Cost Sheet Analysis of

Britannia Bread

SUBMITTED BY AKSHAT JAIN (LR/2112003)

ANANYA GUPTA (LR/2112007)

KATYAYNI SOIN (LR/2112021)

SAGAR YADAV (LR/2112043)

SHEFALI SAXENA (2112046)

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 Introduction

MEANING OF COST

COST‟ represents a sacrifice of values, a foregoing or a release of something of value. It is

the price of economic resources used as a result of producing or doing the thing costed. It is
the amount of expenditure incurred on a given thing. Cost has been defined as the amount
measured in money or cash expended or other party transferred, capital stock issued, services
performed or a liability incurred in consideration of goods and serviced received or to be
received. By cost, we mean the actual cost i.e. historical cost. ICWA (UK) defines cost as the
amount of expenditure (actual or notional) incurred on, or attributable to a specified thing or
activity.

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CLASSIFICATION OF COST

Cost classification is the process of grouping costs according to their common features. Costs
are to be classified in such a manner that they are identified with cost center or cost unit.

ON THE BASIS OF BEHAVIOUR OF COST

Behavior means change in cost due to change in output. On the basis of behavior cost is
classified into the following categories:

FIXED COST

It is that portion of the total cost which remains constant irrespective of the output upto
capacity limit. It is called as a period cost as it is concerned with period. It depends upon the
passage of time. It is also referred to as non-variable cost or stand by cost, capacity cost or

“period” cost. It tends to be unaffected by variations in output. These costs provide conditions
for production rather than costs of production. They are created by contractual obligations
and managerial decisions. Rent of premises, taxes and insurance, staff salaries constitute
fixed cost.

VARIABLE COST

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This cost varies according to the output. In other words, it is a cost which changes according
to the changes in output. It tends to vary in direct proportion to output. If the output is
decreased, variable cost also will decrease. It is concerned with output or product. Therefore,
it is called as a “product” cost. If the output is doubled, variable cost will also be doubled.
For example, direct material, direct labour, direct expenses and variable overheads. It is
shown in the diagram below.

SEMI-VARIABLE COST

This is also referred to as semi-fixed or partly variable cost. It remains constant up to a

certain level and registers change afterwards. These costs vary in some degree with volume
but not in direct or same proportion. Such costs are fixed only in relation to specified
constant conditions. For example, repairs and maintenance of machinery, telephone charges,
supervision professional tax, etc.

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ON THE BASIS OF ELEMENTS OF COST

Elements means nature of items. A cost is composed of three elements, material, labour and
expenses. Each of these elements can be direct and indirect.

DIRECT COST

It is the cost which is directly chargeable to the product manufactured. It is easily identifiable.
Direct cost consists of three elements which are as follows:

DIRECT MATERIAL

It is the cost of basic raw material used for manufacturing a product. It becomes a part of the
product. No finished product can be manufactured without basic raw materials. It is easily
identifiable and chargeable to the product. For example, leather in leatherwares, pulp in
paper, steel in steel furniture, sugarcane for sugarcane etc. what is raw material for one
manufacturer might be finished product for another. Direct material includes the following:
1. All materials specially purchased for production or the process.
2. All components purchased for production or the process.

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 3. Material transferred from one cost center to another or one process to another.
4. Primary packing materials, wrappings, cardboard boxes etc, necessary for
preservation or protection of product.
Some of the items like nails or thread in the store are a part of finished product. They are not
treated as direct materials in view of negligible cost.

DIRECT LABOUR OR DIRECT WAGES

It is the amount paid to those workers who are engaged in the manufacturing line for
conversion of raw materials into finished goods. The amount of wages can be easily
identified and directly charged to the product. These workers directly handle raw materials,
work in progress and finished goods on the production line. Wages paid to the workers
operating lathes, drilling, cutting machines etc are direct wages. Direct wages are also as
productive labour, process labour or prime cost labour.
Direct wages include the payment made to the following group of workers:

1. Labour engaged on the capital production of the product.

2. Labour engaged in aiding the operations viz. Supervisor, Foreman, Shop clerks and
Worker on internal transport.
3. Inspectors, Analysts needed for such production.

DIRECT EXPENSES OR CHARGEABLE EXPENSES

It is the amount of expenses which is directly chargeable to the product manufactured or

which may be allocated to product directly. It can be easily identified with the product. For
example, hire charges of a special machine used for manufacturing a product, cost of

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designing the product, cost of patterns, architects fees/surveyors fees, or job cost of
experimental work carried out especially for a job etc. Cost of special drawings, cost of
special layout designs, patents, patterns, cost of models, surveyors fees, Excise duty, royalty
on production, cost of rectifying defective work. Utility of such expenses is exhausted on
completion of job.

