Table of Contents

1. Introduction to Poultry Research Institute……………………………………………. 02

1.1. History and Background……………………………………………………………….. 02
1.2. Departments………………………………………………………………………………. 02
1.3 Products and Processes………………………..………………………………………… .. 03
2. Significance…………………………………………………………………………….. ...05
2.1. Objectives…………………………………………………………………………………06
3.1. Breading Farm Costing ..................................................................................................... 06
3.2. Rearing Farm (Rearing of Poultry Units 1-12 weeks) .................................................... 99
3.3. Rearing Farm (Rearing of Poultry Units 1-20 weeks) .................................................... 11
3.4. Costing of Hatchery Unit................................................................................................... 13
4. Key Findings……………………………………………………………………….……….. 15
4.1. Figure 1……………………………………………………………………………………. 15
4.2. figure 2…………………………………………………………………………………….. 16
4.3. Figure 3……………………………………………………………………………………. 17
4.4. Figure 4……………………………………………………………………………………. 18
4.5. Figure 5……………………………………………………………………………………. 18
5. Conclusion……………………………………………………………………………...…… 19
6. Recommendations………………………………………………………………………….. `19

1
1. Introduction to Poultry Research Institute
1.1. History and Background
The Poultry Development Centre, Punjab, Rawalpindi was established in 1975 as Development
Scheme through PC-I (proposed concept) for a period of 120 months i.e. from 1975 to 1985.
However, on successful achievement of prescribed targets during 1975-85, the scheme was
converted into Non-Development phase. Directorate of Poultry Research Institute was made
permanent for continuous support from the Punjab Government in the development of commercial
and rural poultry sector.

This Institute is in the historical and culturally alive city of Rawalpindi. It has played a leading
role in the development of poultry sector in the country. The Institute strives to provide a conducive
environment for undertaking research on various aspects of poultry production. Technical staff
serves all over the Punjab through a network of disease diagnosis, surveillance, control, extension
offices and training centers. Researchers of the Directorate extend and share updated knowledge
with the field staff and poultry farmers. This Institute maintains a close liaison with poultry
producers, poultry breeders, hatcheries, feed milling operation, meat processors and poultry allied
industry to identify problem areas and work for their solution and remedies.

1.2. Departments
1.2.1. Breeding Farms

At breeding form adult birds of different breeds are kept for egg production. Different crosses of
pure breeds have been developed to produce cross bred chicks. These birds are maintained under
strict bio-security measures. Birds are regularly vaccinated and medicated against different
diseases by skilled technical staff. High quality poultry feed is provided for maximum production
and hatchability. Fertile eggs are collected and supplied to hatchery for production of day-old
chicks. Every breeding farm is being supervised by a veterinary doctor.

2
1.2.2. Hatching Facility (incubators and hatcher machines)
• Incubators: Incubators are a part of hatchery. Graded hatching eggs are kept in these machines
in specific trays for 18 days. Specific temperature and humidity are maintained during this
period. Eggs are turned automatically after every 1-3 hours.

Hatcher Machines: After 18 days, the eggs are transferred from the incubator to the hatcher
baskets where eggs are in free rolling condition, ready to hatch. After 3 days, chicks are pulled out
of the hatching baskets and are then graded. Female chicks are packed in plastic crates having 100
chicks in each crate and transported to rearing farms present in 9 different districts of Punjab. The
male chicks are sold to private poultry farmers who reared them for meat purpose. Chicks are
vaccinated against Marek’s disease in the hatchery. All this process is being carried out under strict
bio-security measures. Eggs before setting in the incubators are fumigated to prevent the transfer
of disease germs.

1.2.3. Rearing Farms

Day old chicks from hatchery are supplied to rearing farms located at different districts of Punjab.
Chicks are reared up to 80-90 days. Every farm has brooding rooms and rearing sheds. Day old
chicks are kept in brooding rooms for 4-6 weeks depending on the seasonal conditions. Specific
temperature, humidity and ventilation is maintained for their proper growth. After 4-6 weeks these
chicks are transferred to poultry sheds. Chicks are vaccinated against different diseases as per
vaccination schedule for each flock. Birds are also medicated to avoid any disease problem and
treated when there is any disease outbreak. High quality feed is provided for maximum growth.

