AMUL: A LOGISTICS SUCCESS STORYGujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), is India's largest food product marketing organisation with annual turnover (2012-13) US$ 2.54 billion. Its daily milk procurement is approx 13 million lit per day from 16914 village milk cooperative societies, 17 member unions covering 24 districts, and 3.18 million milk producer members.GCMMF is India's largest exporter of Dairy Products. It has been accorded a "Trading House" status. Many of THE products are available in USA, Gulf Countries, Singapore, The Philippines, Japan, China and Australia. GCMMF has received the APEDA Award from Government of India for Excellence in Dairy Product Exports for the last 13 years. For the year 2009-10, GCMMF has been awarded "Golden Trophy" for its outstanding export performance and contribution in dairy products sector by APEDA.1. BACKGROUNDThe Kaira District Cooperative Milk Producers Union Limited was established on December 14, 1946 as a response to exploitation of marginal milk producers in the city of Anand (in Kaira district of the western state of Gujarat in India) by traders or agents of existing dairies. Producers had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand often milk went sour, especially in the summer season, as producers had to physically carry in individual containers.These agents decided the prices and the off-take from the farmers by the season. Milk is a commodity that has to be collected twice a day from each cow/buffalo. In winter, the producer was either left with surplus unsold milk or had to sell it at very low prices. Moreover, the government at that time had given monopoly rights to Polson Dairy (around that time Polson was the most well-known butter brand in the country) to collect milk from Anand and supply to Bombay city in turn (about 400 kilometres away). India ranked nowhere amongst milk producing countries in the world in 1946.The producers of Kaira district took advice of the nationalist leaders, Sardar Vallabhbhai Patel (who later became the first Home Minister of free India) and Morarji Desai (who later become the Prime Minister of India). They advised the farmers to form a Cooperative and supply directly to the Bombay Milk Scheme instead of selling it to Polson (who did the same but gave low prices to the producers). Thus the Kaira District Cooperative was established to collect and process milk in the district of Kaira. Milk collection was also decentralized as most producers were marginal farmers who would deliver 1-2 litres of milk per day. Village level cooperatives were established to organize the marginal milk producers in each of these villages. The first modern dairy of the Kaira Union was established at Anand (which popularly came to be known as AMUL dairy after its brand name). The new plant had the capacity to pasteurize 300,000 pounds of milk per day, manufacture 10,000 pounds of butter per day, 12,500 pounds of milk powder per day and 1,200 pounds of Casein per day. Indigenous R&D and technology development at the Cooperative had led to the successful production of skimmed milk powder from buffalo milk the first time on a commercial scale anywhere in the world. The foundations of a modern dairy industry in India had just been laid as India had one of the largest buffalo populations in the world.

Some statistics about the company:-The Turnover of Amul was Rs. 52.55 billion in 2007-08.

Members:13 district cooperative milk producers' Union

No. of Producer Members:2.7 million

No. of Village Societies:13,141

Total Milk handling capacity:10.21 million liters per day

Milk collection (Total - 2007-08):2.69 billion liters

Milk collection (Daily Average 2007-08):7.4 million liters

Milk Drying Capacity:626 Mts. per day

Cattle feed manufacturing Capacity:3090 Mts per day

2. PRESENT SCENARIOWe move to year 2010. The dairy industry in India and particularly in the State of Gujarat looks very different. India for one has emerged as the largest milk producing country in the world (see Table 1). Gujarat emerges as the most successful State in terms of milk and milk product production through its cooperative dairy movement. The Kaira District Cooperative Milk Producers Union Limited, Anand becomes the focal point of dairy development in the entire region and AMUL emerges as one of the most recognized brands in India, ahead of many international brands.TABLE 1: World milk productionSource: nddb.orgThe sales turnover of the GCMMF from 1994-2013 is been represented below in chart 1 which helps to get a clear view of the earnings of the company, GCMMF is today nation's largest food company with an annual turnover exceeding Rs. 13735 Crores

Chart 1: Annual Turnover of AMULSource: AMUL.com

3. THE AMUL MODELThe AMUL Model of dairy development is a three-tiered structure with the dairy cooperative societies at the village level federated under a milk union at the district level and a federation of member unions at the state level. Starting with a single shared plant at Anand and two village cooperative societies for milk procurement, the dairy cooperative movement in State of Gujarat had evolved into a network of 3.18 million milk producers (called farmers) who are organized in 16,914 milk collection independent cooperatives (called Village Societies). These Village Societies (VS) supply milk to seventeen independent dairy cooperatives (called Unions). AMUL is one such Union. Milk and milk products from these Unions are marketed by a common marketing organization (called Federation). Figure 1 and 2 together show the structure and the range of activities in this extensive network.

