Costing Assignment 3

On

Laxmi Soap Factory

Submitted to

Prof. Govind Shinde

Submitted by

Name: Sanket Deepak Aiya

MMS- 1st year Sem II

Division: B

Roll No: 60
 Index

S. R. No Topic

1 Objective of Study

2 Company Profile

3 Products

4 Data Analysis & Cost Sheet

5 Findings

6 Suggestions

7 Conclusion
Objective of Study

The following are the main objectives to be that are assessed and brought into consideration
in assessing the cost structure of the company.

1. To assess the cost structure of the company.

2. To know how the company is performing in the long run.

3. To determine the exact profit structure of the company and know how it maintains the
stock and other working capital requirements.
 Company Profile:

Laxmi Soap Factory was established in the year 1959. But for the Ranglani family, the roots
of soap manufacturing are traceable to the year 1921. Sheth Thakurdas Ranglani was based in
Karachi when he initially started a soap-manufacturing unit . After partition, Thakurdas
migrated to India and started a manufacturing unit in the year 1948.

Having worked hard, Sheth Thakurdas looked around and fixed his site in Pune and as a
result Laxmi Soap Factory was setup in the year 1959. Sheth Thakurdas passed away in 1981
but the company still continues to flourish. To establish themselves in the competitive local
market, it was necessary to introduce a product which would speak for its own quality. A
number of experiments were conducted by Shri Ramchand Thakurdas Ranglani and the
fruitful outcome was "Foaran". This brand was introduced to the consumers in 1973.

This partnership firm under the guidance of Mr. Girish Ranglani, Mrs.K. Ranglani and Shri
Ramchand T. Ranglani have managed to conquer a segment of the market in Maharashtra,
Gujarat and Karnataka and exports to 42 Countries namely Malaysia, Dubai, Somalia,
Angola, Tunisia, Abidjan, Burkina Faso, Panama, United Kingdom, New york(USA), Fiji,
Ecuador (Latin America), Loma, Congo. Laxmi Soap Factory operates on the principle of
appointing stockists agents in all towns and cities. The policy is to aim at smaller profit and
larger turnover. Retail outlets and Door to Door selling methods are not used. Though sales
staff is employed to supervise, book orders and conduct promotion campaigns.

The company manufactures Laundry Detergent, Detergent Cake, Detergent Powder / Dish
Scouring bar and Toilet Soap / Laundry Soap / Multipurpose Soap and Essance Sticks
(Agarbatti) also have their own Sulfonation plant. The company intends to go in for the
manufacture of toilet soaps. As Mr.Girish puts it, "Ambitious plans are on the anvil inspite of
stiff competition from all types of manufacturers, big and small."
Products

To cater to the high demanding market we have worked towards producing a number
chemicals for cleaning. The chemicals are specially formulated to give the most effective
results. Following are the products:

- Detergent Powder

- Toilet Soap

- Detergent Cake

- Laundry Soap

- Multi Purpose Soap

- Dish Scouring

- Bar Ramas Detergent Cake

- Abhirup Essence Stick (Agarbatti)

Infrastructure

We have been a renowned industry and from the start have aimed at producing better
products everyday. The success to our dynamic specialized team who put in all the effort to
achieve a better quality. Our technical lab provides proper work facilities, to make the
products of world class standards. The latest science techniques are utilized to formulate our
products for effective use. Different blending machines are used for the betterment of our
products.

Team

Our industry has its own specialized team of lab technicians to manufacture all our products.
The quality procedure involved in formulating various compositions are effective. The team
has knowledge in all kinds to help produce products which are environmental friendly.

Quality

We produce good quality products. The products have been specially formulated to give the
desired results. Our quality is tested by special technicians to avoid any shortcomings, and the
product can be used to maximum efficiency. Not only this all products are eco-friendly and
biodegradable and pose no threat to environment.

Packaging
For packed convenience of clients we have packaging facilities for easy transport and
delivery of products. The products are sealed properly to avoid any leakage thus ensuring the
safety of products.

Research Development

Our team of research associates is continuously involved in improving and developing the
products. They are continuously researching to formulate all our products. Latest researchers
are used to improve the products. Organized testing of the chemicals is conducted before the
final product reaches the cleaning agents. The chemicals are tested for its biodegradability to
avoid hazards.

Clientele

We aim at giving our customers the satisfaction of associating with the best in the industry.
We supply a wide range of clients with our products. Our clients lists include various houses,
industries, hotels and motels.

Why Us?

Our company has been a reliable source producing different household products. The reason
for us being appreciated in the market are:

- Innovative and quality products

- International standards quality
- Relevant industry experience to produce good quality products
 Cost Sheet of Laxmi Soap Factory with Assumptions

