bread costing

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IES MCRC

COST ANALYSIS OF

BRITANNIA BREAD

Eat Healthy, Think Better

CERTIFICATE


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Cost Analysis - Britannia Bread

This is to certify that the Project titled: Cost Analysis of Britannia Bread has beensubmitted by:

Atul Ratnapakhi

Reshma Rasal

Sheetal Rathod

Sneha Patil

Vikas Rathod

Vineet Saraf

Towards fulfillment of the requirement of PGDM course 2008 2010 and has beencarried out under the guidance of Prof. Jayesh Jain at the Indian Education

Societys Management College & Research Centre.

The information submitted is true and original to the best of our knowledge

_____________

Guide:

Place:

Date:

------------------------------

Prof Jayesh Jain

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DECLARATION

We hereby declare that this report submitted in partial fulfillment

of the requirement of the award for the Post Graduate Diploma in

Management Studies to IES Management College is our

original work and not submitted for award of any titles or prizes.

While the data required for analysis has been sourced from

various magazines, books and portals, the analysis is original.

We further certify that we have no objection and grant the rightsto the IES Management College to publish any chapter/ project if

they deem fit in journals/ Magazines and newspapers etc without

our permission.

Place : Mumbai

Date : 2nd September, 2008.

Name : Sneha Patil (76)

Reshma Rasal (82)

Sheetal Rathod (83)

Vikas Rathod (84)

Atul Ratnaparkhi (85)

Vineet Saraf (86)

Class : PGDM 1st year

Division: B

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ACKNOWLEGDEMENT

One is filled with great sense of pride when students are able to distinguish themselves

in works, even beyond the four walls of the classroom.

This work is synergistic product of our mind. We are grateful to many Tran generational

source and roots of wisdom that helped us to make this project viable and also on the

right time. The material and arrangement has slowly evolved and has imbued those

who has deeply and sincerely immersed in it.

We are very grateful to Prof. Jayesh Jain for giving us the fine opportunity by making

us move out of the four walls of classroom and taking the practical look.

I am indebted to IES Management College and Research Centre and University of

Mumbai for this golden chance

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Index

Sr.No Topic Page No

1 An Introduction to Food and Beverage Sector 06

2 Bakery Industry 07

3 Introduction To Britannia Industry 08

4 Britannia Daily Fresh Bread 09

5 SWOT Analysis 10

6 Cost Sheet 11

7 Cost Sheet Analysis 14

8 Conclusion 17

9 Bibliography 18

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AN INTRODUCTION TO FOOD & BEVERAGES SECTOR

The multi-billion food and beverage industry comprises several markets including

bakery products such as bread, biscuits etc., milk and dairy products, beverages suchas tea, coffee, juices, bottled water etc., snack food, chocolates, etc. beverage,

confectionery, processed foods and others. India's Food and Beverage industry is

valued at Rs. 3584 billion. India produces above 600 million tonnes of food products

every year and is one of the major producers of food in the world.

The food and beverage industry registered a growth rate of 8.5% in 2005-06. With

increase in disposable income of consumers, growing awareness among consumers

about health products, rapid urbanization, and increasing popularity of convenience

foods, food and beverage sector is expected to grow at a high rate. This sector holds a

huge potential to grow because of the increase in advertisement spending, awareness

campaign about products in urban as well as rural areas, and large scale

transformation.

The food and beverage industry is primarily driven by consumer health trends.

Presently, the food and beverage industry is in a dynamic phase, marked by a high

degree of competition. As product development within the food and beverage market

moves towards a focus on health and nutrition, the growth and development of food

manufacturers in the market depends on having prudent strategies in place, which can

be applied globally. In effect, this has created a highly competitive market place, which

fosters growth of participants with a clear vision of "growing with their customers."

The major players in the "Food and Beverage" Industry is: Heinz, Mars, Marico,

Conagra, Pepsi, HLL, Pillsbury, Nestl, Amul, ITC, Dabur, Britannia, Cadbury, Smith

Kline Beecham, The Surya Food and Agro Private Ltd.

