BY

ANIL KARANJKAR
FACULTY,VAMNICOM
CHALLENGES FOR SUGAR CO-OPS

•Complexity in : -
* Operation
* Decision making Process
* Products
* Legislation
* Technology
* Large Volume of Data
•Spread of Operation / Globalization
•Competition
•Risk
•General attitude towards Cooperatives
TODAY’S OBJECTIVE

DECISION MAKERS
COST CONCEPT AND ITS IMPORTANCE
IDENTIFY COST CENTRES

IMPORTANCE OF COST REDUCTION

MYTHS ABOUT COST REDUCTION

COST REDUCTION TECHNIQUES

STRATEGIES : ACTION PLAN

IT IS MULTIPRODUCT INDUSTRY

IT IS EXTERIMELY LABOUR INTENSIVE

NOW,IT IS TECHONOLOGY DRIVEN

BORROWED FUNDS FORM THE BULK OF THE

CAPITAL EMPLOYEED
MILLS ARE SUBJECT TO A CONSIDERABLE DEGREE
OF CONTROL FROM GOVERNMENT
OXFORD DICTIONARY : ‘COST’ IS THE PRICE PAID
FOR SOMETHING

MANAGEMENT TERMINOLOGY : COST REFERS TO

EXPENDITURE AND NOT REVENUE

ICMA : COST IS DEFINED AS THE AMOUNT OF

EXPENDITURE ( ACTUAL OR NOTIONAL ) INCURRED
ON, OR ATTRIBUTABLE TO ,A GIVEN THING.
 TYPES

1.OUT LAY COST

2.OPPURTUNITY COST

3.PAST COST

4.FUTUR COST
5.HISTORICAL COST
6.REPLACEMENT COST
7.INCREMENTAL COST
8. DIFFERENTIAL COST
 9.TRACABLE COST
10.COMMON COST
11.JOINT COST
12.SUNK COST
13.ESCAPABLE COST
14. UNAVOIDABLE COST
15. URGENT COST
16. POST-PONABLE COST
17.FIXED COST

18.VARAIBLE COST

19.TOTAL COST

20.AVERAGE COST
C
O FIXED COSTS
S
T

OUT PUT
C

AFC

O.P.
C
V.C.

O.P.
C
T.C.

O.P.
 [INDIRECT COSTS]

FUNCTIONAL
….PRODUCTION
….SELLING
….ALLIED SERVICES
PACKING MATERIAL
PRNSION
POSTAGE,TELEPHONES
RENT AND RATES
REPAIRS
TRAVELLING EXPENSES
AGM EXPENSES
BOARD MEETINGS,COMMITTEES
GUARDING DIRECTORS
ELECTIONS EXPENSES
MEMBER WELFARE
1.BY TYPE OF EXPENDITURE
….MATERIALS
….LABOUR
….EXPENSES

2.BY ALLOCATION

….DIRECT COSTS
….INDIRECT COSTS
3.BY FUNCTION
….PRODUCTION
….ADMINISTRATION
….SELLING AND SO ON
4.BY RELATIONSHIPS TO CHANGES IN
THE VOLUME OF OUTPUT
….VARAIBLE COSTS
….FIXED COSTS

5.INTEREST COSTS
….NON INTEREST COSTS
ADVANTAGES OF COSTING
BRANCH / RETAILOR LOCATION
CAPACITYAND MANPOWER PLANNING

CONTROL ON MANPOWER AND OVERHEADS

WASTAGE CONTROL

DECIDE PRODUCT MIX

OPTIMUM USE OF RESOURCES

MAKE OR BUY DECISION

CENTRALISED V/S DECENTRALISED

MEDIA FOR ADVERTISEMENT

LABOUR MIX

MANAGEMENT BY EXCEPTION

COST OF CAPITAL / CAPITAL STRUCTURE

EFFICIENCY MEASUREMENT
 RETURN ON INVESTMENT

PROFIT
ROI = INVESTMENT
PROFIT
=
FIXED ASSEST + CURRENT ASSET
10 % LESS
100 100
=2 = 2.5
50 40
Rs. 10 Cr., TURNOVER, SAY
WITH Rs. 6 Cr MATERIAL COST & Rs. 1 Cr. PROFIT.
TO INCREASE PROFIT BY 0.3 Cr.
I ) INCREASE TURNOVER BY 30%
SO THAT PROFIT BECOMES 1.3 Cr.
OR
II) REDUCE THE MATERIAL COST BY 5 %
SO THAT PROFIT BECOMES Rs. 1.3 Cr.
=> 30 % INCREASE IN TURNOVER = 5%
DECREASE IN MATERIAL COST .