INDIRECT COST

It is that portion of the total cost which cannot be identified and charged directly to the
product. It has to be allocated and apportioned and absorbed over the units manufactured on a
suitable basis. It consists of the following three elements:

INDIRECT MATERIAL

It is the cost of the material other than direct material which cannot be charged to the product
directly. It cannot be treated as a part of the product. It is also known as expenses materials. It
is the material which cannot be allocated to the product but which can be apportioned to the
cost units. Examples are as follows:

1. Lubricants, cotton waste, oil, grease, stationery etc

2. Small tools for general use
3. Some minor items such as thread in dress making, cost of nails in shoemaking etc

INDIRECT LABOUR

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It is the amount of wages paid to those workers who are not engaged on the manufacturing
line, for example, wages of workers in administration department, watch n ward department,
sales department, general supervision.

INDIRECT EXPENSES

It is the amount of expenses which is not chargeable to the product directly. It is the cost of
giving service to the production department. It includes factory expenses, administrative
expenses, selling and distribution expenses etc.

COST SHEET
For determination of total cost of production a statement showing the various elements of
cost is prepared. This statement is called as a statement of cost or cost sheet. Cost sheet is a

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statement which provides assembly of the detailed cost of a cost center or a cost unit. It is a
statement showing the details of a) total cost of job b) Cost of an operation or order. It brings
out the composition of total cost in a logical order under proper classifications &
subdivisions. The period is covered by the cost sheet may be by a week a month or so.
Separate columns are provided to show total cost, cost per-unit etc. In case of different
products there are different cost sheets for different products. A cost sheet is prepared under
output or unit costing method.

PURPOSE OF COST SHEET

1. It gives the breakup of total cost under different elements.

2. It shows total cost as well as cost per unit.
3. It helps in comparison with previous years.
4. It facilities preparation of tenders or quotations.
5. It enables the management to fix up selling price.
6. It controls cost.

DIVISIONS OF COST

PRIME COST

It comprises of all direct materials, direct labour and direct expenses. It is also known as flat
cost

Prime cost = Direct Materials + Direct Labour + Direct Expenses

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WORKS COST

It is also known as a factory cost or cost of manufacture. It is the cost of manufacturing an

article. It includes prime cost and factory expenses.

Works Cost = Prime Cost + Factory Overheads

COST OF PRODUCTION

It represents factory cost plus administrative expenses.

Cost of Production = Factory Cost + Administrative Expenses

TOTAL COST

It represents cost of production plus selling and distribution expenses.

Total Cost= Cost of Production + Selling & Distribution Expenses

SELLING PRICE

It is the price which includes total cost plus margin of profit or minus loss, if any.

Selling Price = Total Cost + Profit (-Loss)

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UTILITY OF COST SHEET

DETERMINE THE TOTAL COST

A total cost sheet (statement) helps in determining aggregate cost of manufacturing a product
or providing a service.

DETERMINING PRODUCT PRICE

A cost sheet helps in identifying the total cost for a product or service which in turn helps in
properly pricing of products & services.

COST REDUCTION OR COST CONTROL

Cost sheets helps in identifying the total cost stage wise & any unwanted cost can be
curtailed.

PREPARE BUDGETS
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A cost statement helps in preparing budget for each department

PROFIT PLANNING

It helps to minimize cost & increase profits.

1. STAGE WISE COST IDENTIFICATION

Costs such as prime cost, factory cost, cost of production, cost of goods sold, total
cost of sale etc.

2. DETERMINE THE COST PER UNIT

This helps in determining cost per unit on which u can predict further cost.

DETERMINATION OF TOTAL COST

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Cost of product is determined as per cost attach concept. Total cost of a product consists of
various elements of cost which have the quality of coherence. All the elements of cost can be
grouped and regrouped. Grouping and regrouping of various elements of cost leads to
significant divisions of cost. The logical process of determination of cost by grouping and
regrouping various elements is illustrated as follows:

ESTIMATION OF COST

Very often, the management desires to know, „what will be the cost?‟ even before the
production starts. The purpose to know the cost before it is incurred, might be different. It
may be to keep the cost within control or it may be used for profit planning. May times it is
required to submit tenders, to give quotations, to prepare price lists etc. For this purpose the
estimations of “probable cost” of production is essential. This requires the past cost data to be

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analysed, present circumstances are taken into consideration and future is projected. The
technique is known as estimation of cost. This involves the study of each and every element
of cost and their nature of behaviour . Keeping in view the nature of behaviour of elements of
cost, it can be classified into following three categories:

FIXED COST

Fixed cost is that cost which remains unaffected even though there is change in the level of
output. It remains constant at all levels of output for a given period of time. Examples of such
costs are rent, rated and taxes of factory premises, salary of general manager, foreman,
watchman, insurance, depreciation etc. These expenses incur according to the unit of time
and not according to level of production. Hence sometimes it is called as periodic cost.

