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1.1 INDUSTRY SCENARIO

MACRO AND MICRO VIEW

A macro to micro study on the history of milk co-operatives across the

globe

INTRODUCTION

The Milk man of India , the Father of white Revolution in India and the
Architect of NDDB. This one in individual [Link] kurien has impacted
millions of lives in India and put the name of Amul on the world map of
milk dairy Cooperatives . Dr Karien breathed his last in September 2012
at the age of 91. The author felt that this is perhaps the right moment to
trace the history of milk production and the formation of milk dairy
cooperative across the world.

About 650 to 700 billion liters of milk are produced each year by all
countries put together in the world . India produces more milk than any
other country. But its farmers do not deliver all of this milk to dairy plants.

In terms of the volume of milk produced on forms, India is the world

numbers one in 2007. U.S Came first in terms of the quantity of milk
delivered by the farmers to dairy plants. New Zealand leads in terms of
dairy exports.

Milk is one of those natural products consumed by people all around

the world in one form or another. Milk is rich in calcium. Milk contains
carbohydrates which are the most important source of energy in our diet.
Milk and dairy products have become an inseparable part of our daily
lives. Milk and Milk products, such as cheese and butter are the main
source of calcium in the diet of people in western and non-western
countries. Milk also countries milk also an important constituent of human
cell walls.

Milk has extraordinary nutritional value and is called a balanced diet.

Milk and Milk products are one of those very few items commonly
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consumed across all sections of people around the world. It is interesting

to trace the history of organized milk production and the effect it had on
the life of the people in various countries.

Milk production takes place all around the world, Global demand for
dairy countries to increased in large part due to population growth, Rising
incomes, urbanization and westmization of diets in countries such as
china and India with this increasing demand for dairy, there is growing
pressure on natural resource, including fresh water and soil. WWF works
with dairy farmers, industry groups, and other stakeholders in various
countries to conserve and protect natural resources and habitat.

Millions of farmers world wide tend Approximately 270 million dairy

cows to produce milk. Milk production impacts the environment in various
ways, and the scale of these impacts depends on the practices of the
dairy farmers and feed growers. Approximately 150 million households
developing countries milk is produced by small holders, and milk
production contributes to house hold livelihoods food securities quick
returns for small-scale producers and is an important source of cash
income.

In recent decades, developing countries have increased mostly the

result of an increase in numbers of producing animals rather than a rise in
productivity per head. In many developing Countries, dairy productivity is
Constrained by poor-quality feed resource, diseases, limited access to
markets and services (e.g., health, credit and training) and dairy animals
low potential for milk production unlike developed countries, many
developing countries have not and /or humid ultimates that are
unfavorable for dairying.

Some Countries in the developing world have a long tradition of milk

production, and milk or its products have an important role in the diet.
Other Countries have established significant dairy production only
recently most of the former countries are located in the Mediterranean
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and near east, the Indian subcontinent, the savannah regions of west
Africa, the high lands of east Arica and parts of south and central America.
Countries without a long tradition of dairy production are in south and
dairy production regions with high temperatures and /or humidity.

In the last three decades, world milk production has increased by more
than 50 percent million tons in 1983 to 769 million tons in 2015. Since
the 1970s most of the expansion in milk production has been in south
Asia which is the main driver of milk production growth in the developing
world.

The countries with highest milk surpluses are new Zealand, the united
states of America, Germany, France, Australia and Ireland. The countries
with highest milk deficits are china, Italy, the Russian Federation Mexico,
Algeria and Indonesia.

Global milk production is estimated at approximately 735 billion liters

annually. The largest producers are Europe(EU) at 156 billion liters
annually at-131 billion liters and the united states (US) at 91 billion liters.
New Zealand is the 8th largest producers at 21 billion liters annually. The
top eight represent 407 billion liters or-55 percent of global production.
Farming systems varies greatly across these major dairy producers from
Indias conventional model with an average herd size of less than two,
EUs high producing system where cows spend time outside and in barns
with a moderate to high use of supplementary feeds and New Zealands
low cost, largely outdoor posture system.

Forming system varies greatly across these major dairy producers from
Indias conventional model with an average herd size of less than two, EUs
high producing system where cows spend time outside and in bars with a
moderate to high use of supplementary feeds and New Zealands low
cost, largely outdoor pasture only system.

Today India is the oyster of the global dairy industry. It offers

opportunities galore entrepreneurs world wide, who wish to capitalize on

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one of the largest and fastest growing markets for milk and milk products.
A bagful of pearls awaits the international dairy processor in India. The
Indian dairy industry is rapidly growing, trying to keep pace with the
galloping progress around the world. As he expands his overseas
operations to India many profitable options await him. He my transfer
technology, sign joint venture or use India as a sourcing center for
regional exports. The liberalization of the Indian economy beckons to
MNCs and foreign Investors alike. Indias dairy sector is expected to triple
its production in next 10 years in view of expanding potential for export to
Europe and the west. Moreover with WTO regulations expected to come
into force in coming years all the developed countries which are among
big exporters today would have to withdraw the support and subsidy to
their domestic milk products sector.

Also India today is the lowest cost producer of per liter of milk in the
world, at 27 cents, compared with the U.S 63cents, and Japans 52.8
dollars. Also to take advantage of this lowest cost of milk production and
increasing production in the country multinational companies are planning
to expand their activities here. Some of these milk producers have
already abstained quality standard certificates from the authorities. This
will help them in marketing their product in foreign countries in processed
form. The urban market for milk products is expected to grow at an
accelerated pace of around 33% per annum to around RS 43500cr
product is expected by year 2005. This growth is the urban market for
milk products is expected to grow at an accelerated pace of around 33 %
per annum to around RS 43500 crores by year 2005. This growth is going
to come from the greater emphasis on the processed foods sector and
also by increasing in the value of Indian dairy produce is expected to be
Rs 1000000 million. Presently the market is valued at around Rs
700000million.