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BAKERY INDUSTRY

Bakery industry in India is probably the largest among the

processed food industries, production of which has been

increasing steadily in the country. Bakery products onceconsidered as sick mans diet have now become essential food

items of the vast majority of population. The two major bakery

industries, viz., bread and biscuit account for about 82% of the

total bakery products. The annual production of bakery products

which includes bread, biscuits, pastries, cakes, buns, rusk, etc.,

most of which are in the unorganized sector, is estimated to be in

excess of 3 million tonnes. The production of bread and biscuits in

the country both in the organized and unorganized sectors isestimated to be around 1.5 million tonnes and 1.1 million tonnes

respectively. Of the total production of bread and biscuits, about

35% is produced in the organized sector and the remaining is

manufactured in the unorganized sector. Indian Bakery sector is

indicating significant growth both in terms of volumes and

customer base. The sector, which is estimated at Rs 3,500 crore,

is currently registering a 40% growth according to industry

sources. The production of Bakery products has increased from

5.19 lakh tonnes in 1975 to 18.95 lakh tonnes in 1990 recording

four-fold increase in 15 years.

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Some of the well-known and most frequented bakeries in the

country are Sweet Chariot, Modern Bakery, Daily Bread in

Bangalore, Monginis, Birdie's, Croissants in the west, and in thenorth and eastern parts of the country, there are quite a few big

players too.

BREAD

Bread is the cheapest and basic instant food available for

consumption. Though bread is not a staple food in the country, its

consumption has increased over the years. In India it is still a

secondary staple food when compared to chapatti, puri or rice.The different types of bread available are White bread, Whole

meal or whole wheat bread, mixed grain bread, Kibbled wheat

and cracked wheat bread, Fibre-increased white breads, Rye

bread

INTRODUCTION TO BRITANNIA INDUSTRIES

The story of one of India's favorite brands reads almost like afairy tale. Once upon a time, in 1892 to be precise, a biscuit

company was started in a nondescript house in Calcutta (now

Kolkata) with an initial investment of Rs. 295. The company we all

know as Britannia today is one of Indias best known brands and

also one of the most admired Food Brand in the country. Having

succeeded in garnering the trust of almost one-third of India's

one billion population and a strong management at the helm

means Britannia will continue to dream big on its path ofinnovation and quality. And millions of consumers will savors the

results, happily ever after. The company has four production

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facilities, 4367 employees, and sells its products in over 600,000

outlets across India.

The Britannia Brand is all about eating healthy for leading a

better life. It is the largest company in the food processing

industry whose product range also includes breads and cakes.

Britannia has a basketful of goodies with biscuits like Nice Time,

Tiger, Marie Gold, 50 50 Maska Chaska, Milk Bikis, Pure Magic,

Time Pass Nimkee, Treat, Good Day, Little Hearts, Nutri Choice,

Nutrichoice Digestive, Daily Fresh Bread and Britannia Cakes.

BRITANNIA DAILY FRESH BREAD

Till 1958, there were no breads in the organized sector and bread consumption was a

habit typified by the British. Then, a mechanised bread unit was set up in Delhi with the

name "Delbis" which produced sliced bread and packed it under the Britannia name.

Thus, Britannia was not only the pioneer, but also inculcated in the people of Delhi the

habit of eating white sliced bread.

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The Mumbai unit came up in 1963, and there again Britannia was the first branded

bread in the city. From a company offering 2 packs - the 400gm and the 800gm plainwhite sliced bread - Britannia has evolved into a company offering 22 packs, catering to

a variety of taste and price segments in the bread consuming market. The last couple of

years also saw the introduction of Whole Wheat Bread as a part of "Eat Healthy, Think

Better" credo.

Britannia Daily Fresh Bread, which finds its way to over 6 lakh households daily, is the

mainstay of the companys non-biscuit business at present. Britannia hopes to drive this

emerging business through the exploding modern trade and has already gained access

to Reliance Retail, Trinethra and Fabmall for its breads. Britannia is widely recognized

as an innovative marketer.

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SWOT ANALYSIS OF

BRITANNIA BREAD

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COST SHEET OF BRITANNIA BREADPROFORMA OF COST SHEET

Cost sheet for every 1lac units produced and sold.

Cost PerUnit

Quantity Manufactured 1 100000

Quantity sold 1 100000

CPU(Rs)

DIRECT COST

Raw materials consumed

Opening stock of raw materials 0

Purchases of Raw Materials 5.805

(-)Closing stock of Raw Materials 0

Materials Consumed 5.805

Direct labour/wages 0.124

Direct cost/expenses 0.2415

PRIME COST 6.1705

INDIRECT COST

Factory/Works Overheads

Indirect labour 0.122

Depreciation on Machinery 0.675

Works Overheads 0.05204

Cost of Maintanence 0.0589

Other Factory Expenses 0.0282

Supervisors Salary 0.0385

Power & Fuel 0.567812 | P a g e


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Total Overheads 1.54244

FACTORY COST/WORKS COST 7.71294

Office and Administrative Overheads

Depreciation on office furniture@7% 0.0281

Office Rent 0.0585

Salary to Staff 0.089

Office and General Expenses 0.0257

Telephone expenses 0.0219

Electricity and Lightings 0.03123Printing and stationary 0.00294Total Office and AdministrativeOverheads 0.25737

