Amul Cost Analysis

Amul is a brand dealing with dairy products under the Gujrat Cooperative Milk
Marketing Federation, which is India’s largest food products marketing organization. It is
a state level apex body of milk cooperatives in Gujrat which aims at providing
remunerative returns to the farmers and also serve the interest of consumers by providing
products which are good value for money.

Amul the age old brand belongs to (GCMMF), Amul means “Priceless in sanskrit”. Amul
is a symbol of providing quality products at reasonable cost, of the genesis of a vast
co=operative network, of the triumph of indegenois technology, of the marketing savvy
of farmer’s organization, And of a proven model for dairy development.

Looking athe ice cream section of Amul we have anaylsed and observed the different
types of cost incurred by Amul which are as follows

Direct Cost

Variable Cost
The cost incurred in the ice cream manufacturing plant of Amul that vary with production
are costs of glucose, flavouring substances, freight, storage, labour because they vary
with the quantity of ice cream produced.

Fixed Cost
The Fixed cost that does not tend to vary with activities include costs of machinery and
factory premises, wages and salaries, electricity, utilities, rent, insurance, equipment
depreciation, advertisement etc.

Product Cost
Amul purchases sugar, machines, essences, dry fruits, labour and manufacturing
overhead and packaging materials,etc.

Period Cost
Costs that can be mapped to specific periods such as rent, salaries, taxes, electricity costs
are called Period Costs.

Opportunity Cost
The potential benefits that Amul has given up when it produces ice cream are utilizing its
resources to other products such as flavoured milk, ghee, cheese, butter and other milk
products.
Sunk Cost
Sunk Costs of Amul are Machinery Cost, Plant Cost, Equipment Cost, Building Cost.

Controllable Cost
Amul’s managers have full control over allocation of budget on some expenditures like
promotion, distribution, social costs, etc.

Uncontrollable Cost
There are some costs on which Amul have no direct control are raw material prices,
electricity charges, tax rates, i.e. Amul cannot control the tax rates fixed by Govt.

Out of Pocket Cost

Costs such as scheduled maintenance expenses, operating costs of boilers and freezers.
This is because Amul does not have a choice to incur these expenses.

Differential Cost
Since its inception, Amul has increased its production tremendously. Hence, the cost of
selling the additional units also increased. The difference between the initial cost of sales
and the current cost of sales can be taken as one of the differential cost.

Marginal Cost
Cost of producing one additional unit of ice cream is called Marginal Cost.

Average Cost
The total cost of all jobs involved in the production of ice cream divided by the total units
of ice cream produced is called the Average Cost.