MANAGEMENT ACCOUNTING PROJECT REPORT ON COST ANALYSIS ON SETUP OF A NEW ATM MACHINE FOR STATE BANK OF INDIA

SUBMITTED TO: Dr Ritesh Srivastava SUBMITTED BY: (SECTION A) Sandeep Yadav Karnika Ghildiyal

ACKNOWLEDMENT
We take this opportunity to express our profound sense of gratitude and respect to all those who helped us throughout this endeavor. We owe our regards to Prof. Dr Ritesh Srivastava, IILM-GSM, Greater Noida, for his cooperation and valuable support and for giving us the opportunity to undertake this project and providing the necessary infrastructure. We would like to express our heartfelt thanks to Minto and Bisender for helping us in various printouts of the project. Our heartiest thanks to Mr. Shailender Girdher, Mr. Ajay Verma and Mr.Pradeep Vats, Mr.Suresh Bansal for their cooperation and help wherever it was required. Last but not the least, we owe our overwhelming gratitude to our families and friends who gave us constant support and motivation to continue with this endeavor.

CONTENTS
Introduction. .. 4

Objectives... 5

Requirements for an ATM business..... 6

Cost sheet.. .8

Analysis of the cost sheet ..10

SWOT Analysis of an ATM business15

INTRODUCTION
As financial technology improves at an everincreasing rate, there is less and less need for individuals to carry large amounts of cash to buy things. In fact, it seems the younger generations have moved to almost entirely electronic transactions where no physical money is ever used. However, in this world of credit and debit cards, there will always be a need for good oldfashioned cash. A smart businessman can make a nice profit supplying cash to those who underestimate the need for it by simply placing and managing automated teller machines (or ATMs). Now, there are reasons why an ATM is considered to be a good business deal. The reasons are:

no inventory to purchase or stock no store front or rental space needed guaranteed, fixed profit on each transaction scalable, i.e., you can start with one machine and expand slowly (or quickly) as you earn your profits

low investment needed to start investment costs are usually returned within 1 year (six months or

OBJECTIVES
To setup a new ATM machine under the small scale industries category To ascertain the various costs that go into starting such a business

To spend within the limit of Rs. 5 crore to 10 crore.

To prepare a cost sheet of all the costs to be incurred To analyze the cost sheet and come to a conclusion regarding the business

REQUIREMENTS FOR AN ATM BUSINESS

Items
ATM (4 Machines) Air Conditioners units) UPS (4 units) Stationery

Cost/Machi ne (Rs.)
4000000 (6 300000 1,60,000 30,000

3 Guards 2,52,000 (Rs.5000/month for 1 guard for day shift + Rs.8000/month/guard for 2 guards for night

shift)

Furnishing (Lighting, 4,50,000 Flooring, Laminates, Signboard, Drop boxes, Brochure holders) Cleaner (Rs.500/month) 6000 Electricity Lighting (10 tube 89,425 lights 10 units/day Rs.2.45/unit for 1 15,27,525 year) 6 Air conditioners 90,520 (225 units/day, Rs.3.1/unit) 4 UPS units/day, Rs.3.1/unit) Security (Rs.50000/month) Annual (20

Van 6,00,000

Maintenance 4,00,000

Contract (ATM) Insurance (Rs.500/day machines) Premium 7,30,000 for 4

Paper roll for account 3,84,000 balance receipts (Rs.8000/month/machi ne) Websites promotion Telephone charges Internet charges 10,00,000 50,000 1,50,000

COST SHEET
Particulars PRIME COST + Work Expenses:Depreciation:Machine (10%) Air conditioner (10%) 4000000 300000 Total Cost ------

UPS (10%) Other expenses:Salary to watchman Furnishing expenses

160000

2520000 4500000

Paper roll for account balance 3840000 receipts(Rs.80000/month/mac hine) Salary to cleaner Electricity charges:6 Air conditioners (225 15,27,525 units/day @ Rs. 3.1/per unit ) 4 UPS (20 units/day Rs.3.1/- per unit) @ 90,520 60000

