MANAGERIAL ECONOMICS

ASSIGNMENT
Submitted To: Subodh Pandit Sir

TOPIC:
ANALYSIS OF
MAHINDRA AND MAHINDRA

Submitted By:

Jagrit Batra
About the Company:
Mahindra & Mahindra Limited (M & M) is an
Indian multinational car manufacturing corporation
headquartered in Mumbai, Maharashtra, India. It was
established in 1945 as Muhammad & Mahindra and later
renamed as Mahindra and Mahindra in 1948. It is one of the
largest vehicle manufacturers by production in India and the
largest manufacturer of tractors in the world. It is a part of
the Mahindra Group, an Indian conglomerate. It was ranked
17th on the list of top companies in India by Fortune India
500 in 2018.
Mahindra & Mahindra, brands its products as "Mahindra",
produces SUVs, saloon cars, pickups, lightweight commercial
vehicles, heavyweight commercial vehicles, two wheeled
motorcycles and tractors. It manufactures over 20 models of
cars, including larger, multi-utility vehicles like the Scorpio and
the Bolero. Mahindra maintains business relations with foreign
companies like Renault SA, France.
M&M has a global presence and its products are exported to
several countries. Its global subsidiaries include Mahindra
Europe S.r.l. based in Italy, Mahindra USA Inc., Mahindra South
Africa and Mahindra (China) Tractor Co. Ltd. In 2015, Mahindra
reentered the Philippine market after a brief presence in 1990s.
 COST
TOTAL COST: The term ‘cost’ is most widely used as the
‘money cost’ of production which relates to the money
expenditure of a firm on:
 Wages and salaries paid to the labor.
 Payment incurred on machinery and equipment.
 Payment for materials, power, light, fuel, transportation
etc.
 Payments for rent and insurance.
Cost or Total Cost (TC) is the sum total of Total Fixed Cost (TFC)
and Total Variable Cost (TVC).

FIXED COST: The Total Fixed Costs (TFC) refers to the costs
that remain fixed in the short period. These costs do not
change with change in level of output. The fixed costs occur
even when the production of the organization is Zero. These
costs are also known as supplementary costs, indirect costs,
overhead costs, historical costs and unavoidable costs. The
examples of these costs include rents, interest and salaries.

VARIABLE COST: The Total Variable Cost (TVC) refers to the

costs that change with change in level of output. These costs
are Zero, when the output of the organization is zero. These
costs are also known as prime costs, direct costs, and avoidable
costs. The examples of these costs are costs incurred on
purchasing raw material, hiring labor, and using electricity.
MARGINAL COST: Marginal cost is the additional cost
incurred in the production of one more unit of a good or
service. It is derived from the variable cost of production, given
that fixed costs do not change as output changes, hence no
additional fixed cost is incurred in producing another unit of a
good or service once production has already started.

To find out the cost curves of Mahindra and Mahindra, I went

through its Statement of Profit and Loss for the years 2010 to
2019 and took certain items as shown in the table 1 below to
calculate the TVC, TFC, TC and MC.

( RS. In Crores)
YEAR CONSUMPTION PURCHASE OF EMPLOYEE COSTS DEPRECIATION
OF RAW TRADED GOODS [3] [4]
MATERIALS [1] [2]
2010-11 14708.94 1757.23 1431.52 413.86
2011-12 18804.52 5292.58 1701.78 576.14
2012-13 22376.85 8125.65 1855.63 721.63
2013-14 21630.08 8076.92 2163.72 863.34
2014-15 20272.48 7359.37 2316.93 974.90
2015-16 19364.88 10409.26 2348.72 1068.10
2016-17 20913.11 10893.63 2595.37 1327.16
2017-18 23265.31 10674.47 2840.89 1479.42
2018-19 27095.07 12111.61 2980.22 1860.40

Table 1
On the basis of the data in table 1 the various costs have been
calculated as follows:
TVC= Consumption of Raw Materials + Purchase of Traded
Goods
TFC= Employee Costs + Depreciation expenses
TC= TFC + TVC
MC= Change in TC

The table so obtained is as follows:

