KMF

Visvesvaraya Technological University MBA, Belgaum.

Project Report on `COSTING”

A Report Submitted in Partial Fulfillment of The Requirement for the Award of MASTER’S DEGREE IN BUSINESS ADMINISTRATION

2011-2012

Submitted by: MALLIKARJUN N. HEBBALKAR USN NO. 2VX10MBA44

KARNATAKA MILK FEDERATION DHARWAD Institute Guide:

Company Guide:

PROF.NITYANAND

Faculty Finance VTU, MBA, Belgaum.

DECLARATION

I hereby declare that this project report titled as " costing, In –plant Training ” It has been prepared by me as part of my academics during the year 4 th Dec 2006 to 31 st Dec 2006 and 1 st Jan 2007 to 31 st March 2007, two days in a week. For the partial

fulfillment of degree of "Master of Business Administration", under the guidance and supervision of our PROF.NITYANAND , at VISVESVARAYA TECHNOLOGICAL UNIVERSITY – BELGAUM

To the best of my knowledge and belief the matter presented in this report has not been submitted earlier for the award of any degree to any university. This report is prepared by me on my own efforts.

VISVESVARAYA TECHNOLOGICAL UNIVERSITY – BELGAUM

KARNATAKA MILK FEDERATION DHARWAD

MALLIKARJUN N. HEBBALKAR



CONTENTS S.No. TITLES

PAGE No.

I.

Company Profile          

II.

III.

IV.

Sector Details History Functions Objectives Vision Mission Products Organization Chart Departments Milk procurement Procedure

Research Methodology  Need for the study  Objectives  Data Collection Method  Sample Size  Tools for data collection

Data Analysis  Conceptual Frame Work  Tables  Interpretation

01 02 04 18 18 19 19

20 30 31 31 31 32

33 69 75

Conclusion  

Findings Suggestions Conclusion

77 81



Bibliography

83





         

SECTOR DETAILS HISTORY FUNCTIONS OBJECTIVES VISION MISSION PRODUCTS ORGANIZATION CHART DEPARTMENTS MILK PROCUREMENT PROCEDURE

A. SECTOR DETAILS



Dharwad milk union (DMU) came into existence on 3-3-1986. DMU was established under a co-operative Act as on 3-3-1986 at Dharwad & Gadag, Haveri, Uttar Kannada & Dharwad come under this operation. The Dharwad Milk Union is a co-operative society among the 13 establishments, under KMF. The Dharwad Milk Union (DMU) is one of the most modern plants in the country. It is located in the specious 25acres of land, located in Lakamanahalli Industrial Area, Adjacent to the National Highway-4. The milk is collected from farmers, that raw-milk is processed & sold in the markets with brand of Nandini. Around 1.18 lakhs liters of milk is collected every day from various farmers. Various quality control measures are undertaken specially in keeping the surroundings clean and healthy. Karnataka co-operative Milk Producers Federation Limited (KMF) is the Apex Body in Karnataka representing Dairy Farmer’s Co-operative. It is the 3rd largest Dairy Cooperative among the Dairy Co-operative in the country; in south Indian it stands 1st in terms of procurement as well as sales. The brand is the household name for fresh milk & milk products. Karnataka Milk Federation (KMF) sells products by name of NANDINI. They are famous for taste and quality. Nandini products like Peda, Paneer various types of Curds and milk are liked by thousands of people in India. Almost every district in state of Karnataka has milk producing co-operative Union.

B. History:


KARNATAKA MILK FEDERATION DHARWAD History of KMF:

The Karnataka diary development co-operation was established in the year 1975 under the World Bank assistance. The main objective was to organize the best pattern milk co-operative societies & thereby helping the formers to increase the milk production by getting technical input service and procuring the milk. In order to process and market the milk so collected, dairies and chilling centers were established in southern part of Karnataka. The KMF is the Apex body according to the national development board. History of DMU A group of experience officers appointed by the KMF surveyed the whole Dharwad

district (including the two newly formed districts Gadag & Haveri) & Uttar Kannada. Further they found out that there is a need for a Milk dairy. They traveled even the surrounding villages about the milk & milk products & even they considered the benefits they would be getting from the Milk dairy. Seeing the overwhelming response and the untapped resources & the huge market the KMF decided to set up the Milk union in 1984, known as the Dharwad District CoOperative Milk Producers Societies Union Limited. Further in 1988 the Raipur

Diary & the chilling centers. Setup in 1968 also came under this union. DMU was a Rs. 7crores project of which Government has share capital of Rs. 2crores 7 the

authorized capital of DMU was of Rs 5 crores.

Evaluation


KARNATAKA MILK FEDERATION DHARWAD Karnataka Milk Federation which is most popular as KMF evolved itself as a premier and most profitable Dairy farmers’ organization in the state of Karnataka. As an agency in 1975 to implement the world bank Aided Dairy Development projects, Karnataka Dairy Development Corporation (KDDC) was formed, the company grew itself fast as it spreads the wings of the new found rural economic activity – Dairying all over the state, the genesis of Apex Co-operative body took the shape of KMF in 1983 encompassing entire state with 13 district Co-operative milk union executing various parameters of Dairy activity – organization of Dairy Cooperative milk routes, veterinary services, procurement of milk in two shifts of the day, chilling, processing of milk, distribution of milk and also establishment of cattle feed plants , Nandini sperm station, liquid nitrogen supply, training centers – as its main stay. The entire system was reconstructed on the model of now well know ‘ANAND’ pattern Dairy Co-operative societies. 8 southern districts of Karnataka was considered initially with a target of organizing 1800 Dairy Co-operative societies, 4 milk unions and processing facilities were set up to the tune of 6.5 lakhs per day by 2012. Under Operation Flood – II &III, project which started in 1984 & 1987 covered the remaining parts of Karnataka. Thirteen milk unions are organized in 175 Talukas of all 20 District then and the field work was extended by organizing more dairy Cooperative societies. The processing facilities i.e., chilling centers, milk Dairy Cooperative societies. The processing facilities i.e. chilling centers, milk dairies and powder plants were transferred in phases to the administrative control of respective Co-operative


KARNATAKA MILK FEDERATION DHARWAD Milk unions and the activities continued to be implemented by these District Organizations. Additional processing facilities were created & existing facilities augmented every decade with the help of Govt. / Zillah Panchayat and NDDB to handle ever increasing milk procurement without declaring milk holidays. The processing facility as exists lakh liters/day is further strengthened. C. Functions of DMU →

The main function of DMU is to procure milk from villagers for a right price.

