YESHWANT MAHAVIDYALAYA, NANDED

DEPT. OF DAIRY SCIENCE

NAME : HEENA YASHAWNT BHATT
CLASS : M.Sc 2nd YEAR
SUBJECT : SEMINAR 3rd
TOPIC : COST ESTIMATION OF PANEER IN ORGANIZED SECTOR
IN THE GUIDENCE OF : DR. RAJKUMAR S SONWANE SIR
MR. BALASAHEB D LANDGE SIR
Study of Cost Estimation of
Paneer in Organized Sector.
 INTRODUCTION
Due to the increasing disposable income of 250 million of middle class families. expanding population and
growing urbanization. The demand for milk is expected to increase to 180- 190 million tons by 2023.The
increase in demand and production of milk, which has grown nearly at a rate of 5% per annum, has attracted
the multinationals to set up the milk plant in India.
But the installed capacity of the milk plants is still remaining underutilized thereby resulting in high unit cost
of processing. Volume of milk handling and the energy’s conservation in milk plants are the two important
aspects, which affect the cost of milk processing and products manufacturing. Therefore, the large handling
ability of milk plants will cut down per unit cost of processing.
 METHODOLOGY
The milk plant under study was classified into two departments, namely, main department and auxilian
department. The former was directly related to the manufacturing of milk products. Whereas the later
provided the services like steam generation, refrigeration, water supply, maintenance, quality control,
effluent treatment plant etc., items under direct expenses like raw materials, packaging material, fuel and
spare parts, etc. were allocated to the products as per their actual use.

The milk fat and milk SNF losses were worked out and the equipment amounts of losses were added in the
cost of raw materials. Depreciation of the building /machines and equipment was worked by the straight-
line method the actual amount of interest paid be the plant during the study period was taken into account.
Definition
Of Cost Estimation
 “
For computing the cost items. the whole expenditure
was classified into fixed and variable costs as below.

“TOTAL COST=TOTAL FIXED COST +

TOTAL VARIABLE COST”
ESTIMATION
PROCEDURE
OF PANEER IN ORGANIZED SECTOR
 1. RAW MATERIAL COST
The raw material cost includes all the expenditure on
milk and other material inputs, like sugar, salt, citric
acid, flavors etc. used for manufacturing particular
product. Milk losses are also included in the raw
material. The plant received mixed milk (cow and
buffalo milk) and the data on price paid be the plant
on the basis of fat contents where collected from the
records of the plant.
The fluctuations in price of raw milk were observed
during the period of study So weighted average of the
price of raw milk was taken into account The cost of
raw milk was computed for different products on the
basis of FAT and SNF contents in different products.
 2. WATER CHARGES
The cost of extracting ground water per kiloliters
was worked out.The cost of preparing soft water
was also separately calculated and added in the
cost of raw water for arriving at the cost of soft
water.
The soft water is mainly used for mixing in the
products, steam generation and refrigeration
section. The raw water is used for cleaning and
washing crates etc. The water consumption was
worked out for the boiler section as per the
capacity of the boiler to evaporate water per hour.
 3.STEAM CHARGES

To arrive at the cost of total steam/ steam

used in different products, first of all the
cost of production of one kg of steam
produced was calculated and then it was
multiplied with the quantity of steam used
in different operations and for
manufacturing different products. The
quantity of steam used in different
products and for boiling the water was
worked out be using the formula given in
the analytical framework.
 4. REFRIGERATION CHARGES

The role of the refrigeration section is to

proc ide chilling water and maintain the
required temperature in the cold stores of
the plant. The cost of one kilocalorie of
refrigeration was worked out and it was
multiplied with the kilo calories required
in extracting the heat from a particular
product.
 5. ELETRICITY CHARGES
The electricity energy can be estimated
accurately if the separate energy meters are
installed in each section of the plant. Since, the
energy meters in different sections of the plant
were not installed, therefore, in order to
measure the power and electricity consumption,
watt hour method was used to estimate the
electrical energy consumed be street lights,
tube light, ceiling fans, exhaust fans, wall fans,
lamps. computers. air conditioners, impellers of
the cold stores and other electric points around
the buildings of the plant.
 6.LABOR CHARGES

In accordance with the manufacturing operations

to the performed in all operating shifts, the
requirements of the personnel needed for the
manufacturing of paneer. The persons directly
involved in the production are include plant
operators and manufacturing labor. Labor and
supervision charges are proportional to the
volume of production. Since these charges are
likely to depend on the complexity of plant,
extent of automation and manufacturing
practices, these need to be calculated for the
specific situations.
 7. QUALITY CONTROL EXPENDITURE

The expenditure incurred in the quality

control section of the plant was classified into
fixed and variable costs. Expenditure on fixed
costs such as depreciation on building and
equipments was apportioned among different
products on the basis of the value of the
products. The expenditure on variable costs
like chemicals was apportioned in different
products on the basis of the material used in
the sample tested for different products.
 8.DEPRECIATION ON BUILDING & MACHINERY

Depreciation is a loss in the value of an asset due

to its wear and tear. The depreciation rate of 2.5
percent was charged on the building as per the
discussion with engineers of the plant ensuring
that expected life of building is 40 years. In case
of working out the depreciation on machinery/
equipment like moving machines. compressors.
motors still equipment. double jacketed equipment
(silo tanks) and boilers, the useful life of different
types of equipment and machinery was
determined 15 to 25 years in consultation with the
engineers of the plant.
 9.INTEREST ON INVESTMENT 10.STORE MAINTENANCE
11.WATCH AND WARD EXPENSES
12.STREET LIGHT EXPENSES

o The interest on fixed capital was taken into account as such the actual amount paid toward
interest by the plant during the financial year.
o The expenditure Incurred on repair and maintenance of equipment, machinery and building
was allocated as per the records maintained in the store and included in the separate store
maintenance head.
o Watch and wards are the expense of the plant for its security, which was given on annual
contract. The total expenditure of the security contract was apportioned among different
products on the basis of their value.
o Miscellaneous expense Include the small expense on dusters, soap cakes. detergents.
cleaning and sanitation material, glasses, towels used in different sections.
 COST OF PANEER
The cost of manufacturing Paneer was
estimated to be 350/kg and Rs 70/200 gm.
After the raw material cost (94.37%), the
highest cost was followed by administration
and supervision (1.38%), labor cost (1.29%)
interest and depreciation (1.29%) and less
than one per cent share was observed for rest
of the components.
 Cost Components Unit Cost Rs./kg Cost % Unit cost (Rs/200gm)

Raw material 69.56 94.37 13.91

Labour 0.95 1.29 0.19
Electricity 0.23 0.31 0.05
Water 0.12 0.16 0.02
Steam 0.12 0.16 0.03
Refrigeration 0.24 0.33 0.05
Quality control 0.19 0.26 0.04
Miscellaneous 0.08 0.11 0.02
Packaging material 0.25 0.34 0.05
1.02 1.38 0.21
Administration & supervision
Interest, depreciation on building & machinery 0.95 1.29 0.19
Total 73.71 100 14.76
 PROFITABILITY IN PANEEER

Product Price Unit cost of Profit margin Profit %

received by manufacturin
the plant g

Paneer(kg) 74.56 73.71 0.85 1.15

 REFERENCES
Entrepreneurship Development and Industrial Consultancy.:-A.K.Makwana and
A.K.Chauhan

Economics of manufacturing different milk point analysis in Sirsa cooperative

milk plant Haryana. :- Rigi Doni

Model Detailed project Report on Paneer Making Unit. :- NIFTEM (National

Institute of food Technology Entrepreneurship and Management)
THANK YOU