Figure 1,2: Milk supply chain and benefits distribution (Source: AMUL.com)

The AMUL model has helped India to emerge as the largest milk producer in the world. More than 15 million milk producers pour their milk in 1, 44,246 dairy cooperative societies across the country. Their milk is processed in 177 District Co-operative Unions and marketed by 22 State Marketing Federations, ensuring a better life for millions.FUNCTIONS OF VARIOUS TIERS IN THE AMUL MODELA. Village Dairy Cooperative Society (VDCS)a. Collection of surplus milk & payment based on quality & quantity.b. Providing support services to the members.c. Selling liquid milk for local consumers of the village.d. Supplying milk to the District Milk UnionB. District Cooperative Milk Producers Union (Milk Union)a. Procurement of milk from the Village Dairy Societies of the District.b. Arranging transportation of raw milk from the VDCS to the Milk Union.c. Providing input services to the producers.d. Conducting training on Cooperative developmente. Providing management support & regular supervision to the VDCS.f. Establish Chilling Centers & Dairy Plants for processing the milk.g. Selling liquid milk & milk products within the District.h. Process milk into various milk & milk products.i. Decide on the prices of milk to be paid to milk producers.C. State Cooperative Milk Federation (Federation)a. Marketing of milk & milk productsb. Establish distribution network c. Arranging transportation from the Milk Unions to the market.d. Creating & maintaining a brande. Providing Technical Inputs, management support & advisory services.f. Decide on the products to be manufactured at various Milk Unions (product-mix)g. Conduct long-term Milk Production, Procurement, Processing & Marketing Planning

ACHIEVEMENTS

Amul : Asias largest dairy co-operative was created way back in1946 to make the milk producer self-reliant and conduct milk- business with pride. Amul has always been the trend setter in bringing and adapting the most modern technology to door steps to rural farmers. Amul created history in following areas:

a) First self motivated and autonomous farmers organization comprising of more than 5000000 marginal milk producers of Kaira District. b) Created Dairy co-operatives at village level functioning with milk collection centres owned by them.

c) Computerized milk collection system with electronic scale and computerized accounting system.

d) The first and only organization in world to get ISO 9000 standard for its farmers co-operatives. e) First to produce milk from powder from surplus milk.

Amul is the live example of how co-operation amongst the poor marginal farmers can provide means for the socio-economic development of the under privileged marginal farmers.

AWARDS

Amul a co-operative society and its co-operation has led many different awards in its favour. Magsaysay award for community leadership presented in manila, Philippines to Shri Tribhuvandas Patel, Shri D N Khurody and Shri V. Kurien.1964: Padmabhusan award given to Shri T.K. Patel 1965: Padmashri awarded was given to V. Kurien, general manager, by the president of India1987: Best Productivity awarded by national productivity council for the year 1985-86 awarded to Amul dairy.1988: Best Productivity awarded for the second successive year 1986-87 by the president of India, Mr. R. Venkatrao to kaira union.1993: ICA Memento towards genuine and self-sustaining co-operative worldwide ICA regional office for Asia and pacific, New Delhi, 1996.1999: G.B.Birla award.Moreover the Amul union has achieved the prestigious ISO 9001-2000 and HACCP Certificate and effects are got to obtain ISO 14000.

AMUL IN ABOARD

Amul is going places, literally. After having established its presence in China, Mauritius and Hong Kong, Gujarat Cooperative Milk Marketing Federation (GCMMF), Indias largest milk cooperative, is waiting to flood the Japanese market. Then, GCMMF is also looking at Sri Lanka as one of its next export destinations. Amul products are already available on shelves across several countries, including the US, China, Australia, West Asian countries and Africa. GCMMF recorded a turnover of Rs.2,922crore last fiscal. Its products include pouch milk, ultra heat treated (UHT) milk, ice-cream, butter, cheese and buttermilk.

Key information related to Amuls Products :ButterLaunched in 1955, butter was one of the first milk products offered by Amul. It was also the first time Amul successfully challenged the hegemony of an established brand. Amul's earliest competitor, Polson had been the monopoly milk supplier to the Bombay Milk Scheme. Amul displaced Polson to emerge as the undisputed leader in the butter market...CheeseGCMMF launched processed cheese in 1959 followed by cheese powder in the early 1970s. In the 1980s the popularity of cheese increased

Ghee,Skimmed milk powder and Baby food

Amul launched ghee (clarified butter) and skimmed milk powder in 1955. Amul Ghee was an instant success...

Milk and UHT Milk

Amul was the market leader in the Gujarat whole milk market with a 90% market share in 2002. Apart from supplying milk to parts of Maharashtra and Rajasthan, GCMMF also sold milk to the NDDB owned Mother Dairy in Delhi...

