Bus Feasibility Final Project

8/12/2019 Bus Feasibility Final Project

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DECLARATION

I, the undersigned, hereby declare that the Project Report entitled "

MARGINAL COSTING written and submitted by me to the University

of Pune, in partial fulfillment of the requirement for the award of

degree ofMaster of Commerce in Cost and or! Accountin under

the guidance of #r$ A%$LO&%AN#ALA is my original work and the

conclusions drawn therein are based on the material collected by

myself.

Place: Pune

Research

Date:

Student Robab Sarvari Ali

Babaloo


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MARINAL COSTIN

A Stud! "ith re#erence TRA$ELTIME CAR

RENTAL P$T% LTD

A Pro&ect re'ort sub(itted to Pune )niversit! *Pune* Maharashtra%

In #ul#ill(ent #or the a"ard o# the de+ree o#

MASTER O, COMMERCE

IN

COST AND -OR.S ACCO)NTIN

B!

ROBAB SAR$ARI ALI BABALOO

)nder the estee(ed +uidance o#

DR% ABBAS /%LO./AND-ALA

DEPARTMENT O, COMMERCE

POONA COLLEE O, ARTS*SCIENCE 0 COMMERCE

1A##iliated To* and A''roved b! )niversit! o# Pune 2

P)NE3 455665

2010-2011


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AC.NO-LEDEMENT

I express our deep sense of gratitude and indebtedness to the Principal,

Dr% A#tab An"ar Shai7h .and Vice Principal and Head of the

Commerce Department , Pro#% 7halid 8aheer of Poona College of

Commerce , Pune, for the encouragement given to me to complete the

project and for the facilities provided to me through out the project.

I am thankful to our guide and coordinator DR% Abbas /%Lo7hand"ala

for his valuable guidance and kind cooperation right from the beginning

of the project report.

I am thankful ver much for her kind constant encouragement and

guidance sho!n during the course of our project.

RO'A' SAR(ARI ALI 'A'ALOO


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ABSTRACT

" project gives a brief stud regarding marginal costing and about its

objectives ,features and various tpes of the cost related to marginal

costing. #ne of the important tools of marginal costing is $reak%even

point and it facilitates the determination of selling price and also helps

the

management for costing profit to plan optimum utili&ation of thecapacit

etc. $ased on the topic the project analses the marginal costing of the

compan and it gives brief report of the performance of the compan

and tested hpothesis and !hich is useful for decision making of the

management.


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Cha'ter35

Meanin+ and De#inition o# Mar+inal Costin+ 3

Ob&ectives o# Mar+inal Costin+ 9 Si+ni#icance

,eatures o# Mar+inal Costin+

,ied and $ariable Cost

Practical a''lication o# Mar+inal Costin+

Contribution Anal!sis

Pro#it $olu(e Ratio

Mar+in o# Sa#et!

Brea7 even and C$P Anal!sis

Brea7 even Chart


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Cha'ter3;

Na(e *addresses

$ision

Mission

Core value

/istor! o# co('an!

Or+ani8ation chart

Activities o# co('an!

Services b! co('an!


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Cha'ter here, C ? Contribution

* ? *ales

V ? Variable Cost.

Contribution is the difference bet!een selling price and variable cost of

sales. In marginal costing contribution is the base in the process of

determining profitabilit of each product. >hen t!o or more products

are manufactured net profit per product can/t be ascertained as the fixed

overhead are charged in total to the profit and loss account. Hence

contribution per product plas a ver important role in determining

profitabilit of each product. It is a surplus generated b the product for

recover of fixed costs.


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Ea('le:

Particulars Product) Product$

*elling Price per unit 7s. 0@@ 7s. 0A@

5ess6 Variable cost ;@ B@

Contribution Per nit ;@ 2@

(hus, though selling price of product $ is higher than the selling price of

product a contribution per unit of product $ is less than of product ).

usuall selling price includes an element of profit. Ho!ever, products

ma be sold at no profit no loss basis or sometimes ma be at loss.