For example such fixed cost is ascertained of a particular concern Rs. 12000 pm. The
capacity of this concern is to produce 1000 units pm. If they produce 100 units or 500 units
or 700 units or 100 units the fixed cost will remain constant at all these levels of output.

This fixed cost remains fixed at all levels of output, but the cost per unit changes if there is a
change in the level of output.

VARIABLE COST

It is the cost which tends to vary directly with the volume of output. If there is increase in
output this cost increases and vice versa. The change in the variable cost takes place in the
same direction in which the level of output changes. This cost consists of direct materials,
direct wages, direct expenses and some part of indirect expenses which varied according to
the level of output. Say for example if standard unit of final product requires the raw
materials of Rs.20 per unit the expenses on direct materials will change if level of output

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changes. However variable cost per unit will remain unchanged provided the price level does
not change.

SEMI-VARIABLE COST

This is the third category of nature of behavior of the expenses. These expenses are neither
fixed nor variable. These expenses change in the same direction in which the level of output
changes. Thus these expenses are partly fixed partly variable in nature. Examples of such
expenses are depreciation of plant and machinery, maintenance of factory building etc. These
expenses will increase if factory is run from single shift to double or triple shifts.
Depreciation and maintenance will increase but not in the same ratio, the output increases.
Thus these expenses are neither fixed nor variable cent percent. Hence they are called as semi
variable expenses.

Company Profile

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Britannia Industries Limited (BIL) is a major player in the Indian Foods market with
leadership position in Bakery category. Its brand portfolio includes Tiger, Marie Gold, Good
Day, 50:50 and Treat. The Company was born in 21st March of the year 1918 as a public
limited company. The Company's plants are situated in Kolkata, Delhi, Chennai, Mumbai and
Uttarakhand. In 1921, it became the first company east of the Suez Canal to use imported gas
ovens. Britannia's business was flourishing. But, more importantly, Britannia was acquiring a
reputation for quality and value. As a result, during the tragic World War II, the Government
reposed its trust in Britannia by contracting it to supply large quantities of 'service biscuits' to
the armed forces. A new factory was established in the year 1924 at Kasara Pier Road in
Mumbai. In the same year, the Company became a subsidiary of Peek, Frean & Company
Limited, U.K., a leading biscuit manufacturing company, and further strengthened its
position by expanding the factories at Calcutta and Mumbai. In 1952, the Kolkata factory was
shifted from Dum Dum to spacious grounds at Taratola Road in the suburbs of Kolkata.
During the same year automatic plants were installed in Calcutta and later in 1954 the
automatic plants were installed in Mumbai plant, also in the same year the development of

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 high quality sliced and wrapped bread in India was initiated by the company and was first
manufactured at Delhi and a new bread bakery was set up at Delhi in the year 1965. Britannia
Biscuit Company takes over biscuit distribution from Parry's during the year 1975. In 1976,
the company had introduced Britannia bread in Calcutta and Chennai. During the year 1978,
the company made Public issue, in that Indian shareholding crossed 60%. The Company re-
christened from Britannia Biscuit Company Limited to Britannia Industries Limited with
effect from 3rd October of the year 1979. The Company had signed a 10-year technical
collaboration agreement with Nebico Pvt Ltd., Nepal during the year 1980 for the supply of
know-how relating to manufacturing, packaging and marketing of biscuits and selection of
plant and machinery.

Growth and profitability

The company is growing at a steady rate, and is currently profitable. Between 1998 and 2001,
the company's sales grew at a compound annual rate of 16% against the market, and
operating profits reached 18%. More recently, the company has been growing at 27% a year,
compared to the industry's growth rate of 20%.

At present, 90% of Britannia‟s annual revenue of Rs2,200 crore comes from biscuits.

Britannia is one of India's 100 Most Trusted brands listed in The Brand Trust Report.

Data Collection & Analysis

COST SHEET OF BRITANNIA BREAD

PROFORMA OF COST SHEET

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Cost sheet for every 1lac units produced and sold.

Cost Per Unit

Quantity Manufactured 1 100000

Quantity sold 1 100000

CPU(Rs)
DIRECT COST
Raw materials consumed
Opening stock of raw materials 0
Purchases of Raw Materials 5.805

(-)Closing stock of Raw Materials 0

Materials Consumed 5.805
Direct labour/wages 0.124
Direct cost/expenses 0.2415
PRIME
6.1705
COST

INDIRECT COST
Factory/Works Overheads
Indirect labour 0.122
Depreciation on Machinery 0.675
Works Overheads 0.05204

Cost of Maintanence 0.0589

Other Factory Expenses 0.0282

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Supervisors Salary 0.0385
Power & Fuel 0.5678