→

To educate the villagers about the milk & its quality.

→

To make ‘NANDINI’ as a part of dairy life for its customers.

→

To provide good quality of cattle feed, fodder, veterinary properly & in an efficient manner.

→

To see that the milk is brought from DCS’s to the chilling centers in the prescribed time.


KARNATAKA MILK FEDERATION DHARWAD D. Objectives of DMU →

Providing hygienic & good quality of milk to the consumers.

→

To build the economic strength of the milk products in villages.

→

To eliminate middlemen’s in the business so that the milk products receive their appropriate share of bread.

→

To educate the villages about the adulteration of milk & its harmful effects on the body.

→

To see that every citizen becomes healthy by consuming good quality of milk.

→

To make villagers self-viable & build self image in the society.

E. Vision of DMU →

Cleanliness.

→

Total quality maintenance.

→

Maintenance of discipline.

→

Co-operation.

→

Transparency.


KARNATAKA MILK FEDERATION DHARWAD F. Mission of DMU: →

To promote social economic development of rural people.

→

Empowering rural people through self-sustaining through dairy activities.

→

Ensure that the milk & FDP supply to its customers around the clock.

→

To penetrate up country market to enhance liquid milk sales & PDF.

→

To be self sufficient in milk production through rural development.

G. Products of DMU: →

→

MILK: 1.

Toned milk.

2.

Standard milk.

3.

Shubham milk.

MILK PRODUCTS: 1.

Butter,

2.

Ghee,

3.

Curd,

4.

Lassi,

5.

Paneer,

6.

Milk powder.


KARNATAKA MILK FEDERATION DHARWAD PRODUCTS OF DMU: TYPES OF MILK: Pasteurized Toned Milk: - It is the Karnataka’s most favorite milk. Nandini

Toned, Fresh and pure milk contains 3.0% FAT and 8.5% SNF. It is available in 500ml and 1 liter pouches

Nandini

Homogenized

Milk:

Nandini

Homogenized and Pasteurized milk is pure and contains 3.5% FAT and 8.5% SNF. It is rich in nutrients and has got

uniform thickness. One can feel the extra creamy feel till

the

last drop. It is available in 500ml, 1 liter and 5 liters

pouches.

Pasteurized Toned Milk



Shubham Milk

Homogenized Cow’s Pure Milk

Good life Milk



MILK PRODUCTS:

Ghee & Butter

Milk Powder

Flavoured Milk

Butter Salted & Unsalted

Dharwad Peda


KARNATAKA MILK FEDERATION DHARWAD Paneer

Ghee in Pet Jar

H. Organization Chart:

The organization is three tiered on Co-operative principles. A. Dairy Co-operative Societies at grass root level. B. District Co-operative Milk Unions at single / multi district level.


KARNATAKA MILK FEDERATION DHARWAD C. Milk Federation at state level. All above three are governed by democratically elected board from among the milk producers. Under the direction of elected boards, KMF, various functional Units & Unions are performing the assigned tasks to ensure fulfillment of organization objective.

I. Departments 

Administration department.



Purchase department.



Quality control department.



Production department.



Procurement & input (P&I) department.



Human resource department.



Finance department.



Marketing department.





Departmental Study:

1. Administration Department: This department controls the over all functioning of the organization. The department looks after the administrative functions such as payment of salaries, arrangements to be made for conveying various meetings & formation of policies etc. Functions 

Maintaining up-to-date files, books etc.



Collecting & presenting data in the form of useful information from the records.



Implementing the organization system & organization policies in the coordinate manner.



Maintenance of records of officer’s entrance & leave from the premises.



Providing required facilities etc.



Ensuring smooth running of the office by interfacing with the external agencies whenever required. E.g. making payment of telephone, water & electricity bills etc.



Other Functions:

Employee’s attendance, Sanction of increments, Promotion, Transfers, Personal security, Time officers, Administrative officers, Labour officer.


KARNATAKA MILK FEDERATION DHARWAD Administration department structure:

Deputy Manager

Assistant Manager (Board)

Assistant Manager (Personnel)

Administrative Superintend

Administrative Superintend

Administrative Assistant

Time

Canteen

Security



2. Purchase Department: As in any organization even in this organization the purchase department does the work of purchasing of goods & required raw material which are ordered by the stores department to maintain smooth functioning of all the departments in DMU & to meet the requirements at the right time. The weekly report submitted by the stores department gives an idea the item whether it is to be purchased or not. If the need arises they even make a call for tenders mentioning all the order. But in case of few cases the decision is left to the board. For instance, purchase of machinery is to done but its cost is in lakhs then this decision is left in the hands of board whether to purchase or not. If there is any defect in the goods or if they are not up to the specification then they are returned back or the suppliers are given a notice about the matter as the case may be. Function: •

Receiving indent (requirement) from various department.

•

Determination of purchase material quality.

•

Maintain comparative statement of all suppliers.