Lighting (10 Tube lights- 89,425 10units/day @ Rs.2.45/unit) Security (Rs.500000/month) WORKS COST Van 6000000 38454700

+ Office and Administration Expenses:Insurance Premium Telephone charges Internet charges Stationery OFFICE COST 7300000 500000 1500000 300000 48054700

+ Selling & Distribution Expenses:Websites promotion 10000000

Annual Maintenance Contract 100000 Security Van Charges TOTAL COST 6000000 6,50,54,700

+ Profit 12000000 (Rs.3000000/machine) SALES 7,70,54,700

ANALYSIS
With the idea of starting a business of ATM at a place like Jagat Farm, Greater Noida, where the average number of transactions is very high, the proposal prepared by us shows an estimated cost of Rs.6,50,54,700 for 4 ATMs. Whereas, the State Bank of India is providing us with Rs.77054700 on an average to meet our expenses. Therefore, our approximated profit comes out to be Rs.3000000 per ATM.

1. Profit as a % of sales = Profit x 100 Sales = 3000000 x 100 25684900 = 11.6 %

Our expected net profit ratio is 11.6 %. Its above boundary line. Our company will increase its net profit as we cant operate at just BEP (Break even point). The ideal percentage for net profit ratio is 10%. We are currently at safe level of 11.6%. It means that we have demand of our product in market.

Cost-Volume Profit Analysis

2. Profit volume ratio (P/V Ratio) = Sales variable Cost x100 Sales = 77054700-(2520000+ 60000) x 100 77054700 = 96.65%

The difference between sales and marginal cost, i.e. contribution, bears a relation to sales and the ratio of contribution to sales remains constant at all levels, as, the sales and marginal costs vary directly with the number of

units sold or produced. The higher the P/V Ratio better is for company prospects. We have a very high P/V Ratio (96.65%), implying we have better prospects.

3. Breakeven point (in Rs.)= Fixed Cost = P/Ratio 4000000+300000+160000+4500000+384 0000+1527525+90520+89425+7300000+ 500000+1500000+300000+10000000+10 00000+6000000 96.65% = Rs. 58432177.9

BEP is the point at which cost and revenue are equal: one has "broken even". Therefore has not made a profit or a loss. After this level (Rs. 5843217.79) our firm will start earning profit.

4. Margin of Safety (MOS) = Actual Sales Sales at BEP

= Rs.77054700 Rs.58432177.9 = Rs.18622522.1

In break-even analysis, margin of safety is how much output or sales level can fall before a business reaches its break-even point (BEP).Larger the margin of safety, more sound is the position of the business in respect of profit earning. Our MOS is Rs.18622522.1 which is higher from BEP. MOS has a direct relation with profit.

SWOT ANALYSIS OF AN ATM BUSINESS

STRENGTHS
Video on demand

 In-built cameras in ATMs Provides timely access to network resources Supports message traffic of variable length Provides higher transmission speeds Provides self-routing capabilities for multiple traffic types Supports new data communications and telecommunications applications Offers guaranteed network access for voice and video applications Enables users to request a desired level and quality of service Provides protection mechanisms against network congestion conditions

WEAKNESS

Threat of cross border ATM crimes like debit card fraud Skimming and ATM scams, perpetrated in many cases by highly mobile crime syndicates

OPPORTUNITIES
Merchants receive three things when allowing you to place an ATM in their business. One, they will be offering an added convenience to their customers. Two, they will save money on credit card fees due to customers using cash, and three, they will be able to profit from the ATM by receiving a percentage of the surcharge revenue without any of the expenses or liabilities.

THREATS 1. Eavesdropping Eavesdropping refers to the threat that the attacker connects or taps into the transmission media and gain unauthorized access to the data. It is one of the most common attacks to the network. Since most ATM networks are connected with optic cables, some people might get the wrong

impression that is not so easy to tap a ATM network. 2. Spoofing Spoofing attack means that an attacker tries to impersonate another users identity and take advantages. However, since a network will be connected to many untrusted networks via the Internet, it's impossible to prevent a hacker from getting this access permission or even trace the people with this particular access permission. ATM is being implemented in public domain.