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CHAPTER- I
INTRODUCTION
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Thus, CVP analysis is the study of the interrelationships of cost patterns, Level of activity and the results from each alternative combination of cost-volume-profit.
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It is also important for an SSI limit its risk element downside. The study analyses the extent of risk involved and helps to take important decision.
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Research Methodology:
P. G. Dept. of Studies in Commerce, K.L.Es G. H. College, Haveri Page 4
CHAPTER- II
COMPANY PROFILE
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COMPANY PROFILE
Sagun copper conductors (P) Ltd. ,was founded by a team of profession and engineers to Manufacture the best quality of copper conduction. It was set up under technocrat scheme by its promoters director Sir Paras Nath. B. Yadav, in the year 1998 for the purpose of setting up a small scale unit for manufacture and sales of copper conductors. This unit was financed by the Sham roa Vithal Co-operative Bank Ltd. On liberal terms taking in to consideration the feasibility of the project & the competences of the promoter.
The unit with an initial capacity of 45 MTS per month went into production in the year 1998:Right from the beginning, the promoters have been able to make it a success & the unit has been able to have phenomenal progress the period.
The capacity has been gradually increased & as on date the unit is having a capacity of 50 MTSpm. The sales which were to the extent of Rs.196.10 lakhs during the first year, has gradually increased& for the year ended 31-03-2004.the Company had a business turnover of Rs.500.97 lakhs.
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The success of the company is mainly due to the emphasis laid on the quality of the management from the beginning of the set up. The company an ISO 9002 company in the year October 2000.
The promoter directors are continuing as full time directors looking after the day-to-day management of the company.
VISION IF THE COMPANY:* To manufacture the best range and quality insulated copper conductors. * To be the first choices & preferred supplier for the customers. * To be the number one manufacturer of quality copper conductors *To gain high reputation in the market.QUAL 11 . Y POLICY: * The quality policy of Sagun is to manufacture & market quality Products at competitive price & give customer satisfaction by providing zero defect their quality end products
QUALITY POLICY:The quality policy of sagun is to manufacture & market jollity products at competitive price & give customer satisfaction by providing zero material for their quality end products.
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The unit being a SSI unit, manufacturing the best range of insulated copper conductors stared in January 1998 by a group industry in Hubli (Karnataka) in the line of manufacture copper conductors.
The company is managed by directors with vast experience in similar line for two and half decades of year of experiences and assisted by experienced shop floor personnel and offices staff.
In a span of two years, the company has been able to produce consisted quality product, Apart from the regular buyers, it also has gained Acceptance of a reliable source of bare/ insukated copper conductors for major original equipment manufacture of transformers and rotating electrical machine in the country.
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MANUFACTURING FACILITIES
Tandom bull block wire drawing machine with machine accessories including shaving Attaching, Die polishing machine etc. Vacuum Bright Annealing.
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Horizontal Glass coving machine. Chess winding machine. Vertical Strip Enameling Machine for 2-Line operation in Dust proof atmosphere. Rewinding machine. 200KVA Generator set with A.M.F Panel (Automatic Changeover) Material Handing equipments Welding Equipments. Vertical Glass Lapping & Varnish Bonding machine.
TESTING TYPES: Hardness test Elongation Comer radius Resistively Conductivity Bread-Down voltage (BDV) Insulation thickness Adherences Heat Shock BDV at elevated temp Flexibility Cure test
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ORGANIZATIONAL STRUCTURE:The organizational structure chart of sagun copper conductors P. Ltd. Is shown in Chart 2.1.
Quality assurance
Quality assurance
Quality assurance
Quality assurance
Quality assurance
Shri. Prakash Rathod has vast experience in non-ferrous line for more than thirty five year. The promoters are totally aware of the technical, organizational & financial aspect of this line. They have actively involved in business and conversant with the working of this type of unit.
The promoter and directors are continuing as full time directors looking after the day to day affairs of the company.
DIRECTOR: To conduct contract review, to hold review meeting with sales/ Purchase/ production/quality assurances-heads. To interact with HODS for achieving Desired quality standard To take care of training needs. P. G. Dept. of Studies in Commerce, K.L.Es G. H. College, Haveri Page 14
MANAGEMENT REPRESETATIVES:
To arrange for re meeting to communicate quality polices to HODs. To arrange for international quality assurances analysis take corrective & preventive actions. To reduces non- conformances. To interact with inter departments.