•

Sending the purchased items to the quality control department for checking the quality.

•

Return the defective goods to the respective suppliers for replacement.

•

Calling tenders & sending quotations.


KARNATAKA MILK FEDERATION DHARWAD Opinion Of: 

Finance officers



Audit department



Finally Managing director’s approval.

Purchase department structure

Purchase Officers

Purchase Superintend

Assistant Purchase Officers

Helpers



3. Quality Control Department: 

Alcohol test.



Clot on boiling.



Taste.



Flavor.



Acidity.



Corrected lactometer reading.



Gender method for the test.



Milk tester method.



Moisture.



Solid not Fat test (SNF).



Quality Control Department Structure:

Deputy Manager

Assistants Manager

Chemist

Tester

Helper



4. Production Department The main objective of this department is to follow up the production schedule as per the plan & to maintain good relations with other department in the plat & ensure to upgrade the technical efficiency of production. Most of the production equipment are imported from Sweden & Denmark. The entire production process, at every stage of production the plant takes care to maintain the quality & freshness of the milk & milk products. Objectives:

Department preplans the production activities soon after receiving the order: 

Execute, Co-ordinate, organize & monitor the production activities.



Increase the output as far as possible.



Decrease that the actual production & wastages.



Ensure that the actual production meets the planned requirements.

Procedure following in production process:

When the milk is received from the cans or tankers, it is first taken for the testing, here the freshness & quality of the milk is tested. After the approval of the testing officers the milk is then taken to the chilling centers for extending the self-life of the milk. DMU has 2-2.5 lakhs production capacity of milk, 12,000 liters/hr capacity cream separation, 36 tones/day production capacity of butter & 12-15 tones production capacity powder plants in Karnataka.



Everyday input:

Milk processed (in liters) – 1.18 to 1.24 lakhs Water (in liters) – 8 to 10 lakhs. Electricity – 11,000 Coal – 6 tones.

Production department structure:

Manager (Diary)

Deputy Manager

Deputy Manager

Manager Assistants Accounts Assistants

Stores Assistants

Typist

Clerk

Technical Officer

Senior Supervision

Junior Supervision

Manager (Dairy)

Dairy Technicians

Dairy Workers

5. Procurement & Input Department:


KARNATAKA MILK FEDERATION DHARWAD To upgrade the functioning & expand the productivity capacity of each society the union provides many facilities. 

Remunerative price for the milk produced.



Animal husbandry & veterinary health care programmed for the member animals.



Cross breeding programmers.



Supply powder seeds for animal’s development.



Training to all the members of Co-operatives for smooth functioning of cooperative.



Subsidized cattle feed to the member of the society.



DMU has 13 doctors to provide door to door service.



First aid centers at every co-operative society.



Conducting animal health camp every 2 weeks.

→

Functions:

 Procurement

of milk producer’s co-operative society.

 Establishment  Encourage  Giving

of milk produce’s co-operative societies.

in producing more milk.

fair prices for good quality milk.



P & I Department structure:

Manager

Procurement Wings

Deputy Manager

Assistant Manager Extension Officer

Technical Wings

Development Officer

Assistant Manager

Marketing Assistant

Clerks Clerks

Helper



6. Finished goods store (FGS) department:

FGS department is an intermediate between the production & marketing department. It is only concerned with issue of goods to marketing department which are received from production department. The goods are usually perishable items such as Butter, Ghee, Peda & paneer. The goods received are stored in cold storage under 16 degree Celsius condition & stored goods are issued on demand by the marketing department. If the stock is out of demand, the indent is sent back for further certification with regard to present stock. FGS is only concerned with quality dispatching aspect. Other sections do the accounting, clearing of stores, maintenance etc. Before dispatching, approval of the goods by quality department is mandatory. A consolidated dairy and monthly report is submitted to production, marketing and finance department. This department practices the BIN CARD system and FIFO method is followed. Policies •

Maintain maximum and minimum stock level for inventory so as to avoid twin Evils i.e., blockage of capital and storage in the disruption of the smooth running of the unit.

•

Ordinary available commodities are maintained in a possible minimum number.

•

Items of urgent nature are not easily available sometimes, so they are stored in sufficient number to meet the future demands.


KARNATAKA MILK FEDERATION DHARWAD Finished Goods and stores Department structure

MANAGER

Marketing Manager

Account Assistant

Marketing Manager

Dairy Workers


KARNATAKA MILK FEDERATION DHARWAD 7. Human Resources Department: This department after the requirement, selection & welfare of the employees. It also conducts training, development & orientation programs for the employees. Objectives: •

Training.

•

Career Development.

•

Performance appraisal.

•

Suggestion schemes.

Benefits: •

Medical Facilities (ESI).

•

Shoe & uniform.

•

Government Holidays.

•

Attendance Bonus.

•

Increment for promotion of small Family.

Leave: •

Earn Leave (EL) – 30 days per year.

•

Extra ordinary – accident, sick – 10 months’ salary.

•

House Construction / purchase advance – 15 months’ salary.

•

10 days compensatory leave per 20 days H.P (Half Pay Leave).



Recruitment: •

It will be organized by the central office.

•

Every 10 years employee receives the time Bond bones (T.B.T).

•

Retirement age – 58 years.

Training & Education Programme: •

Women secretary training.

•

Milk tester training.

•

Woman management committee members training.

•

First aid worker training.

•

Animal husbandry & dairy management training programs.

Awareness Programs: •

Health & Nutrition.

•

Gender Sensitization.

•

Legal Literacy.

Training Programs: •

National Diary Development Board (NDDB).

•

National Dairy Research Institute (NDRI).

•

Institute of Rural Management Anand (IRMA).

•

Karnataka Milk Federation Centers Training Institute (Bangalore).