(RS. In Crores)
YEAR TOTAL FIXED TOTAL VARIABLE TOTAL COST MARGINAL COST
COST [3+4] COST [1+2] [TFC+TVC] [Change in TC]
2010-11 1845.38 16466.17 18311.55 -
2011-12 2277.92 24097.10 26375.02 8063.47
2012-13 2577.26 30502.50 33079.76 6704.74
2013-14 3027.06 29707.00 32734.06 -345.70
2014-15 3291.83 27631.85 30923.68 -1810.38
2015-16 3416.82 29774.14 33190.96 2267.68
2016-17 3922.53 31806.74 35729.27 2538.31
2017-18 4320.31 33939.78 38260.09 2530.82
2018-19 4840.62 39206.68 44047.30 5787.21
Table 2

On the basis of Table 2 the following Cost Curves are obtained:

 TFC, TVC & TC of M&M
50000
45000
40000
35000
30000
RS in Crores

TFC
25000 TVC
20000 TC

15000
10000
5000
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
YEAR

Fig 1

MC of M&M
10000

8000

6000
RS in Crores

4000

2000

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
-2000

-4000
YEAR

MC

Fig 2
ANALYSIS OF THE COST CURVES:
It can be clearly observed in Fig. 1, that the Total Fixed Cost
(TFC) curve of the company is almost a straight line, whereas
different patterns can be observed for the shape of Total
Variable Cost (TVC) curve and Total Cost (TC) curve.
The Fig. 2 shows that there are steep changes in the shape of
the Marginal Cost (MC) curve of the company. Since the
Marginal cost changes mainly due to change in the Variable
cost of the company, we can conclude that these changes
occurred due to change in production levels of the company,
which in turn is affected by change in the emission standards
set by the Government.
 REVENUE
TOTAL REVENUE: Total revenue (TR) in economics refers to
the total receipts from sales of a given quantity of goods or
services. It is the total income of a business and is calculated by
multiplying the quantity of goods sold by the price of the goods
for example, if Company A produces 100 widgets and sells them
for $50 each, the total revenue would be 100 × $50 = $5,000.

MARGINAL REVENUE: Marginal revenue (MR) is the

additional revenue generated from the sale of an additional
unit of output. In other words, it's the change in total revenue
from the sale of one more unit of a good. For example, if
Company A sold one more widget and their revenue increased
from $5,000 to $5,050, then marginal revenue would be equal
to $50.
The revenue curves of Mahindra and Mahindra from 2010 to
2019 are based on the following data:
(RS in Crores)

YEAR TOTAL REVENUE MARGINAL REVENUE

2010-11 23460.26 -
2011-12 31853.52 8393.26
2012-13 35472.65 3619.13
2013-14 40508.50 5035.85
2014-15 38945.42 -1563.08
2015-16 43638.90 4693.48
2016-17 47096.04 3457.14
2017-18 49444.99 2348.95
2018-19 53614.00 4169.01
On the basis of the above data, the following Revenue curves
are obtained:

TR OF M&M
60000

50000

40000
RS in Crores

30000

20000

10000

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
YEAR

TR

MR OF M&M
10000
8000
6000
Axis Title

4000
2000
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
-2000
-4000
Axis Title

MR

It can be clearly seen that the total revenue of the company

keeps on increasing except in the year 2014-15. However the
TR of company doesn’t increase at a fixed pace as is clear from
the shape of the MR curve.
 PROFIT
Profit has several meanings in economics. At its most basic
level, profit is the reward gained by risk taking entrepreneurs
when the revenue earned from selling a given amount of
output exceeds the total costs of producing that output. This
simple statement is often expressed as the profit identity,
which states that:

Total profits = total revenue (TR) – total costs (TC)

However, the concept of profit needs clarification because
there is no standard definition of what counts as a cost.\

The Profits of Mahindra and Mahindra from the year 2010 to

2019 are as follows:

(RS in Crores)

YEAR PROFITS
2010-11 2662.10
2011-12 2878.89
2012-13 3027.42
2013-14 3758.35
2014-15 3321.11
2015-16 3204.57
2016-17 3955.65
2017-18 4356.01
2018-19 4796.04
On the basis of the above data, the profit curve of M&M is as
follows:

PROFITS OF M&M
6000

5000

4000
RS in Crores

3000

2000

1000

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
YEAR

PROFITS

It is clearly visible from the above table and graph that the
profits of the company are increasing from the year 2010 to
2014. After that the profits earned by the company decline for
two successive years. But the company again acquires pace and
the profits of the company start increasing, and the company
ends achieves the highest profit of the decade in th year 2018-
19.

THANKS