SUPERVISOR:
To carry out the department activities as delighted. Maintaining the discipline. Maintaining the quality standards effectively. Issuing the work instructions. Co-ordination with the inter departments.
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FAINANCIAL HILIGHTS
Particulars Sales Share capital Profit after tax Retained earnings Net worth 2006-07 319.72 15.01 4.67 5.28 40.5 2007-08 335.13 30.00 11.94 17.22 67.79 2008-09 263.95 30.00 11.76 28.98 79.54 2009-10 373.18 30.00 11.21 40.20 90.76 2010-11 500.97 30.00 5.53 45.73 96.29
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PROCESS CONTROL:
RESPONSIBILITY:
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TESTING EQUIPMENTS:
MICROMETERS. MICRO OHM METER, CONUCTMTY METER. TENSIBLE TESTER. HARDNESS TESTER. PROFILE PROJECTOR. BENDTESTING FIXTURES & MANDRELS. BREAKDOWN VOLATGE TESTER MANDRELS. HOT AIR OVENS
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INSPECTION TEST STATUS SL NO. 1 2 3 4 STATUS O. K REWORK A. 0. 13 REJECTED COLOUR GREEN ORANGE YELLOW RED
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1. If vendor is not approved verify delivery challan or purchase order to ascertain whether the order is for approval is so take up supplies for inspection (wherever necessary) w\n. 2. If supplies are not from an approved vendor trial supply then return goods receipt note to stores with a remark non-conformances 7vender not approved (w/n). 3. Inspect products components as per quality plans. 4. Append the accepted, rejected quantity and non conformance details in goods note. 5. In case f review of non conformance, disposition is carried out per QSP based on quality assurance request from purchase. 6. Control of inspection measuring and testing equipment is also carried out.
CORRECTIVE ACTION PROCEDURE:1. Corrective action is arising out of customer complaints. 2. Whenever customer complaints are received from quality department will take corrective action procedure.
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21. Third level manual are prepaid taking into consideration the work, instruction, nature of work, skills & personnel to be trained. 22. Amend the third level manual suitability & correlate the QSP. 23. Finalize the QSP & department manual board on QSM. 24. Inform all department/sectional heads about the date implementation of the system. 25. Monitor he system implementation through internal quality audit-QSP-17. 26. Amend the QSP and department manuals where ever it is essential with due corrective action taken. 27. Monitor the system for continuous maintenance. 28. Minimize non-conformance report observed during outside agencys audit, 29. Organize pre-assessment of system from certifying agency. 30. Initiate and implement corrective action to reduce non-conformance report observed preaudit.
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SYSTEM PROCEDURE.
1. Appointment of management representatives. 2. Prepare draft of quality system (QSM) after discussion with MD taking into consideration of quality policy of organization. 3. Discuss the quality policy in MRM & finalize policy & necessary quality objectives. 4. Communicate quality policy & objective in the organization. 5. Arrange awareness of ISO 9000 system quality and objective to all employees. 6. Discuss the draft of QSM with all heads including organization chart, responsibility matrix and authority to key personnel. 7. Finalize the QSM in management review committee. 8. Approve QS manual. 9. Distribute the QSM as per the distribution list.
10. Amend the QSM suitable after obtaining, the Adequacy report from certifying agency. 11. Prepare draft QSP as per the element of ISO 9002-1994. 12. In relevance to quality system manual (QSM), policy and objective
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16. Third level manual are prepared taking into consideration the work, instruction, nature of work, skills& personnel to be trained. 17. Amend the third level manual & correlate the QSP. 18. Finalize the QSP & department manual board on QSM 19. Inform all departmental/ sectional heads about the date implementation of the system of 20. Monitor the system implementation through internal quality audit QSP-
21. Amend the QSP and-department manuals where ever it is essential with due corrective
action taken.
23. Minimize non- conformance report observed during outside agency audit.
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during pre-audit.
INSPECTION AND DISPATCH OF PRODUST:Whenever customer inspection is involved in coordination with production Q.A, and customer Clear product for dispatch as per order acceptance/ purchase order
Obtain necessary document from transporters L .R copy/ from customers like G.R.N/ acceptance/ Invoice acknowledgement as per Quotation /rate contracts.
WARRANTY
SAGUN COPPER CONDUCTORS PVT.LTD. Has guarantee against defective materials. Goods returned by the customers are replaced with the new product after g testing by the product. The product will be sent according, to the specification of the customers.
