You are on page 1of 17

Pani Puri stall

M.Sabari Ayyappan(87)
Swathi Manjunath(108)
Tanveer Khan(110)
Varsha Kumar(112)
Costs Involved
Cost incurred are broadly classified in to direct cost and indirect cost
•Direct cost – directly attributed to production
•Indirect cost – incurred in the course, but cannot be directly attributed to
In this business venture –
•Direct cost – Oil peas, onions, puris, tomatoes, Samosas, coriander, green
chillies, sev tamarind, chutneys(sauces), coconut salt, fuel, spices and
transport(freight) – Rs 486(per 100 plates).
•Indirect cost – Rent, electricity, anti rodent poison cakes, drinking water etc
(Rs 39 per 100 plates)
Cost also divided in to Fixed cost and variable cost
Cost that has to be incurred for the mere sustenance of the business irrespective
of the volume of business or trade is called – Fixed cost.
Rent paid, electricity charges are fixed cost no matter how the sales are in that
particular period.
Cost that depends heavily on the quantity of production or volume of the
business – Variable cost.
Oil peas, onions, puris, tomatoes, Samosas, coriander, green chillies etc are
dirteclty proprtional to the volume of the business i.e the number plates made
and sold
Varying cost – mutual relation between volume and variable cost – volume can
alter it & it can alter volume
In this case it can also depend on the process undertaken – Different dishes
produced i.e Sev Puri, pani puri etc
Break-Even Analysis

Study of interrelationships among a

firm’s sales, costs, and operating
profit at various levels of output

Break-even point (BEP) is the

point at which cost or expenses and
revenue are equal: there is no net
loss or gain, and one has "broken
In the linear Cost-Volume-Profit Analysis model, the break-even point (in
terms of Unit Sales (X)) can be directly computed in terms of Total Revenue (TR)
and Total Costs (TC) as:

TFC is Total Fixed Costs, P is Unit Sale Price, and V is Unit Variable
The quantity (P-V) is of interest in its own right, and is called the Unit
Contribution Margin (C). It is the marginal profit per unit, or alternatively the
portion of each sale that contributes to Fixed Costs.
Graphical method: We first draw the
total cost curve (TC in the diagram),
the fixed cost curve (FC) and finally the
various total revenue lines (R1, R2, and
R3) which is the total revenue received
at each output level, given the price
you will be charging.
The break even points (A,B,C) are the
points of intersection between the total
cost curve (TC) and a total revenue
curve (R1, R2, or R3). The break even
quantity at each selling price can be
read off the horizontal axis and the
break even price at each selling price
can be read off the vertical axis.
Cost Sheet of a Chat stall per da
per 100plates FactoryOverheads
rent - Rs 2000/pm(for ashop 10hours and 5hours for the pani puri2

Electricity - 200/pm(same 10,5hours as above)

Direct materials: Factory cost 2

Cost of production/ cost of sales 511

fuel (1kg/30days/rs300)
Profit 489
sales 1000
=3kgs a month =rs 900/30
IN 48.94

big =0.56 kgs/day *rs 700 per14kg cylind

BE analysis in the chosen Pani Puri Stall

SP is Rs 10
Component Rs
Sales 1000
Variable cost 486
Contribution 514
Com ponent
Case2: SPisRs8d cost
Total Cost
Component Rs Rs
Sales 800 61
Variable cost 48
Vratio 37
Contribution 31
Esales 24
Case 3: SPisRs12
Component Rs
Sales 1200
Variable cost 486
Contribution 714
Fixed cost 24
Stock control
Reorder level: This is the level at which storekeeper initiates purchase
requisition for fresh supplies of material.
Minimum level: This represents a level which the stock will reach with
fresh delivery of material provided the fresh delivery is made within the
reorder period and usage remains normal during the period. Stock is not
allowed to fall below this level. It is known as buffer stock.
Maximum level: This represents the stock level above which the stock
should not be allowed to rise. It is computed as reorder level plus reorder
quantity minus minimum consumption during reorder period.
Stock turnover and average stock-holding: Stock turnover ratio for a
period is calculated as follows:
Stock turnover ratio=cost of materials used divided by average stock of material
held during that period
Average stock holding is obtained by:-
1) averaging opening and closing stocks.
2) averaging minimum and maximum levels of stock.
3) minimum stock plus half of reorder quantity.
Reorder quantity: this refers to the quantity to be covered in a single
purchase order.
Carrying cost and ordering cost: cost of carrying includes rent, insurance
and other cost of storage, interest on capital blocked, losses and pilferage, risk of
obsolescence, etc. Cost of ordering consists of the cost of placing an order,
setting up of production-run, transportation and receiving cost. Carrying cost is
fixed while ordering cost is variable.
Economic order quantity (EOQ): EOQ is the quantity fixed at a point
where total cost of ordering and the cost of carrying the inventory will be
Inventory calculation
Economic Order Quantity

EOQ = sqrt ((2*4900*10)/0.23*6)

= 266 units of puri = 3 packets

Reorder Level
Reorder Level = Maximum Consumption * Max lead time
= 1050 * 2 days
= 2100
Minimum Level

Minimum level = Reorder level – Normal Consumption * Normal Lead time

= 2100 – 700 * 1
= 1400

Maximum Level

Maximum level = Reorder Level + Reorder Quantity – Minimum


Maximum level = 2100 +2100 – 350

= 3850
Waste and Scrap
Waste is defined as discarded substances having no value. It is that part of
material which is either lost, shrinks or evaporate in the manufacturing
process and hence, invisible, or a residue which is visible but having
measurable recovery value.
Accounting: Good units should absorb the cost of waste. However, if any
value is realized, the process account concerned may be credited.
Scrap is defined as discarded material from manufacturing operations that
has measurable but relatively value. They are usually disposed of without
further treatment. They may be reintroduced into the production process in
place of raw material, such as, scraps in metallurgical industries.
Pani Puri Wastage
•Readymade puris get crushed due to various reasons.
•For every 60 plates of panipuri, 16 rupees worth of puri get crushed.
•Around 13.5 rupees worth of crushed puris get used as sev.
•crushed puris worth 2.5 rupees/100 plates will be lost.
•Since the cost of crushed puri lost cannot be identifiable with any process, this
will added to either overheads or material cost respectively.