Total Overheads 1.54244

FACTORY COST/WORKS COST 7.71294

Office and Administrative Overheads

Depreciation on office furniture@7% 0.0281

Office Rent 0.0585

Salary to Staff 0.089

Office and General Expenses 0.0257

Telephone expenses 0.0219
Electricity and Lightings 0.03123
Printing and stationary 0.00294
Total Office and Administrative Overheads 0.25737

COST OF GOODS SOLD 7.97031

Selling and Administrative Overheads

Sales Commission 0.705
Salary of Salesman 0.1
Carriage Outward 0.12798

Sales Expenses 0.057

Total Selling and Administrative Overheads 0.98998

COST OF SALES 8.96029

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 PROFITS 1.03971
SALES 10

Raw Materials Cost

Flour 3.756
Water 0.892

Yeast 0.6789
Salt 0.4781

Raw Materials per unit 5.805

NOTE
The Value are determined on the basis of apportionment as the
company produces more than one product (including fixed cost)

Cost sheet for every 1lac units produced and sold.

Some of the above Values are estimated

COST SHEET ANALYSIS

Direct Cost:

Direct materials

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

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 Water
Yeast
Salt

Direct labor/wages:

Direct labor/Wages amounts to Rs. 0.124 per unit which is approximately 2.009% of the
PRIME COST. This percentage is low because a good amount of work is automated as a
result of which Human resources are diverted to more productive areas such as SALES and
MARKETING.

Direct cost/expenses:

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

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Indirect Costs:

Factory Overheads:

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

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

Depreciation on machinery: The depreciation is calculated on the basis of WDV

calculated @ 10% p.a. This value amounts to around 43.7% of the FACTORY
OVERHEADS. The percentage high because of the level automation and technology used
for production.

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

Other factory expenses: Other factory expenses include maintenance of factory and other
miscellaneous expenses.

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Office and Administration Overheads:-
Office and administration overheads include Depreciation on office furniture@7%, office
rent, salary to staff, office and general expenses, Postage and Telegrams, telephone
expenses, electricity and lightings

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

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

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

Telephone Expenses: Calls made by the staff members.

Electricity and lightings: It consists of office lighting and air conditioning expenses
Sales and distribution overheads:-

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

Sales Commission :
As a part of encouragement for sales people, they are given commission of 5 % of the total sales
done by them.

Discount allowed :
To attract whole sellers to buy the product they are offered a discount of 5% on the selling price.

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

Carriage outward :
To carry the finished goods to the whole sellers, the transportations charge per unit/product is
set as RS 0.12798.

Sales expenses :
This includes expenses incurred on advertisements and promotional expenses such as newspaper
advertisements, hoardings, TV commercials etc.

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

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CVP Analysis
 Findings & Conclusions

Finding The Study:

1- Direct labor/Wages amounts to Rs. 0.124 per unit which is approximately 2.009% of the
PRIME COST
2- Direct cost includes costs incurred in bringing the raw materials into the factory which is
Carriage inward.
3- The amount of indirect labor is Rs. 0.122 per unit. This value includes sweeper charges,
support staff etc.
4- The depreciation is calculated on the basis of WDV calculated @ 10% p.a. This value
amounts to around 43.7% of the FACTORY OVERHEADS
5- Office and administration overheads include Depreciation on office furniture@7%, office
rent, salary to staff, office and general expenses, Postage and Telegrams, telephone
expenses, electricity and lightings
6- As a part of encouragement for sales people, they are given commission of 5 % of the
total sales done by them.
7- The average salary paid to the sales people is around Rs. 0.1 of the total per unit cost of
the product.

Conclusion

1.Britannia is undoubtedly the number one retailer in India. It has built a very emotional and
cordial relationships with its customers which is very essential for a successful business venture.

2.The employees accept their responsibilities wholeheartedly, accept that it is their responsibility
to carry out a part of their activities of Britannia company as they will be held accountable for
the quality of their work.

3. As per the study, we would like to conclude that bread not being the staple food in India, has
definitely evolved as a substitute for chapattis, rotis, rice, etc. It is easily available due to its
excellent distribution channels. Britannia bread has acquired almost 50% stake in daily bread
market.

4. Today a variety of breads are available, such as brown bread, whole wheat bread, chutney
bread, etc.

5. The company is reaching out to all the sections of the society. Even after having many
competitors around, Britannia bread has managed to capture a large market share not just in the
urban but has also managed to penetrate the rural markets.

Suggestions:
1- The amount of direct as well as indirect labor should be decreased from Rs. 0.122 per
unit to Rs. 0.1 in order to decrease the per unit cost.

2- The average Salary paid to the sales people should be maximized in order to motivate the
sales personnel in order to maximize the sales in the market.

3- As a part of encouragement for sales people, they should be given a commission of 8 %

instead of 5% of the total sales done by them in order to maximize sales and production
and decreasing cost per unit.
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