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DISTRIBUTION The sales will be based on quality products. Efforts are made to improve the quality of the copper conductors. The sales of copper conductors according to state wise are as under Maharastra Gujarat Karnataka Others 35% 50% 05% 10%
From the above figures, we come to know that the maximum sales of as 4 gun copper conductors PVT .Ltd. is in Gujarat. Almost half of the sales are in Gujarat. However, the sales in Karnataka and other states are lowest. The directors and sales executives of the company are aggressively coming in market in recent days to give support to the distribution of the product and to increase the market shark of copper conductors.
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RESPONSIBILITIES: To specify the system of handling of product in order to prevent damgages and deterioration and To specify the control to be exercised on packing materials & purchase. Page 27
INSULATING MATERIAL:The insulating material mainly used is fiber glass yarn and enamel/varnishes. The insulating materials are purchased mainly from. The fiber yarn is purchased from: 1. M/S untica, Japan 2. MIS owens Corning U.S.A The enamel / Varnish are purchased from: 1. M/s dow coring U.S.A 2. MIS Dr.Beck & co. Pune.
PACKING MATERIALS:
The packing materials are mainly wooden reels, polythene plastic, etc.the wooden are mainly purchased from. 1. M/s Kaiser spools, Bangalore. 2. M/S ruby industries, Bangalore.
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STORAGE
The materials are to be stored in the specified location the storage facilities are in the form of racks, contains etc. The quality department specifies the method of storage to be adopted in order to prevent the copper conduction from damage. The materials at in process shall be kept damage.
PACKING
Packing responsibility is handed over to the dispatch department. packing process is continued out in accordance with document work instruction specified. Packing is maintained by making use of quality plans prescribing the order specification of the materials and also the recording of verification of the packing materials upon receipts. The recording formats used for packing materials upon recipts the recording format used for packing materials are referred in quality plan.
DELIVERY
The dispatch department has the overall responsibility of the delivery of the goods, which aqre agreed contractually .the dispatch is made through customer specified transporters. Before the dispatch of the product it is technically and commercially cleared it is ensured that the material are in line with the
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PRODUCTION DEPARTMENT
QUALITY POLICY To manufacture quality products, by utilizing best skills and follow the process, procedure at every stage of manufacture. SCOPE OF THE DEPARTMENT Activities carried out in production department for converting Raw continuous cost rod into finished product and maintaining level of specified quality requirements for the production to achieve the above objective the following finished product are produced. 1. BARE COPPER CONDUCTORS. 2. ENAMELED COPPER CONDUCTORS. 3. ENAMELED DOUBLE FIBRE GLASS COVERED COPPER CONDUCTORS. 4. DOUBLE FIBRE GLASS COVERED COPPER CONDUCTORS. 5. NOMEX COVEREDCOPPER CONDUCTORS. 6. POLYSTER FILM COVERED COPPER CONDUCTORS. 7. COTTON COVERED COPPER CONDUTORS. RESOURCES:
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RESPONSIBILITY
HOD (head of the department) of production has the overall responsibility for implementation and maintenance of various activities and functions of production and deletion of responsibility to delegation and other staff as appropriate.
FUNCTIONS
Wire drawing flattening annealing insulations as per is customer specification.
INTERACTIONS
P. G. Dept. of Studies in Commerce, K.L.Es G. H. College, Haveri Page 31
PROCESSING ACTIVITIES
The various processing activities of production areas under. 1. WIRE DRAWING PROCESS. Wire drawing is a process of converting the copper rod of higher sizes of copper wire through drawing in the bull block machine either the help of tungsten carbide dies. By redrawing the copper wire, repeat till to the required size also the shaving process is carried out through the bull block machinery.
2. FLATTENING PROCESS. The draw wire or wire rods pass through edge rolls in random strip rolling mill to get rectangular bare strip as per the required sizes.
3. ANNEALING. Bare copper wire and strips in steel bobbins are kept in the pot and in vacuum (to avoid oxidations) and passes through bright annealing electrical furnace for heat. There is a
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4. BARE COPPER WIRE AND STRIPS After cooling at the pit type cooling pot the required annealed bare copper strips are obtained the bare copper wire strips sort then sent for quality tests. After obtaining satisfactory quality results the material is rewound on bobbins and weighed for dispatch.
5. ENAMELED WIRE AND STRIPS. To obtain enameled wire and strips the bare copper wire and strips obtained from cooling pit type pot are passed through the vertical enamellings plant through the heating zones where it is enameled. Then after coating of enamel they are rolled on wooden it is bobbin. Then the enameled department the bobbins wire are weighed and then packed for dispatch.
