Financial and Management Accounting

Group Field Project Report

Company Name: STAR POLY PVT LTD.

Location: Khandwa

Type of Business: Manufacturing

Activity of Business Deals: Manufacture of Plastic products

Introduction:
STAR Poly Pvt Ltd is a company based in Khandwa, Madya Pradesh. The company was
incorporated on 22nd November 2020. The company deals in the manufacturing of plastic and
rubber products. The company was born just a few years back, therefore it has an authorized
capital of Rs. 10,00,000 and a paid-up capital of Rs. 1,25,000 only. Directors of STAR Poly
Private Limited are Tapan Dongre, Siddharth Jain, and Manojkumar Manakchand Mittal.
Other than the directors, there are around 10-12 employees that run the manufacturing
activities of the company.

One of the major aims of the company is to carry out manufacturing without harming the
environment in terms of pollution. It has emission standards set, that it does not violate.
Although the company is in its initial stage, it has started to set an example for other big
manufacturing industries with respect to protecting the environment.

Cost Sheet – Statement of cost and profit (for the year 2021)

Cost Sheet
Production Capacity - Annual Cost
324000 units sheet Breakup
Utilization - 75% Actual Production 2,43,00
 in units 0
In Total
Particulars Sales/Cost in Rs per kg Rs
% of
Total
Fabric Woven Bags Total Total Sales
Direct Materials consumed:
1) RIL (H030SG) - Raw 3,74,22,00
Material 77.0 77.0 154.0 0 59%
2) Calcium Carbonate
(Caco3) - Raw Material 14.0 14.0 28.0 68,04,000 11%
Labour 5.0 5.5 10.5 25,51,500 4%
Power 7.0 7.0 14.0 34,02,000 5%
Normal loss 1.0 1.0 2.0 4,86,000 1%
Prime Cost 5,06,65,50
104 104.5 208.5 0 79.6%

Maintenance 3,88,800 1%
Miscellaneous 6,07,500 1%
Works Cost 5,16,61,80
0 81%
Depreciation 24,30,000 4%
Cost of Goods Sold 5,40,91,80
0 85%
Sales 6,36,66,00
130 132 262 0 100%
Profit 95,74,200 15%

Cost Classification:

The cost has been classified in relation to per kg of fabric and woven bags manufactured
 Actual Production - 2,43,000 units
Sales/Cost in
Sales/Cost per kg Total
Woven
Fabric Total
Bags Total
Sales 130 132 262 6,36,66,000
Variable cost:
1) RIL (H030SG) 77 77 154 3,74,22,000
2) Calcium Carbonate
(Caco3) 14 14 28 68,04,000
Labour 5 5.5 10.5 25,51,500
Power 7 7 14 34,02,000
Normal loss 1 1 2 4,86,000
Total Variable Cost 104 104.5 208.5 5,06,65,500
Contribution 26 27.5 53.5 1,30,00,500

Fixed Cost:
Maintenance 3,88,800
Miscellaneous 6,07,500
Depreciation 24,30,000
Total Fixed Cost 34,26,300
Net Income 95,74,200

Actual Production - 2,43,000 units

Cost per kg Sales/Cost in Total
Woven
Fabric Bags Total Total Cost
Direct Expenses:
RIL (H030SG) 77 77 154 3,74,22,000
Calcium Carbonate
(Caco3) 14 14 28 68,04,000
Labour 5 5.5 10.5 25,51,500
Power 7 7 14 34,02,000
Normal loss 1 1 2 4,86,000
Total Direct Expenses 104 104.5 208.5 5,06,65,500
Indirect Expenses
Maintenance 3,88,800
Miscellaneous 6,07,500
Depreciation 24,30,000
Total Indirect
Expenses 34,26,300

Break Even Point Analysis

 Break Even Point (units)

Total Fixed Cost ₹ 34,26,300

Contribution per unit ₹ 53.50
Break Even Point (units)
= Total Fixed Cost / Contribution per unit
64,04
3
Break Even Point (Sales Rs)
Total Fixed Cost ₹ 34,26,300.00
Price Volume Ratio 20.42%
Break Even Point = Total Fixed Cost / PV Ratio
₹ 1,67,79,264

Break Even Point Analysis:

A break-even point analysis is used to determine the number of units or dollars of revenue
needed to cover total costs.

Components:

1) Fixed Costs: Costs that do not change with varying level of output
2) Sales Price per Unit is the selling price (unit selling price) per unit.
3) Variable Cost per Unit is the variable costs incurred to create a unit and varies with the
level of output
Formula:

Break-Even Point (Units) = Fixed Costs ÷ (Revenue per Unit – Variable Cost per Unit)
Break-Even Point (sales Rs) = Fixed Costs ÷ Contribution Margin

Company’s Breakeven Analysis:

Company's breakeven Point in units stands at 64,043 which is achievable within the first year
itself whereas Breakeven Point in Amount stands at Rs 1,67,79,264.

Contribution margin stands at 20.42%, which is comparatively lower than its competitors.
This is primarily due to high Variable cost of the company which consumes significant
portion of the revenues

Marginal Cost Analysis:

The marginal cost is fundamental to companies being able to price goods and services
appropriately and turning a profit. If changes in the production volume result in total costs
changing, the difference is mostly attributable to variable costs. The marginal cost of
production must be lower than the price per unit for a company to be profitable

Components:

1) Fixed Costs
2) Variable Costs
3) Change in quantity produced

Formula:

(Year 2 Cost - Year 1 Cost) / (Year 2 Production Units - Year 1 Production Units)

Company’s Marginal Cost Analysis

Company’s Marginal Cost Analysis shows that the marginal cost is equal to Rs 208.50 ie the
variable cost incurred in producing every additional unit is equivalent to the Variable cost

Breakeven Point Workings

Working Note for break-even
point ₹
Sales 6,36,66,000
Less: Variable Cost 5,06,65,500
Contribution 1,30,00,500
Number of units 2,43,000
Contribution Rs per unit = 53.5
Contribution / Sales *
Profit Volume Ratio = 100
20.4%

Assumptions:

Company has not provided any information regarding inventory or work in progress owing to
which we have assumed that the company is able to sell all its products that it manufactures.

Difficulties faced:

Resistance from the Manager: Since the costs of a small-scale business are not available in
the public domain, the manager at the factory was hesitant to reveal the raw costs of
manufacturing which was a major hindrance to our project.

How we solved it: We convinced him that we are just MBA students studying at NMIMS
Mumbai and we are working on an academic project. Moreover, we do not need the exact
bifurcated numbers, we just need a raw estimation, and the rest we will do on our own. It was
difficult, but eventually, he was convinced and agreed to help us.