1.3. Products and Processes

1.3.1. Products

Products offered by the institute are:

1. Chickens (both Pure breed and Mixed breed)

▪ RIR
▪ Fayoumi
▪ Black Australorp

3
 ▪ Naked Neck
▪ FIRI
▪ RIFI
▪ FB
▪ FN
2. Chicks
3. Eggs
1.3.2. Processes

There are two areas:

• Hatchery (clean area)

• Shed/Farm (dirty area)
➢ Hatchery
1. Eggs Storage Room
▪ Hatching eggs are received from breeding farm in the eggs storage room where
temperature is kept at 16-18°𝐶.
▪ Hatching eggs are then selected and cleaned for breeding. The eggs that weigh less
than 35g are discarded and those that weigh more than 35g are selected for breeding.
▪ Selected eggs are then set into trays and trays are shifted into trolleys for storage.
2. Setter Machine
▪ Eggs are placed into the setter machines where the process goes on for 18 days. Here
fumigation is done.
▪ There are total of 3 incubators that have a capacity of 17107 eggs with 130 trays in
them and they are maintained at a temperature of 37.5°𝐶. There are heaters, fans and
cooling systems to maintain this temperature.
3. Candler
▪ After getting eggs out of the setter, they are placed over a candling tray with 132
lights in it. The eggs under which the light turns on, are fertile and the other ones are
infertile that are discarded.

4
4. Hatcher
▪ Fertile eggs are shifted flock wise into hatcher machines. There are total of 3 hatchers
with the capacity of 5676. Control panels and humidity alarms are installed for setters
and hatchers to maintain the proper temperature.
▪ Hatchery operations are continuously monitored via CCTV cameras.
5. After the chicks come out of the egg, male and female chicks are separated into chick boxes.
6. Day old chicks are counted, vaccinated, weighed, packed and delivered to poultry farm as per
schedule.
7. Hatchery is sprayed, and the waste is disposed of.

2. Significance
Correct estimation and application of costs plays a very important role in any organization. Cost
accounting helps the managers to track, record and analyze the cost structure of an organization.
It helps the companies to understand the costs they are dealing with as well as where these costs
occur and who bears them. We’re conducting the cost analysis of Poultry Development Institute
to understand and analyze what costs are being incurred in the company, how they are incurred
and what should be done in order to help the company to identify cost discrepancies. The main
purpose is to know the methods by which expenditure on materials, labor and overheads is
recorded, classified and allocated so that the cost of products and services may be accurately
determined.

2.1. Objectives
• To understand and examine the costing techniques which Poultry Development Institute is
currently using.
• To identify the gap between the company’s current costing methods and standard costing
methods.
• To identify possible inefficiencies in the current costing techniques and suggest necessary
improvements to control costs.
• To develop a proper cost structure for Poultry Development Institute, involving a cost
breakdown for each department (Breeding, Hatching and Rearing) which will help the

5
 management to identify cost inefficiencies, eliminate the wrong methods to accumulate
costs so that the costs of the products can be ascertained.
• To recommend changes in the current cost structure and implement process costing method
to identify cost inefficiencies.

3. Costing for Each Department

3.1. Breading Farm Costing

A. Capital Investment

1. Land
It is assumed that land is available

2. Building

5 shed measuring 80x25 feet 25,00,000

each=10000sqft.@ Rs.250/-sqft.
One Feed Store measuring 20x10feet 1,00,000
=200sqft. @ Rs.500/-sqft
One labor room/egg store measuring 60,000
10x10feet=100sqft. @ Rs.600/-sqft
One office measuring 10x10feet=100sqft. @ 60,000
Rs.600/-sqft
Total 27,20,000

3. Equipment

200 round feeders (1 for 25 hens) @ 30,000

Rs.150/each
50 automatic drinkers (1 for 100 hens) @ 22,500
Rs.450/each
4 buckets for feed @ Rs.700/each 2800
2 wheel barrow @ Rs.2300/each 4,600
1 spray pump @ Rs.5000/each 5,000

6
 80 laying nest (16 for 1000 hens) @ 2,00,000
Rs.2500/each
300 egg trays (plastic) @ Rs.50/each 15,000
66 sarkanda chicks @ Rs.400/each 26,400
Miscellaneous expenditure (transport cost, 10,000
telephone cost etc.)
Total 316300

Grand Total (2+3) 30,36,300

B. (a) LAYING EXPENDITURE 21-72 Weeks (1 year) (5% Rearing Mortality)

Cost of 5000 birds @ 300 per bird 1500000

Cost of feed 36kg/bird for 5000 birds @ 7560000
Rs.42/kg
Cost of vaccination & medication @ Rs.15/ 75000
birds
Labor charges @ Rs.18000/each/month(5 1,080,000
person)
Electricity & fuel consumption charges @ 1,20,000
Rs.10000/month
Cost of litter 10,000
Miscellaneous expenditure (transport cost, 10,000
telephone cost etc.)
Total 10355000