•

Regional Training Centers (Dharwad).

•

Vaikunt Mehata Institute of Co-operative Management (Pune).



8. Finance Department:

This department controls the financial activities of the diary. Financial activities include like preparation of annual report, maintenance of accounts etc. this department is also held responsible for keeping the record of all inflow & outflow of money. It prepares budget every financial rule for receipts & payments.

Functions •

To prepare monthly accounts (such as receipts, payments accounts etc).

•

To prepare integrated business plans,

•

To prepare procurement & transportation change bills,

•

To prepare quarterly financial statement,

•

To prepare year ending financial statement (such as profit & loss accounts & balance sheet), Marking payment to farmers for the procurement of milk, maintain budgetary control, Passing all payment bills, Maintain sales Ledger,

•

Preparation of cost sheet, Maintenance of all subsidiary books under Cooperative society Acts (books like cash book; debtors & salary registers).

•

Direction to the internal audit.



Finance Department Structure:

Deputy Manager

Assistant Manager

Assistant Account Officers

Assistant Accountant



9. Marketing Department

The marketing department of DMU is considerable extensive which covers major area such as Dharwad, Uttar Kannada district, Haveri, Gadag, Sirsi and Karwar covering almost 26 taluks. Marketing milk & milk products is done under the brand name called “Nandini” except loose milk packets & milk products which are marketed with the name of KMF by its marketing agencies. As the products are of perishable nature hence the biggest responsibility lines in the hands of marketing department to sell all the products before they loose its quality. Before pre-liberalization (July 21-1991) DMU enjoyed a monopoly due to Cooperative organization & other benefits received from the state government. But after 1991 the scenario totally changed, new products Diaries started grounding like mushrooms with entrance of private Diaries the DMU started facing tough competition in the market which resulted in major loss of market share gradually over the years. Today DMU as only 23% of total market share. DMU operates in 17 cities having total population 1.05 million. Functions •

To prepare the marketing plan at the very beginning of the year, taking into consideration the demand, sales production capacity & customer’s demands.

•

To promote milk &milk products in the market.

•

To study competitor’s products & their strategies.



Media of Advertising •

News papers

•

Magazines

•

Wall paintings

•

Pamphlets

•

Television

Distribution channel

DMU has its own marketing channels. It follows two types of direct channels. Those are; •

Consumer market

•

Institutional market



Consumer market

DMU sells directly to the consumers through its special vendors. It distributes its products to around 424 retailers & milk parlors. These sell only KMF products. Main Dairy

Agents

Own Sales Person

Consumers

Own Parlors

Consumers Institutional Markets:

There is a demand of 4000 liters of milk per day from the institutions, hospitals, jails, school; hostels etc. strategies adopted by this department are as follows: •

Conduct awareness programs of milk & homogenized processed milk.

•

Attain dairy complaints of consumer & retailers.

•

Need for healthy promotional activities against competitors.

•

Adopting differentiated marketing strategies in place of undifferentiated

•

marketing strategies.



Competitors •

Bharat

•

Siddhi Vinayak

•

Datta

•

Mayoor

•

Goppal

•

Aditya

•

Arogya milk

•

Loose vendors etc.

Marketing Department Structure

Marketing Manager

Deputy Manager

Technical Officer

Marketing Superintendent

Development Officer

Development Officer

Vanshroff

Vanshroff

Marketing Assistant

Marketing Assistant



J. Milk procurement procedure

DCS

Fresh Liquid Milk

Chilling

Storing

Pasteurization

Separation

Homogenization

Storing

Packing

Dispatching



Explanation of the procedure 1. Collection of milk In this stage, the milk is bought from the various DCS to the main dairy in a can containing 40 liters capacity of in milk in a vehicle. The cans are marked with two different colors to differentiate between the cow milk & buffalo milk. The recolor is used for buffalo milk & green or blue is used for cow milk. Once the milk is bought to the dairy it undergoes for testing of FAT & SNF. 2. Testing In this stage the testing takes place in three different processes, such as: →

Smelling (odor) test A man at the dock station checks the acidic nature of the milk by smelling or tasting the raw-milk. If it is found that the tasted milk has some bad smell or taste, then the dairy will pay lower rate of the milk to such society members than the normal rates.

→

Extraneous matter appearancesThis test is conducted by the chemist. The chemist checks two aspects, mainly whether the milk is contaminated or not & secondly whether the milk is in liquid from or curd from. He also checks for the presence of any extraneous matters like dust & flies which results in spoilage of milk.

→

Acidic test-


KARNATAKA MILK FEDERATION DHARWAD The payment to suppliers depends mainly on the SNF & FAT content in the raw milk. The suppliers may add sugar to the milk so as to increase the content of SNF & FAT content in the milk. Hence to avoid adulteration, this test in conducted. In this process, 10ml of milk & 1ml of hydrochloric acid is collected in a test tube. This solution is shaken well & is heated for 5minutes. If the solution turns into orange color it proves that sugar is added to it. 3. Chilling & Storing After testing, the milk is stored in the SILOS (storage tanks). It is maintained in the cold temperature of 4 degree Celsius. The union is having 7 the other 4 horizontally among which 2 are having capacity of 10,000 liters each & the other 2 have 15,000 liters capacity each. 4. Pasteurization & separation In this stage, the heating of milk is done at 72 degree Celsius. When the milk is passing through pasteurization process the cream is removed depending up on the quality of milk required (standardization). 5. Packing & dispatching In this, the packing of fluid products is done by machines & manually in case of solid products like Peda. The machines are automatic with the capacity of packing 10,000-14,000 packets per hour. The machine packs the milk in 500ml pouches made of plastic. These machines are used to pack all types of milk as well as other products like lassi, ghee etc.