6. GLASS COVERED WIRE AND STRIPS The bare wire and strips obtained after cooling from the bright annealed pot are converted with as per the required specification and then material is lapped by fiber glass yarn and
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7. COTTON COVERED WIRE AND STRIPS. The bare wire and strips obtained after cooling from the bright annealed pot is covered with as per specification and the material is insulated by cotton yarn is passed and finally it comes as wooden bobbins then the insulated wire and stripes are tested the clearances of Q.A Department the bobbins wire weighed and packed for dispatch.
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INSPECTION REPORT
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PRODUCTION PROBLEMS:
The company has a problem of electric power. The company has a generator to overcome the problem of shortage of electricity. If there is a problem in the working of machinery, there arise several problems which will lead to stoppage of production process. Sometime there are labor problems, which will affect the smooth process. Sometime there are labor problems which will affect the smooth working of production department.
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Approval release revision and distribution of department manual and quality records and interaction with co departments.
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AWARDS
1. ISO 9001-2008certificate 2. Commercial taxes department gold card holder 3. Exporter award from chamber of commerce and industry 4. Award of appreciation for obtaining iso certification from north Karnataka small scale industries association, Hubli 5. Award of excellence from Karnataka chamber of commerce and industry 6. Rajiv gandhi shiromani award.
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CHAPTER- III
CONCEPTUAL FRAME WORK
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level of activity or volume fluctuates information on relative profitability of its various products, information on relative profitable effect of changes in selling price and other variable such information can help the management to improve the relation such information can help can help the management to improve the relation between these variable for example an analysis of sales and cost data can be helpful in determining the level of sales volume necessary for the business to achieve a desired or target profit similar CVP analysis the effect of cost increases or decrease on the profitable of the business enterprise.
1. Contribution margin concept 2. Profit volume (P/V)Ratio 3. Break even Analysis 4. Margin of safety.
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contribution margin adds directly to operating income of the firm. Thus, Sales - variable costs = fixed cost + profit.
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P.V. ratio may be expressed with the help of the following formula contribution.
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BREAK EVEN POINT The break even and expenses are equal. At this amount of sales the organization has no profit or loss break even analysis is an important technique used in profit planning and managerial decision making.
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B. EQUATION APPROACH:
An equivalent approach to finding the breakeven point is based on this equation.
MARGIN OF SAFETY
The margin of safety indicates by how much sales may decrease before a loss occurs, if refers to sales in excess of the break even volume. It is important there should be a reasonable margin of safety to run the operation of the company in profitable position. Alow margin of safety usually there provide strength and stability to a concern.
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The margin of safety is an important measure, especially in times of receding sales to know the real position to operate without incurring losses and to take steps to increase the margin of safety to improve profitability. Margin of safety is calculated by using the following formula Margin of safety (Rs) = Actual sales Break even sales.
Or =Profit/ PN ratio
Margin of safety as percentage of total sales = Margin of safety/X 100 Total sales
The higher the margin of safety, the better profitability of the product / product line.
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LEVERAGES
The employment of an asset or source of funds for which the firm has to pay a fixed return may be termed as leverage if earning less the variable costs exceed the fixed costs or earnings before interest and taxes exceed the fixed return requirement the leverage is Called favorable. When they do not the result is unfavorable leverage.
TYPE OF LEVERAGE
1. Operating leverage 2. Financial leverage 3. Combined leverage
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OPERTING LEVERAGE
Operating leverage results from The existences of fixed operating expenses in the firms income stream it may be defined as the firms ability to use fixed operating costs to magnify the effects of changes in sales on its earring before interest and taxes.
The operating leverage is greatest in firm with large proportion of fixed costs, low proportion of variable costs, and the resulting high profit volume ratio.
Manager can use operating leverage to measure the impact of changes in sales on income from operations (EBIT). A high operating leverage indicates that a small increase in sale sales will yield a large percentage increase in sales is necessary to significantly increase EBIT.
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FINANCIAL LEVERAGE
Financial leverage relates to the financing Activities of a firm. It refers to the situation where a relatively `small increase in income can provide proportionately much larger increase in return to the equity shareholder it is the result of having a relatively large proportion of financing through debt or preference share, which pay interest or dividends at a fixed rate. When income increases, the interest and preference share dividends remain constant, leaving most of the increase in income to the equity shareholders.