(b) Depreciation
On building @ 5% annual 1,36,000
On equipment @ 20% annual 63260
Total 199260
Grand Total (a+b) 10554260

(c) Return
Sale of 20 dozen eggs / bird for 5000 birds @ 9600000
Rs.96/dozen
Sale of 4750 spent hens weighing 1.6 kg each 912000
@ Rs.120/kg
Sale of 3600 empty bags @ Rs.10/bag 36,000
Sale of poultry manure 10000
Total 10558000

7
(d) Cost of Eggs
(Total Expenditures – Return other than eggs) / No. of dozen of eggs = 10554260 –
958000 =9596260/100000 = 95.96/ dozen

8
3.2. Rearing Farm (Rearing of Poultry Units 1-12 weeks)
A. Capital Investment
1. Land

It is assumed that land is available

2. Building

5 shed measuring 80x25 feet 25,00,000

each=10000sqft.@ Rs.250/-sqft.
One Feed Store measuring 20x10feet 1,00,000
=200sqft. @ Rs.500/-sqft
One labor room/egg store measuring 60,000
10x10feet=100sqft. @ Rs.600/-sqft
One office measuring 10x10feet=100sqft. @ 60,000
Rs.600/-sqft
Total 27,20,000

3. Equipment

12 electric /gas @ Rs.750/each 9,000

60 chick guard sheets @ Rs.200/each 12,000
240 chick feeders / trays @ Rs.80/each 19,200
240 drinkers(small) @ Rs. 85/each 20,400
240 round feeders @ Rs.150/each 36,000
72 automatic drinkers @ Rs.450/each 32,400
4 buckets @ Rs.700/each 2800
2-wheel barrow @ Rs.2300/each 4,600
1 electric water pump @ Rs.7500/each 7,500
1 spray pump @ Rs.5000/each 5,000
66 sarkanda chicks @ Rs.400/each 26,400
Miscellaneous expenditure 10,000
Total 1,84,300
Grand Total (2+3) 29,04,300

9
4. Expenditures

a. Rearing Expenditure

Cost of 12750-day-old chicks @ Rs.15/each 1, 91,250

Cost of feed 3.22 kg / bird for 7200 birds for 9,73,728
12 weeks @ Rs.42/kg
Cost of feed 1.7 kg / bird for 4800 birds for 8 3,42,720
weeks @ Rs.42/kg
Cost of vaccination & medication of 12000 2,16,000
birds @ Rs.18/bird
Labor charges @ Rs.18000/each /month (4 216,000
person for 3 months)
Electricity & fuel consumption charges @ 30,000
Rs.10000/ month
Cost of litter 10,000
Miscellaneous expenditure 10,000
Total 19,89,698

b. Depreciation

On building @ 5% annual (3 months) 34,000

On equipment @ 20 % annual (3 months) 9,215
Total 43,215
Grand Total (a+b) 20,32,913

c. Return

Sale of 4800 male birds @ Rs.105/ bird 504000

Sale of 595 empty bags @ Rs.10/ bag 5,950
Sale of poultry manure 10000
Total 5,19,950

d. Cost of per bird

Total Expenditures – Return = 20, 32, 913 – 5, 19, 950 =15,12, 963/ 7200= Rs. 210/ bird

10
3.3. Rearing Farm (Rearing of Poultry Units 1-20 weeks)

A. Capital Investment
1. Land
It is assumed that land is available

2. Building

5 shed measuring 80x25 feet 25,00,000

each=10000sqft.@ Rs.250/-sqft.
One Feed Store measuring 20x10feet 1,00,000
=200sqft. @ Rs.500/-sqft
One labor room/egg store measuring 60,000
10x10feet=100sqft. @ Rs.600/-sqft
One office measuring 10x10feet=100sqft. @ 60,000
Rs.600/-sqft
Total 27,20,000

3. Equipment

12 electric /gas @ Rs.750/each 9,000

60 chick guard sheets @ Rs.200/each 12,000
240 chick feeders / trays @ Rs.80/each 19,200
240 drinkers(small) @ Rs. 85/each 20,400
240 round feeders @ Rs.150/each 36,000
72 automatic drinkers @ Rs.450/each 32,400
4 buckets @ Rs.700/each 2800
2-wheel barrow @ Rs.2300/each 4,600
1 electric water pump @ Rs.7500/each 7,500
1 spray pump @ Rs.5000/each 5,000
66 sarkanda chicks @ Rs.400/each 26,400
Miscellaneous expenditure 10,000
Total 1,84,300
Grand Total (2+3) 29,04,300

