Sip More Imp Project

Cost Volume and Profit Analysis at Grasim Industries Ltd
Chapter 1
Introduction
Institute of Excellence in Management Science Page 1

1.1 TOPIC CHOSEN FOR THE STUDY:
“A STUDY ON COST VOLUME PROFIT ANALYSIS”
Statement of the problem
For every business is it necessary to make profit for their growth and its survival. The business enterprise
will find difficult to survive amidst this cut-throat competition that is taking place in this growing
competitive world. So in order to make profit, it becomes important for every business enterprise to fix
the cost of their product and its profit level, for this purpose cost volume profit analysis is used. The
business enterprise has to surpass the no loss no profit point in order to make profit. For this the
breakeven point needs to be calculated and also concentrate on various resource of the enterprise to work
towards closing it.
1.2 Need for the study:
 In order to know the cost controlling practice and procedures that is adopted in Grasim Industries
Limited.
 To determine the profit maximisation sand cost efficiency.
 To know the net income and operating revenue with regards to variations in cost volume profit In
the company.
1.3 Objectives of the study:
 To know the conceopt of cost volume & profit analysis

 To find the P/V ratio & contribution.
 To find the maximum required sales volume.
 To calculate Break Even Point in order to avoid losses.
 To find the products margin of safety.

1.4 SCOPE OF THE STUDY:
The area that is being covered under the study is Grasim Industry limited Karwar. This is study is being
carried out on the basis of the policy, concept and financial statement of GIL.
The management is benefited by the use of cost volume profit analysis as it helps the management to
know the quantity of products that is to be manufactured by the company at a lower cost. In addition to
this, the organisation makes use if cost volume profit to decide upon the required profit under different
cost and volume relationship. In the present day it is also helpful in taking business decisions relating to
cost control by comparing with the previous data that is available. This study helps in the estimation of
profits correctly as it necessary to understand the relationship of cost and profit.
METHODOLOGY ADOPTED
1. DATA COLLECTION METHOD
Source of data are:.

Primary data
Secondary data
Primary data:
 Primary data is to be collected by interacting with the staff and with the help of the external guide.
Secondary data:
 The secondary data is collected by interacting with the staff and with the help of the external
guide.
 Annual report of the company
 Cost sheet of the Grasim industries Limited.
 Journals, text books.
 Internet.

1.5 REVIEW OF LITERATURE:
Dr.Ilhan Dalci”(2005):
In the article of IlhanDalci , he has conducted "a study on Cost volume profit analysis with the
objectives to understand how traditional cost volume profit analysis leads managers to make wrong
decision and also to make a comparison between activity based cost volume profit analysis and the
traditional cost volume profit analysis. The secondary data have been collected from various sources like
annual reports of the companies, journals, articles, publications and websites. The study has found that
under traditional cost volume profit analysis, costs are categorized strictly as fixed or variable with
respect to number of products produced and sold, but some costs that are fixed with respect to the volume
are not fixed with respect to other factors and due to this traditional cost volume profit analysis may not
generate accurate information. It has also been identified that predicting total costs requires multiple cost
factors such as number of output produced, number of units sold at which will be covered by activity
based cost volume profit analysis. The study has concluded that traditional cost volume profit analysis
includes only volume based cost drivers whereas activity based cost volume profit analysis includes
multiple cost drivers which proves more accurate.
Edna Gunderson(2009):
In the article of Edna Gunderson, he has conducted "a study on Cost Volume Profit Analysis” with the
objectives to identify the essential elements of cost volume profit analysis and to show that the cost
volume profit analysis helps in decision making. Break-even point and contribution have been used to
analyze the collected data. The findings of break-even point can be calculated as either the minimum
sales quantity or the minimum revenue required to avoid a loss or profit. The cost volume profit model
can also be used to calculate target operating income. Managers also use cost volume profit analysis to
take other decisions, mainly strategic. Different choices can affect selling prices, variable costs and fixed
costs. Therefore the author has concluded by suggesting that the cost volume profit model proves better
in making managerial decisions.
Objectives:
1 . To ascertain the contribution and P/V ratio of Grasim industry ltd.
2. To analyze the Break-Even point in rupeesand Break-Even ratio.
3. It also helps in management in taking decision relating to launching the product

Robert Kee (2007):
In the article of Robert Kee, it has been stated that the model of traditional CVP has been
prolonged to contain the Cost of Capital. by making use of this activity –based cost theory,
the alternative cost of funds that is being invested in the product is found and it can also be
used to identify the after tax alternative profits after deducting the cost of capital for each
period .As the effective life of the product exceeds its alternative (operating )income will be
compensated when the manufacturing of the product starts, at the time it will be equal to the
Net value of the product (NPV).
Therefore this model provide3s a foundation for carrying out the analyzing of CVP.
Flora Guidry, Cathy Craycraft and James O, Horrigan :

Ref-Journal of managerial issues , published by pittsburg state university ,1998.
According to this article, CVP is a commonly used systematic tool for taking various decisions that are
related to the management. Target income level which are related to the
fixed charges, sales and variable charges are being examined by CVP in its basic form.
The article is intended to widen the scope of basic model of CVP that shall include the composition of the
assets of the company and its amount of risk that is involved. The inclusion of the Cost of capital, assets
which are variable and fixed in nature, and the measures of systematic risk operations in the wider model
of the CVP.
Roger A. Lohmann:
Several findings may create some problems that are related to the managements for the executives of the
service organizations. According to this article the executives are able to draw an integrated balanced
budget with the help of logical method that is being adopted from the organizations practices. This
budget provides a trustworthy overview of the financial position of the organization.
Arnold Schneider:
A lot of businesses are required to consider profit planning because the earning based
bonuses has turned out to be the major expenses for the several organizations .According to this article,
the addition of these bonus costs in the analysis of CVP reveals the use of the formulas and the
procedures. In addition to this, it also becomes important to attain the required profit level by finding
ou6t the output level. This article also talks about how the use
of these formulas helps the managers in taking decisions and in planning. At last it is necessary to
consider the limitation of the procedures and the formulas.

Dr. Seung Hwan Kim:
Ref: Cost-volume-profit analysis of Multi-product Company; micro approach, Vol 5, No

1(2015)
In the introductory course of management accounting CVP analysis are the main and the
crucial chapters .The analysis of CVP of the company which is into producing of single unit
can be easily illustrated , whereas the analysis of the CVP of a company which is into production of
multiple units will be slightly elaborate as it might include extra steps. in case the company which are
into the production of multiple units may possess the product which may have the ratio of sales mix
between them, this analysis has extended the micro approach to the decimal handling, if it comes into
view, when the BEP and targeted profit in found by the company.
Orjih (2001):
Orjih in his study stated that the analysis of the CVP is a precise techniqueto study and present the
interconnection that exists among the cost, profit and the volume.
Basu, Onker N,
Conrad, Edward J,
Ref: The Journal of the Bank Cost and Management Accounting,Vol.7,No.2,1994.

Analysis of CVP is a tool which is used for planning and which is also very effective or helpful in sales
forecasting and to forecast the level of profits at the certain costs .Analysis of traditional CVP has been
used by the manufacturing industries which has the base of the tangible products .In addition, this theory
is also used in the service industries which are into
insurance ,banking and various financial service enterprises .This paper will summarize the
basic model of the CVP and subsequently present the relevance of it in the banking
enterprise .
Cafferky, M.E .& Wentworth, J.(2010)
Cafferky, M.E &Wentworth,J (2010),Breakeven Analysis: The definitive guide to cost-

Volume-Profit-analysis , Published by Business Expert Press, New York.
This book explores the uses of CVP and also prevents how the CVP concepts are used in the
marketing and the management scenario, This book also investigates the appropriate classification of a
‘unit’, the variety of expressions to find breakeven, profit planning by
making use of the formulas of breakeven ,and the use of CVP in sensitivity analysis.

Kodjo [2004:2007]:
Kodjo stated that the change between the incomes and the variable expenses would be the
contribution margin. It happens to the different from the whole margin as there is no change
among the incomes and the sum of the products that the company is offering. According to
Kodjo he says while calculating the contribution, fixed expenses is not to be taken into
account as it does not change or fluctuate with the changes that take place in the production phase of the
company.
Maggic Xiaoyang and Chen :
According to this article it has been stated that the fixed cost shall contain the improvemental costs and
also the other expenses which does not rely upon the output that is being produced by the company. It is
said that when the output produced by the company increases then the average of the fixed expenses will
come down.
Johnson(2015);
Johnson stated that it is necessary to understand the breakeven point of the company which will help
the owners of the small business .The owners of the business would like to know how much the sales
need to be made by them in order to make a profits .The incomes made from the sales ,variable expenses
and the fixed costs as well as profit volume ratio are the elements in the analysis of the breakeven

1.6 LIMITATIONS :
 This study confined to a particular unit of the company.
 This study is dependent on availability of documents and data that is provided

by Grasim Industries Limited at the time research.
.
 As the internship was for the short period complete study was not possible.