Units FY 10 FY 11 FY 12

Cost Assumptions
Raw Material Volume Req

Acid Ml 105 105 105

Speciality chemicals Ml 10 10 10

Ordinary chemicals Ml 5 5 5

Perfumes Ml 10 10 10
Raw Material Price

Acid paise/ ml 7.7 8.8 9.2

Inflation % 14.3% 4.5%

Speciality chemicals paise/ ml 3.7 4.5 5.0

Inflation % 21.6% 11.1%

Ordinary chemicals paise/ ml 1.7 2.5 2.8

Inflation % 47.1% 12.0%

Perfumes paise/ ml 5.8 6.5 7.0

Inflation % 12.1% 7.7%
Packaging Cost

Soaps INR/ unit 1.0 1.1 1.2

Inflation % 10% 9%
Headcount

Manufacturing # 9 10 12

Marketing professionals # 2 2 3

Corporate employees # 1 1 1
Average Monthly Salary
INR/
Manufacturing month 10,000 10,000 10,500
INR/
Marketing professionals month 15,000 15,000 15,750
INR/
Corporate employees month 16,000 16,000 16,800
% Hike 0.00% 5.00%
Bonus (% of Salary) 10.0% 12.0% 12.0%

Power Cost INR 65,000 80,000 100,000

% Inflation 23.1% 25.0%

Packaging Cost INR/ unit 1.0 1.1 1.2

% Inflation
Ads as % of Sales % 5.0% 8.4% 7.2%
 Ads Cost INR 298,368 655,367 689,355
Commissions as % of Sales % 5.0% 5.0% 5.0%

Commisions INR 300,000 388,125 480,000

Maintenance as % of Sales % 0.2% 0.2% 0.2%

Maintenance Cost INR 14,918 17,583 18,272

Insurance Premium INR 65,000 65,000 65,000

Revenue Assumptions
Sales INR/
Price packet 32 36 40
Inflation % 12.5% 11.1%

Sales Volume packets 187,500 215,625 240,000

Growth % 15.0% 11.3%
Revenue & Cost Build-up of Laxmi Soap Factory Soap:-

Units FY 10 Fy 11 FY 12
Revenue Build-UP
INR/
Sales Price packet 32 36 40

Sales Volume packets 187,500 215,625 240,000

INR
Sales Revenue lakhs 60 78 96
Total
Cost Build-Up
Raw Material Prices
paise/
Acid ml 8 9 9
paise/
Speciality chemicals ml 4 5 5
paise/
Ordinary chemicals ml 2 3 3
paise/
Perfumes ml 6 7 7
Raw Material Volumes
Acid litres 19688 22641 25200
Speciality chemicals litres 694 970 1200
Ordinary chemicals litres 319 539 672
Perfumes litres 1088 1402 1680
Raw Material Cost
INR
Acid Lakh 15.16 19.92 23.18
INR
Speciality chemicals Lakh 0.26 0.44 0.60
INR
Ordinary chemicals Lakh 0.05 0.13 0.19
INR
Perfumes Lakh 0.63 0.91 1.18
INR
Total Lakh 16.10 21.41 25.15

Headcount
Manufacturing 9 10 12
Marketing professionals 2 2 3
Corporate employees 1 1 1

Average Monthly Salary

INR/
Manufacturing month 10000 10000 10500
INR/
Marketing professionals month 15000 15000 15750
INR/
Corporate employees month 16000 16000 16800
 Bonus on Salary (% of Salary) 10% 12% 12%
Employee Cost
Manufacturing 11.9 13.4 16.9
Marketing professionals 4.0 4.0 6.4
Corporate employees 2.1 2.2 2.3
Total 18.0 19.6 25.5

INR
Power Cost Lakh 0.65 0.8 1

Packaging Cost 1.875 2.371875 2.88

Advertising Costs 2.98 6.55 6.89

Commissions 3 3.88 4.80

Maintenance Costs 0.149 0.176 0.183

Insurance Premium 0.65 0.65 0.65

Total Costs 43.361 55.461 67.097

Cost Sheet of Laxmi Soap Factory:-

Particulars FY 10 FY 11 FY 12
Direct Material
Acid 15.16 19.92 23.18
Speciality chemicals 0.26 0.44 0.60
Ordinary chemicals 0.05 0.13 0.19
Perfumes 0.63 0.91 1.18
Total 16.10 21.41 25.15
Direct Labor 11.88 13.44 16.93
Direct Expenses (Packaging) 1.88 2.37 2.88
Prime Cost 29.86 37.22 44.96
Production Overheads
Power 0.65 0.8 1
Maintenance 0.149 0.176 0.183
Factory Cost 30.66 38.19 46.15
Findings

- The company is maintaining an optimum price level i.e. Rs. 32 and which is feasible
for a local customer to afford the soap.

- Also the sales volume that is generated 240,000 by the company is meeting the
demands of the customer and there is no too much WIP, as maintaining optimum
stock levels.

- The company is adding an adequate expenditure on the packaging as well as on the

maintenance of the machinery, though that is adding up the cost but at the same time
it is bringing out the quality product in the long run with generating returns of 15%.

- The packaging cost of the company is low so as to keep the customers with the
company and generate high profit as it is generating profit of 15% on each unit.

- The company is expecting increase in selling price of 12.5% on its product as to

sustain in the long run.

Suggestions

The expenditure incurred by company on the research and development should be improvised
and used at the maximum point to bring in more quality in the product.

As the company is performing well on the all the levels be it employee incentives or the
benefits for the customer, it is doing good justice to all the factors of production.
Conclusion

The firm since a very long period is in this business and hence is very well aware of
its competitors pricing and thus maintains optimum cost and selling price to sustain in the
business. Thus we can say that the company is performing better and can sustain in the long
run, by meeting its objectives as well as serving better to society.