11
4. Expenditures

a. Rearing Expenditure

Cost of 12750-day-old chicks @ Rs.15/each 1, 91,250

Cost of feed 6.95 kg / bird for 7200 birds for 21,01,680
20 weeks @ Rs.42/kg
Cost of feed 1.7 kg / bird for 4800 birds for 8 3,42,720
weeks @ Rs.42/kg
Cost of vaccination & medication of 12000 2, 40, 000
birds @ Rs.20/bird
Labor charges @ Rs.18000/each /month (4 360000
person for 5 months)
Electricity & fuel consumption charges @ 50,000
Rs.10000/ month
Cost of litter 10,000
Miscellaneous expenditure 10,000
Total 33,05,650

b. Depreciation

On building @ 5% annual (5 months) 56,667

On equipment @ 20 % annual (5 months) 15,358
Total 72,025
Grand Total (a+b) 33, 78, 675

c. Return

Sale of 4800 male birds @ Rs.105/ dozen 5, 04, 000

Sale of 1171 empty bags @ Rs.10/ bag 11, 710
Sale of poultry manure 15, 000
Total 5, 30, 710

d. Cost of per bird

Total Expenditures – Return = 3378675 – 530710 = 28, 47, 965/ 7200=Rs. 395/ bird

12
3.4. Costing of Hatchery Unit

A. Capital Investment
1. Land

5. Land
It is assumed that land is available

2. Building

Hatchery room measuring 50x40 feet 10,00,000

each=20000sqft.@ Rs.500/-sqft
Egg receiving and store room measuring 1,00,000
20x10feet =200sqft. @ Rs.500/-sqft
Chicks grading, packing/ holding room 4,00,000
measuring 20x40 sqft 2 Rs. 500/- sqft
Staff room measuring 12x12feet=144sqft. @ 72,000
Rs.500/-sqft.
Office measuring 12x12feet=100sqft. @ 72,000
Rs.500/-sqft
Total 16,44,000

B. Machinery

3 Incubators capacity 17000 eggs each and 3 1, 80, 00, 000

hatchers capacity 5670 eggs each along with
all accessories.
2 Air conditioners 1, 40, 000
One generator 40 KVA 19, 00, 000
Total 1,81,40,000
Grand Total (2+3) 2, 00, 40, 000

C. Expenditures

a. Running Expenditures

Cost of 68000 hatching eggs (17000*4) @ 5, 44, 000

Rs.8/ egg
Labor charges @ Rs.18000/each /month (4 72,000
person for 1 month)

13
 Electricity & fuel consumption charges @ 55,000
Rs.55000/ month
Repair & Maintenance of machinery 10000
Total 6,81,000

b. Depreciation

On building & machinery @ 5% annual (1 83, 500

month)
Total 83, 500
Grand Total (a+b) 7, 64, 500

c. Cost of chick

Total Expenditures / Total No. of chicks hatched in one month = 7, 64, 500/ 51000= Rs.
15/ chick

14
4. Key Findings
4.1. Breeding Farms

Figure 1

15
4.2. Rearing Farms (1-12 Weeks)

Figure 2

16
4.3. Rearing Farms (1-20 Weeks)

Figure 3

17
4.4. Hatchery Unit

Figure 4

4.5. Equivalent Units

Figure 5

18
5. Conclusion

The organization of study for this project, The Poultry Development Centre, is a purely
government-run organization. Thus, it is devoid of any technologically advanced machinery or
equipment, except basic computer systems. Moreover, it operates on a relatively small scale, and
not on a bigger commercial space, which once again limits their scope of operations. Thus, it is a
relatively old school organization, and majority of their documentation and operations are
manual in nature, including their costing method. They do not use a proper sophisticated costing
method like ABC Costing or Process Costing, rather rely on basic human calculations to keep
track of their expenses. Furthermore, their costing does not have a separate record system for any
of the various processes that are a part of their operations, rather an overall forecasting is carried
out for future costing needs and these estimates are carried forward until the actual costs are
incurred.

Keeping in view the above listed circumstances, we have applied the Process Costing method for
the institute, which we deemed as most appropriate as per their needs and processes. Hence, we
carried out the costing of the Rearing, Breeding and Hatching Departments separately. This had
been leading to costing miscalculations and faulty perceptions of key expense areas. In this
methodology, we calculated the Equivalent Units of the different processes of the departments.
By the application of Process Costing, there is much more visibility in the process expenses now,
and it is opening avenues for cost-saving methods in the future as well.

6. Recommendations:

We would like to recommend them to adopt a proper Process Costing method, as described and
shown above. This can be done using sophisticated a Cost Accounting software for even on a basic
level using Microsoft Excel. It will help them combat losses that they are incurring and help carry
out pricing of their products and services accordingly as well.

19
20