As we can see from the products shown above there is : There is product consistency in the product line of Amul as all its products are milk based. Amul deals only in consumer goods and not in industrial goods or any other sector. In 2001, GCMMF entered the fast food market in India with the launch of vegetable pizzas under the brand name SnowCap in Ahmedabad, Gujarat. GCMMF was also planning to launch its pizzas in other western Indian cities like Mumbai, Surat, and Baroda. Depending on the response in these cities, GCMMF would decide to introduce its pizzas in other cities in India.Amul also decided to bring into market low cost pizzas, The pizzas were offered in four flavours: plain tomato-onion-capsicum, fruit pizza (pineapple-topped), mushroom and Jain pizzas'(pizzas without onion or garlic). It entered the Pizza business, where the base and the recipes were made available to restaurant owners who could price it as low as 30 rupees per pizza when the other players were charging upwards of 100 rupee.supplying jain pizzas shows that it was catering to needs of the masses as in India most of the people are vegetarian. SOUPSAmul introduced ready-to-use (just pour and heat) soups branded Masti in tetra packs of one liter. To begin with they were introduced in two flavors - Hot n Sour and Tomato. Said Sodhi, It was a test marketing drive in Gujarat and in a month or two it would be introduced all over India. And there wasnt much competition for there were not many companies in India that sold ready-to-use soups.Sodhi added, Soup is a milk product and thats a secret. You will come to know only when you consume it. Keeping the ingredients a closely guarded secret, the company stated that one of the reasons to launch soups was to utilize the already installed equipment for tetra packaging Amul also brought its range of ice creams into the market . the lucrativeness of this sector was very good and Amul beniffited a lot by entering into ice cream sector. Amul is planning to enter into the sector of bottled water.

Operational costingOperations managementis a multi-disciplinary field that focuses on managing all aspects of an organization's operations. "The typical organization consists of the integration of many different functions, " wrote Howard J. Weiss and Mark E. Gershon inProduction and Operations Management."The two most obvious functions are to provide the product or service and to sell the product or service. Operations management focuses on the function of providing the product or service. It is concerned with the planning and controlling of all activities necessary for the provision of the firm's product or service." Aspects of operations management, then, include products or services to emphasize; facility size and location with respect to customers and suppliers; marketing strategies to attract clients/custmers; techniques and equipment to use to make the goods or to provide the services; work force management and training; and measurements of quality assurance. Operations managers apply ideas and technologies to increase productivity and reduce costs, improve flexibility to meet rapidly changing customer needs, enhance product quality, and improve customer service.

KEY ISSUES IN OPERATIONSAs an organization develops plans and strategies to deal with the opportunities and challenges that arise in its particular operating environment, it should design a system that is capable of producing quality services and goods in demanded quantities in acceptable time frames.DESIGNING THE SYSTEMDesigning the system begins with product development. Product development involves determining the characteristics and features of the good (or service if engaged in a service-oriented industry) to be sold. It should begin with an assessment of customer needs and eventually grow into a detailed product design. The facilities and equipment that will produce the product, as well as the information systems needed to monitor and control performance, are part of this system design process. In fact, manufacturing process decisions areintegralto a system's ultimate success or failure. "Of all the structural decisions that the operations manager faces, the one with the greatest impact on the manufacturing operation's success is the process/technology choice, " said Thomas S. Bateman and Carl P. Zeithaml inManagement: Function and Strategy."This decision addresses the question 'How will the product be made?' " Product development should be a cross-functional decisionmaking process that relies on teamwork and communication to install the marketing, financial, and operating plans needed to successfully launch a product.Product designis a critical task because it determines the characteristics and features of the product, as well as how the product functions. Product design determines a product's cost and quality, as well as its features and performance. These are important factors on which customers make purchasing decisions. In recent years, new design models such as Design for Manufacturing and Assembly (DFMA) have been implemented to improve product quality and lower costs.DFMA focuses on operating issues during product design. This can be critical even though design costs are a small part of the total cost of a product, because, procedures that waste raw materials or duplicate effort can have a substantial negative impact on a business's operating profitability. Another innovation similar to DFMA in its emphasis on design is Quality Functional Deployment (QFD). QFD is a set of planning and communication routines that are used to improve product design by focusing design efforts on customer needs.Process designdescribes how the product will be made. The process design decision has two major components: a technical (or engineering) component and a scale economy (or business) component. The technical component includes selecting equipment and selecting asequencefor various phases of operational production.The scale economy or business component involves applying the proper amount of mechanization (tools and equipment) to make the organization's work force more productive. This includes determining: 1) If the demand for a product is large enough to justify mass production; 2) If there is sufficient variety in customer demand so thatflexible productionsystems are required; and 3) If demand for a product is so small or seasonal that it cannot support a dedicated production facility.Facility designinvolves determining the capacity, location, and layout for the production acility. Capacity is a measure of an organization's ability to provide the demanded services or goods in the quantity requested by the customer in a timely manner.Capacity planninginvolves estimating demand, determining the capacity of facilities, and deciding how to change the organization's capacity to respond to demand.Facility location is the placement of a facility with respect to its customers and suppliers. Facility location is a strategic decision because it is a long-term commitment of resources that cannot easily or inexpensively be changed. When evaluating a location, management should consider customer convenience, initial investment necessary to secure land and facilities, government incentives, and operating transportation costs. In addition, qualitative factors such as quality of life for employees, transportation infrastructure, and labor environment should also be taken under consideration.Facility layout is the arrangement of the work space within a facility. It considers which departments or work areas should be adjacent to one another so that the flow of product, information, and people can move quickly and efficiently through the production system.PLANNING THE SYSTEMPlanning the system describes how management expects to utilize the existing resource base created as a result of the production system design. One of the outcomes of this planning process may be to change the system design to cope with environmental changes. For example, management may decide to increase or decrease capacity to cope with changing demand, or rearrange layout to enhance efficiency.Decisions made by production planners depend on the time horizon. Long-range decisions could include the number of facilities required to meet customer needs or studying how technological change might affect the methods used to produce services and goods. The time horizon for long-term planning varies with the industry and is dependent on both complexity and size of proposed changes. Typically, however, long-term planning may involve determining work force size, developing training programs, working with suppliers to improve product quality and improve delivery systems, and determining the amount of material to order on an aggregate basis. Short-term scheduling, on the other hand, is concerned with production planning for specific job orders (who will do the work, what equipment will be used, which materials will be consumed, when the work will begin and end, and what mode of transportation will be used to deliver the product when the order is completed).MANAGING THE SYSTEMManaging the system involves working with people to encourage participation and improve organizational performance. Participative management and teamwork are an essential part of successful operations, as are leadership, training, and culture. In addition, material management and quality are two key areas of concern.Material management includes decisions regarding the procurement, control, handling, storage, and distribution of materials. Material management is becoming more important because, in many organizations, the costs of purchased materials comprise more than 50 percent of the total production cost. Questions regarding quantities and timing of material orders need to be addressed here as well when companies weigh the qualities of various suppliers.BUILDING SUCCESS WITH OPERATIONSTo understand operations and how they contribute to the success of an organization, it is important to understand the strategic nature of operations, the value-added nature of operations, the impact technology can have on performance, and thegloballycompetitive marketplace.Efficient organization operations are a vital tool in achieving competitive advantage in the daily contest for customers/clients. What factors influence buying decisions for these entities? For most services and goods, price, quality, product performance and features, product variety, and availability of the product are critical. All these factors are substantially influenced by actions taken in operations. For example, when productivity increases, product costs decline and product price can be reduced. Similarly, as better production methods are developed, quality and variety may increase.By linking operations and operating strategies with the overall strategy of the organization (including engineering, financial, marketing, and information system strategy)synergycan result. Operations become a positive factor when facilities, equipment, and employee training are viewed as a means to achieve organizational objectives, rather than as narrowly focused departmental objectives. In recognition of this evolving viewpoint, the criteria for judging operations is changing from cost control (a narrowly defined operating objective) to global performance measurements in such areas as product performance and variety, product quality, delivery time, customer service, and operational flexibility.In today's business environment, a key component of operational flexibility in many industries is technological knowledge. Advances in technology make it possible to build better products using fewer resources. As technology fundamentally changes a product, its performance and quality often increases dramatically, making it a more highly valuedcommodityin the marketplace. But the growth in high-tech business applications has created new competitiors as well, making it important for businesses to try to register advantages in any and all areas of operations management.Over time, operations management has grown in scope and increased in importance. Today, it has elements that are strategic, it relies on behavioral and engineering concepts, and it utilizes management science/operations research tools and techniques for systematic decisionmaking and problem-solving. As operations management continues to develop, it will increasingly interact with other functional areas within the organization to develop integrated answers to complexinterdisciplinaryproblems. Indeed, such interaction is widely regarded as essential to long-term business success for small business establishments and multinational corporations alike.

Financial Performance Analysis can be carried out by using various analytical tools like trend analysis, horizontal analysis, cash flow statement analysis, & various important ratios. Ratios have evolved substantially over a period of time. I have studied the effect of different variable of liquidity & profitability of AMUL for last 10 years from 2001-02 to 2010-11 by using Pearsons correlation for analysis. The result shows that there is moderate negative correlation between liquidity & profitability. The purpose of this study is to familiarize the readers with various analytical tools and their usefulness in the financial analysis of an organization. The idea of this project is to know the short term as well as long term financial position of AMUL.AMUL is Asias no. 1 and worlds second number co-operative dairy. It has large market and dairy network in every state of India and across the India, like central Asian countries, Bangladesh, Thailand, Indonesia, Malaysia, Singapore, etc. It was started with 250 liters of milk and 2 societies and now, it produces 10 lakhs litters milk per day and has 1113 societies and more than 6 lakes farmer members. It produces milk and milk products. The main motto of AMUL is to help farmers. Farmers were the foundation stone of AMUL. The system works only for farmers and for consumers, not for profit. The main aim of AMUL is to provide quality products to the consumers at minimum cost. The goal of AMUL is to provide maximum profit in terms of money to the farmers.Vision of AMUL is to provide and vanish the problems of farmers (milk producers). The AMUL apparition was to run the organization with the co-operation of four main parties, the farmers, the representatives, the marketers, and the consumers.YearMilk procured (in kgs)Sales turnover (Rs. In lack)