KARNATAKA MILK FEDERATION DHARWAD 6. After packing packing the the milk pouches pouches are are arranged arranged in caters. caters. Each Each cater contains contains 10 10 liters of milk. These caters are then kept in a cold room which has a temperature of about 5 degree Celsius or below sometimes.

McKinsey’s 7-S Frame Work The profile of the company can be explained with the help of McKinsey’s 7-S model. The McKinsey’s 7-S framework is as bellow

•

Strategy: the plan devised to maintain and build competitive advantage over

the competition. •

Structure: the way the organization is structured and who reports to whom.

•

Systems: the daily activities and procedures that staff members engage in to

get the job done. •

Shared Values: called "super ordinate goals" when the model was first

developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic.


KARNATAKA MILK FEDERATION DHARWAD •

Style: the style of leadership adopted.

•

Staff: the employees and their general capabilities.

•

Skills: the actual skills and competencies of the employees working for the

company.

7S Checklist Questions Here are some of the questions that you'll need to explore to help you understand your situation in terms of the 7S framework. Use them to analyze your current (Point A) situation first, and then repeat the exercise for your proposed situation (Point B). Strategy: •

What is our strategy?

•

How do we intend to achieve our objectives?

•

How do we deal with competitive pressure?

•

How are changes in customer demands dealt with?

•

How is strategy adjusted for environmental issues?

Structure: •

How is the company/team divided?

•

What is the hierarchy?

•

How do the various departments coordinate activities?

•

How do the team members organize and align themselves?

•

Is decision making and controlling centralized or decentralized? Is this as it

should be, given what we're doing? •

Where are the lines of communication? Explicit and implicit?

Systems:



What are the main systems that run the organization? Consider financial and

HR systems as well as communications and document storage. •

Where are the controls and how are they monitored and evaluated?

•

What internal rules and processes does the team use to keep on track?

Shared Values: •

What are the core values?

•

What is the corporate/team culture?

•

How strong are the values?

•

What are the fundamental values that the company/team was built on?

Style: •

How participative is the management/leadership style?

•

How effective is that leadership?

•

Do employees/team members tend to be competitive or cooperative?

•

Are there real teams functioning within the organization or are they just

nominal groups? Staff: •

What positions or specializations are represented within the team?

•

What positions need to be filled?

•

Are there gaps in required competencies?

Skills:



What are the strongest skills represented within the company/team?

•

Are there any skills gaps?

•

What is the company/team known for doing well?

•

Do the current employees/team members have the ability to do the job?

•

How are skills monitored and assessed?

SWOT Analysis of DMU Strengths •

Nandini enjoys good image

•

Wide distribution network leads to regular & timely supply.

•

Milk processed is local milk, which reduce the transportation cost.

•

It enjoys highest market shares in the packed milk segment.



Different price & quality to suit different customers

Weaknesses •

Proper customer feedback needs to be taken.

•

Recurring quality problem.

•

Lowest paying brand i.e., commission given by the company is less compared to other brands.

•

Inadequate sales promotional activity. Due to bad smell that persists causes low sales.

Opportunities •

There is scope for developing in new area.

•

Availability of buffalo milk-improves milk quality.

•

Predominant of loose milk segment- divide appropriate strategies.

Threats •

No entry barriers for private players.



Low level of consumer awareness.

•

Persuade benefits of competing brand.

a. Need for study →

Understand the true profitability of earned by the DMU.

→

For getting the practical knowledge about the cost &costing techniques.

→

Ascertainment of costs involved in producing milk and milk products.

→

Analyze overhead costs so they can be managed more effectively.

→

Measuring product performance.

b. Objectives: →

To identify the process involved in procuring milk.

→

To know and assign the cost involved for each identified activities.


KARNATAKA MILK FEDERATION DHARWAD →

To know the estimated cost of manufacturing milk.

→

To identify the gap and suggest improvements that can be taken place.

c. Data collection: The data is collected from both primary and secondary sources. →

Primary sources:

Primary source are the data collected at first hand. It is collected by discussing the subject with the management, employees, department heads etc. →

Secondary sources These are the data that have been derived from the original source. Here the original source includes the record maintained by the company, from the website of the company etc.

d. Sample size

The size of sample covers preceding three years financial statement. e. Tools for data analysis: tables, charts etc. Conceptual frame work: COST ACCOUNTING

Cost accounting means recording expenditure & income in a systematic way so that this information would be useful in arriving at the cost of production. COST

Cost means the amount of expenditure incurred on given thing or in rendering services. COST ACCOUNTANCY

It is the widest of all the items includes not only costing & cost accounting but also cost control, cost audit, cost ascertainment &budgetary control. ADVANTAGES To the management: •

Profitable & unprofitable activities are disclosed.

•

It guides future production policies.



It provides information upon which estimates & tenders are based.

•

It helps in increasing profit by disclosing idle capacity. To the workers:

•

It discloses the efficiencies of different workers.

•

Workers will get better wages.

•

It provides job security.

To the society •

People will get better quality goods at a reasonable price.

•

Curbing inflationary trend in the economy.

•

Public feels that the prices charged by the concerns are fair & reasonable. DISADVANTAGES

•

It is expensive.

•

It is sometimes not accurate.

•

Absence of readymade statement.

INSTALLATION:

Steps •

Objectives to be achieved after installing cost system.

•

Studying the existing organization & routine.

•

Deciding the cost structure of cost accounts.

•

Determining the cost rates.

•

Introducing the system.

•

Organizing the cost office.

•

Relation of cost office with other department.

•

Authority and responsibility should be clearly defined.