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The urban market for milk product is expected to grow at an

accelerated pace of around 33% r annum to around Rs 43500 crores. This
growth is going to come from the greater emphasis on the processed
foods sector and also by increase in the conversion of milk into milk
products. The value of Indian dairy produce is expected to be Rs 1000000
million. Presently the market is valued at around Rs 700000 million.

Indian dairy sector contributes the large share in agriculture gross

domestic products. Presently there are around 70000 village dairy
cooperative across the country. The co-operative societies are federated
into 170 district milk producers unions, which is turn has 22 state
cooperative dairy federation. Milk production gives employment to more
than 72mn dairy farmers. In terms of total production, India is the leading
producers of milk in the India. The milk production in 1990-00 is
estimated at 78mn MT as compared to 74.5mn. Although milk production
has grown at fast pace during the last three decades, milk yield per
animal is very low.

1.2 THEORETICAL BACIKGROUND OF THE TOPIC

INTRODUCTION TO FINANCE

Finance is one of the major elements, which activities the overall growth of economy.
Finance is the lifeblood of economic activity. Finance is a body of facts, principles and
theories dealing with the raising and use of money by individuals and others.

A well-knit financial system directly contributes to growth of the economy. This is because
in the modern money-oriented economy finance is one of the basic foundations of all kind of
economic activities. It is master key which provides access to all the sources for being
employed in manufacturing and merchandising activities. It has rightly been said that

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business needs money to make more money. Hence efficient management of every business
enterprise is closely linked with efficient management of its finance.

The study is made to analyze the leverages with reference to financial statements like profit
and loss account and balance sheet with the help of tables, graphs, providing suggestions for
improving the methods and procedures followed in the firm.

The main aim is to study the activities of finance department by utilizing the theoretical
knowledge relating to practical situation and to highlight differences in practice.

MEANING OF FINANCE:

Finance describes the management, creation and study of money, banking, credit,
investments, assets and liabilities that make up financial systems, as well as the study of those
financial instruments. Some people prefer to divide finance in to three distinct categories:
public finance, corporate finance and personal finance. Additionally, the study of behavioral
finance aims to learn about the more human side of a science considered by most to be
highly mathematical.

DEFINATION OF FINANCE:

Finance is defined in numerous ways by different groups of people. Though it is difficult to

give perfect definition of Finance following selected statements will help you deduce its
broad meaning.

According to Experts: Finance is a simple task of providing the necessary funds required by
the business of entitles like companies, firms, individuals and others on that are most
favourable to achieve their economic objectives.

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According to Academicians: Finance is the procurement of funds and effective utilization of

funds. It also deals with profits that adequately compensate for the cost and risks borne by
the business.

FEATURES OF FINANCE:

1) Investment Opportunities
2) Profitable Opportunities
3) Optimal Mix of Funds
4) System of Internal Controls
5) Future Decision Making

INTRODUCTION OF COST VOLUME PROFIT ANALYSIS

Cost volume profit analysis is a technique for studying the relationship between cost, volume
and profit. Profits of an understanding depend upon a large number of factors. But the most
important of these factors are the cost of manufacture, volume of sales and the selling price of
the product s. The cost volume profit relationship is an important tool used for the profit
planning of a business. The cost volume profit relationship is of immense utility to
management as it assists in profit planning, cost control and decision making.

Cost-Volume-Profit Analysis, in managerial economics is a form of cost accounting. It is a

simplified model, useful for elementary instruction and for short run. Cost-Volume-Profit
Analysis expands the use of information provided by breakeven analysis.

Cost-Volume-Profit analysis, or break-even analysis, is used to compute the bvolume level at

which total revenues are equal to total costs. When total costs and total revenues are equal,
the business organization is said to be breaking even.

Cost-volume-profit-analysis:

Meaning:

The cost volume profit analysis, commonly referred to as CVP, is a planning process that
management used to predict the future volume of activity, costs incurred, sales made, and
profits received. In other words, its a mathematical equation that computes how changes in
costs and sales will affect income in future periods.

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The CVP analysis classifies all costs as either fixed or variable. Fixed costs are expenses
that dont fluctuate directly with the volume of units produced. These costs effectively
remain constant. An example of a fixed cost is rent. It doesnt matter how many units the
assembly line produces. The rent expense will always be the same.

Definition of CVP analysis:

Cost-volume profit (CVP) analysis is based upon determining the breakeven point of costs
and volume of goods and can be useful for managers making short-term economic decisions.
Cost-volume profit analysis makes several assumptions in order to be relevant including that
the sales price, fixed costs and variable cost per unit are constant. Running this analysis
involves using several equations using p rice, cost and other variables and plotting them out
on an economic graph..

Cost-volume-profit (CVP) analysis studies the relationship between

(cost), revenue (sales) and net income (Net profit). The aim is to establish
what will happen to financial result if a specified level of activity or volume
fluctuates i.e., the implications of levels of changes in cost, volume of
sales or prices on profit.

The CVP analysis is the study of the inter-relationships of cost behavior

patterns, levels of activity and the profit that results from each alternative
combination. In decision making management pays a great deal of
attention to the profit opportunities of alternative course of action. The
price of a product depends upon so many external and internal factors
such as market demand, competitive conditions of the market,
management marketing policies etc., Cost of the products is influenced
by memories factors such as volume, product mix, price of inputs, size of
lot or order, size of plant, efficiency in production and marketing,
accounting methods etc.

The alternative that involve changes in the level of business activity

profit does not usually vary in direct proportion to these changes in
volume. This is a result of the cost behavior patterns. Better evaluation
can be made of profit opportunities by studying the relationships among

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costs, volume and profits, profit is clearly a function of sales volume,

selling prices and costs.