(herefore., the follo!ing e'uations can be used6

0. Contribution ? ixed Cost : Profit 3>here product is sold at

profit4

A. Contribution ? ixed Cost 3>here product is sold at profit4

1. Contribution ? ixed Cost % 5oss 3>here a loss is incurred4

? ixed Cost

P ? Profit

C ? Contribution


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If an three factors are given, the fourth can be ascertained. (he

e'uation is also used for the ascertainment of +$reak 9ven Point+ 3$9P4

that. (he point or level !here there is no profit or no loss.

Profit Volume 7atio

. (his is popularl kno!n as P V 7atio,. It expresses the relationship

bet!een contribution and sales. It is expressed in percentage. PV ratio is

given b the formulae6

*% V 0@@ ? C.0@@

s s

>here, C ? Contribution 3being the difference bet!een sales and

variable costs4

* ? *ales

V ? Variable Costs

PV 7atio can be determined b expressing change in profit or loss in

relation to change in sales. PV 7atio indicates the relative profitabilit ofdifferent products, processes and departments. PV 7atio is most

important in business. It is the indicator of the rate at !hich the

organi&ation in earning profit. ) high ratio indicates a high profitabilit

and a lo! ratio indicates lo! profitabilit. It is useful for calculating

$reak 9ven Point, profit at a given level of sales, sales re'uired to earn a

certain amount of profit, etc.


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Mar+in O# Sa#et!:

It is the excess of present value over the break even sales."argin of safet indicates the strength of a business. High margin of

safet indicates that profits !ill be earned even if there is a fall in the

selling price. #n the other hand if the margin of safet is small, a decline

in sales value !ill be a matter of great concern to the management. In

such a situation, management ma be re'uired to take the follo!ing

decision

Increase the selling price,

Increase the level of activit,

7educe costs,

*ubstitute the existing product !ith more profitable product.

"argin of safet is also popularl kno!n as "-/s. it is the excess of

actual sale ofproduction volume over the $reak 9ven

B! #or(ula Mar+in o# sa#et! could be stated as:

0. "-s. % 3sales. units% break even units4.

"-*. ?Profit

P V 7atio

A. "-s. is directl related to profit. (his is sho!n belo!6

P ? "-s PV 7atio.


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If the margin of safet is large the business prospect are strong. )s

against this, if the margin of safet is small, the business prospects are

!eak. (he margin of safet indicates the profitabilit. (he margin of

safet could be improved b increasing the selling price, !hich

improves sales revenue or b reducing the costs.


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Brea73Even And C$P Anal!sis

$reak%even analsis refers to ascertainment of level of operations !here

total revenue e'uals to total costs. It is an analsis used to determine theprobable profit or loss at an level of operations. $reak%even analsis in

a method of studing the relationship among sales revenue, variable cost

and fixed cost to determine the level of operation at !hich all the costs

are e'ual to its sales revenue and it is the no profit no loss situation. (his

is an important techni'ue used in profit planning and managerial

decision making. $reak%even Point is the point at !hich total revenue is

e'ual to total cost. It is the level of output 3or sale4 !here there is no

profit no loss. )t this stage contribution is just sufficient to absorb fixed

cost. (he organi&ation starts earning profit !hen the output or sales

activit crosses this point. #utput or sales belo! this point result in the

loss. $9P can be calculated b the follo!ing formula6

In terms of output ? ixed Cost

Contribution per unit

In terms of *ales Value ? ixed Cost

P V 7atio

Assu('tion o# Brea7 Even Anal!sis:

1. Costs can be classified into fixed and variable categories.

2. ixed costs remain fixed for the entire volume.

3. Variable costs change according to the change in output.

4. *elling price per unit remains the same for the entire volume.


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)ses o# Brea7 Even Anal!sis:

1. It facilitates determination of selling price !hich !ill give the

desired profits.

2. 0t makes it possible to divide the sales volume to cover a given

rate of return on capital emploed.

3. (he management can forecast profit and volume at levels of 2

activit.