COST SHEET/ STATEMENT OF COSTS It is a document which provides for the presentation of estimated detailed cost in respect of cost unit. The statement summarizes the cost of manufacturing a particular list of products and discloses the prime cost, works cost, cost of production and total cost.


KARNATAKA MILK FEDERATION DHARWAD PURPOSES A cost sheet serves the following purposes: •

It discloses the total cost as well as the cost per unit.

•

It helps for comparison.

•

It helps for preparation of vendors & quotations.

•

It gives the breakup of total cost by eliminates and sub –divisions.

•

It helps for fixing the selling price.

Cost sheet pasteurized Toned Milk as on 1-11-2011

SL NO A 1 2 3 4 5 6

PARTICLARS

AMOUNT

Raw Materials Cost Price paid to DCS Chilling cost at CC BMC maintenance cost Transportation Charges from DCS to CC P&I input cost KMF levy

17.40 0.15 0.04 0.66 0.14 0.01



F G

TOTAL Raw material Cost at Main Dairy Transportation cost from DCS to BMC Transportation cost from BMC to Main Dairy + CC to PDD TOTAL Process cost Process & manufacturing cost Packing cost Direct Labour connected with processing Weight Volume Difference TOTAL Administrative Overheads General salary of all Staff Other Administrative Cost TOTAL Selling & Distribution Overheads Distribution Transportation Charges Retailer Margin Advertisement & publicity Salary of marketing Staff TOTAL Interest Depreciation

H I J

TOTAL COST PROFIT/LOSS SELLING PRICE

B 7 8 C 1 2 3 4 D 1 2 E 1 2 3 4

18.40

0.17 0.39 0.56 0.72 0.57 0.08 0.57 1.94 2.29 0.19 2.48 0.98 0.77 0.07 0.28 2.10 0.16 25.64 -3.64 22.00

INTERPRETATION


KARNATAKA MILK FEDERATION DHARWAD The dairy follows its own costing method. There are no specialized personnel or committee appointed or organized by the diary in this regard.



Procurement of raw material for pasteurized Toned Milk is Rs. 18.40/-



Process includes process cost, manufacturing cost, packing cost & labour cost which is Rs.1.94/-



Administrative overhead includes other processing & marketing cost which is Rs.2.48/-



Selling & distribution overhead includes transportation charges, retailer margin, advertisement expenses, salary of marketing manager etc. which is Rs.2.10/-

Cost sheet Homogenized cow Milk as on 24-11-2011

SL NO A 1 2 3 4 5 6 B 7

PARTICLARS Raw Materials Cost Price paid to DCS Chilling cost at CC BMC maintenance cost Transportation Charges from DCS to CC P&I input cost KMF levy TOTAL Raw material Cost at Main Dairy Transportation cost from DCS to BMC

AMOUNT 17.40 0.15 0.04 0.66 0.14 0.01 18.40 0.17


KARNATAKA MILK FEDERATION DHARWAD 8

0.39 0.56

F G

Transportation cost from BMC to Main Dairy + CC to PDD TOTAL Process cost Process & manufacturing cost Packing cost Direct Labour connected with processing Weight Volume Difference TOTAL Administrative Overheads General salary of all Staff Other Administrative Cost TOTAL Selling & Distribution Overheads Distribution Transportation Charges Retailer Margin Advertisement & publicity Salary of marketing Staff TOTAL Interest Depreciation

H I J

TOTAL COST PROFIT/LOSS SELLING PRICE

25.87 -1.87 24.00

C 1 2 3 4 D 1 2 E 1 2 3 4

0.72 0.57 0.08 0.57 1.94 2.29 0.19 2.48 0.98 1.00 0.07 0.28 2.33 0 0.16



INTERPRETATION: 

Procurement of raw material for Homogenized Cow Milk is Rs. 18.40/-

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







Cost sheet SHUBHAM MILK as on 24-11-2011

SL NO A

PARTICLARS Raw Materials Cost

AMOUNT

1 2 3 4 5 6

17.40 0.15 0.04 0.66 0.14 0.01 18.40

F G

Price paid to DCS Chilling cost at CC BMC maintenance cost Transportation Charges from DCS to CC P&I input cost KMF levy TOTAL Raw material Cost at Main Dairy Transportation cost from DCS to BMC Transportation cost from BMC to Main Dairy + CC to PDD TOTAL Process cost Process & manufacturing cost Packing cost Direct Labour connected with processing Weight Volume Difference TOTAL Administrative Overheads General salary of all Staff Other Administrative Cost TOTAL Selling & Distribution Overheads Distribution Transportation Charges Retailer Margin Advertisement & publicity Salary of marketing Staff TOTAL Interest Depreciation

H I

TOTAL COST PROFIT/LOSS

25.87 0.13

B 7 8 C 1 2 3 4 D 1 2 E 1 2 3 4

0.17 0.39 0.56 0.72 0.57 0.08 0.57 1.94 2.29 0.19 2.48 0.98 1.00 0.07 0.28 2.33 0 0.16


KARNATAKA MILK FEDERATION DHARWAD J

SELLING PRICE

26.00

INTERPRETATION: 

Procurement of raw material for Homogenized Cow Milk is Rs. 18.40/-







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Cost sheet of PEDA as on 27.08.2011


KARNATAKA MILK FEDERATION DHARWAD PARTICULARS

PEDA 250

100

25

Milk Purchase price (120 KG

Gram 2088.00

Gram 2088.00

MILK) PTC/Kg (120 * 0.65) CC Chilling cost/Kg ( 120 * 0.15) CC Transportation/Kg (120*

78.00 18.00 50.40

0.42) P & I Input Cost (0.25*120) Other administrative cost (120*0.19) Genl salary COST OF HEATING COST DETERGENT COST OF SUGAR @ 11 % OF MILK @ Rs 28.00 / KG YIELD IN KGS COST OF DIRECT LABOUR TOTAL COST PER KG PACKING COST VPP TIXO TAPE BOPP TAPE DC CARTONS MC CARTONS TOTAL TOTAL MFG + PKG COST / KG AVG REALISATION CONTRUBUTION / KG DEALER PRICE / KG DEALER PRICE / PIECE

KHOA Bulk

KHOA 200

Gram 2088.00

2088.00

Gram 2088.00

78.00 18.00 50.40

78.00 18.00 50.40

90.00 18.00 49.20

90.00 18.00 49.20

30.00 22.80

30.00 22.80

30.00 22.80

30.00 22.80

30.00 22.80

344.00 330.00 20.00 369.60

344.00 330.00 20.00 369.60

344.00 330.00 20.00 369.60

258.00 280.00 20.00 0.00

258.00 280.00 20.00 0.00

31.00 231.88 3582.68 115.57

31.00 231.88 3582.68 115.57

31.00 231.88 3582.68 115.57

22.00 69.30 2925.30 132.97

22.00 69.30 2925.30 132.97

1.00 0.07 0.10 4.00 0.93 6.10 121.67 159.40 37.73 155.98 39.00

1.50 0.11 0.15 7.20 1.20 10.16 125.73 170.00 44.27 170.00 17.00

14.00 0.00 0.15 0.00 1.50 15.65 131.22 170.00 38.78 170.00 4.25

0.00 0.00 0.10 0.00 1.00 1.10 134.07 170.00 35.93 170 0.00

6.50 0.00 0.00 0.00 1.00 7.50 140.47 180.00 39.53 180 36.00



INTERPRETATION:



Milk purchase price is 120 kg milk.



PTC/kg (120*0.65).



CC Chilling cost/kg (120*0.15).



CC Transportation/kg (120*0.42).



P&I cost (0.25*120).



Other administrative cost (120*0.19).



Cost of 1 kg PEDA is Rs. 15.57/-



Packing cost differs depending upon size & weight of Peda i.e., for 250 grams its Rs.121.67/-, for 100 grams its Rs.125.73/- & for 25 grams its Rs.131.22/-



Total cost includes manufacturing & packing cost per kg.



Selling price is also calculated is done depending up on 1kg.



Cost sheet PANEER as on 27.08.2011

1000 Particulars Milk purchase price (1000 kg milk) PTC/kg (1000 * 0.75) Cc chilling cost/kg ( 1000 * 0.15) Cc transportation/kg (1000* 0.42) P & i input cost (0.25*1000) Other administrative cost (1000*0.19) General salary Cost of heating Cost of chemicals Cost of Maslin cloth YIELD in kgs Cost of labour TOTAL MFG COST Cost per kg PACKING COST

200 grm 17400.00 650.00 150.00 420.00 250.00 190.00 2870.00 770.00 42.00 15.00 160.00 441.60 23198.60 144.99

grm 17400.00 650.00 150.00 420.00 250.00 190.00 2870.00 770.00 42.00 15.00 160.00 441.60 23198.60 144.99

Bulk 17400.00 650.00 150.00 420.00 250.00 190.00 2870.00 770.00 42.00 15.00 160.00 441.60 23198.60 144.99

1000 200 gm paneer packet Cost of sealing BOPP tape MC cartons TOTAL TOTAL MFG + PKG COST / KG PROFIT/LOSS SELLING PRICE

200 grm 6.50 0.03 0.00 0.00 6.53 151.52 20.40 171.92

grm 3.75 0.10 0.00 0.00 3.85 148.84 -10.72 138.12

Bulk 0.40 0.00 0.10 0.80 1.30 146.29 -8.17 138.12



INTERPRETATION: 




PTC/kg (1000*0.75).









P&I cost (0.25*1000).






Cost of 1 kg KHOA is Rs. 15.57/-



Packing cost differs depending upon size & weight of PANEER i.e., for 200 grams its Rs.6.53/-, for 1000 grams its Rs.3.85/- & for Bulk its Rs.1.30/-






Profit/loss valuation is done depending on per kg.






Cost sheet of KHOA as on 27.08.2011

Particulars Milk purchase price PTC/kg CC Chilling cost/kg CC Transportation P & I input cost Other administrative cost General salary Cost of Heating Detergent cost Cost of sugar YIELD in kgs Cost of Direct Labour TOTAL COST PER KG PACKING COST VPP Tixo Tape BOPP Tape DC cartons MC cartons

BULK 2088.00 90.00 18.00 49.20 30.00 22.80 258.00 280.00 20.00 0.00 22.00 69.30 2925.00 132.97

200 grms 2088.00 90.00 18.00 49.20 30.00 22.80 258.00 280.00 20.00 0.00 22.00 69.30 2925.00 132.97

0.00 0.00 0.10 0.00 1.00

60.50 0.00 0.00 0.00 1.00


KARNATAKA MILK FEDERATION DHARWAD TOTAL TOTAL COST PROFIT/LOSS/kg SELLING PRICE

1.10 134.07 35.93 170.00

7.50 140.47 39.53 180.00

INTERPRETATION: 




PTC/kg (1000*0.75).









P&I cost (0.25*1000).






Cost of 1 kg KHOA is Rs. 15.57/-


KARNATAKA MILK FEDERATION DHARWAD 

Packing cost differs depending upon size & weight of Khoa i.e., for 200 grams its Rs.6.53/-, for 1000 grams its Rs.3.85/- & for Bulk its Rs.1.30/-







Cost sheet GHEE as on 27.08.2011

PARTICULARS Cost of Butter Fat Conversion cost Cost of film / Tin Cost of M Cartons Rs 21 each

1000 ml 139.35 4.13 1.45 1.75

500 ml 139.35 4.13 1.64 1.75

200 ml 139.35 4.13 2.60 1.75

15 kg Tin 139.35 4.13 5.00 -


KARNATAKA MILK FEDERATION DHARWAD Cost of gum tape / soldering Direct labour Cost of Maintenance Fixed wages ADM charges Agmark Charges Total charges Ghee UTP

0.05 0.11 0.10 2.80 0.08 0.36 150.18 139.95 -10.23

0.05 0.29 0.10 2.80 0.08 0.36 150.55 142.82 -7.73

0.05 0.34 0.10 2.80 0.08 0.36 151.56 147.19 -4.37

0.20 0.10 0.10 2.80 0.08 0.36 152.12 156.18 4.06

177.27

180.9

186.36

185.71

PROFIT/LOSS SELLING PRICE/AGENT RATE

INTERPRETATION:


KARNATAKA MILK FEDERATION DHARWAD 

Cost of M cartons Rs.21 each



Total cost differs depending upon size & weight of Ghee i.e., for 1000ml its Rs.150.18/-, for 500ml its Rs.150.55/-, for 200ml its Rs.151.56/-, for 15kg tin it is Rs.152.12/-



Here selling price is nothing but the agent rate.



Cost sheet of SALTED BUTTER as on 27.08.2011

PARTICULAR

500 gm US

500 gm S

100 gm S

10 gm S

Cost of Butter Cost of salt Cost of VPP Rs 130 / kg Cost of DC Cartons Cost of M Cartons Rs 23 each Cost of Gum Tape/Soldiering Direct labour Cost of Maintenance Fixed wages Adm charges Storage charges Total charges

162.75 0.00 1.02 4.00 1.54 0.78 0.84 0.11 2.80 0.08 0.35 174.27

158.82 0.40 1.02 4.00 1.54 0.78 0.84 0.11 2.80 0.08 0.35 170.74

158.82 0.40 2.21 8.50 1.54 0.78 0.84 0.11 2.80 0.08 0.35 176.43

158.82 0.40 18.78 9.00 1.54 0.78 1.03 0.15 2.80 0.08 0.35 193.73

SELLING PRICE PROFIT/LOSS

180.7 6.43

176.52 5.78

178.03 1.60

168.84 -24.89



INTERPRETATION: 

There are two different types of butter produced by the diary those are salted butter & unsalted butter.



The cost sheet for the salted butter is shown in above table where as the cost sheet prepared for the unsalted butter is shown below.



Cost of VVP is 130/kg.



Cost of M cartons is Rs.21each.



Total cost differs depending upon size & weight of salted butter i.e., for 500grms its Rs.170.74/-, for 100grms its Rs.1176.43/-, & for 10grms it is Rs.168.84/-






Cost sheet of Unsalted Butter as on 27.08.2011

PARTICULAR

500 grms

Cost of Butter Cost of salt Cost of VVP Cost of DC Cartons Cost of M Cartons Cost of Gum Tape/Soldiering Direct labour Cost of Maintenance Fixed wages Adm charges Storage charges Total charges

162.75 0.00 1.02 4.00 1.54 0.78 0.84 0.11 2.80 0.08 0.35 174.27

PROFIT/LOSS SELLING PRICE

6.43 180.7



INTERPRETATION: 

Cost of VVP is 130/kg.



Cost of M cartons is Rs.21 each.



Total cost is 174.27 for 500 grams of unsalted butter.






CHAPTER IV


KARNATAKA MILK FEDERATION DHARWAD A.FINDINGS B.SUGGESTIONS C.CONCLUSION



A.FINDINGS: 

Nandini products have a good image in the market.



Pricing Strategies of the products are appreciated by its customers.



Proper training programs are going on from last few years. Trade union is active.



In the diary the co-ordination at all the levels of management is appreciable.



Lack of consumer awareness about the wide range of products available.



The method of costing adopted by DMU is lengthy & difficult to understand.



The growth percentage of the different milk products is not constant, as the demand for toned milk & standards milk is increase day by whereas the demand for shubham milk is decreasing.



The demand for Nandini milk Peda in twin cities is less as the Mishra Peda & Thakur Peda’s have captured the market.



DMU has a waste area of operation which is geographically spread.



B. SUGGESTION: 

Firstly I would suggest the diary to utilize the whole space available to it. Each & every corner of the infrastructure available should be made use.



Increase the advertisement effect of the various milk products produced by the diary especially in the twin cities.



They should try hard to increase the sales as all the upcoming activities & opportunities depend up on the sales & profit earned by it.



They should try to decrease the cost of the product without making any changes in the quality of the products, as this will automatically increase the profit ratio.



They should try to decrease the cost of such as manufacturing, selling & distribution expenses.



They should try to come up with many more related products & should try to capture the larger share & the market.



They should set the standards for everything for efficient use of resources available & for reducing wastages.

C. CONCLUSION


KARNATAKA MILK FEDERATION DHARWAD DMU is a large scale dairy situated in Lakamanhalli industrial area; it is successfully functioning from the year 1984. It manufactures various types of milk and milk products. Products manufactured by the dairy are qualitative in nature. It has good name in the market. There is sufficient demand for its products in the market. In recognition of the outstanding work done by the company, it has been honored as the “BEST DAIRY” in the district in spite of the healthy completion faced by it. After studying at DMU, I felt that the method of maintaining accounts is in proper manner but in store department still the modern electronic system is missing and they should soon adopt it for reducing the paper work as well the work load of the store’s manager.



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BIBLIOGRAPHY



ANNEXURES





BIBLIOGRAPHY

[email protected] www.kmf.com www.nandini.com BIBLIOGRAPHY

REFERANCE BOOKS:

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