Pani Puri stall
M.Sabari Ayyappan(87)Shivakumar(98)Swathi Manjunath(108)Tanveer Khan(110)Theagarajan(111)Varsha Kumar(112)Vedashree(114)
Costs Involved
Cost incurred are broadly classified in to direct cost and indirect
cost
•Direct cost – directly attributed to production
•Indirect cost – incurred in the course, but cannot be directly
attributed to production
In this business venture –
•Direct cost – Oil peas, onions, puris, tomatoes, Samosas,
coriander, green chillies, sev tamarind, chutneys(sauces), coconut
salt, fuel, spices and transport(freight) – Rs 486(per 100 plates).
•Indirect cost – Rent, electricity, anti rodent poison cakes,
drinking water etc (Rs 39 per 100 plates)
Cost also divided in to Fixed cost and variable cost
Cost that has to be incurred for the mere sustenance of the business
irrespective of the volume of business or trade is called – Fixed cost.
Rent paid, electricity charges are fixed cost no matter how the sales
are in that particular period.
Cost that depends heavily on the quantity of production or volume of
the business – Variable cost.
Oil peas, onions, puris, tomatoes, Samosas, coriander, green chillies
etc are dirteclty proprtional to the volume of the business i.e the
number plates made and sold
Varying cost – mutual relation between volume and variable cost –
volume can alter it & it can alter volume
In this case it can also depend on the process undertaken – Different
dishes produced i.e Sev Puri, pani puri etc
Break-Even Analysis
Study of interrelationships
among a firm’s sales, costs, and
operating profit at various
levels of output
Break-even point (BEP) is the
point at which cost or expenses
and revenue are equal: there is
no net loss or gain, and one has
"broken even"
In the linear Cost-Volume-Profit Analysis model, the break-even
point (in terms of Unit Sales (X)) can be directly computed in terms
of Total Revenue (TR) and Total Costs (TC) as:
TFC is Total Fixed Costs, P is Unit Sale Price, and V is Unit
Variable Cost.
The quantity (P-V) is of interest in its own right, and is called
the Unit Contribution Margin (C). It is the marginal profit per unit, or
alternatively the portion of each sale that contributes to Fixed Costs.
ComputationGraphical method: We first draw the total cost curve (TC in the diagram), the fixed cost curve (FC) and finally the various total revenue lines (R1, R2, and R3) which is the total revenue received at each output level, given the price you will be charging.The break even points (A,B,C) are the points of intersection between the total cost curve (TC) and a total revenue curve (R1, R2, or R3). The break even quantity at each selling price can be read off the horizontal axis and the break even price at each selling price can be read off the vertical axis.
Cost Sheet of a Chat stall per day per 100 plates
Rs for 1 day = 100 unitsDirect materials:fuel (1kg/30days/rs300) 30=3kgs a month = rs 900/30 daysbig = 0.56 kgs/day *rs 700 per14kg cylinder 28
Samosas 40oil 5peas 39onion (2kg) 38puris 161tomatoes 5coriander and green chillies 13sev 25tamarind 30chutneys 7.5coconut 10salt 200 GMS 1spices 32
Direct expensesFuel - transport 12carriage inward 10--Prime Cost-- 486
Factory OverheadsFixedrent - Rs 2000/pm (for a shop 10 hours and 5 hours for the pani puri store)22SemiFixed
Electricity - 200/pm (same 10,5hours as above) 2
Factory cost 24
Cost of production/ cost of sales 511Profit 489sales 1000PFT MARGIN 48.94
BE analysis in the chosen Pani Puri StallComponent Rs Rs
Sales 1000 47Variable cost 486 23Contribution 514 24Fixed cost 24 24Total Cost 510 47Profit 490 0
PV ratio 0.514BE sales 47BE units 5GP/NP 49MOS 953M/S 95
SP is Rs 10
Component Rs RsSales 600 126Variable cost 486 102Contribution 114 24Fixed cost 24 24Total Cost 510 126Profit 90 0
PV ratio 0.19BE sales 126BE units 21GP/NP 15MOS 474M/S 79
Case 1: SP is Rs 6
Component Rs RsSales 800 61Variable cost 486 37Contribution 314 24Fixed cost 24 24Total Cost 510 61Profit 290 0
PV ratio 0.3925BE sales 61BE units 8GP/NP 36MOS 739M/S 92
Case 2: SP is Rs 8
Component Rs RsSales 1200 40Variable cost 486 16Contribution 714 24Fixed cost 24 24Total Cost 510 40Profit 690 0
PV ratio 0.595BE sales 40BE units 3GP/NP 58MOS 1160M/S 97
Case 3: SP is Rs 12
Stock control
Reorder level: This is the level at which storekeeper initiates
purchase requisition for fresh supplies of material.
Minimum level: This represents a level which the stock will
reach with fresh delivery of material provided the fresh delivery is
made within the reorder period and usage remains normal during
the period. Stock is not allowed to fall below this level. It is known
as buffer stock.
Maximum level: This represents the stock level above which the
stock should not be allowed to rise. It is computed as reorder level
plus reorder quantity minus minimum consumption during reorder
period.
Stock turnover and average stock-holding: Stock turnover ratio
for a period is calculated as follows:
Stock turnover ratio=cost of materials used divided by average stock
of material held during that period
Average stock holding is obtained by:-
1) averaging opening and closing stocks.
2) averaging minimum and maximum levels of stock.
3) minimum stock plus half of reorder quantity.
Reorder quantity: this refers to the quantity to be covered in a
single purchase order.
Carrying cost and ordering cost: cost of carrying includes rent,
insurance and other cost of storage, interest on capital blocked,
losses and pilferage, risk of obsolescence, etc. Cost of ordering
consists of the cost of placing an order, setting up of production-run,
transportation and receiving cost. Carrying cost is fixed while
ordering cost is variable.
Economic order quantity (EOQ): EOQ is the quantity fixed at a
point where total cost of ordering and the cost of carrying the
inventory will be minimum.
Inventory calculation
EOQ = sqrt ((2*4900*10)/0.23*6)
= 266 units of puri = 3 packets
Reorder Level = Maximum Consumption * Max lead time = 1050 * 2 days = 2100
Reorder Level
Economic Order Quantity
Minimum Level
Minimum level = Reorder level – Normal Consumption * Normal Lead time
= 2100 – 700 * 1 = 1400
Maximum Level
Maximum level = Reorder Level + Reorder Quantity – Minimum Consumption
Maximum level = 2100 +2100 – 350
= 3850
Waste and ScrapWaste is defined as discarded substances having no value. It is
that part of material which is either lost, shrinks or evaporate in
the manufacturing process and hence, invisible, or a residue
which is visible but having measurable recovery value.
Accounting: Good units should absorb the cost of waste.
However, if any value is realized, the process account concerned
may be credited.
Scrap is defined as discarded material from manufacturing
operations that has measurable but relatively value. They are
usually disposed of without further treatment. They may be
reintroduced into the production process in place of raw material,
such as, scraps in metallurgical industries.
•Readymade puris get crushed due to various reasons.
•For every 60 plates of panipuri, 16 rupees worth of puri get
crushed.
•Around 13.5 rupees worth of crushed puris get used as sev.
•crushed puris worth 2.5 rupees/100 plates will be lost.
•Since the cost of crushed puri lost cannot be identifiable with any
process, this will added to either overheads or material cost
respectively.
Pani Puri Wastage