4. 0t suggests to make a change in sale mix.

5. 0t helps management to do inter%firm comparison of

profitabilit.6. 0t sho!s the impact of changes in costs on profits.

7. 0t enables the management to plan for the optimum utili&ation

of capacit.

Li(itations o# Brea7 Even Anal!sis:

1. $reak 9ven )nalsis is based on the assumption that costs can

be classified into fixed and variable categories. In practice it is

ver difficult to have such a clear cut distinction bet!een fixed

and variable cost. (hese are certain costs !hich cannot be

classified accuratel.

2. It assumes that fixed cost remains constant ho!ever, in

practice it ma change.3. Variable costs ma not var in direct proportion to the volume.

4. *elling price ma not remain constant.

5. (he assumption that onl one product is produced, does not

hold true in practice.

6. (he assumption regarding production and sales does not

reali&e in practice.


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7. (he analsis is static ho!ever, circumstances are dnamic.

$reak 9ven )nalsis becomes complicated !hen all these

changes are to be incorporated.

8. It does not consider capital emploed in business. It presents

onl one fact of profit planning.


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C#*( %V#5"9 %P7#I( )=)5*I*6

Cost %Volume %Profit3CVP4 analsis is an important tool that provides the

management !ith useful information for managerial planning and decision%making. Profit of a business firm are the result of interaction of man factors.

*uch factors determine, !hether !e have profits or losses and !hether profits

increase or decrease over%time.

Cost%Volume%Profit 3CVP4 analsis is a sstematic method of examining the

relationships bet!een selling prices, total sales revenue, volume of production,

expenses and profit. (his analsis simplifies the real global conditions that a

business enterprise is likel to face. CVP analsis can pla an important role

b providing the management !ith information regarding the financial results

if a specified level of activit or volume fluctuates.

The success o# a business is (easured in ter(s o# 'ro#it and 'ro#it is

de'endent on three basic #actors:

a) Cost of production

b) *elling prices

c) Volume of sales

(hese three factors are inter%dependent because cost determines selling price to

arrive at the desired level of profitE the selling price affects the volume of sales,

the volume of sales directl affects the volume of production and volume of

production in turn influences cost. )n understanding of the inter%relationship

bet!een these factors is extremel useful to management in budgeting and


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profit planning. (his is because C.V.P. )nalsis helps in predicting the

probable effects of change in an of these factors on the remaining factors.


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C/APTER ;

COMPAN PRO,ILE


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INTROD)CTION O, T/E COMPAN

Co('an! Pro#ile

a2 Na(e :3

(ravel (ime Car 7entals Pvt 5td

b2 Address :3

$ >ings, )stral Court, )undh, Pune 6 200 @@F

c2 Nature o# Business :3

7enting vehicles on hire charges

d2 Nu(ber o# !ears o# business :3

*ince last 0@ ears

e2 Clients:3

*oft!are Companies like Infoss 5td, (C5 etc.,

"ultinational and manufacturing companies.


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$ision o# co('an!:

$ision:(o be the most *afe, 7eliable and *upportive travel service provider in

the industr.

Mission o# co('an!:

Mission6 (o provide timel, effective and safe, transport

Core $alues:

$e responsible to!ards the societ !e live in b providing an environment%

friendl fleet of vehicles.

$eing creative and consistent in our services.

(rain and maintain 'ualit staff to guarantee the safet and comfort of our

customers.

5ogistics and planning are essentiall the most important aspects of an

efficient

transport sstem, especiall felt in large corporations. $ providing an

une'ualled

level of 'ualit service that stresses *)9(, 795I)$I5I( and *PP#7(.

In order to achieve our mission, (7)V95(I"9 has consistentl recruited the

most experienced drivers in the industr. >e conduct scheduled vehicle

inspections and driver training programs to ensure that each passenger travels

safel and securel !hen using our *ervice.


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/ISTOR O, COMPAN:

(he o!ners of the compan have started this line of business in the ear 0GG2

as a sole proprietar business. )s business increased in the volume and the

proprietor converted the business into Private 5td Compan namel (ravel

(ime Car 7entals Pvt 5td from A@@J.=o! the business is run as private

limited compan.