The non-uniform response of certain costs to changes in the volume of

business can have serious impact upon profit. CVP analysis answers the
key question: what effect would increasing or decreasing in one or more of
labor cost material cost, fixed cost, volume of sales have on profits? CVP
analysis is used in profit planning and as a guide to making. Tactical
decisions on sales effort .

ABJECTIVES OF CVP ANALYSIS:

The main objectives of cost-volume profit analysis are given below:

1) This analysis helps to forecast profit fairly and accurately as it is

essential to know the relationship between profits and costs on the
one hand and volume on the other.
2) This analysis assists in evaluation of performance for the purpose of
control. In order to review profits achieved and costs incurred, it is
necessary to evaluate the effect on costs of changes in volume.
3) This analysis is useful in setting up flexible budget which indicates
costs at various levels of activity. We know that sales and variable
costs tend to vary with the volume of output. It is necessary to
budget the volume first for establishing budgets for sales and
variable costs.
4) This analysis helps to know the amount of overhead costs to be
charged to the products at various levels of operation as we know
that pre-determined overhead rates are related to a selected
volume of production.
5) This analysis makes possible to attain target profit by locating the
volume of sales required for such profit and finally achieving such
sales volume.
6) This analysis helps management in taking number of decisions like
make or buy, suitable sales mix, dropping of a product etc.

ADAVANTAGES OF CVP ANALYSIS:

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Cost-Volume-profit analysis is a managerial accounting technique used to

analyze how changes in cost and sales volume affect changes in a
companys profit. The technique is widely used in business and has many
advantages. However, there are some drawbacks as well. Understanding
the pros and cons to CVP analysis can help you determine whether this
technique should be implemented in your company.

1. Ease of Calculation:

One of the biggest advantages to CVP analysis is that calculations are

incredibly simple. CVP analysis uses a standard set of formulas that
work for all of the analysis techniques. Anyone who can plug numbers
into the formulas is able to quickly determine the effects of
hypothetical changes in these variables.

2. Understandability:

For the most part, CVP analysis is free of accounting jargon and
complex terminology. This makes both the preparation and
interpretation of CVP analysis figures understandable. For example,
you might want to know how many individual units of your companys
product you would need to sell to break even for the year.

3. Accuracy:

One of the downfalls of CVP analysis is that it isnt always accurate.

CVP analysis techniques assume that all costs in the company are
completely fixed or completely variable. Fixed costs are costs that do
not change with changes in production, such as rent or insurance costs.
Variable costs change at a constant rate as you increase the number of
units produced.

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4. Inflexibility:

As part of it being quick and easy to use, CVP analysis has a built-in set
of assumptions that are fairly rigid. For example, CVP analysis
assumes that a company sells one product, or that if it sells multiple
products the proportion of how much of each product is sold remains
constant. This is known as a constant sales mix assumption, and many
businesses do not follow this sales pattern.

LIMITATIONS OF CVP ANALYSIS:

The CVP Analysis is a subject to the following limitations:

1. It assumes that output is the only factor affecting costs, but there
are other variables which can affect costs, e.g., inflation efficiency
and economic and political factors.
2. Not all costs can be easily and accurately separated into fixed and
variable elements.
3. Total fixed cost do not remain constant beyond certain ranges of
activity levels but increasing in a step-like.
4. It assumes that where a firm sells more than one product the sales
mix is constant, However, the sales mix will be continually changing
owing to changes in demand.
5. There is an assumption that there are either no stocks, or no
changes in stock levels. Profit is therefore dependent on the sales
volume. However, when changes in stock levels occur such stocks
are valued using a absorption costing principles, then profit will vary
with both production and sales. If sales are dep0ressed, profit can
be raised by increasing production and thereby increasing stock
levels. Profit is therefore a function of two independent variables
(sales and production). The conventional break-even chart is two
dimensional and cannot cope with two independent variables. It is
important to note that if stocks valued using marginal costing
principles then profit is a function of sales only, and the
conventional CVP Analysis applies.

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6. CVP Analysis assumes that costs and sales can be predicated with
certainty. However, these variables are uncertain and the
management accountant must try to incorporate the effects of
uncertainty into his information.

ROLE OF CVP ANALYSIS

As stated earlier, a cost-Volume-Profit Analysis can be used to measure

the effect of factor changes and management decision alternatives on
profits. These factors include possible changes in selling prices, changes
in variable or fixed cost, expansion or contraction of sales volume, or
other changes in operating methods or policies. Cost-Volume-Profit
Analysis is also useful for problems of product pricing, sales-mix, adding or
deleting product lines, and accepting special orders. Some situations
where CVP analysis can be used, are explained below:

1. Changes in Selling prices:

The CVP graph is frequently used to illustrate the potential profit effect of
contemplated price changes. A change in the selling price of a product
changes its P/V ratio, which in turn has two effects on the profit pattern,
first, a new break-even point is established, second, profits above and
bellow the break-even sales volume are different. Effects on the profit
pattern are as follows:

a) Increase in selling price:

If the selling price is increased it increases the P/V ratio, and the rate of
fixed costs recovery is increased. The break-even point (break-even
volume) declines, profits beyond the break-even point increases; losses
below the break-even point decreases.

b) Decreases in selling price:

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If the selling price decreases, it decreases the P/V ratio and the rate of
fixed cost recovery declines. The break-even point moves at a higher
point; profits beyond the break-even point decreases, losses below the
break-even point increases.

2. Changes in variable costs:

The CVP graph is used to evaluate the impact of increases and

decreases in variable costs per unit. Changes in variable cost change the
P/V ratio, change the break-even point and affect profit and loss at
different volumes. The effects of changes in variable costs can be
summarized as follows:

a) Increases in variable costs:

An increase in variable costs has the same effect as a decreases in the

selling price. It decreases the P/V ratio and the rate of fixed cost recovery
is slower. The break-even point moves to a higher level, profit after the
break-even point decreases; losses before the break-even point increases.

b) Decrease in variable costs:

A decrease in variable costs has the same effect as an increase in the

selling price. A higher P/V ratio is achieved and the rate of fixed costs
recovery is increased. The break-even point declines; profits beyond the
break-even point are higher; losses before the break-even point are lower.

3. Changes in Fixed Cost:

Increase and decrease in the fixed cost do not have any impact on the
P/V ratio, but they changes in break-even point. With the same P/V ratio,
the rate of fixed costs recovery remains the same:

a) Increases in fixed costs:

If fixed costs are increased, the break-even point (break-even volume)

is higher. Profits above the break-even point are lower by the amount of

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the increases in fixed costs; below the break-even point losses increase by
the amount of increase.

b) Decrease in fixed costs:

If fixed costs are decreased, it lowers the break-even point. The profits
are greater by the amount of the decrease, and losses are smaller by the
amount of the decrease in fixed costs.

4. Desired or Target Profit:

Sometimes, management faces two decision: (i) to increase sales

volume through reduction in selling prices, and (ii) to increase selling
prices in case the P/V ratio is low, with the expectation that a higher profit
will be earned. These decisions should be taken carefully after studying
the profit pattern other factors otherwise the results can be harmful
particularly for those companies whose P/V ratios are already low. Also, if
reduction in selling prices does not increase the sales volume, the price
reduction will result only in lower profits. Price cuts, like increase in
variable unit costs where the contribution margin.

5. Multi-Product Situations:

When there are multiple products with different contribution margins,

the mix of the product has a direct effect on the fixed costs recovery and
total profits of the firm. Different products have different P/V ratios
because of different selling prices and variable costs. Some products
make larger contributions to fixed cost recovery and profit than others.
The total profits depends to some extent upon the proportions in which
the products are sold.
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ASSUMPTION OF COST-VOLUME-PROFIT ANALYSIS

1. This analysis presumes that costs can be reliably divided into-fixed

and variable category. This is very difficult in practice.
2. This analysis presumes an ability to predict cost at different activity
volumes. In practice, a lot of experience may be required to reliably
develop this ability.
3. A Series of break-even charts may be necessary where alternative
pricing policies are under consideration. Therefore, differential price
policy makes break-even analysis a difficult exercise.
4. It assumes that variable cost fluctuates with volume proportionally,
while in practical life the situation may be different.
5. This analysis presumes that efficiency and productivity remain
unchanged. In other words, this analysis presents a static picture of
a dynamic situation.
6. The break-even analysis either covers a single product or presumes
that product mix will not change. A change in mix may significantly
change in mix may significantly change the results.
7. This analysis disregards that selling prices are not constant at all
levels of sales. A high level of sales may only be obtained by
offering substantial discounts, depending on the competition in the
market.
8. This analysis presumes that volume is the only relevant factor
affecting cost. In real life situations, other factors also affect cost
and sales profoundly. Break-even analysis becomes over-simplified
presentation of facts, when other factors are unjustifiably ignored.
Technological methods, efficiency and cost control continuously
influence different variables and any analysis which completely
disregards these over changing factors will be only of limited
practical value.
9. This analysis presumes that fixed cost remains constant over a
given volume range. It is true that fixed costs are fixed only in
respect of a given capacity, but each fixed cost has its own capacity.
This factor is completely disregarded in the break-even-analysis.
While factory rent may not increase, supervision may increase with
each additional shift.

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10. This analysis presumes that influence of managerial policies,

technological methods and efficiency of men, materials and
machines will remain constant and cost control will be neither
strengthened nor weakened.
11. This analysis presumes that production and sales will be
synchronized at all points of time or, in other words, changes in
beginning and ending inventory levels will remain insignificant in
amount. The impact o9f inventory changes on cost-volume-profit
relationship has been discussed in detail elsewhere in this chapter.
12. The analysis also presumes that prices of input factors will
remain constant.

Cost-profit-volume analysis is based on the above-mentioned

limitations. Attempts to draw inferences disregarding these
limitations will lead to formation of wrong conclusions. The application
of cost-volume-profit relationship is restricted by the assumption on
w2hich it is based. Therefore, cost-volume-profit analysis cannot be
used indiscriminately.

COST-VOLUME-PROFIT RELATIONSHIP

Introduction

Profit is always a matter of primary concern to management. The

volume of sale never remains constant. It fluctuates up and down and
income also goes up and down with fluctuations in volume. Profit is
actually the result of interplay of different factors like cost, volume and
selling price. Effectiveness of a manager depends on his capability to
make right predictions about future profits. This can be done when
correct relationship existing between cost, volume and profit is known.
For this reason, knowledge of relationship among cost, volume and profit
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is of immense help to management. This knowledge of cost-volume profit

relationship helps management top find out right solution for such
problems as are given below:

What should be the volume to be attempted for obtaining a

desired profit?
How will the change in selling price affect the profit postion of
the company?
How will the change in cost affect profit?
What should be the optimum mix of the company?

These basic questions present themselves to management for solution in

different forms. The conventional income and expenditure statement
does not provide any answer to all these questions is sought by analysis
of cost-volume-profit relationship. Cost-Volume-Profit Analysis spotlights
the relationship existing among factors like cost, volume and profit.