Chapter 2
Industry and Company Profile

1.7 INDUSTRY AND COMPANY PROFILE
ABOUT INDUSTRY
Grasim’s industries, the flagship of the Aditya Birla Group was on August 25, 1947. It
ranks among India’s largest private sector companies. Starting as the textile manufacturer
in 1948, Today Grasim business enterprise comprise viscose staple fibre (VSF),cement
chemicals and textiles. Its core business are VSF and cement, which contribute to over
90 percent of its revenue and operating profits.
It is exported to countries like Germany, UK, Japan, Spain etc. According to reports India occupies the
12th position in the entire world while is the 3rd largest in the chemical industry are those which are
engaged in production of chemicals. The main activity of this industry is that transforms materials such
as natural gas oil, water, minerals, air and metals into semi-finished and finished products. Although
utilization of chemicals industry came into being in the pre industrial revolution period.
The Aditya Birla Group is the world largest producer of viscose staple fibre (VSF) commanding a 24
percent global market share . It is also the second largest producer of caustic soda which is used in the
production of (VSF) in India
In cement ,Grasim through its subsidiary Ultra Tech Cement Limited has a capacity of 52 million
tpa and is a leading player in India. In July 2004 Grasim acquire a majority stake and management
control in Ultra Tech. One of the largest of its kind in the cement sector ,this acquisition catapulted the
Aditya Birla Group to the top of league in India

The chemical industry is considered ads the fastest developing industries in the economy. The chemicals
that are produced in India may compose either those products which are mainly related to manufacturing
applications i.e. in textile, plastics, pharmaceuticals, fertilizers, paints and other products are those which
are used as raw materials by other industries.
 Basic chemicals
 Special purpose chemicals
 Final consumption chemicals.
Basic chemicals refer to those chemicals that are produced in large quantities and act a raw materials to
other industries for the purpose of final product before it reaches to the consumer. Specialty purpose
chemicals consist of variety of chemicals that are used for crop protection, inks and paints. Consumer
chemicals are those which results in final consumption. They include for example soaps and other
detergents. Apart from these, they are also involved in production of chemicals that is used for cosmetic
and fragrances.
Indian chemical industry is playing Major role in the contribution of GDP of Indian Economy. The
Indian chemical sector gives a greater contribution heavily to the foreign trade of the country. Chemicals
contribute 5.4% to the India`s total export. The major sub segments such as dyes, pharmaceuticals and
agro products play a major role in export market. Dyes are mainly producing output in entire Asia. The
consumption of per capita on this industry in India is held at 1/10th of the world average which gives a
clear picture of this particular sector
.The production of chlor-alkali requires high amount of energy, which contributes electricity cost that
results in 40-50% of operating production costs. Electricity consumption depends on different technology
used in chlor-alkali production. Around 74% of global chlor-alkali capacity uses membrane cell
technology in 2014. Diaphragm cell and other technology account for 17% and 4%, respectively. About
4% of global chlor-alkali capacity still uses mercury cell, but this is expected to decrease, but this is
expected to decrease substantially in the near future chlorine and caustic are two of the most important
commodity inorganic chemicals. Other two important and related alkalis are sodium carbonate,
commonly known as soda ash, and potassium hydroxide, are called caustic potash. Chlorine and caustic
soda together are jointly known as chlor-alkali: this describes the properties of chlorine and caustic
potash.

GROWTH OPPORTUNITY;
There will be growth of 8-9% in the Indian Chemicals Industry and based upon overall chemicals in the
upcoming years & also hike in the shares in global chemical industry to 5-6 years by 2021. Some
initiatives & keys factors need to be taken care of for the growth of chemical industry i.e. current
demand, product Mix, rival competitors etc. Companies should adopt such a strategy that results in
reduction of the cost electricity & water which are
necessary to carry out their day to day activities. Companies can adopt merger policies so that they can
expand their business in different segments, gain market share and the global market. There is a huge
demand for specialist chemicals in the domestic market so company can work for them.
Government Policies & Regulations
Government considers Chemical Industry as a key factor element for the growth of chemical
Industry.100 percent FDI is permitted is allowed in Chemical Sector. Most of the manufacturing firms of
this sector have been deprived from holiday license because they are hazardous in nature. But some
companies need to be compulsory licensed carrying out business with items like Hydrocyanic acid &
derivatives, Isocyanides & di-isocyanides of hydrocarbons.
The following are the initiatives that have been proposed in the 5 year plan (2014-2019) to increase the
growth of chemical sector:
Investment Policies:
 Investment is major activity which is required for the growth of chemical industry.
Government aim to increase share of this industry in GDP from 16% to 25%.
 Technology up gradation fund of $80 million is also proposed.

Other Policies:
 Loan facility to those firms which carry out nature friendly activities.
 Encouraging companies by reducing the taxes on import duties like coal, furnace oil etc

COMPANY PROFILE
Company Grasim Industries Limited
Address Chemical Division Karwar,

P.O Binaga 581307
Uttara Kannada, Karnataka, India
Registered Office Birlagram

Nagda 456 331
Madhya Pradesh
India
Board of Directors : Shri P.P Sharma

Shri G.M Dave Shri A.K Agarwal.
Shri Biswajit Choudhuri Shri J.C.Chopra
Shri Lalithkumar S. Naik
Size of the unit Medium Scale unit
Type of industry Bulk-chemical manufacturers
Year of acquisition 2013
Area of operation National
Infrastructure Facility Power, Water, Steam, Manpower,

Machineries
Other Certification ISO-9000 (2008), ISO-14001 (2004) &

18001 (2007)

1.8 ABOUT THE COMPANY
Grasim Industries Ltd is one of the medium scale manufacturers of chemicals which is situated in
Karwar. It was established in the year 1976 with an initial caustic soda capacity of 33,000tpa, the
company has since grown to become a leading manufacturer of caustic soda and other chemicals. The
company manufacturer’s chemicals like Caustic Soda, Liquid Chlorine, Phosphoric Acid, Hydrochloric
Acid and Kestra Products. Grasim industries Ltd with a capacity of 2,42,725 tpa caustic soda is a leading
chlor-alkali company.
Grasim Industries Ltd, A part of Aditya Birla Group has many Units of chemicals in India they are Nagda
(Madhya Pradesh), Vilayat (Gujarat), Renukoot (Uttar Pradesh), Ganjam (Odisha) and in Karwar
(Karnataka). It is based on the medium scale industry so the success of the company is the quality and
service followed by an updated technology. Factory is followed by a good manufacturing practice at all
stages of the production and also the quality check is done and supervised in each stage which is the real
strength of excellence. In short the company’s research and development and well equipped quality
assurance department leads to the increasing the efficiency of the industry.
Grasim industries ltd. is subsidiary of Aditya Birla Group, which operates in 12 countries on four
continents. Grasim is an Indian chemical manufacturing company headquartered in Mumbai,
Maharashtra. It was ranked 154th in worlds best regarded firms compiled by Forbes. In 1948 it was
started as a textile manufacturer. Then it diversified its business into Viscose Staple Fibre (VSF), Sponge
iron chemicals, Cement and Diversified financial services (NBFC), Asset management and Life
Insurance).
Subsidiaries companies of Grasim:
 UltraTech Cement
 Grasim Bhiwani Textiles
 Aditya Birla capital

Background
Grasim Industries Ltd which is a unit of Aditya Birla Group has also acquired chlor-alkali and
phosphoric acid division of Solaris Chemtech Industries Limited, based in Karwar, Karnataka in the year
2012. with the addition of the unit, named Karwar Chemical Division, the concern makes a strong
attraction in the southern region, which provides intensification opportunities in the caustic business as
well as a leadership position in phosphoric acid.
On December 2012 the caustic soda plant was shut down because the production of mercury was banned
due to the transaction is subject to statutory and regulatory approvals. As the company had to
manufacture membrane cell by converting mercury.
This acquisition of the Solaris Chemtech Industries Limited (SCIL) was made for Rs 153 Crores. This
acquisition enabled the Grasim Industries will lead to open its way in southern Indian places and in
addition it also added phosphoric acid to its list of chemicals. It is engaged in manufacturing of bulk fine
chemicals. It produces high quality caustic soda, Hydrochloric acid, phosphoric acid and high purity
liquid chlorine that is packed in tonners and transported safely to the customers. This captured the market
through its good quality and reliability and found its significant place in southern region market. Above
products are used in the industries, preparation of food & beverages, home & personal care, water
purification, agriculture, textile and Pharmaceutical segments.
It is based on the medium scale industry. Success of ABCIL is the quality and service followed by an
updated technology. Factory followed by the good manufacturing practice ast all stages of production is
the real strength of excellence quality , In short research and
development , and well equipped quality assurance department is the real back bone of
the industry. It is one of the pioneering chemical industrial establishments inh the north kanara district.
ABCIL RECEIVED ISO 9001-2008 certificate for its quality system. The company has
ambitious plans to expand its activity in manufacture of some more bulk chemicals in
the near future .ABCIL is a leading chlor –alkali company with a caustic soda capacity of 242725 tpa
capacity
.