Or+ani8ation Chart

Officer Officer

Supervis

or

Direction Business

promotion

Director FinanceDirector Operation

Operation Manager Account manager Sales manager

Officer Vendor

payment in

carge

Officer

Supervis

or

Supervis

or

Supervis

orStaff Staff


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Services b! the co('an!

Radio ca'

(echnolog "akes "agic Possible )t (raveltime, all our radio cabs are

e'uipped !ith mobile phones and


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"id *i&e Car *egment

Premium Car *egment

High Capacit Vehicle

5uxur Car *egment

niformed drivers !ill greet ou politel and hold the door open or load our

luggage

into the taxi. (he driver !ill drive safel and smoothl !hile ou read the local

.

ne!spaper ensuring ou arrive at our destination refreshed and relaxed.

>hether it is

a business trip or pleasure, our (raveltime Cab *ervice can provide localinformation

on hotels, restaurants, the theatre or famous tourist spots. (he driver is

kno!ledgeable

on the local roads and !ill al!as use their expertise to avoid traffic

congestion !here possible and strive to deliver ou to our destination on tim

,LEET O, MANAEMENT

(raveltime provides end to end cab solutions to all it/s corporate clients.

7ight from doing a thorough check on the drivers background to ensuring

all the rosters are up to date !e take care of ever small thing.

)ll our chauffeurs are !ell mannered, clean and neat, and proudl sport

their (ravel(ime uniform and ID !ith integrit. (he are safet conscious

and abide b all the traffic as !ell as compan rules. >ith utmost respect

for ladies, their safet is of prime importance to us and it is taken care of


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b ensuring the presence of an escort in each of the lad emploees/ cab.

)ll our cabs are neat and tid and are e'uipped !ith a fire extinguisher, first%

aid kit, torch, and an umbrella.

#ur back office staff efficientl handles the pickup and drop rosters and

deplos the cabs !ell in time, to ensure that everone is in snc !ith the

compan time%table.

>e have dedicated teams to maintain the pickup and drop rosters,

compliances, accounts and the tracking of cabs.

In large corporations, logistics is the most important aspect of an

efficient transport sstem. )t (raveltime !e understand that and appl

our ingenious methods to achieve our mission and vision. >e conduct

scheduled vehicle inspection and driver training programs to ensure that

each passenger travels safel and securel !hen using our services.

'us Service

>e provide buses to most of the corporate in Pune. >e have a !ell trained

staff to take care of the backKoffice operations, like taking the dump data,

chalking the route of each bus to target the pickup of maximum emploees.

(his makes our service cost effective and time effective for our clients. )ll our

Corporate $uses are !ell maintained !ith neat and clean interiors and are

e'uipped !ith e also provide buses for compan events and outings

.

#ur leet of $uses consists of

0F *eater

A; *eater


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AF *eater

1A *eater

2@ *eater

2G seater

(raveltime has been proudl providing bus service to Puneites to travel

an!here across India for the last 0; ears.

ACTI$ITIES O, T/E COMPAN

)t (raveltime !e believe that (raining is crucial for organi&ational

development and success. It is extremel fruitful to both emploers and

emploees of an organi&ation. Leeping this is mind, !e conduct various

activities for our customer service executives, office staff, corporate staff,

and also our drivers. (hese activities are designed in a !a to help them

better understand themselves, ou, their !ork and also the business.

ollo!ing are some of the activities !e enjo as a famil.

Communication *kills for our Customer Care 9xecutives to help them

understand and serve ou better.

7oad *afet for our team of drivers to help them understand ho! to be

better drivers and responsible citi&ens.

*!ine lu )!areness and Immuni&ation Programmed for all staff

members.

Assurance Sche(e 3 Chala7 Mala7

(his is a scheme started b (raveltime to make our drivers the o!ners of

their destin.


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C/APTER

Bus Feasibility Final Project

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