USES OF COST VOLUME PROFIT ANALYSIS

1. This relationship enables management to predict profit over a wide

range of volume. This knowledge is very useful in preparing flexible
budget.
2. In a lean business season, company has to determine the price of
the products very carefully. It becomes necessary sometimes to
bring down the price to boost the sale of a product. For all decisions
like this, management must determine, by cost-volume-profit
analysis, what impact this reduction in price is going to have on
profit position of a company.

3. Analysis of cost-volume-profit relationship helps in decision-making.

There are situations when management has to decide whether it
should add to it capacity or not. With the knowledge of cost-
volume-profit analysis, a manager can easily take decision showing,
in its report how utilization of available capacity will lead to increase
in profit.

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PRACTICAL APPLICATION OF CVP ANALYSIS:

CVP Analysis is applied in the following situations:

Planning and forecasting of profit at various levels of activity.

Useful in developing flexible budgets for cost control puposes
Helps the management in decision making in the following typical
areas:
Identification of the minimum volume of activity that the enterprise
must achieve to avoid incurring the loss.
Identification of the minimum volume of activity that the enterprise
must achieve to attain its profit objectives.
Provisions of an estimate of the probable profit or loss at different
levels of activity within the range reasonably expected.
The provision of data on relevant costs for special decision relating
to pricing, keeping or dropping product lines, accepting or rejecting
particular orders, make or buy decision sales mix planning, altering
plant layout, channels of distribution specification, promotion
activity etc.
Guide in fixation of selling price where the volume has a close
relationship with the price level.
Evaluates the impact of cost factors on profit.

CVP Analysis of multiple products may be extended to linear programming

problems of short term capacity utilization where a number of products
are involved may conveniently formulations into linear programming
models.

PROFIT VOLUME CHART:

The impact of cost and revenue on profit various levels of activity can
be represented in profit volume chart as shown in figure. Which highlights
the loss area at the levels of activity below the Break-even. Volume and
the profit area at levels of activity above the Break-even-volume. Profit

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curve cuts the vertical axis below the point at zero profit even when there
are no sales the fixed cost must be paid and, consequently, the area
below the break-even volume represents loss.

The following steps are involved in construction of profit-volume-chart:

Select a scale for sales on horizontal axis.

Select a scale for profit and fixed cost on vertical axis.
The horizontal sales line divides the chart into two parts. The lower
part of the line is representing loss area and the area above the line
represents the profit area.
On the vertical axis, the area below the sales line represents fixed
cost and above that represents profit.
Profit and fixed cost are plotted for corresponding sales volume and
the points are joined by a line called profit line.
The profit where the profit line intersects the sales line is the break-
even point.
The angle which the profit line makes with the sales line is called
angle of incidence.
The sales volume beyond the point of intersection is called margin
of safety.

CONCEPT OF CVP

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Cost-Volume-Profit Analysis is an important tool that provides

management with useful information for managerial planning and
decision-making. Profits of a business firm are the result of interaction of
many factors. Among the many factors influencing the level of profits, the
following are considered the key factors:

Selling Prices
Volume of sales
Variable costs on a per unit basis
Total fixed costs
Sales mix (proportions or combinations in which different
products are sold).

To do an effective job in planning and decision-making, management

must have analyses which allow reasonably correct predictions of how
profits will be affected by a change in any one of these factors. Also,
management needs an understanding of how revenues, costs and volume
interact in providing profits. All these analyses and information are
provided by cost-volume-profit analysis.

Cost-volume-profit analysis is a systematic method of examining the

relationships between selling prices, total sales revenue, volume of
production, expenses and profit. CVP analysis can play an important role
by providing management with information regarding financial results if a
specified level of activity or volume fluctuates, information on relative
profitability of its various products, information on probable effects of
changes in selling price and other variables. Such information can help
management improve the relationship between the variables. Similarly
CVP Analysis may be used in setting selling price, selecting the products
mix to sale, choosing among alternative marketing strategies and analysis
the effects of cost increases or decreases on the profitability of the
business enterprise.

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TECHNIQUES OF CVP ANALYSIS

CVP analysis used the following techniques or analyses while

answering many questions in the area of managerial planning and
decision-making.

1) Contribution Margin Concept

2) Break-Even Analysis
3) Profit-Volume-(P/V) Analysis

Contribution Margin Concept:

Contribution margin concept indicates the profit potential of a business

enterprise and also highlights the relationship between cost, sales and
profit. Contribution margin is the excess of sales revenue over variable
expenses. From the contribution margin, fixed expenses are deducted
giving finally operating income or loss. Contribution margin is thus used
to recover fixed costs. Once the fixed costs are recovered, any remaining
contribution margin adds directly to the operating income of the firm.
Contribution margin is a highly technique for planning and decision
making by the management.

Break-Even Analysis:

Break-Even Analysis stresses the relationship and the factors a affecting

profit. A break-even analysis indicates at what level cost and revenue are
in equilibrium. It is a simple and easily understandable method of
presenting to management the effect of changes in volume on profit.

Profit-Volume (P/V) analysis:

A P/V graph is sometimes used in place of or along with a break-even

chart. Profits and losses are given on a vertical scale, and units of
products, sales revenue or percentage of activity are given on a horizontal

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line. The horizontal line is drawn on the graph to separate profits from
losses. The profits and losses at various sales levels are plotted and
connected by the profit line. The break-even point is measured at the
point where the profit line intersects the horizontal line. The P/V graph
may be preferred to the break-even chart because profit and losses at any
point can be read directly from the vertical scale, but the P/V graph does
not clearly show how costs vary with activity.

CVP ANALYSIS AND ECONOMICSS VIEW

In economics, economists give more attention to the problem of

determining the optimum level of a firm. Accepting the objective of profit
maximization, the optimum level of activity is when marginal cost(MC)
equals marginal revenue (MR). Economists approach as compared to
accountants approach in CVP analysis has the following assumption:

Economic approach, similar to accounting approach assumes that

volumes is the sole determination of cost and revenue changes.
Economic approach assumes that total cost function is curvilinear
and not linear as is assumed in accounting approach. The main
reasons for the difference in the two assumptions of cost functions is
the range of activity levels assumed in both economic model and
accounting model. The economic model considers a range of
outputs sufficient to cause significant changes in changes in
efficiency whereas the CVP relationship is assumed over a smaller
range of activity.
In Exhibit 8.5 above, point 0 indicates the optimum level of activity
in economic approach where profit is at a maximum. Under the
economic approach, there can be two break-even points. On the
contrary, break-even chart in the accounting model has a single
break-even point and further assuming linearity assumptions,
accounting break-even chart predicts unrealistically-that profits can
continually be increased by expanding output. Without further
analysis, the accounting break-even approach can not be used to
establish the optimum output level.

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The economic approach is based on opportunity costs which include

a normal rate of profit. A normal rate of profit is considered by
economists to be a cost that has to be met if the firm is to stay in
business.
The accounting break-even point does not include any profit
element but it merely balances accounting costs and revenues. This
break-even chart, to serve as a base for decision making, should be
based on expected future costs and revenues and not on historical
costs.
The economic approach, assuming a curve-linear relationship,
shows increasing profits at low activity and decreasing profits at
higher levels. The economic approach displayed in Exhibit. 8.5
assumes imperfect competitions where pricing and output decisions
are inter-dependent.
According break-even point assumes a linear revenue function with
a constant price per unit at all production levels and therefore profit
increases proportionately with output. The assumption is that the
firm operates under perfect competition and is a price taker.
The validity of either model depends upon the type of market in
which the firm operates although in practice the position is more
complicated than the simplistic assumption contained both of the
models. Product differentiation, promotion policies, tactical pricing,
changes in the marketing mix, foreign competition at subsidized
prices and other such operating disturbances all tend to cloud the
clear cut relationships embodied in both models.

CVP ANALYSIS IN SERVICE AND NON-PROFIT ORGANISATIONS

CVP Analysis can be usefully applied by service and non-profit

organizations besides the manufacturing and merchandising firms. In
service and non-profit organization, their output needs to be measured
which is different from tangible units sold in a manufacturing and
merchandising firm. For example, output in some service and non-profit
industries are as follows.

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INDUSTRY MEASURE OUTPUT

Hotel Room nights
occupied
Hospitals Patient Days
Airlines Passenger Kms.

The working of CVP analysis and its assumptions are identical to service
and non-profit organizations as they apply to manufacturing and
merchandising organizations.

What is CVP, and How Is It important to managerial accounting:

Cost-volume-profit analysis, or CVP, is something companies use to

figure out how changes in costs and volume affect their operating
expenses and net income. CVP works by comparing different
relationships, such as the cost of operating and producing goods, the
amount of goods sold, and profits generated from the sale of those goods.
By breaking down costs into fixed versus variable, CVP analysis gives
companies strong insight into the profitability of their products or services.

Uses of CVP:

Many companies and accounting professionals use cost-volume-profit

analysis to make informed decisions about the products or services they
sell. In this regard, CVP analysis plays a larger role in managerial
accounting than in finacing accounting. Managerial accounting focuses on
helping managers-or those tasked with running businesses make smart,
cost-effective moves. Financial accounting, by contrast, focuses more on
painting an economic picture of a company so that outside parties, such
as banks or investors, can determine how financially healthy it is.

CVP ANALYSIS COMBINES PROCEDURE IS:

CVP analysis combines the concepts and techniques listed above by

initially following the procedure given below.

Establishing the fixed and variable cost related to products.

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Calculating the relationship between sales volume and revenue by

reference to actual or assumed unit prices.
Working out the profit-volume (P/V)ration by calculating contribution
(sales revenue minus variable cost) as a proportion of sales
revenue.
Using differential costing and sensitivity analysis to assess the
impact of alternative decisions on activity levels of cost and profit.
Deducting from the break-even analysis, the margin of safety ration
to indicate the levels of profit at different volumes of sales above
the break -even point.
Drawing up break-even charts which establish the point at which
sales begin to produce profits.
Determining the cumulative or combined effect of each product of
profitability to assess the effects of changes in the product mix.

The out come of each of the above analysis are then linked to answer
such questions as follows:

What sales revenue must be achieved to recover fixed costs?

By what percentage can current sales drop before the margin of
safety is exhausted and break-even point is reached?
How will profits be affected by different levels of sales?
What level of sales revenue must be achieved to reach profit
target?
What are the implications of increasing or decreasing in costs per
unit of fixed cost on profits?
What is the optimum mix of products from the point of view of
probability?
What effect will price changes have an profits?

The benefit of CVP analysis is that it highlights the key factors that
effect profits and enables the company to understand the
implication of changes in the sales volume, costs or prices. This
knowledge of cost behavior patterns and profit volume relationships
provides insights which are valuable in planning and controlling
short-run and long-run operations.

CVP ANALYSIS IN MULTI PRODUCT SITUATIONS:

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Where a company manufacturing more than one product of verifying

profitability, a change in profitability of one product will lead to change in
the profitability of group as a whole. The profit volume chart may be used
to illustrate effects of changes in product profit path as shown in figure or
separate profit lines are drawn for each of the assumed profit mixes as
shown in figure for each individual product.

II. CHAPTER

RESEARCH METHODOLOGY

TITLE OF THE STUDY:

Cost-Volume-Profit Analysis of KOMUL

2.1 NEED FOR THE STUDY

Need for the study helps the company to identify the position by which
the company can increase or decrease the total cost of production. It also
helps the company to identify and offer a minimum rate of product price
according to the expectations of the customer so that the companys sales
level will get increased. Hence, it is prepared to understand the study on
cost volume profit analysis.

2.2 OBJECTIVES OF THE STUDY

To understand the financial position of the company.

To study the cost volume profit analysis of the company.
To study the growth and developments at KOMUL
To know the price policy of the company.
To find out the flexible budget of the firm.
To know the profits of KOMUL accurately.
To evaluate the performance of KOMUL.
To increase the opportunities for adaptation to other contexts.
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To analyze the various elements of the cost volume profit analysis at

KOMUL.

2.3 REVIEW OF LITERATURE

A critical part of CVP analysis is the point where total revenues equal total costs
(both fixed and variable costs). At this break-even point, a company will experience
no income or loss. This break-even point can be an initial examination that precedes
more detailed CVP analysis.

Cost-Volume-Profit (CVP) Analysis is defines a tool for planning and decision-

making that emphasises the interrelationships of cost, quantity sold, and price

(Hansen et al., 2007). It studies the effects of changes in cost and volume on a

company's profits (Weygandt et al., 2009). It can be used for analysing management

decisions such as setting selling prices, determining product-mix, and maximising the

use of production facilities.

2.4 SCOPE OF THE STUDY

To understand the importance of price fixing in order to gain profits.

The study covers a period of three years between 2013-2016 which
enables us to perform a study of the entire costing system and
review the performance of different plants based on their capacity
utilized and the contribution earned during that particulate period.
Cost behavior will be analyzed in relation to their activities.
Using the data of the previous years we can make a analysis.
The study of performance e is compared with in this period and
makes an analysis on the overall costing system and pricing system.
The study covers the financial position of the KOMUL.
The study focused to analyze the weaker position of the firm.

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2.5 OPERATIONAL DEFINATION OF CONCEPTS

MEANIGNG OF COST:
A cost is the value of money that has been used up to produce something, and
hence is not available for use anymore. In business, the cost may be one of
acquisition, in which case the amount of money expended to acquire it is counted as
cost. In this case, money is the input that is gone in order to acquire the thing.
MEANING OF VOLUME:

Volume is the quantity of three-dimensional space enclosed by a closed surface, for

example, the space that a substance (solid, liquid, gas, or plasma) or shape
occupies or contains.[1] Volume is often quantified numerically using the SI derived
unit, the cubic metre. The volume of a container is generally understood to be the
capacity of the container, i. e. the amount of fluid (gas or liquid) that the container
could hold, rather than the amount of space the container itself displaces.

MEANING OF PROFIT:

Profit is a financial benefit that is realized when the amount of revenue gained from a

business activity exceeds the expenses, costs and taxes needed to sustain the

activity. Any profit that is gained goes to the business's owners, who may or may not

decide to spend it on the business.

MEANING OF ANALYSIS:

Analysis is the process of breaking a complex topic or substance into smaller parts
in order to gain a better understanding of it. The technique has been applied in the
study of mathematics and logic since before Aristotle (384322 B.C.),
though analysis as a formal concept is a relatively recent development. [1]

2.6 METHODOLOGY

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The producer that have been implemented while collecting the

information and interpreting those in a meaningful way.

SAMPLING SIZE
Three years profit and loss account and cost particulars of the period
2013-2014, 2014-2015,and 2015-2016

SAMPLING TECHNIQUES
Exploratory technique.

2.7 DATA COLLECTION

The study is all about cost-volume profit analysis at KOMUL.
The is collected in two ways:
Primary data
Secondary data

Primary data:
The primary data collection is one of the key tools used by the researcher
for data collection it is the first hand information collected by the
researcher from the respondents directly. Primary data is collected
through interviewing with the top executives and interaction with finance
departments.
Secondary data:
The secondary data is another form of data collection, where the data is
collected from the existing records, company manual and form previously
carried our ffreasearch work and also through internet.

2.8 LIMITATION OF THE STUDY

The limitation of study is:
o The period of study is just limited to four weeks
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o The study uses only the historical data

o Time constraint.
o Confidentiality is maintained by the company.
o The time span given for doing project was not enough to study all
the aspects of the organizations policies.
o Omission of certain cost categories.

2.9 CHAPTER SCHEME

The study report will be presented in 5 chapters as indicated below:
CHAPTER-1: INTRODUCTION
The chapter gives information about the cost-volume-profit analysis.
Objectives, role of cvp analysis.
CHAPTER-2: RESEARCH DESIGN
This chapter gives the details about the statement of the problem, title of
the study, objectives of the study, scope of the study, operational
definitions of concepts, limitations of the study and overview of the
chapter scheme.
CHAPTER-3: PROFILE OF STATE BANK OF TINDIA BANK
The chapter gives information about history, memorable milestones and
which includes company growth and it deals with the company
background and details.
CHAPTER-4: ANALYSIS AND INTERPRETATIKON OF DATA
An attempt has been made in this chapter to present the profile of cost
volume profit analysis in KOMUL.
CHAPTER-5: SUMMARYU OF FINDINGS, SUGGESTIONS AND
CONCLUSIONS
It presents the summary of all findings and conclusions

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It helps to take out some unwanted informations by giving suggestions.

BIBLOGRAPHY
ANNEXURE

CHAPTER 3
PROFILE OF THE ORGANISATION
3.1 HISTORY
KARNATAKA MILK FEDERATION:

Karnataka Cooperative Milk Producers Federation Limited (KMF)is the Apex

Body in Karnataka representing Dairy Farmers Co-operatives. It is the
second largest dairy co0operative amongst the dairy cooperatives in the
country. In South India it stands first in terms of procurement as well as
sales. One of the core functions of the Federation is marketing of Milk and

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Milk Products. The Brand NANDINI is the housejhold name for pure and
Fresh milk and milk products.