COST OF GOODS SOLD 7.97031

Selling and Administrative Overheads

Sales Commission 0.705Salary of Salesman 0.1

Carriage Outward 0.12798

Sales Expenses 0.057Total Selling and AdministrativeOverheads 0.98998

COST OF SALES 8.96029

PROFITS 1.03971

SALES 10

Raw Materials Cost

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Flour 3.756

Water 0.892Yeast 0.6789

Salt 0.4781

Raw Materials per unit 5.805

NOTEThe Value are determined on the basis of

apportionment as the company produces more thanone product (including fixed cost)

Cost sheet for every 1lac units produced and sold.

Some of the above Values are estimated

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COST SHEET ANALYSIS

Direct Cost:

Direct materials

To manufacture one unit of bread the following RAW MATERIALS are required.

Flour

Water

Yeast

Salt

Direct labor/wages:

Direct labor/Wages amounts to Rs. 0.124 per unit which is approximately 2.009% of the

PRIME COST. This percentage is low because a good amount of work is automated asa result of which Human resources are diverted to more productive areas such as

SALES and MARKETING.

Direct cost/expenses:

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Direct cost includes costs incurred in bringing the raw materials into the factory which isCarriage inward. It also includes the amount paid loading unloading charges and otherpetty expenses.

Indirect Costs:

Factory Overheads:

The Factory Overheads includes the indirect labor, Depreciation on Machinery, WorksOverheads, Cost of Maintenance, Other Factory Expenses, supervisors Salary andPower & Fuel.

Indirect labor: The amount of indirect labor is Rs. 0.122 per unit. This value includessweeper charges, support staff etc.

Depreciation on machinery: The depreciation is calculated on the basis of WDVcalculated @ 10% p.a. This value amounts to around 43.7% of the FACTORYOVERHEADS. The percentage high because of the level automation and technologyused for production.

Power: Per unit power and fuel consumption is Rs. 0.5678.

Other factory expenses: Other factory expenses include maintenance of factory andother miscellaneous expenses.

Office and A dministration O verheads:-

Office and administration overheads include Depreciation on office furniture@7%, officerent, salary to staff, office and general expenses, Postage and Telegrams, telephoneexpenses, electricity and lightings

Salary to staff: The salary paid to staff comes up to around Rs. 0.089 per unit cost.

Office and general expenses: This comprises of refreshments (tea and snacks),Postage and Telegrams and other petty expenses.

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Printing and stationary: This consists of photocopy charges, printouts and otherstationary items.

Telephone Expenses: Calls made by the staff members.

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

Sales and distribution overheads:-

Selling and distribution cost includes Sales Commission, Discount allowed, Salary ofsalesmen, Carriage outward and Sales expenses

Sales Commission :

As a part of encouragement for sales people, they are given commission of 5 % of the

total sales done by them.

Discount allowed :

To attract whole sellers to buy the product they are offered a discount of 5% on the

selling price.

Salary of salesmen :The average salary paid to the sales people is around Rs. 0.1 of the total per unit cost

of the product.

Carriage outward :

To carry the finished goods to the whole sellers, the transportations charge per

unit/product is set as RS 0.12798.

Sales expenses :

This includes expenses incurred on advertisements and promotional expenses such as

newspaper advertisements, hoardings, TV commercials etc.

Profit :

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The Profit arise out of selling per unit of the product is 11.603% of the total per unit cost

price

CONCLUSION

As per the study, we would like to conclude that bread not being the staple food in

India, has definitely evolved as a substitute for chapattis, rotis, rice, etc. It is easily

available due to its excellent distribution channels. Britannia bread has acquired almost

50% stake in daily bread market.

Today a variety of breads are available, such as brown bread, whole wheat bread,

chutney bread, etc.

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Even after having many competitors around, Britannia bread has managed to capture a

large market share not just in the urban but has also managed to penetrate the rural

markets.

Bibliography

Online Sources

www.britannia.co.in www.google.com

www.wadiagroup.com

www.capitaline.com

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Books & Authors

Cost & Management Accounting Ravi Kishore

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