Case 3: Application of Costing to Indigenous Business Unit in Hubli City A case study of Malatesh Student Mess *Prof. Mahesh Bendigeri **Mr. Naveen Angadi ***Mr. Gurudatta Amate
An attempt has been made by students of Sem II of 2012-14 batch to align classroom teaching into practical world. It is first of its find to bridge the gap between academic learning with pratical knowledge by taking up mini project and trying to apply the concept of cost sheet to local business units. Mr. Naveen Angadi and Mr. Gurudatta Amate of Sem II class had selected Malatesh Student Mess for the purpose of the study. It is located in Dharwad. Brief Profile of Malatesh Student Mess: It is a sole proprietorship concern, started on 16th Feb 2008 by Mr. Hanumanthagowda Gowdar. . The mess is located in Gandhi Nagar, Dharwad. Mr. Hanumanthagowda is a BA graduate and has 4 years of experience in this field. He started the mess with the initial investment of Rs. 200000. He took a premises on rental basis and invested the capital on purchase of utensils, tables and chairs, fan, grinding machine, wet grinder, Television, Gas stove, Cylinder etc. Purpose of the Study: The main purpose of this study is to understand the costing model applied in the food industry and the method adopted in ascertain the cost per plate of meals. Ascertainment of cost per meal is most challenging job as the components that entire in preparing the food, there prices keep on fluctuating. Maintaining the quality and price per meals is most important. Further it is felt that cost per meal is determined by either some rough estimate or based on competitor pricing. But after having conducted this study, it is found that even the costing technique can be applied to determine the cost per meal. Cost Sheet: Cost sheet is a statement, which shows various components of total cost of a product/service. It classifies and analyses the components of cost of a product. It is a statement which shows per unit cost in addition to Total Cost. Selling price is ascertained with the help of cost sheet. The details of total cost presented in the form of a statement is termed as Cost sheet.
Data collection and Analysis Following is the information collected from owner of Malatesh Students Mess with respect to component of cost sheet. The information is collected for a period of one day cost incurred for operating the mess. Based on this the analysis was done to determine the most appropriate way of ascertain the cost per meal. The information collected here are based on the oral interaction
done with the owner and the prices mentioned are the prices prevailing during the month of Dec 2012, hence there may be slight variation in the presentation of facts.
Cost Sheet of Preparation of One Plate Meal Particulars
Amount
Rice (12kg @ Rs. 45 per kg) Millet (10kg @ Rs. 24 per kg) Jawar (10kg @ 25per kg) Oil (2.5kg @ 80per kg) Bringal (10kg @ 40per kg) Capcicum(10kg @ 25 per kg) Moongdal(6kg@ 60 per kg) Direct Wages (4members @ 100 per day) Direct Expenses Prime Cost
540 240 250 200 400 250 360 400 -
Direct Materials
Factory Overhead Indirect Materials Masala Coconut (10 qty @ Rs. 10 each) Corinder Tomato (7kg@ Rs. 15 per kg)
400 2640
2.67 17.6 1.40
605 50 100 20 105
Ginger & Garlic Salt Chilli Powder, pickle and chatni Chilli Milk Gas & Power Water bill Grinding
20 10 240 100 100
Works Cost Administative Overhead Rent (per day is calculated based on monthly rent) Cost of Production Selling & Distrubution Overhead Total Cost Profit Sales (150 plates @ Rs. 50 per plate of meals) Cost per plate of meal
Analysis:
150 plates per day. Total Cost per print 2240 14.93
433 17 50 3885
25.9
165 4050
27.00
4050 3450 7500
27.00 23.00 50
From the analysis of Cost sheet it is found that total cost incurred for preparing 150 plates of meals is Rs. 4050, were as the total revenue from sales of 150 meals is Rs. 7500. Considering the Rate per plate of meals as Rs. 50/- the operating profit per plate comes to Rs. 23 and the total profit Rs. 3450 per day. Since mess run on montly food coupon system and hence considering 30 working days and assuming the price of materials doesn’t vary, the total cost of one month comes to Rs. 121500 and the revenue comes to Rs. 225000. The overall operating profit per month would be Rs. 103500 Conclusion: From this study it is found that we can apply the concept of cost sheet to indigenous business unit and ascertain the probable cost of a given product/ service. We conclude that small business unit can also make huge amount of profit if cost are properly accounted for. Snap of Menu on a given day: