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report of DDC market
report of DDC market
INTRODUCTION
A first five-year plan, stressed upon the need of developing a modern dairy
industry in public sector. The dairy development commission was formed in
1995 A.D. The dairy development section was established in the year 2010/11
B.S. As the demand of milk and milk products were gradually increasing, it
was felt necessary improvement of Dairy Development Center. As a result,
dairy development center at Bhotahity was established in the same year
2010/11. This center started to distribute the collected milk with processed to
the urban people in Kathmandu.
In this way, the demand of milk and milk products had been increasing day by
day, the dairy plant become necessary. Due to the inadequacy of space this
center was shifted to Lainchour in the year 2013. The dairy development
commission had been converted into dairy development board in 2019 B.S.
Dairy Development Corporation (DDC) had been established in 1st Shrawan
2026 as a manufacturing enterprise under the corporation act 2021.
The dairy development activity in Nepal was started at Tusal village of Kavre
district in 2009 B.S. (1952), on experimental basis with a small-scale milk
processing plant under the development of agriculture. In the year 2010/11
B.S. at the initiative of Diary Development Board, the central diary plant was
established and it starts milk collection processing and marketing activities
from the year B.S. 2014 (1957).
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The third year plan has provided potential market to the farmers, who are far
distance and remote areas to supply the homogenized and pasteurized milk
and other milk products to the consumer of urban area and to ensure the
improvement of life style of farmer.
The main objectives of the corporations are to provide guaranteed market and
fair price to the rural milk producers and to supply hygienic pasteurized milk
and other standard dairy product to the urban consumers. Being a public
enterprise its main objectives is to fulfill the social benefits rather than earning
profits.
DDC was able to make profit only in 3 years and incurred losses in later 3
years. If there is no improvement in the efficiency of public enterprises, the
PEs can not be existed for the long run because the investment in such
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enterprises of government will remain as a financial wastage. In such a
situation the PEs should at least generate a reasonable surplus for existences.
The financial performance of DDC is not satisfactory. It is continuously
failure to generate surplus though it has been serving the social benefits. It is
necessary to earn surplus to serve the society for long run otherwise the
subsidy provided by the state will have no meaning.
Due to limited capital formation DDC have been adversely affected. It has
created difficulties circumstances to run production, business and other
service. The main problem facing DDC is the shortage of good quality raw
milk whereas demand for its milk and milk products in the urban areas is
increasing. In an effort to fulfilling the increasing demand for milk and milk
products, DDC has expanded its milk collection network in distant rural areas.
Than to improve the Dairy Business DDC could take the following options.
Livestock can widely distributed with even distribution of cattle and
buffaloes throughout the country
Involvement of private sector in dairy business will greatly increase the
establishment of dairy industries.
Try to acquire new sample from your own consumer.
Increasing involvement of NGOs and private sector in livestock
development activities particularly in providing technical support
services and veterinary health care.
.Seek Donors’ support can create a positive environment for dairy
livestock and dairy business development.
Improve in quality of dairy products.
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1.3 Objective of Study
This case study of DDC is intended to fulfill the requirement of BBS third
year. This helps us to understand the practical methods of keeping accounting
records within the firm and their decision regarding the changing variables in
the outer environment. The main objectives of the present assignment are as
follows:
This research study is concerned with Cost concept and classification of Dairy
Development Corporation, which is a public enterprise. For the analytical
purpose last 5 years data and its trend will be analyzed. The analysis will be
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based upon the primary as well as secondary data, which will be provided
from the management of DDC. We are unable to prepare method of
distribution of overhead costs lack of relevant information like ratio between
production department and service department, cost items and its amount. We
cannot find accurate data show our result is wrong. So, we are going to do our
task by Standard costing Time and resources constraints may limit, that areas
covered by the study. The field survey will be done at central office of DDC.
A) Introduction
Research methodology is the main organ of this study. It is use to achieve the
objectives of the study. The best thesis & its practicability also depend upon
the scientific research & method. Research methodology is the process that
guides us to the conclusions base upon empirical observations in a systematic
manner so that the conclusions reached at are reliable. Moreover selection of
proper methodology leaves rooms for the analysis of the degree of reliability
of the research agenda. Thus, an appropriate research methodology will be
developed that uses statistical as well as other tools available for the study of
profit planning and control will be used that depend upon the secondary data
along with primary ones.
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1. To define and describe the behavior of following types of cost:
variable, step-variable, fixed, step- step, semi-variable (or mixed) and
curvilinear
2. To explain the importance of relevant range in using cost behavior
pattern for predication.
3. To define and give example or engineered costs, committed cost and
discretionary costs.
4. To describe and use of the following cost estimation methods: account
classification, visual fit, high-low method, least square regression.
5. To describe the multiple regression engineering and work
measurement approaches to cost estimation
6. To describe some problems of the encountered in collecting data for
cost estimation
The primary and secondary data are considered to be the major data for
writing the fieldwork report. These data are also called tools of research. Data
are two types.
I. Primary data
II. Secondary data
I Primary data
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First hand data is known as primary data. When next firm uses this data it
becomes secondary data. Methods of collections primary data are:
1) interview
2) information from correspondence
3) questionnaire
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CHAPTER II
PRESENTATION AND ANALYSIS
Presentation and analysis data are an important stage of the research study.
The presentation of data is the basis of organization and classification of data
for analysis. Research is as a media, which can be interpreted methodology
after completing the collection of data it is in still raw from such as
questionnaires, form and into note cards. It is necessary to change the data as
requirement the easy method of presenting the data in to examine it is chart,
graph, table and so on before the arranging the data in table it is essential to
rearrange the raw data and to make the data as well as ordered "The main
purpose of analyzing the data is to change it from an unprocessed form to an
understandable presentation
Dairy Development Corporation has established in B.S. 2026 for the purpose
of pasteurized milk and milk products to urban people and to manage the fair
market for the rural people’s production. The corporation has concentrated on
the production or development of manpower as well as physical development.
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As the rural farmers who produce milk are the backbone of the corporation, It
has tried it's best for developing the economic status of the farmers to involve
them in the effective production of milk, the corporation has provision for
providing additional amount for those who provide high quality milk products.
The program under the DDC milk collection policy has strengthen the present
operation of DDC and its financial performance which encourage the
government and improvement of life style of Nepali people.
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2.4 Definition of Cost
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Cost classification is the process of group cost on the basis of their common
features. Costs are to be classified suitably to identify with costs centers or
cost unit.
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II. Indirect Cost: -
The cost that cannot be identified specially and exclusively with a given cost
is called indirect cost. These costs cannot easily trace out as direct cost.
1. Material cost: -
A product that is not related directly with production is called indirect cost.
That are not directly related to produce but is play vital role while
production .For example coal for manufacturing industry, kerosene for
machine, nail for furniture etc
2. Labour cost: -
The cost given to labour, which is indirectly involved in production, is called
indirect labour cost. For example salary given to foreman, supervisor,
watchman storekeeper.
3. Expenses cost: -
The cost, which is indirectly related, to produce goods and except included in
indirect material cost and indirect labour cost is called indirect, expenses cost.
For example rent of factory, insurance premium, depreciation, electricity bills
etc.
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C. Selling and Distribution cost: -
The cost incurred while goods transferred from factory to market and
promotional activities is called selling and distribution cost. For example
advertising costs, insurance cost.
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Fixed costs cannot be controlled in a short-term period and by the lower
level responsibility center.
Look at the above graphs and table that explains in the case of fixed cost total
fixed cost curve PQ is parallel with line OX, so it indicate total fixed cost does
not depended upon no of unit produced. Total Fixed cost does not affected by
activity of output. And in the case of Per Unit fixed cost the curve PQ moved
to down right side with shape of 'C'. It indicates, per unit fixed cost diminished
in a diminishing rate with the increase in the level of activity.
Fixed costs may be classified into following places:
1. Committed Fixed cost
2. Discretionary Fixed cost
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Variable Cost. The total volume of cost changes only with the change in level
of output, but per unit V.C. remains constant.
Some measure characteristic of variable cost is follows:
Variable cost per unit is fixed.
Total variable cost is proportionately related to operate activity level.
Variable costs can be regulated and controlled in the same responsibility
center and in the short run as well.
Cost that changes proportionately in total but remains fixed per unit in
variable.
For example,
Thus we can prove it.
So we can say variable costs are based on production activity because they
are incurred as a direct result of output activity or work done. If the out put
doubles variable cost will also doubles and vice versa.
Curve T.V. cost Vs. Production Unit Showing Variable Cost Fig:
Characteristics
“Variable cost is a cost that changes in direct proportion to the change in the
cost driver”- CHARLES T. HORNGREEN. If the V.C. increases, total cost
also increases, but P/V ratio decreases and then BEP increases. In this way,
increase in variable costs decreases profit in a given sales volume.
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Per Unit Variable Cost:
Cost (Y)
0 Unit Produced X
According to above figure, the curve PQ is parallel with line ox, which
indicate per unit variable cost is not depended upon change in unit. So it is
fixed.
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Mixed costs are those, which are partly fixed and partly variable. Mixed cost
increases in total and decreases in per unit, as production or sales volume
increases. The thought of cost-volume-profit analysis assumes that all cost can
be classified as fixed and variable. Therefore, mixed cost should be segregated
into V.C. & F.C.
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The cost required to be incurred on the course of normal manufacturing
operation is called normal cos. E.g. scrap value.
The cost that is incurred by the negligence of management, unskilled
inefficient labour on the course of manufacturing operation is called abnormal.
c) Expired and Un-expired costs: -
The cost, which is done or incurred for only twelve months, is called expired
cost.
The cost, which is incurred for more than one year or several years, is called
un-expired costs.
d) Incremental and Managerial costs: -
The costs, which are in, alternatively in budgetary item is called incremental
cost.
The extra cost, which is incurred when extra one unit is product, is called
managerial cost.
e) Capital and Revenue costs: -
The cost, which is incurred form capital, is called capital cost. The cost that is
incurred from net profit of a year is called revenue costs.
Fixed costs do not change in short term period within a relevant range. It is
remains constant in total amount and also unaffected by changing level of
activity fixed cost per unit of volume decreases and vice versa but fixed cost is
also called time cost or capacity cost. Rent, properly tax, supervisors' salary,
depreciation, advertising etc are some examples of fixed cost.
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Fixed cost and variable costs are necessary for every business organizations.
Variable cost and fixed cost of DDC FY 2068/2069 and 2069/2070 are given
below table 1.
Table No.1
Variable Cost and Fixed Cost
2069/2070 2070/2071
Cost items Fixed Variable Fixed Variable
Collection - 1061415385 - 1181408647
Processing exp. - 196280234 - 208686500
Selling exp. - 34643649 - 38370438
Adm. Exp. 53275042 - 69088994 -
Depreciation 34679426 - 32129435 -
Interest loan exp. 11801615 - 11676425 -
Gratuity exp. 9531810 - 75081087 -
Total 109287893 1292339268 187975941 1428465585
Percentage on sales 7.80% 92.20% 11.63% 88.37%
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Fig; Bar Diagram Showing Variable Cost and Fixed Cost
Standard costs are used for the purposes of cost control the technique is known
as the standard costing. Standard cost is pre-determining cost. Thus it is the
predetermined cost based on a technical estimate for materials, labor and
overhead, for a selected period of time. The actual costing system cannot be
ignored standard costing system and control is a very important function of
management through control management ensures that performance of the
organization conforms to its plans and objective. Analysis of variances is
helpful in controlling the performance and achieving the profit, that have been
planned.
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The deviation of the actual cost or profit or sales from the standard cost or
profit or sales is known as variance. When actual cost is less than standard
cost or actual profit is better than standard profit it is known as favorable
variance and such a variance is usually a sing of efficiency of the organization.
On the other hand, when actual cost is more than standard cost or actual profit
or turnover is less than standard profit or turnover it is called unfavorable or
adverse variance and is usually sign of inefficiency of the organization.
The analysis of variance is most suitable from cost control point of view. For
the analysis of variance following variance analysis are useful for study.
(1) Direct material variance.
(2) Direct labor variance
(3) Overhead variance.
(4) Sales Variance
Deviation between target sales & actual sales and production achievement &
target production sales variances of DDC are presents below.
Table No.2
Dairy Development Corporation
Showing Variances between Target and Achievement of Sales (in lakh
liters)
Years Standard Actual Variances Remarks
2066/067 608 592 16 Unfavorable
2067/068 627 574 53 Unfavorable
2068/069 617 567 50 Unfavorable
2069/070 621 575 46 Unfavorable
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2070/071 621 585 36 Unfavorable
Source: Annual report of DDC 2070
From the above data shows that FY 2066/067 to FY 2070/071 cannot meet
actual sales to budgeted sales so DDC is unable to get favorable variance.
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Source: Annual report of DDC 2070
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Cost estimation Cost behavior Cost prediction
Cost estimation provides input for cost prediction, will help the manager to
make decision on management functions of planning, control and decision
making. Following equation can be used to express the relationship between
mixed cost and the level of activity.
Y= a + bx
Where, Y = total cost (Mixed cost)
a = total fixed cost
b = variable cost per unit
x = level of activity
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In this method cost is shown by in graph where production unit denotes x- axis
and y-axis is denoted by sales. It is used to find out the relationship between
cost and various activity levels.
This method is used to find out the variable cost per unit by the relationship
between sales and level of output. Under this method, the semi variable cost is
segregated into the fixed and semi variable components using exactly two data
points. The extreme data points represent the highest and lowest represent the
lowest level of activity levels of relevant range. The high and low method is
explained, step by step as follows:-
Step 1:- select the highest and lowest activity level.
Step 2:- compute the variables rate, b, using the formula.
Variable cost per unit =
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In this method, we take average of given output units and supervisor cost.
After find out average value of level of output and supervision cost. It is put in
formula:
y=
A central issue in all internal accounting system is called cost allocation, the
assignment of indirect overhead, common or joint cost to different
departments, processes or products.
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Research methodology is the process that guides us to the conclusions base
upon empirical observations in a systematic manner so that the conclusions
reached at are reliable. Moreover selection of proper methodology leaves
rooms for the analysis of the degree of reliability of the research agenda. Thus,
an appropriate research methodology will be developed that uses statistical as
well as other tools available for the study of profit planning and control will be
used that depend upon the secondary data along with primary ones.
The sources of secondary data are DDC publications, reports, the publications
of National Cooperative Development Board and other relevant agencies'
publications. Primary data will be collected through a semi-structured
questionnaire to be responded by the management and its affiliates of DDC.
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Chapter III
SUMMARY, CONCLUSION AND
RECOMMENDATIONS
This study concludes the following points, after detail analyzing the current
practice of profit planning system in Dairy Development Corporation.
3.1 Summary
Nepal is an agricultural country. Most of the people depend agriculture. Most
of the people who live in village, they producing more milk but they can’t
get good market .Some farmers who live in hilly area they can not get any
market to sell their milk to solve there problems DDC and schemes are
playing a vital roles as possible.
The case study is part of BBS 3rd year course .After collecting material and
discussion with my friend and teacher. I decided to choose the topic .A case
study on collecting situation of milk of DDC Lain hour, Kathmandu.
3.2 Conclusion
DDC is a government under taking corporation .DDC as small industry in
Nepal has started 1956 from zero bases. since then it has passed different
market situation to start no market to high market demand .DDC as a public
enterprise have to look for general welfare of the people in country and has
social responsibility. It is popularity in increasing day by day.
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stand decision for small problem have to forward their problem since the
quality of milk is not always same.
3.3 Recommendations
(1) The management of the corporation has broadly defined cost and
variable semi variable and fixed cost. Research persons depend on A/C
section on dairy development corporation.
(2) To achieve the organizational goal and to fulfill the demand of milk
there should be greater efforts to increase milk production on the forms
in other words collection of raw milk should be increased removing the
hindrances in this regard and creating infrastructure for live stock
farming.
(3) Profit planning units are not seen in DDC so it must be established
DDC units.
(4) Variance analysis has to be effective variance must be categorized as
favorable and unfavorable and causes of unfavorable variance should
be identified and diagnosed in time effectively
(5) Reward and punishment policy should be developing effectively to
improve the DDC and workers should be motive by the management.
(6) To reduce collection cost uneconomic collection center, must be closed
up and some of the milk collection center should keep only in season
when enough milk supply is obtained so that profit plan becomes
attractive.
(7) Monitoring and evaluation should be done regularly inside and outside
office.
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Bibliography
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7. Ojha, Khagendra P. (1995). Profit Planning in Nepalese
Public Enterprises. Kathmandu: An unpublished Thesis
submitted to the Faculty of Management, Tribhuvan
University.
8. Gupta, S.P. (1995). Management Accounting. Agra:
Shahitya Bhawan Publication.
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