The present industrial capacity is 242725 mega ton per annum. Caustic soda is produced 59400 MTPA
and the phosperic acid is produced 26000 MTPA .The excellence management &marketing strategy has
created huge demand for products.
Objectives of the Company:
1) To input necessary trainings to employee to perform their tasks effectively and build
team culture.
2) To reduce the costs of the production to better serve the society.
3) To consistently upgrade the technology through innovation.
4) Customer satisfaction at highest level.
5) Maintenance of clean ,safe and hygiene work environment.
Achievements / Awards : -
 Grasim Industries Ltd has received ISO 9001-2008 certificate for its quality system.
 It has been awarded with Environment Excellence Silver Award-2014 by Green Tech
Foundation Agro tech Award.
 Excellence in Community Development for the year 2013-14 has been received by GIL

 Grasim Industries Limited (Unit Harihar Polyfibers) wins Golden Peacock

Award for Sustainability 2018:
Grasim Industries Limited (Unit Harihar Polyfibers), has been named as the Winner of the
Prestigious 'Golden Peacock Award for Sustainability 2018' at the "18th Annual London Global
Convention on Corporate Governance & Sustainability" and 'Global Business Meet'. "The Golden
Peacock Award is a testament to our vision to build sustainable businesses, capable of
consistently delivering best in class environmental performance, underpinned by responsible
stewardship philosophy," said Mr. Dilip Gaur, Managing Director, Grasim Industries.
 Grasim in the list of world's best companies:
Infosys, TCS and Tata Motors are among the 12 Indian companies which feature in a
list of the world’s best regarded firms compiled by Forbes. Entertainment giant Walt
Disney, with a market cap of USD 165 billion topped the list, followed by hospitality
major Hilton and Italian carmaker Ferrari at the second and third spots respectively.
 Grasim Industries wins Dun & Bradstreet Corporate Award 2018:
Grasim Industries Limited bagged the Dun & Bradstreet Corporate Award 2018 for its stellar
performance in the Textile Sector. The Dun & Bradstreet Corporate Awards recognize
outstanding Indian corporate. instituted in 2006, this year the Dun & Bradstreet Corporate Awards
honored leading companies in India, for being ‘Champions of Change’ in the transformation of
the country. The awards were presented by Shri Shiv Pratap Shukla, Honorable Minister of State
for Finance, Government of India.

 Sushil Agarwal wins ‘India’s Greatest CFO’ Award:
Mr. Sushil Agarwal, Whole Time Director and CFO, Grasim Industries, part of the Aditya Birla
Group, has won the ‘India’s Greatest CFO 2017-18’ Award at the 3rd edition of ‘Asia One’
Celebrating 71 Pride of the Nation Summit — India’s Greatest Brands and Leaders Awards 2017-
18 & Summit, held on 10 September 2018 in Mumbai, by Asia One Magazine and URS Media
Consulting P. L.
 Grasim Industries achieves Gold Level Material Health Certification for Birla
Spun shades from Cradle to Cradle Products Innovation Institute:
Grasim Industries assessed Birla Spun shades VSF against the criteria of the Material Health
category in the Cradle to Cradle Certified™ Product Standard. Based on the superior results it has
earned a Gold Level Material Health Certificate from the Cradle to Cradle Products Innovation
Institute. Headquartered in San Francisco, California USA, the institute is a non-profit
organization that administers the publicly available Cradle to Cradle Certified Product Standard
which provides designers and manufacturers with criteria and requirements for continually
improving what products are made of and how they are made.
 Won ICMA Awards:
Grasim Industries Limited, Staple Fibre Division, Nagda, received the ICMA award for Social
Responsibility. And Aditya Birla Chemicals (India) Limited (formerly known as Bihar Caustic and
Chemicals Ltd.), located at Rehala, Plamau, Jharkhand, and was recognized as the Best Responsible
Care committed company by ICMA.

 ENVIRONMENT POLICY:
Grasim Industry is committed to develop sustainable clean environment by reducing pollution and
energy, water consumption by establishing environment management system.Company has taken
significant steps to protect the environment by maintaining a green bell inside the plants and
planting of trees around the plant sites..

1.9 ORGANISATION CHART
President/unit
Head
Head Finance & Technical Head Technical Head

Head HR
Commerce (Phosphoric acid) (Caustic Soda)

2.0 PROMOTERS:-
The following are the promoters of GIL:
1 Hindalco Industries Limited
2 Turquoise Investment And Finance Private Limited
3 Kumar Mangalam Birla
4 Aditya Vikram Kumar Mangalam Birla Huf
5 Trapti Trading And Investments Private Limited
6 Pilani Investment and Industries Corporation Ltd.
7 Rajashree Birla
8 Vasavadatta Bajaj
2.1 VISION, MISSION & QUALITY POLICY:-
 Vision
To be a leading customer-focused global chemicals business that delivers best-in-class products and
specialty solutions using safe, sustainable and innovative processes.
 Mission
To deliver superior value to our customer, shareholders, employees and society at large.

 Values:-
 Reliability
 Obligation
 Zeal
 Seamless
 Promptness
Quality Policy:-
Grasim Industries Limited, Karwar division, the manufacturer and supplier of bulk-chemicals i.e. Caustic
Soda, Liquid Chlorine, Hydrochloric Acid and Phosphoric Acid product is committed to continually
improve the customer satisfaction levels in its target market statements. Environment protection in all its
activity and ensuring a safe and healthy working environment at unit Karwar, by supply of quality
products, that meet or exceed customer relationship management, complying with applicable
environment and OH &S regulation, establishing implementing and maintaining, QMS, EMS and OH&S
systems in line with ISO- 9001:2008, ISO 14001:2004 and BS OHSAS 18 001:2007 standard, continue
planning and involvements in process and open communication with all stakeholders on progress and
performance in quality, environment, OH & S management, continual improvement of the documented
system by regular review and monitoring of process, and taking appropriate corrective action through
training personnel

Nature of business
Aditya Birla is an Indian multinational conglomerate named after Aditya Vikram Birla, headquartered in
Aditya Birla Centre Worli Mumbai. It operates in 40 countries with more than 120,000 employees
worldwide. This group was founded by Seth Shiv Narayan Birla 1857. Grasim Industry Limited, Karwar
is spread on south west coast of India, surrounding in evergreen foliage. The unit was established in the
year 1975 with an initial investment of ₹60 crore by their groups. It is situated in Binaga, which is 5k.m.
away from Karwar and surrounding by an area of 260 acres of land in which 80 acres of land is for the
company and on remaining land, they have done colony for the working people of the company. The first
foray into the manufacture of chemicals was made when captive Caustic Soda and Chlorine plant were
set up at unit Ballapur and Shreegopal to meet the captive needs of these paper plants. These paper plants
gradually grew in size and began to cater to the outside market. Today Grasim Industry is the largest
manufacture and exporter of technical grade Phosphoric Acid (60% market share) and a dominant player
in Caustic Soda, Chlorine, Bromine and Hydrochloric Acid markets.
In food sector chemicals helps in taste environment enhancement, increase the life of self, maintain the
quality of food, helps in import food to various parts of the world. Because of advancement of chemical
products are ready to eat across the world. .More percent of chemical industries are concentrates of
producing plastics and polymers. Advancement of the chemical industry in India are the reason for green
revolution. Large numbers of lifesavbing drugs are provided by chemicals .Discovery of Surplus drug
and penicillin help to cure dysentery and pneumonia.In cancer therapy drugs like cisplatin and taxol are
effective and AZT is used for AIDS victim.

2.2 Products & Services:-
 Caustic soda
Caustic soda is also known as sodium (NaOH).It is an inorganic compound.

It is white solid and highly caustic metallic base and alkali salt which is available
in pellets ,flacks, granules, and as prepared solutions at a number of deterrent
concentrations.
Caustic soda is used in many industries, this chemicals solutions is mainly used
for manufacturing of pulp and papers ,textiles, drinking water, soaps and detergent
etc.
It is used in washing or chemical peeling of vegetables and fruits, chocolates and

and cocas processing , caramel colouring production ,soft drinks processing and
thickening Ice-creams etc. Olives are soaked in sodium hydroxide for softening
them.

 Chemical Processing: Caustic soda is commonly used in regent in chemicals

reactions, .
 Home and Personal Care:-

Caustic soda is used in the saponification reaction to manufacture soap.
 Aluminum:-
The purified alumina is then used to produce aluminium.
 Petroleum Prosecutes:-
Caustic Soda solution is used in the exploration, production and processing of
petroleum and natural gas
Phosphoric Acid

 Phosphoric Acid:
The phosphoric acid is used in De-gumming of vegetables oil, pre treatment

chemicals for metal surfaces, sugar refining, metal anodizing, manufacturing
of toxic gas.
Industrial applications:-
 Production of paints, mixed in dyes.
 This acid is used to produce variety of dyes and pigments.
 Home & personal Care

One of the main users of phosphoric acid in the home and personal care industry is
the production of perfumes.
 Food
Food evaluation phosphoric acid is used as an acidulant and flavoring agent in the
carbonated beverage industry. It is used as a degumming agent while refining
vegetable oil and sugar. It also acts as an acidulant for baking powders and
emulsifying salts in the production of processed cheese.