2000-0127784086150919

2001-0225869244346878

2002-0325795772648834

2003-0425585643554593

2004-0527615037460047

2005-0629743624670922

2006-0732441053681632

2007-08401718616107712

2008-09468587136137807

2009-10498033310169989

2010-11515900000211140

OBJECTIVE OF THE STUDY: The objective of financial statement is to know information about the financial position, performance & cash flows of an enterprise with the help of analytical tools. To know the Market Position AMUL by taking Market Value Ratios To know the tradeoff between Liquidity & Profitability.DEVELOPMENT OF HYPOTHESIS:H0:There is no positive relationship between the Liquidity & Profitability of AMUL.H1:There is positive relationship between the Liquidity & Profitability of AMUL.TESTING OF HYPOTHESIS:STEP 1:Financial Performance on the basis of Profitability & Liquidity Analysis

Relationship Between Current Ratio & Operating Profit Ratio

YearsCROPR

2001-022.70288.380

2002-033.24089.342

2003-042.37690.460

2004-052.34490.199

2005-062.13691.035

2006-071.73890.957

2007-082.13692.178

2008-091.65291.873

2009-101.39492.580

2010-111.431947.906

r-0.415

Relationship Between Current Ratio & Net Profit Ratio

YearsCRNPR

2001-022.7020.314

2002-033.2400.405

2003-042.3760.467

2004-052.3440.523

2005-062.1360.461

2006-071.7380.504

2007-082.1360.421

2008-091.6520.419

2009-101.3940.436

2010-111.4310.440

r-0.323

STEP 2: FIVE DIFFERENT CORRELATIONS1) Strong Negative Correlation (r=-0.933)2) Moderate Negative Correlation (r=-0.674)3) Moderate Positive Correlation (r=0.514)4) Strong Positive Correlation (r=0.909)5) Virtually No Correlation (r=-0.004)STEP 3: INTERPRETATION1) Correlation Result between the Operating Profit & Current Ratio shows a Moderate Negative Correlation between them, & that if the current ratio increases it will have a negative impact on profitability & it will decreases because there is a correlation r=-0.41472. Here AMULs current ratio is more than standard of 2:1, this indicate negative reflection towards current assets2) Correlation Result between the Net Profit & Current Ratio shows a Moderate Negative Correlation between them, & that if the current ratio increases it will have a negative impact on profitability & it will decreases because there is a correlation r=-0.32255. This indicates that if CR is increased by 1 Rs on liquidity basis, it reduces NPR by 0.32255 paisa on profitability.3) Correlation result between Liquidity & Profitability have Moderate Negative CorrelationANALYSIS & DISCUSSION:Financial analysis is the starting point for the making plans, before using any sophisticated forecasting & planning procedures. A number of tools are available in the tool kit of the analyst for the purpose certain tools are:1. Trend analysis2. Horizontal analysis3. Cash flow statement analysis4. Ratio analysis1) TREND ANALYSIS:

INTERPRETATION:1. Consistent rise in sales that shows overall growth in sales of their products in dairy consumption.2. Consistent rise in production throughout the year. Consistent rise in sales throughout the year, but production is more than the sales.3. Growth in gross block & sales neck to neck that shows high fixed assets efficiency & its utilization of uses are more. Growth in net worth is neck to neck that shows high leverage & high dividend distribution around 75% to their consistent farmers2) HORIZONTAL ANALYSIS:Gross Profit16342.7414314.022028.7214.173

PBDIT4327.003350.05976.9529.162

less: Depreciation1614.631121.41493.2243.982

EBIT2712.372228.64483.7321.705

less: Interest1569.381252.58316.825.292

EBT1142.99976.06166.9317.102

less: Tax Provision212.78255.00-42.22-16.557

PAT930.21721.06209.1529.006

Net Profit926.67735.75190.9225.949

Shareholders' Funds:6826.575756.611069.9618.587

Loan Funds:21227.5619111.572115.9911.072

FIXED ASSETS (Net Block)15270.8714046.241224.638.719

Investments1040.58515.33525.25101.925

Current Assets, Loan & Advances:37290.6140524.27-3233.66-7.980

Current Liabilities & Provisions27362.6930422.64-3059.95-10.058

Net Current Assets9927.9210101.63-173.71-1.720

INTERPRETATION:1. The results:through profit at every stage that is PBDIT, PBIT, PBT is higher in absolute terms, it has not been able to maintain growth equal to sales. PBT has grown by just 17.10%2. Tax provision is lower by 16.56% thus improving PAT growth to 29.01% as against PBT growth. In comparison to sales growth however PAT growth in very positive due to maintaining material cost, manufacturing cost. It shows increment in net profit.3. Net worth (shareholders fund) up by 18.59% as against lower growth in loan funds by 11.07%. it shows very strong financial position.Net fixed assets higher by only 8.72% where as net sales grew by 24.69%. it shows very efficient fixed assets utilization.4. Investment grew by 101.92%. Investment in absolute terms very high. It is much more than net worth (18.59%). So it shows a very unique feature.3)DUPONT ANALYSIS:

OR3) DU PONT ANALYSIS

RATIONET PROFIT MARGIN*NET WORTH TURNOVER=RONW

FORMULAEPAT/Net Sales*100*Net Sales/Net Worth=PAT/Net Worth*100

2001-020.31*37.09=11.65

2002-030.41*30.13=12.20

2003-040.47*16.89=7.89

2004-050.52*17.22=9.01

2005-060.46*19.06=8.79

2006-070.50*19.72=9.94

2007-080.42*23.89=10.06

2008-090.42*29.67=12.43

2009-100.44*34.48=15.03

2010-110.44*36.49=16.06

INTERPRETATION:1) Increase in ROA contributed by improvement in both the net profit margin as well as net assets turnover.2) This finding indicates that an ideal situation for the AMUL.OVERALL CONCLUSION:Financial statement summarizes an AMULs financial position at a given moment in time as well as over longer period. They should reflect any variance between the actual operating result & the budgeted goals that were previously approved by the company.

cost sheet analysis

Direct Cost :1) Direct materials

To manufacture one ice cream cup below are the components or raw materials required with their unit cost :

Dry Fruits 3 %Milk 70%Flavours 5 %Other ingredients 4 %Sugar 16 %Cup 2 %2) Direct Labour : There are 17 workers employed in the production of the ice cream and each worker is paid Rs 2000 per month .3) Direct Costs or expenses :The direct cost includes costs incurred in bringing the raw materials into the factory ie. Carriage inward. The raw materials are purchased every month and costs involved for carriage are Rs 1840.

Indirect Costs:

1) Factory Overheads:

The Factory Overheads includes the indirect labour, factory rent, insurance and depreciation on machinery, power, factory supervisors salary ,packing material, ware house expenses and other factory expenses.

Indirect labour : This includes 3 sweepers whose average salaries are Rs. 1000 each.

Insurance: The total insurance amount is Rs 15000.

Break up of the total insurance amount for Machinery - 1200000

Land - 500000(1000 sq. ft. * Rs. 500 per sq. ft.)

Depreciation on machinery : There are 6 machines in the factory ,one machine is used for making ice creams which is Boiler and other are Refrigerators . The cost of Boiler is Rs 300000 and Refrigerators are worth of Rs. 900000. The depreciation method followed is SLM @ 7%.

Power & Fuel: The monthly average cost of power consumption of the factory is Rs 42375.

Supervisors salary : The factory has 2 supervisors and salary of each supervisor is Rs 2500.

Cost of maintenance : oiling and cleaning of machinery and other miscellaneous expences for maintainance.

2) Office and administration overheads:-Office and administration overheads include office rent, salary to staff, office and general expenses, printing and stationary, telephone expenses, electricity and lightings Office rent: The per sq.ft rate of the Office is Rs 18.The area of the factory is 300 sq.ft.

Salary to staff : the office staff has three employees. A peon, clerk and an Accountant and the salaries are Rs 800, Rs 2200 and Rs 4000 respectively.

Office and general expenses: This comprise refreshments(tea and snacks).

Telephone Expenses:- Calls made by the staff members.

Electricity and lightings:- It consists of office lighting and air conditioning expenses.

3) Sales and distribution overheads:-

Sales Commission : As a part of encouragement for sales people ,they are given commission of 2.5 % of the total sales done by them.

Discount allowed : To attract retailer to buy the product they are offered a discount of 5% on the selling price.

Salary of salesmen : The company has 5 sales persons and they are paid a salary of Rs 3500 each per month.

Carriage outward: To carry the finished goods to the whole sellers , the transportations charge per unit/product is set as Re 1.24.

Assumptions : The company produces only one product All raw materials consumed in production of ice cream The production and sales units are same. In Valuation of plant, the rate per square feet has been assumed at Rs. 500. We gave a discount to retailer on 450000 units on bulk purchase.

SWOT ANALYSIS

STRENGTHS:The amul ice-creams brand is one of the the top 3 brands .As its an Indian brand its popular as a family brand. Its available in all metropolitan cities and is in the reach of middleclass &above middleclass .Its available in many flavours and most of these are Indian flavours liked by Indians. They are available in various sizes. They are available in reasonable prices.They have launched brands such as sugar free probiotic ice-creams. There are many premium varieties. Its got good food energy value i.e calories per 100ml-196.7.

WEAKNESS:The durability of amul ice-creams is not really good, it melts very soon. It does not have many outlet centers.Not a famous brand among youngsters who are the main customers of ice-cream.