Financial leverage is defined as the ability of a firm of a firm to use fixed financial charges to magnify the effects in EBIT on the earning per share.
Favorable or positive leverage occurs when the firm earns more on the assets purchased with the funds than the fixed cost of their use. UN favorable or negative leverage occurs when the firm does earn as much as the funds cost.
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Where EBIT- Earnings Before interest and taxes. EBT- Earning before Tax.
Higher Financial Leverage Results into the possibility of great return to the equity holders, but it also increases risk.
COMBINED LEVERAGE.
Combined leverage refers to the extent to which a firm has fixed operating cots as well as fixed financing costs. It represents the effect of a given change in the sales revenue on the earning per share. Combined leverage can vibe computed by applying the following formula: DCL = DOL X DFL
Where DCL Degree of combine Leverage DOL dredge of Operating Leverage DFL- Degree Of financial leverage
Combined Leverage affects the total risk of the firm. To keep the risk with manageable limits, a firm which has degree of operating leverage will be well advise to have low financial leverage and vice versa.
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The financial Breakeven Point can be determined by the following equation: FBEP=I+PD/1-t Where, FBEP FINANICAL Breakeven point. I-Annual Interest Charges PD- Preferences Divides t- Tax Rate.
CHAPTER- IV
P. G. Dept. of Studies in Commerce, K.L.Es G. H. College, Haveri Page 53
373.18%
500.97%
MARGIN OF SAFTETY
Margin of safety (M.O.S) is the differences between the actual sales revenue and the break even sales revenue therefore the formula for calculating margin of safety is Margin of safety = sales-Break Even Sales Margin Of safety as percentage of total Sales = Margin of safety / Total sales*100
TABLE 4.4 SHOWS MARGIN OF SAFETY AND MARGIN OF SAFTETY. AS PERCENTAGE OF TOTAL SALES.
P. G. Dept. of Studies in Commerce, K.L.Es G. H. College, Haveri Page 55
OPERATING LEVERAGE The extent to which an organization uses fixed costs in its costs structure is called operating leverage. Operating leverage at a particular sales volume can be measured using the operating leverage factor. operating leverage factor=Contribution/EBIT
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Finical Leverage Financial Leverage refers to the extent to which the firm uses fixed financing costs arising from the use of debt capital for maximizing the earning evadible to shareholders. Financial leverage factor= EBIT/EBT
TABLE 4.6 SHOWS THE FINANCIAL LEVERAGE Financial Leverage factor Year EBIT EBT FINANICAL LEVERAGE FACTOR
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COMBINED LEVERAGE The combine leverage or the total leverages the effect of a given change in the sales revenue on the earning per share. The degree of combined leverage, DCL is calculated by using the following formula. Where, DOL-Degree of Operating Leverage DFL- Degree of financial Leverage TABLE 4.7 SHOWS DEGREE OF COMBINED LEVERAGE TABLE 4.7 DEGREE OF COMBINED LEVERAGE
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FINANCIAL BREAKEVEN POINT Financial Breakeven point is the level of EBIT at which the earning per share is equal to zero. Financial break even Points is obtained by solving the following equation for EBIT. EBIT Where, I -Annual Interest charges TABLE 4.8 SHOWS THE FINANCIAL BREAK EVENT POINT FINANCIAL BREAK EVEN POINT (Rs. In lakh) =I
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NET INCOME Net income is the earning available after deducting the interest and other financial charge from EBIT.
Thus, the formula for calculating net income is Net income -= EBIT-I Where, EBIT- Earnings Before interest and taxes I-Interest. SHOWS THE NET INCOME OF THE COMPANY
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Sources: Official records of the company for the respective years Note: Here Net income= earnings before tax
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CHAPTER V
FINDINGS, SUGGESTIONS & CONCLUSIONS
FINDINGS CVP analysis, being an important tool for planning and decision making, can be applied in several in several situations practically. For the unit under study thought it is caring profit from the year of its established. It is essential to know to know the trends in various aspects from year to year. It is also essential know the profitable and its the extent of risks involved. The main finding of the analysis is:
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8. Financial break even point has come down to decline in the interest obligations. 9. Overall profitable of the company revels that company has been able to cover operating risk and financial risk. P. G. Dept. of Studies in Commerce, K.L.Es G. H. College, Haveri Page 63
SUGGESTIONS
1. Cost reduction: Variable costs of the company are high sagun copper conduction (P) Ltd...m, must these costs considerably by efficient utilization of men machine and materials
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CONCLUSION
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