 Chlorine
 Chlorine:
The application of chlorine in purification of drinking water and extraction

of gold and plantinum and it also makes the manufacturing of toxic gas.
Its Applications:-
Agriculture
This liquid is mostly used in production of pesticides and insecticides.
Paper & pulp

Liquid chlorine helps for whitening of pulp.

Water purification
Chlorine is mostly used for purification of water and it avoids the biological
growth. Liquid chlorine also acts as a controller of hydrogen sulphide
.
Plastics
Chlorination of ethylene produces PVC. Polyurethanes which is outcome of
ToleneDisocyanate (TDI) and Methylene Diphenyl disocynate(MDI) are all
produced from Liquid Chlorine
 Hydrochloric Acid
 HCL (Hydrochloric acid)
Production of Hydrochloric acid is done mainly for food components and other is
for daily use, production 300 MT/ 1 day and is transported in tankers.

Industrial Application
 Production of paints, mixed in dyes.
 This acid is used to produce variety of dyes and pigment
Food
Hydrochloric acid is utilized in the making of high fructose corn syrup (HFCS).
this chemical can be found in soft drinks, used also utilized in processing of
food items in outcomes of this acid are citric acid and artificial sweeteners
Steel
The uses of hydrochloric acid are the picking of carbon and stainless steels. It is
used etching of aluminum, and cleaning of metal.
Area of operation:-
It is having its business spread over India. The GIL (Grasim Industries Limited)
Karwar unit operates in the following companies
.
 West Cost Paper Mills Dandeli
 TannirBavi Power Company Private Ltd-Mangalore
 Mangalore Refinery Petro-chem. ltd. Mangalore
 Indian Aluminum Company-Belgaum

Operation and Expansion of business:
The NGO Canopy, in its Hot Button Report ranked the company as the number ONE globally for
its work on the conservation of ancient and endangered forests.
Viscose Staple Fibre: VSF plants operated at full capacity across various locations. Its brand “LIVA’
has gained enormous traction. Today over 29 million garments feature the LIVA tag, clearly a testament
to the discerning customer’s choice. Viscos sales Revenue grew up by 11% YoY to ₹8538Cr in FY 2017-
18. EBITDA rose to ₹1680 Cr. up 17% YoY.00 Viscos Filament Yarn (VFY) business, is now part of the
company, consequent to the merger of Aditya Birla Novo Ltd. (1st July 2017). Company has also
acquired the rights to operate and manage the Century Rayon Division of Grasim industries limited.
Pulp and Fibre JVs: Grasim have strategic investments in pulp units in Canada and Sweden. These
cater to 50% of our pulp requirement. These JVs ensure consistency in the supply of prime quality pulp
to our Indian operations.
Chemicals: Remarkable year for the Chlor Alkali industry as it witnessed an improvement in
utilization levels. This was led by greater demand from the user industry. Caustic Soda prices rose
sharply driven by global factors. The chemical business saw a record 22% YoY rise in the Revenue to
₹5105 Cr. And 54% YoY increase in the EBITDA to ₹1300 Cr. In FY 2017-18, on better realization and
volumes. With ongoing Brownfield capacity expansion, the Caustic soda capacity is set to increase by
200KT to 1140 KT by H1FY 2018-2019.
Grasim Industries aims to enter global markets by providing the quality products and by capturing
domestic Market.

Infrastructure Facilities:-
The location of the industry is such that it is easily approachable by sea and road, On one side of the
factory are the Western Ghats at National Highway 17 runs in front of the factory which is adjacent to
Arabian Sea thus making this place the most suitable one for establishing this factory as it is necessary
for the transportation of finished goods and also for the supply of raw materials to the factory.
Residential Quarters:
The Company is providing residential quarters for its employees without deducting HRA from
employee’s salary.
Bus Facility:-
The employees staying in quarters can It is having its business spread over India. The GIL (Grasim
Industries Limited) Karwar unit operates in the following companies
.
Canteen Facilities:-
The company provides canteen facility to its employees wherein tea, snacks and meals are provided.
Employees can avail this facility can taking monthly coupons which are provided at subsidized rate.
Rest Room:-
The Company provides rest room facility wherein the workers can take rest and also interact with their
co-workers.
Drinking Water Facility:-

Water is very essential for human beings; with this intention company provides cool & purified drinking
water to its employees. Water coolers are installed in every department and many taps are installed
around the plant
.

First Aid:-
First Aid room is installed in the campus so that necessary actions can be taken in times of emergency.
Even Ambulance facility is provided.
Other Facilities:-
i. The school called Bal Bhavan for the employee’s children was established in 1987, the syllabus is
according to the State Government in English.
ii. Safety equipments like gumboots, gloves, helmets, masks are provided by the company for personal
safety purpose.
iii. Guest room is available so that outsides can take rest and wait there till their work is done with higher
officials
.
“Analysis of cost volume profit ratio With Reference to Grasim Industries Limited Karwar”
College of Institute of Excellence in Management Science
2.2 SWOT ANALYSIS of the company
SWOT analysis is an auditing of an organization and environment. It is the analysis of strength,

weakness, opportunities and Threats of the organization. Strength and weakness are internal opportunities
and threats are external.

Strengths
It is about company advantages that company faces, and how well the company can perform. The points
that highlight strength of Grasim industry is as follows:
 Professional and dedicated employees
 Grasim Industries captured national market because of its quality product

.
 Automated and uniform production throughout the year.
 Grasim Industries have good brand name in the market
 By the introduction of product innovation, more importance is given on branding and the
environmental cleanliness, which leads the industrial growth and attracts more customers.

Weakness
Weakness can be referred to those aspects which the company has to improve and the things which
should be removed out of practice which people consider as the weaker side of the company. GIL has
promotion policy. Few weaknesses is been rectified in the following area:
 Wastages of products during loading & transportation
 Raw materials have to be procured from faraway place that is from Singach
(Gujarat), so transportation cost increases
 No active Promotion Policy
 The Industry needs to strategies their competitions so that they get greater share in the
global market to carry out their activities
.
 The company should focus on its technical capabilities so that it can carry out their
business globally and capture the market
Opportunities
Opportunities can be considered as future benefits which the company can adopt and contribute to its
growth. Some of the points are discussed below.
 More Scope to enter into the global market
 Expansion in product line
 Continuous improvement in quality of production / operations / services. Threats
Threats are the hurdles, which the corporation faces by the outside environment in the practice of growth.
Following are some of the threats:
 Increase in cost of production because of increase in outlay of raw materials and power
.
 India faces tough competition from China as it is one of the major producers and it has lowered
its power tariff as to meet the competitive strategy and conqueror the global market.
 Health issues involved in producing chemicals.

DEPARTMENTAL STUDY
Human Resource Department
TIME OFFICE
TRANING AND DEVELOPMENT
WELFARE
ESTATE
SECURITY
TRANSPORT
MEDICAL

TIME OFFICE;
The main role of the time office lies in maintaining attendance, leaves, overtime duty rewards of all
employees and consolidating the working days at the end of the month and advice accounts department
of salary. It also maintains data pertaining to accidents, work men’s compensation in case of accidents.
TRAINING AND DEVELOPMENT:
The main function of this section is maintenance of personal records, training and career development,
manpower planning and development, procedure for finalizing promotion cases for management staff and
workers. Here brief description of their recruitment and development process is given below:
RECRUITMENT:
Recruitment is the responsibility of the concerned department head/immediate supervisor against any
vacancy created. HR shall provide necessary assistance and enable filling up the position in time.
 First of all opportunity is provided to deserving internal candidates in filling position without
comprising in way on job profile/requirements as far as possible.
 No recruitment shall be done on personal recommendation and Ex-employees cannot be recruited
without prior approval of MD.
 Recruitment shall be done through placement consultants and shall not be routed via external
advertising.
 Personal handling recruitment shall verify candidates credential/past employment records of all
selected candidates.

PROMOTION:
 Promotion will be strictly on the basis of performance and potential based on competencies
required by different levels.
WELFARE:
Basic amenities:
Function of this section is to provide welfare amenities to employees under the factories act.
 Issue of canteen coupons

 Issue of uniform
 Issue of umbrella/ raincoat
 Providing rest room and locker
PROMOTION:
 Promotion will be strictly on the basis of performance and potential based on competencies
required by different levels.
WELFARE:
Basic amenities:
Function of this section is to provide welfare amenities to employees under the factories act.
 Issue of canteen coupons

 Issue of uniform
 Issue of umbrella/ raincoat
 Providing rest room and locker

2.3 ACCOUNTS DEPARTMENT:
Finance department undertakes following activities:
 Recording and Monitoring of all transactions:

All transaction such as purchases, sales are reworded and monitored so as to study and improve
cost effectiveness.
 Maintain costs and rewords and calculation of production cost:

It maintains and records the costs of all consumed raw materials, utilized power cost &
administration expenses.
 Handling payments of suppliers & day to day petty expenses:

Payments to suppliers are made thought either cheque or through cash as per agreed terms. Cash
is to be arranger terms. Cash is to be arranged from bank for the day to day petty expenses of the
unit.
 Preparation of annual operational plan & capital budgeting of new projects:

Accounts head along with various department head will prepare the annual operational plan and
gets approval from business head. In case of any new projects. Capital budgeting is also done.
 Dealing with banks & other financial institutions:

Accounts head does have the authorizing signatory for all banking transactions. Such as
withdrawal, deposits, issue of cheques and depositing of cheques from the bank are maintained by
the vouchers.

2.4 Future Growth & Prospects:-
The company has ambitious plans to expand its activity in manufacture of some more bulk chemicals in
the near future. GIL is a chlor-alkali company in the midst of a caustic soda facility of 2,42,725 tpa
capacity
.
The present industrial capacity is 2,42,725 Mega ton per annum. Caustic soda is produced 59400 MTPA
and phosphoric acid is produced 26,000 MTPA. The excellence management, good quality of the
products and best management & marketing strategy has created huge demand for products
.
The future of the Chlor-Alkali industry is bright, provided the company must adopt the latest technology
and become more energy efficient. The units, which are running on outdated technology, will cease to
exist, only units which are cost conscious, will be able to survive.

CHAPTER - 3
THEORETICAL BACKGROUND OF THE
STUDY

INTRODUCTION
Cost is the sum that is required to be paid in order to get the materials that is required for the working of
the company. Non-financial cost and financial costs are two elements of the cost. Raw material, cost of
labour etc. comes under financial cost, whereas duration spent on a particular project, hard work that is
taken in the distribution of the goods etc comes under nonfinancial costs will not be taken while
preparing the financial statement of the company and only the financial cost will be taken in preparation
of the financial statements. Analysis of CVP is considered to be one of the most vital model or concept
that is applied in the field of cost accounting. In taking immediate judgements the company makes use of
this concept. With the help of cost accounting it becomes easy to find the cost that is incurred in the
manufacturing the products. Planning, forecasting and many other important decision can be Taken by
the company by finding out the cost that is involved in the manufacturing. Manufacturing costs includes
fixed as well as variable costs, which is also essential in calculation or finding cost of manufacturing.
The analysis of CVP comes under marginal costing. In this the three factor that is the cost, profit and the
sales volume is taken into account and these three factors are interconnected to each other. The
connection that is between the cost and profit can be found out with the help of the most important tool
that is analysis of CVP. Quantity of manufacturing techniques or the methods of production, superiority
of the products produced, area in which the organisation is located are some of the factors which affects
the costs. With the help of analysis of CVP it is also possible to find the profit that is being earned at
various level of the enterprise. The fixed cost remains constant and it does not change in the volume of
output that is produced by the company, whereas variable cost changes with the change in the output
produced by the company.

There are some assumptions that are available in the analysis of CVP which are as follows:
 There will be no changes in the selling price per unit

 There will be no change in the variable4 cost per unit
 There is no change in the Fixed cost
 Costs are categorized into fixed or variable
 The quantity of production is same to the quantity of sales.
The aim or goal of all the organization is to earn profits. Business will be able to survive in the long run
only if they makes profits. While calculating the profits the firm has to consider the cost that is incurred
in the production and the sales, as these two happens to be the vital element while finding out the out the
profit. With the help of cvp analysis the management can get the clear image of the required critical .
OBJECTIVES OF COST VOLUME PROFIT ANALYSIS
o The relation between costs and profit can be found out with the help of the analysis of CVP. This
also helps in proper and precise estimation of the profits.
o It becomes easy to prepare the flexible budget with the help of the analysis, which shows the costs
that are incurred at the various levels of the managements.
o Purpose of control can be estimated with the help of this analysis. In order to estimate the change
in volume of costs, it becomes obligatory to evaluate the profit that is earned and the cost that are
incurred.
o This also helps in preparing the pricing policies by showing the impact on various pricing
structures on the profits and the costs.
o With the help of this analysis it also becomes easy to know the overhead costs that is incurred at
different strata`s of the activities.

USES OF COST VOLUME PROFIT ANALYSIS
Cost volume profit analysis also has number of advantages:
 One of the usefulness of this analysis is that helps the management in making decisions in the
short run.
 The analysis of CVP plays a vital role by helping the management to increase their revenue.
 With the help of this analysis it becomes easy to find out the cost of the products.
 It also helpful to control the that is incurred by the organisation may be fixed cost or the variable
costs.
ESSENTIAL IN ANALYSING OF CVP
Fixed cost
Fixed cost are those which remains fixed: it does not change with the change production. The costs
remain the same even if there4 is a rise or fall in the production of the enterprise. Fixed cost is one of the
constituent of the total cost in addition to the variable cost. Fixed expenses are made use in the breakeven
analysis which is used to find out the price and the production level and the sales where in the enterprise
do not make any gains or losses. The firm required to make more profit in order to reach the breakeven, if
the firm is incurring more fixed costs in its total cost structure.
VARIABLE COST
Variable cost are completely opposite to the fixed costs. Variable costs changes with the change in the
production of the company, which is completely opposite to the fixed costs that do not change with
change in the production of the company. In the variable expenses as the production raises the variable
expenses of the company will also go up and when the production of the company will also come down.

CONTRIBUTION
Contribution is that amount that is found after deducting the variable expenditure from the sales that is
made by the company. With the help of this calculation the company can come to know about the sales
that is to be made by them in order to recover all the costs that has beem incurred by them on the project
and how much sales is required to be made by them in order to make profits by the company.
There is an interconnection between the contribution margin and the contribution margin ratio. This
ratio is been used to evaluate on per unit bases or on the aggregate bases. The contribution margin of each
unit will be divided with the selling price of each unit in the per unit bases calculation method, whereas
in the aggregate bases method the overall contribution margin will be divided with total revenues.
BREAK EVEN POINT(BEP)
The situation where the company`s profit and loss are equal, this point is called Breakeven point.
In case if the production of the company will be less than its BEP level then the company might incur
losses, similarly, when the company produces more than its point then the company shall make profits.
Thus the company has to surpass the BEP point in order to make profits.
USES OF BREAK EVEN POINT
 BEP is used in finding out the selling price which will be helpful in knowing the required profit.
 When there is change in the volume of production BEP helps in predicting the cost and the profits
that happened due to such changes.
 BEP is useful in classifying the costs and the profits that is earned at the different levels of
production.
 It also helps to management in taking decisions relating to launching a product, taking make or
buy decisions etc.

Marginal cost statement:
Marginal cost is generally calculated by the following formula:
Sales-variable expenditure= contribution-fixed cost=profit
Profit or loss statement
Sales Xxx
Less: variable cost Xxx
Contribution Xxx
Less: fixed cost Xxx
Profit or loss Xxx
Margin of safety
The aim of every business organization is to achieve the safety margins. When there is a change between
the actual sales and the breakeven sales it is margin of safety. In other words actual sales are deducted
with the breakeven sales in order to get the safety margin.
Safety margin will be better when the variable expenditure and the fixed expenditure will be lowered and
sales are to be increased in order to improve the PV ratio. It also helps the company in knowing its safety
margin that is required to be maintained by the company In order to prevent the loses.
Steps for improving margin of safety
In order to improve the safety the company has to undertake the following measures:
 The company has to increase the sales price of its products.

 The company needs to increase its capacity in order to increase its volume of sales.
 The company has to lessen its variable expenses in order to improve their contribution margin.
 The company needs to lessen its fixed costs by reducing its BEP.

CHAPTER 4
DATA ANALYSIS AND INTERPRETATION

Computation of break-even point of Caustic soda by using volume profit analysis:
Statement of sales:
Table Number 4.1.1 Statement of sales
(IN LAKHS)
YEAR 2014-15 2015-16 2016-17 2017-18 2018-19
SALES 3742 18440.34 21084 26950 36801
Sales in Lakhs
40000 36801
35000
30000 26950
25000 21084
sales
20000 18440.34
15000
10000
3742
5000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Years
INTERPRETATION
From the above table i.e. 4.1.1 we can see the changes that are taking place in the sales of the company.
In this Table we can see that in the year 2014-2015 the sales was RS 3742 lacs and in the year 2016-2017
it increased to Rs 21084 lacs. From the table it is also clear that the firm`s sales are growing since last 3
years, which is good indicator for the company to grow. The sales in the year 2015-2016 was Rs
18440.34 lacs, which increased by 392.79% when compared to the year 2014-2015. And the sales in the
year 2016-2017 increased by 14.33% when compared to the year 2015-2016. And the sales in 2017-18
increased by 26950 lacs and the in the year 2018-2019 it is increased by 36801 lacs . This also means that
in the recent times the need or the demand for caustic soda has increased.

STATEMENT OF VARIABLE COST
TABLE NUMBER 2.1.2
YEAR 2014-2015 2015-16 2016-17 2017-18 2018-19

VARIABLE
COST 2482 9121.72 8755 15000 20121.9
Variable Cost in Lakhs

25000
20121.9
20000
15000
VARIABLE COST
15000
10000 9121.72 8755
5000
2482
YEARS
Interpretation
From the above table we can see that the variable cost in the year 2014-2015 was Rs 2482 Lacs and in the
year 2015-2016 it increased to Rs 9121.72 lacs. The percentage increase of variable cost was around
267% when compared to 2014- 2015, the reason for this increase is due to raise in the labour cost,
raising prices of Raw material and other cots. And in the year 2016-2017 the variable cost came down to
Rs 8755 lacs. The percentage decrease of variable cost was 4.02% when compared to 2015-2016. Then in
the year 2017-2018 the variable cost increased to 15000. The percentage increased of variable cost was
around 71.33% and when it compared to 2018-19 the variable cost again increased to 20121.9 with
percentage of 34.15%.

Statement of Contribution
year 2014-2015 2015-2016 2016-2017 2017- 2018-2019

2018
sales 3742 18440.34 21084 26950 36801
Variable cost 2482 9121.72 8755 15000 20121.9
contribution 1260 9318.62 12329 11950 16679.1
Contribution in lakh
18000
16679.1
16000
14000
12329 11950
12000
contribution
10000 9318.62
8000
6000
4000
2000 1260
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Years
Interpretation:
From the above table we can see that the contribution in the year 2014-2015 was Rs. 1260 lakhs and in
the year 2015-2016 it was increased to 9318.62 lakhs, that is the percentage increase of contribution was
639% when compared to 2014-2015. In the year 2016-17 the contribution increased to 12329 lakhs, the
percentage increase of contribution was 32.30% when compared to 2015-2016. And when it comes to
2017-2018 the contribution level comes down 11950. Lower level of the contribution margin shows that
the product line of the company is not profitable. But in the year 2018-2019 the contribution increased to
16679.1 with percentage of 39.57%. in order to increase profit margin the contribution level must be
high.

Statement of Profit Volume Ratio:

PV Ratio = Contribution/Sales
Statement of Profit Volume Ratio
(In Lakhs)
Year 2014-2015 2015-2016 2016-20017 2017-2018 2018-2019

contribution 1260 9318.62 12329 11950 16679.1
Sales 3742 18440.34 21084 26950 36801
Profit volume ratio 33.67% 50.53% 58.47% 44.34% 45.32%
Profit volume ratio

70.00%
60.00% 58.47%
50.53%
50.00% 45.32%
44.34%
40.00% 33.67%
PVR
30.00%
20.00%
10.00%
0.00%
2014-2015 2015-2016 2016-20017 2017-2018 2018-2019
yeras
Interpretation:
The ratio of profit volume ratio depends on the amount of sales as well as the contribution of the
company. From the above table in the year 2014-2015 we can see that PV Ratio was 33.67% and in the
next year i.e 2015-2016 we can see that there was increase in the PV ratio as it increased to 50.53% and
the PV ratio continued to increase in the year 2016-2017 i.e. it was increased by 8.47% and the PV ratio
was 58.47%. But in the year 2017-2018 the profit volume ratio comes down to 44.34% i.e. it was
decreased by 14.13% . But when It compared 2019 the profit volume ratio increased by 0.98% which
shows there is less increased in the volume of profit in the current year.

Statement of Fixed cost

(in Lakhs)
Year 20014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Fixed 2028 3053.37 3441 3923 3949

cost
Fixed cost
4500
3923 3949
4000
3441
3500 3053.37
3000
Fixed cost
2500 2028
2000
1500
1000
500
0
20014-2015 2015-2016 2016-2017 2017-2018 2018-2019
years
Interpretation:
In the above table we can see the changes in that takes place in the fixed cost. Fixed cost plays an
important role in every company. In the above table we can see that the fixed cost in the year 2014-15
was Rs.2028 lakhs and in the year 2015-2016 it increased to Rs. 3053.37 lakhs, the total percentage
increase in fixed cost when compared to the previous year was 50.56%. and in the year 2016-2017 the
fixed cost increase to Rs. 3441 lakhs, fixed cost was increased by 12.70%, when compared to the year
2015-2016. This increase in fixed cost may be due to staff salary, rent and various other fixed costs. In
2018 and 2019 also it goes on increased.

STATEMENT OF PROFIT
Profit = contribution- fixed cost
year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

contribution 1260 9318.62 12329 11950 16679.1
Fixed cost 2028 3053.37 3441 3923 3949
Profit (768) 6265.25 8888 8027 12730.1
Profit
14000 12730.1
12000
10000 8888
8027
8000
6265.25
Profit
6000
4000
2000
-768
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-2000
Years
Interpretation
The above table shows the changes in profit in the year 2014-2015, the company faced loss ofRs 768
Lacs, and in the year company earned a profit of Rs 6265.25 lacs in 2015-2016, i.e. profit was increased
by 915% when compared to the previous year. And in the next year i.e 2016-2017 the company profit
reached Rs 8888 lacs, that is the profit percentage was increased by 41.86% compared to its previous
year 2015-2016. But when comes to 2018 the profit went down , which is not good for the company, but
in 2019 it has taken great increasing profit volume i.e. 1230.1. By this we can say that the company has
shown a better performance with its increasing trend in the profits.

4.1.7 BREAKEVEN POINT IN SALES VOLUME
Breakeven point in sales volume = total fixed cost/ profit volume ratio
Table Number 4.1.7 breakeven point in sales volume
(in lakhs)
Year 2014- 2015-2016 2016-2017 2017-2018 2018-2019
2015
Fixed cost 3053.37 3441 3923 3949
2028
profit volume 33.67% 50.53% 58.47% 44.34% 45.32%
ratio
Breakeven 6023.16 6042.68 5885.06 8847.54 8713.59
point in sales
volume
Breakeven point in sales volume

10000
8847.54 8713.59
9000
8000
7000
6023.16 6042.68 5885.06
6000
BEP
5000
4000
3000
2000
1000
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation
With the help of BEP we can come to know that how much sales have to be made by the company
in order to make the profits. From the table shows the above we can see that in the year 2014-
2015 the company has to make a sale of more than 6023.16 lacs in order to make profits and in
the year 2015-2016 and 2016-2017 the company has to --make the sales pf Rs 6042.68 lacs and
Rs 5885.06 lacs in order to make profits, and -in 2018-19 it has to make sales of 8713.59 to make
profit.

Computation of margin of safety
Margin of safety = actual sales – breakeven sales
Table number 4.1.8: margin of safety
(in lakhs)
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Actual sales 3742 18440.34 21084 26950 36801
Breakeven 6023.16 6042.68 5885.68 8847.54 8713.59
analysis
Margin of (2281.16) 12397.66 15198.94 18102.46 28087.41
safety
Margin of safety
30000 28087.41
25000
20000 18102.46
margin of safety
15198.94
15000 12397.66
10000
5000
-2281.16
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-5000
Interpretation
From the above we can see that in the year 2014-2015 the margin of safety of the company was negative
. margin of safety may be in negative when the breakeven sales are more than the actual sales of the
company. After 2014- the safety margin of the company is increasing that is in the year – it was 12397.66
lacs and in the year 2016-2017 it was 15198.94 and it goes on increased 28087lacs in the year 2019.
which is good sign for the company because if the mos is more, then the company can handle the
fluctuations that is happening in sales.

Cost volume Profit Analysis at Grasim Industries Ltd.
Computation of Break-Even Point of Phosphoric Acid by using Cost Volume Profit

Analysis:
Statement of Sales:
Table Number 4.2.1: Statement of Sales
Year 2014-15 2015-2016 2016-2017 2017-2018 2018-2019

Sales 16458 17213.44 16207 15603 16283
Figure Number 4.2.1 :Sales
Sales in lakhs
17500
17213.44
17000
16458
16500 16283
16207
saLES
16000
15603
15500
15000
14500
2014-15 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation:
From the above table i.e, 4.2.1 we can see the change that is taking place in the sales of the company. In
the table we are able to see that in the year 2014.2015 the sales was Rs 16458 Lacs and in the year 2016-
2017 in increased to Rs 17213.44 Lacs ie the sales was increased by 4.5% when compared to previous
year 2014-2015. But in the year 2016-2017 sales of the company came down to Rs 16207 Lacs ie the

sales had come down by 5.8% when compared to the year 2015-2016. And next year also it decreased to
15603 with percentage of 3.72% but in the year 2019 i.e. current year sales volume increased to 16283.
Statement of Variable Cost:

Table Number 4.2.2 :Statement of Variable Cost
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Variable Cost 10263 10376.36 9038 8800 10540.04
Figure Number 4.2.2 : Variable Cost
Variable Cost in lakhs

11000
10540.04
10500 10376.36
10263
10000
variable cost
9500
9038
9000 8800
8500
8000
7500
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation:
From the table we are able to see that the variable cost in the year 2014-2015 was Rs. 10263 Lacs and in
the year 2015-2016 it increased to Rs. 10376 Lacs. The percentage increase of variable cost was around
1.10% when compared to 2014-2015, the reason for this increase is due to raise in the labour cost, raising
prices of raw material and other costs. And in the year 2016-2017 the variable cost came down to Rs.
9038 Lacs. The percentage decrease of variable cost was 12.89% when compared to 2015-2016. And in
2017-18 also it went on decreasing but when comes to 2018-19 the variable cost increased to 10540.14
with the percentage of 19% when it compared to 2017-18.