OPPORTUNITIES:They can come up with new flavours which would be able to attract the youth .They should not restrict themselves to departmental stores infact come with new luxury brands which can be available in hotels and they should come up with their own ice-cream parlours. They should focus more on their advertising and marketing strategies. They should use a strategy similar to what they used in case of butter (Utly butterly girl ).They should come up with offers for purchase of ice-cream in whole market . Offers should run all throughout the year; not only in winters. There should emphasis for special occasions.

THREATS :The biggest threat for amul ice-cream industry would be its competitors. Its ranked 3rd in the Indian market . It faces tough competition from the unorganized sector as well. A slight change in the price of the ice-cream would shift its customers to another brand. Foreign players like Baskin- Robbins entering Indian market with new premium brands at feasible prices.

THREATSOPPORTUNITIESWEAKNESSSTRENGTHS

Cost Sheet of Amul Ice Cream

ParticularsCost per unit Amount

opening stock 10.00 1,000,000.00

Raw materials 3.00 300,000.00

Dry fruits 2.50 250,000.00

Milk 3.00 300,000.00

Flavors 3.50 350,000.00

Other ingredients 2.00 200,000.00

Sugar 2.50 250,000.00

Cup 1.50 150,000.00

Cutlery 1.00 100,000.00

Seasonal fruits 0.50 50,000.00

Waffle 1.00 100,000.00

Cocoa 1.50 150,000.00

8.00 3,200,000.00

Carriage inward 1.85 184,500.00

Raw materials Consumed 33.85 3,384,500.00

Direct expenses 2.20 220,000.00

Direct labour 5.30 530,000.00

Prime cost 40.05 750,000.00

Factory overheads

Fixed

Depreciation 2.50 250,000.00

Rent 1.00 100,000.00

Power 1.75 175,000.00

Insurance 1.50 150,000.00

Supervisor's 0.60 60,000.00

salary 0.70 70,000.00

Variable: 1.00 100,000.00

Electricity 9.05 905,000.00

Running exp of machine

work cost 50.40 5,039,500.00

Office over head

Employee cost 10.00 1,000,000.00

Other expenditure

computer 1.20 120,000.00

Telephone 0.10 10,000.00

Taxes 0.40 40,000.00

Carriage outward 0.20 20,000.00

cost of production 62.30 6,229,500.00

Opening stock 2.00 200,000.00

Closing stock 64.30 6,429,500.00

Cost of goods sold

Selling and distribution expenses 4.00 400,000.00

Advertisement 3.50 350,000.00

Delivery Vehicles 1.75 175,000.00

Petrol 0.51 50,500.00

Packaging 74.05 7,405,000.00

Cost of sales

Profit 18.50 1,851,250.00

Sales 92.56 9,256,250.00

Marginal Cost Sheet

Particulars Amount

Sales 9,256,250.00

Variable Cost

Purchases 3,200,000.00

Raw material consumed 3,384,500.00

Contribution 2,671,750.00

Fixed cost

Factory cost 905,000.00

Employee cost 1,000,000.00

Deprecation 100,000.00

Other expenditure 190,000.00

Profit 476,750.00

Marginal costing is an accounting technique. Marginal costing is not a system ofcosting such as process or job costing. As marginal costing is a technique, it may be used in conjunction with any costing method. Marginal costing as a technique helps the management to measure the profitability of an undertaking by considering the underlying cost behavior. Marginal costing is an impotent technique, which guides the management theory. Marginal costing is also known as direct costing or variable costing or differential costing orincremental costing orcomparative costing.Marginal costing is a very useful tool for management because of its following applications and merits

Cost control:

Marginal costing divides the total cost into fixed and variable cost can be controlled by the top management and that to limited extent. Variable costs can be controlled by the lower level of management. Marginal cost by concentrating all Efforts on the variable costs can control and thus provides a tool to the management for control of total cost. In marginal costing fixed costs are not eliminated at all. These are shown separately as a deduction from the contribution instead of merging with cost of sales and inventories. This helps the management to have a control on fixed costs.

Profit planning

Marginal costing helps the profit planning, that is planning for future operations in such a way s to maximize the profits to maintain a specified level ofprofit. Profits are increased or decreased as a consequence of fluctuations in sellingprices, variable costs, and sales quantities in case there is fixed capacity to produce and sell.

Evaluation of performance Evaluation of performance is the different products, departments markets and sales divisions have differentprofit earning potentialities. Marginal cost analysis is very useful for evaluating theperformance of each sectorof a concern. Performanceevaluation is better done if distinction ismade between fixed and variable expenses.

Decision making:The information provided by the total cost method is not sufficient in solving the management problems. Material costing techniques is used in providing assistance to the management in vital decision making, especially in declaring with the problems requiring short-term. Introduction of a new product or line:A business concern producing only one type of article or multi product concern may add another product either to make use of the available felicities which are otherwise idle or to capture new market.

