEARCH CENTRE ANALYSIS OF COST SHEET PRODUCTION OF BISCUITS Per Minute Per Hour Per Day Per Month Per Year No. of Biscuits 12500 750000 18000000 5400000 00 6480000 000 No. of Packets 781. 25 46875 1125000 3375000 0 4050000 00 No. of Batches 0. 46 28 660. 00 19800. 0 0 237600. 0 0
DIRECT COST COST OF RAW MATERIALS PER BATCH Cost of one Batch (Rs. ) S. No. Raw Material Quantity Rat eTotal Cost 1 Wheat Flour 100 8 800 2 Edible Oil 15 32 480 3 Sugar 35 7 245 4 Flavors 0. 5 50 25 5 Milk Powder 5 83 415 6 Salt 3 7 21 158. 5 1986 DIRECT COST PER BATCH Power Expenses per month (Rs. ) 200000 Power Expenses per Batch (Rs. ) 10. 1010101 10. 10 1 PNG Expenses per month (Rs. ) 300000 PNG Expenses per Batch (Rs. ) 15. 1515151 5 15. 15 15 14 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE 25. 25 25 DIRECT WAGES PER BATCH No. of Permanent Workers per Shift 5 Average Wage per month Rs. ) 12000 Total Wage per month (Rs. ) 300000 No. of Batches per month 19800 Wage per Batch 15. 1515151 5 INDIRECT COST INDIRECT LABOUR No. of Temporary Workers for loading raw materials in Mixer per Shift 2 Average Wage per month (Rs. ) 5000 Total Wage per month (Rs. ) 30000 No. of Batches per month 19800 Wage per Batch 1. 51515151 5 INSURANCE OF PLANT PER BATCH Cost of Plant (Rs. ) 50000 000 15 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE Insurance Premium @ 2% per annum 10000 00 Insurance Premium per Batch 4. 208 754 DEPRECIATION ON MACHINERY Cost of Machinery (Rs. ) 10000000
Life of Machinery (Years) 5 Depreciation rate per annum (%) 20 Depreciation per annum 2000000 Depreciation per Batch 8. 41750842 COST OF MAINTENANCE Cost of Maintenance per month (Rs. ) 200 000 Cost of Maintenance per Batch (Rs. ) 10. 101 01 OTHER FACTORY EXPENSES Other Factory Cost (Yearly in Rs. ) 20000 0 Other Factory Cost per Batch (Yearly in Rs. ) 0. 8417 5084 SUPERVISOR SALARY No. of Supervisors per Shift 6 Average Salary per month (Rs. ) 20000 Total Salary per month (Rs. ) 12000 0 16 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE No. of Batches per month 19800 Salary per Batch 6. 060 606
OFFICE & ADMINISTRATION OVERHEADS DEPRECIATION ON OFFICE FURNITURE Cost of Office Furniture 10000 00 Depreciation rate per annum (%) 5 Depreciation rate per annum (Rs. ) 50000 Depreciation per Batch 0. 2104 3771 SALARY ON STAFF No. of Staff members 20 Average monthly Salary (Rs. ) 18000 Total monthly Salary 36000 0 Total monthly Salary per Batch 18. 18 182 OFFICE AND GENERAL EXPENSES Office Expenses per month (Rs. ) 50000 Office Expenses per Batch (Rs. ) 2. 52525 253 ELECTRICITY AND LIGHTING EXPENSES 17 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE Electricity and Lighting expenses per month (Rs. 60000 Electricity and Lighting expenses per Batch (Rs. ) 0. 2525 253 SELLING AND ADMINISTRATIVE OVERHEADS SALARY OF SALESMAN Salary of Salesman per month (Rs. ) 150 00 No. of Salesman 6 Total Salary (Rs. ) 900 00 Total Salary per Batch (Rs. ) 4. 54 545 45 CARRIAGE OUTWARD Cost of Carriage Outward per month(Rs. ) 2 0 0 0 0 0 Cost of Carriage Outward per Batch (Rs. ) 1 0. 1 0 1 0 1 NOTE: Since there are no Distributors, the biscuits are sent directly to the Retailers. 18 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE Transportation of finished goods is outsourced. SELLING AND ADMINISTRATIVE OVERHEADS
Sales Expenses per month (Rs. ) 200 000 Sales Expenses per Batch (Rs. ) 10. 101 01 INNOVATION IN PARLE 19 IES MANAGEMENT COLLEGE AND RESEARCH CENTRE Innovation : Drastic improvement in current process. Kaizen : Small continuous improvements in current process. Maintenance : Activities directed to maintaining current standard. BIBLIOGRAPHY BOOKS AND AUTHORS: Cost Accountancy – Bhabatosh Banerjee Cost Accountancy – Datar / Foster ONLINE RESOURCES: www. parleproducts. com www. google. co. in/search? hl=en=Parle=G=Google+search www. google. co. in/search? hl=en=Parle-G=30=N 20