Statement of Contribution
Table Number 4.2.3 : Statement of Contribution
(In Lakhs)
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Sales 16458 17213.44 16207 15603 16283
Variable Cost 10263 10376.36 9038 8800 10540.04
Contribution 6195 6837.08 7169 6803 5742.96
Figure Number 4.2.3 Contribution
Contribution in lakhs
8000
6837.08 7169
7000 6803
6195
6000 5742.96
contribution
5000
4000
3000
2000
1000
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation:
From the above table we can see that the contribution in the year 2014-2015 was Rs. 6195 Lacs and in
the year 2015-2016 it was increased to 6837.08 Lacs, that is the percentage increase of contribution was
10.36% when compared to 2014-2015. In the year 2016-2017 the contribution increased to 7169 Lacs,
the percentage increase of contribution was 4.85% when compared to 2015-2016. Lower level of the
contribution margin shows that the product line of the company is not profitable. But in the above table

the contribution of the company is increasing continuously till 2017 but when it reached to 2018-19 the
contribution volume went on decreasing.
Statement of Profit Volume Ratio:
PV Ratio = Contribution
Sales
Table Number 4.2.4 : Statement of Profit Volume ratio
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Contribution 6195 6837.08 7169 6803 5742.96
Sales 16458 17213.44 16207 15603 16238
Profit Volume Ratio 37.64% 39.71% 44.23% 43.60% 35.36%
Figure Number 4.2.4 : Profit Volume Ratio
Profit Volume Ratio

50.00%
44.23% 43.60%
45.00%
39.71%
40.00% 37.64%
35.36%
35.00%
30.00%
PVR
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation:
The ratio of profit volume ratio depends on the amount of sales as well as the contribution of the
company. From the above table i.e. 4.2.4, in the year 2014-2015 we can see that pv ratio was 37.64% and
in the next year i.e. 2015-2016 we can see that there was increase in the pv ratio as it increased to 39.71%

and the pv ratio contribution to increase in the year 2016-2017 i.e. it was increased by 4.52% and the pv
ratio was 44.23%. but in previous and current year the profit volume is keep decreasing.
4.2.5 Statement of Fixed Cost

Table Number 4.2.5: statement of Fixed Cost
(In Lakhs)
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Fixed 2399 3263.22 3700 3132 3238
Cost
Figure Number 4.2.5: Fixed Cost
Fixed Cost in lakhs

4000
3700
3500 3263.22 3238
3132
3000
2399
2500
fixed cost
2000
1500
1000
500
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation:
In the above table we can see the changes in that takes place in the fixed cost. Fixed cost plays an
important role in every company. In the above table we can see that the fixed cost in the year 2014-2015
was Rs. 2399 Lacs and in the year 2015-2016 it increased to Rs. 3263.22 Lacs, the total percentage
increase in fixed cost when compared to the previous year was 36.02% And in the year 2016-2017 the
fixed cost increase to Rs.3700 Lacs, fixed cost was increased by 13.38%, when compared to the year

2015-2016. This increase in fixed cost may be due to salary, rent and various other fixed costs. But in
20018-19 the fixed cost went on decreasing.
4.2.6 Statement of Profit:

Profit= Contribution –Fixed cost
(in lakhs)
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Contribution 6195 6837.08 7169 6803 5742.96
Fixed Cost 2399 3263.22 3700 3132 3238
Profit 3796 3573.86 3469 3671 2504.96
Figure Number 4.2.6: Profit
Profit in lakhs
4000 3796 3671
3573.86 3469
3500
3000
2504.96
2500
profit
2000
1500
1000
500
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation:
The above table shows the various that is happening in the profits. In the year 2014-2015, the company
earned a profit of Rs. 3796 Lacs, and in the next year the profit of the company came down to Rs 3573.86
Lacs in 2015-2016, i.e. profit came down by 5.85% when compared to 2014-2015. And in the next year
i.e. 2016-2017 the company profit decreased to Rs. 3469 Lacs, that is the profit percentage was decreased
by 2.93% compared to its previous year 2015-2016. By this we can say that the company`s sale of
Phosphoric acid is declining as well as the total cost of this is high due to which there in decreasing trend
in the profits. In 2019 it falls down to 2504.96.

4.2.7 Breakeven Point in Sales Volume

Breakeven Point in Sales Volume = Total Fixed Cost/ Profit Volume Ratio
Table Number 4.2.7: Breakeven Point in Sales Volume

(In Lakhs)
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Fixed Cost 2399 3263.22 3700 3132 3238
Profit volume Ratio 37.64% 39.71% 44.23% 43.60% 35.36%
Breakeven Profit in Sales Volume 6373.53 8217.62 8365.36 7183.48 9157.23
Figure Number 4.2.7 : Breakeven Point in Sales Volume
Breakeven Profit in Sales Volume

10000
9157.23
9000 8365.36
8217.62
8000 7183.48
7000 6373.53
BEP IN SALES
6000
5000
4000
3000
2000
1000
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation:
BEP is necessary to know how much sales have to be made by the company in order to make the profits.
From the table shown above we can see that in the year 2014-2015 the company has to make a sale of
more than Rs 6373.53 lacs in order to make profits and in the year 2015-2016 and 2016-2017 the
company has to make the sales of Rs 8217.62 lacs and Rs 8365.36 Lacs in order to make profits. And the
year 2019 has to make sales of 9157.23 to inorder to recover sales of last year/

Computation of Margin of Safety
Margin of Safety = Actual Sales – Breakeven Sales

Table Number 4.2.8 : Margin of Safety
(In Lakhs)
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Actual Sales 16458 17213.44 16207 15603 16283
Break Even Sales 6373.53 8217.62 8365.36 7183.48 9157.23
Margin of Safety 10084.47 8995.82 7841.64 8419.52 7125.77
Figure Number 4.2.8 Margin of Safety
Margin of Safety in lakhs

12000
10000 10084.47
8995.82
7841.64 8419.52
7125.77
Margin of safety
8000
6000
4000
2000
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Interpretation:
From the table above we can see that in the year 2014-2015 the margin of safety of the company was
10084.47 Lacs, and it constantly got reduced in the coming years ie it was 8995.82 Lacs in 2015-2016
and 7841.64 Lacs in the year 2016-2017. As we can see that the MOS of the company has been
constantly coming down the company has to make necessary steps in order to lessen its fixed expenses
and its variable expenses or the company needs to raise the price of selling the product which would help
them to improve their contribution margin. In the year 2019 it fell down to 7125.77

CHAPTER – 5
FINDINGS CONCLUSION
& SUGGESTIONS

FINDINGS AND SUGGESTIONS

Some of the findings found in the course of the study are as follows:
Caustic soda
1) It was found that sale of caustic soda has been rising annually. When it is being compared to the
previous years it was highest in the year 2018-2019, which is a good sign for the company`s
growth.
2) The variable cost of producing caustic soda was more in the year 2015-2016 i.e. it was Rs.
9121.72 lakhs when compared to the other 2 years. At the last year 2018-2019 the variable cost
was Rs. 20121.7 lakhs.
3) The fixed expenses is increasing yearly. When being compared to 3 years, there was a higher
increase in the fixed cost between 2014-2015 and 2015-2016, and later there was a slight increase
in the next year. The fixed expenses at the end of the year was Rs 3949 lakhs.
4) It was found that the profit of the company was increasing which is a good sigh for the company.
The profit of the company in the year 2018-2019 was Rs 12730.1 lakhs which is good sign
5) PV ratio of the soda has been increased when checked with the previous year. It is rising annually
from past 3 years.
6) The Break even sales of the company had come down in the year 2018-2019 when it is compared
to the earlier years.
Phosphoric Acid
1) The sales of phosphoric acid has been fluctuating and the sales have been come down when
compared to the earlier period. The sales was in the year 2015-2016 is Rs 17213.44 Lakhs and the
end of 2018-2019 the sales was Rs 16283 lacs.
2) The variable cost of the company for producing phosphoric acid has come down when it is
compared to the preceding period. That is showed slight increase from the year 2014-15 and 2015-
16 and it showed a greater decline between 2016 to 2018 but in current year the variable cost
increased to 10540.04 which is good sign for the company`s growth.