These are also use of the marginal costing:

Fixation of selling price

Key or limiting factors.

Make or by decisions4.

Selection of a suitable product mix.

Effect of change in price.

Maintaining a desired level of profit.

Alternative methods of products.

Diversification of products.

Closing down or suspending activities.

Alternative course of action

Cost sheet

Particulars Amount

material Consumed 708000.00

Direct wages 371000.00

Prime Cost 1,079,000.00

Production Over head (20% On Prime Cost)

(1079000/100*20%) 215,800.00

Less -Closing working in Progress

material 17000.00

Wages 8000.00

Work over head 5000.00 (30,000.00)

Work Cost 1,264,800.00

Add Administration Over head @3 Pre finished unit

(30000+100)*3 93,000.00

Cost of goods produced 1,357,800.00

Less -Closing of finished goods (1000 Units)

1357800/31000*100 (43,800.00)

Cost of goods sold 1,314,000.00

Add Selles And distribution overheads

(30000*4) 120,000.00

Cost of Sales 1,434,000.00

Add Profit for year 66,000.00

Sales 1,500,000.00

Particular DetailsAmount(Rs)

Profit and loss a/c as per cost a/c66,000.00

Add Production over head (over absorbed)

(215800-213000)2,800.00

Salary and distribution over head (over absorbed)

(120000-113500)6,500.009,300.00

Less Administration over head (under absorbed)

(95000-93500)2,500.00

Over head of closing stock

(43800-40000)3,800.006,300.00

Profit as per financial account 69000

Cost SheetParticularsAmount (Rs)Total Am (Rs)

(A)Standing charges

Depreciation (WN-2) 70,000.00

Interest on capital @4% (WN-3) 14,000.00

Office establishment @ Rs.1000 per month (WN 4) 12,000.00

licenses and taxes @ Rs.1000 every six months(WN-5) 2,000.00

Rent of six garages @ Rs.50 each month (WN -6) 3,600.00

Directors fees @ Rs.400 per month (WN -7) 4,800.00

(A)Total 106,400.00

(B)Repair Chargers

Repair And maintenance 56,000.00

Realization by sales of old tyres and tubes (WN -8) (6,400.00)

(B)Total 49,600.00

Running charges

Wages of 10 drivers @ Rs.100 each per month (WN -9) 12,000.00

wages of Rs.20 cleaners @ Rs. 50 each per month(WN-10) 12,000.00

Total 24,000.00

Total (A+B+C) 180,000.00

passengers900

kms during 1600

Passengers Kms Total (WN -11)1440000

Cost Per Passenger (WN -12)0.125

Working Note1. 5 passenger buses costing -50000.00+120000+45000+55000+80000=3500002. Yearly depreciation of vehicles 20% of the cost - 350000/100*20=700003. Yearly rate of interest @ 4%on capital -350000/100*4=140004. Office establishment @ Rs.1000 per month -1000*12=120005. Licenses and taxes @ Rs.1000 every six months -1000*2=20006. Rent of six garages @ Rs.50 each month -6*50=300*12=36007. Directors fees @ Rs.400 per month 400*12 =48008. Wages of 10 drivers @ Rs.100 each per month -10*100=1000*12=120009. wages of Rs.20 cleaners @ Rs. 50 each per month 20*50=1000*12=120010. realization by sales of old tyres and tubes @ Rs.3200 every six month 3200*2=640011. Total passenger km = Total Passenger *Total kms = Total Passengers Kms =900*1600=144000012. Cost Per Passenger = Total Expanses /Total passengers kms = 180000/1440000 =0.125

Conclusion

Ice Cream market will expand with increase in number of malls. Also companies like - HLL has been increasing their ice cream outlets - Swirl. Few years ago consumers use to go out for walk after dinner and use to buy ice creams from hawkers. But now consumer who often visit malls for entertainment prefers to buy ice creams during different times of the day as it is visible upfront and feel like spending Rs. 50 for that tasty chocolate swirl with cake and nuts.

As marketers are understanding the different needs of consumers, be it health conscious people- (Amul sugar free and pro-life ice-cream) , kids, youngsters, etc, and are coming up with products specific for them., with portfolio of flavors, consumer today has plethora of options at hand to choose from and therefore high probability of buying one more scoop of ice cream. Also with increasing wallet size and innovative modern retail formats, it has definitely given a Philip to the ice cream industry in India.

The factors considered by the customer before purchasing milk are freshness, taste, thickness and availability.

Finally I conclude that, majority of the customers are satisfied with the Amul milk and Milk products because of its good quality, reputation, easy availabilities. Some customers are not satisfied with the Amul Milk because of high price, lack of dealer services, spoilage and low shelf life etc. therefore, if slight modification in the marketing programme such as dealers and outlets, promotion programmers, product lines etc., definitely company can be as a monopoly and strong market leader.

Amul has also to take care of its competitors into consideration and more importantly its customers before making any move.