3) There has been continuous increase in the fixed cost of the company yearly till 2016-17. The Fixed
cost was more in the year 2014 to 2017 but it decreased its fixed expenses to 3238 lacs in the year
2018 to 2019.
4) The profit of the company in phosphoric acid has been decreasing. The [rofit has come down when
it has been checked with the preceding year ie the profit of the company was Rs 3796 lacs in 2014-
2015 and it has come down to Rs 2504.96 Lakhs in the year 2018-2019.
5) PV ratio of the phosphoric Acid has been increasing when checked with the previous years.
6) The Breakeven sales of the company has been increasing till 2016-17 when it checked with the
earlier period but in the 2017-18 there was a slight decrease i.e. Rs 7183.48 lacs but in 2018-2019
it again Increased to Rs 9157.23.
SUGGESTIONS
Some of the suggestions are stared as follows
 It is being found that the sales of the phosphoric Acid have come down. So it becomes
necessary for the company to take the required steps in order to expand the sales the phosphoric
acid which in return will help to improve the CMR.
 It is found that the sales of caustic soda is been continuously increasing so the company must
follow the same for the upcoming period.
 As competition increasing the company has to take required measures to constantly improve its
marketing strategies.
 The company has to take necessary steps in order to reduce its cost of production.
 It is found that the sales of caustic soda is been continuously increasing so the company must
follow the same for the upcoming period.
 As competition increasing the company has to take required measures to constantly improve its
marketing strategies.

 The company has to take necessary steps in order to reduce its cost of production.
 The company is required to adopt new technology which will help the company in reducing its
fixed expenses
3.3 CONCLUSION
The study makes evident that the overall performance of the company with regard to profitability is
average but still, the performance of the company can be maximized through careful measures of cost
control which will enhance the operating efficiency of the company. The company can reduce their costs,
thereby the sales get increase due to their quality and also the performance will be improved in future
.
The financial statements shows a sign of sickness in future, the company has to undergo an
improvements in several areas of management in the near future, the company has to take some
precautions to prevent the sickness, and if the company applies recommendations of this study towards
its management, the company will be back on to a higher profitable position within short time.

Annexure

Mar-15
Grasim Industries Ltd (Chemicals Division)
Profit & Loss statement for the month of March,2018
Caustic Soda Phosphoric
Particulars UOM Act, Acid Act.
Production-Tech Grd MT 12,214 24,415
Production-Food Grd MT
TPD TPD
Sales MTMT 11,637 24,371
ECU Realisation/selling price Rs/MT 24 58,229

Closing stock at Month Beginning MT
Closing stock at Month end MT
Increase / Decrease in stock MT
GROSS SALE Rs/Lacs 3,742 16,458
less ; Excise Rs/Lacs 341 1,807
Net sales Rs/Lacs 3,401 14,651
Other Income (scrap&Kestra) Rs/Lacs 182
TOTAL INCOME Rs/Lacs 3,401 14,833

Variable Expensess
Raw materials & Internal Transfer Rs/Lacs 469 7,623
Chemicals Rs/Lacs 31 944
Utilities Rs/Lacs 1,982 1,309
Packing Cost ? Rock Phosphate Rs/Lacs - 387
TOTAL VARIABLE COST 2,482 10,263
Variable Cost/PMT Rs/MT 20,320 42,038

Percentage to sales % 73% 70%
- -
Stock Variation Rs/Lacs 68 14
Contribution/PMT 3,277 16,192

Fixed Expenses

Repairs & maintainance Rs/Lacs 438 511
Salaries & wages 552 1,194

Manpower cost- unit Rs/Lacs
Manpower Cost Common expenses Rs/Lacs
Other manufacturing cost Rs/Lacs 73 89
Administrative Overheads Rs/Lacs 419 315

coorporate Expenses-admin*other Rs/Lacs
coorporate Expenses- ABMCPL Rs/Lacs
Selling &distribution Overheads Rs/Lacs 20 120
Total Fixed Overheads 1,502 2,230
TOTAL COST Rs/Lacs 3,916 12,479

Percentage to sales % 115% 70%
PBIT after considering HO exp Rs/Lacs (-514) 2,354

Add: Extraneous Exp-HESCOM Tax
arrears Rs/Lacs
PBIT after considering HO exp
PBIT befoe considering HO exp Rs/Lacs
Interest Rs/Lacs 723 1,080
PBDT Rs/Lacs (-1237) 1,274
PBDT/sales % 36% 9%
Depreciation Rs/Lacs 526 169
PBT Rs/Lacs (-1763) 1,105

MAY 16
Grasim industries Ltd
Profit & Loss Statement for the Year Ending, 2016
Particulars UOM Caustic Soda Phosphoric Acid
ACT ACT
Production MT 53,714 25,005
Production TPA
Sales MT 52,731 24,873
HCL TRANSFERS MT
ECU REALISATION/Selling price Rs/MT 31617.11 61514.69
Closing Stock At Month Beginning MT 239.01 150.2
Closing Stock At Month end MT 216.23 317.84
Increase /Decrease in Stock MT -22.78 167.65
Gross Sales Rs/Lacs 18440.34 17213.44
Less: Excise Rs/Lacs 1768.37 1912.6
Net Sales Rs/Lacs 16671.97 15300.83
Other Income Rs/Lacs 97.23 75.34
Total Income Rs/Lacs 16,769.21 15376.17
Variable Expenses
Raw Materials & Internal Transfers Rs/Lacs 1,837.87 8069.05
Chemicals Rs/Lacs 95.43 879.49
Utilities Rs/Lacs 7188.42 1021.57
Packing cost/Rock Phosphate Rs/Lacs 406.25
Total Variable Cost Rs/Lacs 9121.72 10376.36
Variable cost/PMT RS/MT 16,982.16 41,497.14
Percentage to Sales % 1% 1%
Stock Variation Rs/Lacs 5.21 -72.09
Contribution/PMT 14,634.95 20,017.55
Fixed Expenses
Repairs & Maintainance Rs/Lacs 293.4 504.58
Salaries & Wages Rs/Lacs 1,070.60 1,261.37
Other Manufacturing Cost Rs/lLacs 74.78 186.05
Administrative Overheads Rs/Lacs 343.61 383.55
Corporate office Expenses Rs/Lacs 258.39 315.81
Selling & Distribution Overheads Rs/Lacs 150.37 150.51
Total Fixed Overheads 2,190.85 2801.88
Total Cost Rs/Lacs 11,317.78 13,106.15

Percentage To Sales % 0.68 0.86

PBDIT Rs/Lacs 5,451 2,270.03
Interest Rs/Lacs 848.53 1,679.90
PBDT Rs/Lacs 4,603 595.12
PBDT/SALES Rs/Lacs 28% 0.04
Depreciation Rs/Lacs 862.52 461.34
PBT Rs/Lacs 3,740 133.78




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Cost Volume and Profit Analysis at Grasim Industries Ltd

Institute of Excellence in Management Science Page 1

1.1 TOPIC CHOSEN FOR THE STUDY:

“A STUDY ON COST VOLUME PROFIT ANALYSIS”

Statement of the problem

1.2 Need for the study:

1.3 Objectives of the study:

 To know the conceopt of cost volume & profit analysis

Institute of Excellence in Management Science Page 2

1.4 SCOPE OF THE STUDY:

1. DATA COLLECTION METHOD

Source of data are:.

Institute of Excellence in Management Science Page 3

1.5 REVIEW OF LITERATURE:

1 . To ascertain the contribution and P/V ratio of Grasim industry ltd.

2. To analyze the Break-Even point in rupeesand Break-Even ratio.

3. It also helps in management in taking decision relating to launching the product

Institute of Excellence in Management Science Page 4

Robert Kee (2007):

Flora Guidry, Cathy Craycraft and James O, Horrigan :

Institute of Excellence in Management Science Page 5

Dr. Seung Hwan Kim:

Ref: Cost-volume-profit analysis of Multi-product Company; micro approach, Vol 5, No

Ref: The Journal of the Bank Cost and Management Accounting,Vol.7,No.2,1994.

Cafferky, M.E &Wentworth,J (2010),Breakeven Analysis: The definitive guide to cost-

Institute of Excellence in Management Science Page 6

Maggic Xiaoyang and Chen :

Institute of Excellence in Management Science Page 7

 This study confined to a particular unit of the company.

 This study is dependent on availability of documents and data that is provided

Institute of Excellence in Management Science Page 8

Institute of Excellence in Management Science Page 9

1.7 INDUSTRY AND COMPANY PROFILE

Institute of Excellence in Management Science Page 10

Institute of Excellence in Management Science Page 11

Government Policies & Regulations

Institute of Excellence in Management Science Page 12

Institute of Excellence in Management Science Page 13

Company Grasim Industries Limited

Address Chemical Division Karwar,

Registered Office Birlagram

Board of Directors : Shri P.P Sharma

Size of the unit Medium Scale unit

Type of industry Bulk-chemical manufacturers

Year of acquisition 2013

Area of operation National

Infrastructure Facility Power, Water, Steam, Manpower,

Other Certification ISO-9000 (2008), ISO-14001 (2004) &

Institute of Excellence in Management Science Page 14

1.8 ABOUT THE COMPANY

Subsidiaries companies of Grasim:

 Grasim Bhiwani Textiles

 Aditya Birla capital

Institute of Excellence in Management Science Page 15

Institute of Excellence in Management Science Page 16

Objectives of the Company:

2) To reduce the costs of the production to better serve the society.

3) To consistently upgrade the technology through innovation.

4) Customer satisfaction at highest level.

5) Maintenance of clean ,safe and hygiene work environment.