KMF has 13 Milk Unions throughout the State which procure milk from
Primary Dairy Cooperative Societies (DCS) and distribute milk to the
consumers in various Towns/Cities/Rural markets in Karnataka.

The first ever world bank funded dairy development program in the
country started in Karnataka with organization of village level dairy Co-
operatives in 1974. The AMUL pattern of dairy co-operatives started
functioning in Karnataka from 1974-75 with the financial assistance from
World Bank, Operation Flood II and III. The dairy co-operatives were
established under the ANAND pattern in a three tier structure with the
Village Level Dairy Co-operatives forming the base level, the District Level
Milk Unions at the middle level to take care of the procurement,
processing and marketing of milk and the Karnataka Milk Federation as
the Apex Body to co-ordinate the growth of the sector at the State level.

Coordination of activities among the Unions and developing market for

Milk and Milk products is the responsibility of KMF. Marketing Milk in the
respective jurisdiction is organized by the respective Milk Unions.
Surplus/deficit of liquid milk among the member Milk Unions is monitored
by the Federation. While the marketing of all the Milk products is
organized by KMF, both within and outside the State, all the Milk and Milk
products are sold under a common brand name NANDINI.

LIST OF CO-OPERATIVE MILK PRODUCERS UNDER KARNATAKA

MILK FEDERATION:
Kolar-chikaballapura milk union
Bangalore milk union (BAMUL)
Mandya milk union
Mysore milk union
Hassan milk union
Belgaum milk union

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Shivmoga milk union

Thumkur milk union
Gulbarga milk union
Bijapur milk union
Bellary milk union

FUNCTIONS OF KMF
Co-ordination of activities between the unions.
Development of the markets for the increase in milk production.
To make the brand NANDINI as a house hold name.
Excellence in quality is to be maintained to lay a solid foundation for
wide.
Spread acceptance of NANDINI products.
To increase the market share of NANDINI.

KOLAR-CHIKABALLAPURA MILK UNION LIMITED

Processing Capacity

Kolar dairy was established during 1994 with a processing capacity of 1

LLPD of milk. The processing capacity of the dairy was increased to 2.5
lakh liters during 2005 under perspective plan phase1. Due to the rapid
increase in milk procurement, again the processing capacity of the dairy is
increased to 4.0 lakh liters per day in the year 2011.

Kolar-chikkaballapura district co-operative milk producers union is registered under co-

operative societies act after bifurcation from Bangalore district co-operative milk producers
union on 23-3-1987. The area of operation is restricted to kolar and chikaballapura district
having 2919 villages of 11 revenue taluks.

KOMUL has three subdivisions:

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At Chintamani
AT Kolar
Chikkaballapura

KOMUL has 4 chilling center they are:

Kolar chilling center

Chiontamani chilling center
Sadali chilling center
Gowribidnur chilling centre.

MILK PROCUREMENT

The present average milk procurement during November is 9.12. Lakhskgs per day from
1713 DCS comprises of 2.78 lakhs members. The Union had registered a growth to the tune
of 7% for the last 5 years.

STEP (Support to Training and Employment Programme)

STEP programme is implemented by KMF through Govt of India funds. The Programme of
STEP aims
To make a significant impact on women in traditional sectors (Dairying & Animal
Husbandry) by upgrading skills.
Providing employment to women on a project basis by mobilizing women in viable
groups, improving skills,
arranging for productive
assets.
Creating forward and
backward linkages&
improving/arranging
support services,
providing access to
credit.

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Awareness creating, gender sensitization, nutrition education, sensitization of project

functionaries

As at the end of Feb-17 Union have 194 exclusive Women Dairy Co-operative Societies.
Out of which 150 DCS are covered under STEP program.
OBJECTIVES OF THE UNION:
a) To improve Dairy farming activities in rural area by establishing Milk producers co-
operative societies (MPCS) under co-operative principles.
b) To provide assured and remunerative market round the year for the Milk produced by the
producer members.
c) To provide package of technical inputs to its Milk producers for the enhancement of milk
production. This includes facilities such as emergency visit service, Infertility
camps, First Aid services, Artificial insemination, Mass Vaccination programme against
diseases.
d) Supply of balanced cattle feed at subsidised rate, Fodder development programmes,
beside extension programmes.
e) To provide necessary training for producers, members and staff of the Dairy co-operative
Society.
f) To facilitate rural development by providing self-employment opportunities for
unemployed youths at village level. In other words to prevent migration of unemployed
youths from rural area they're by providing an opportunity for steady income.
g) To eliminate middleman by organizing DCS which is owned and managed by producers
themselves.
h) To provide quality milk and milk products to urban consumers at affordable price.
i) To uplift the Socio economic status of the rural people.

NATURE PF THE BISOMESS CARROED:

One of the core functions is procurement of milk, processing it and marketing milk and milk
products. KOMUL markets its products under the brand name Nandini. The Union
processes the milk and market in urban area through various agents. The union is providing

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service to the milk producer with technical inputs like veterinary service, seeds, etc and also
by giving training to farmers and induction program.

The union also takes research, development and also other promotional activities for the
overall benefit of the farmers.

3.2. VISION AND MISSION

VISION:

Kolar-chikkaballapura will collect 20 lakhs Lts. Of Milk/day.

Entire Milk will be collected through Bulk Milk Coolers, Computerized systems at
villages.
Kolar-chikkaballapura Milk Quality will be a Global Benchmark.
Milk Products manufactured from Kolar Raw Milk will be of International Standards.

Mission
Kolar - Chikkaballapura Milk Union to continuously procure quality milk by providing
remunerative price & technical input services to Producers and supply quality Milk &
Milk Products to the consumers. It also strives to achieve top position in the dairy industry by
improving the financial position of the union.
QUALITY POLICY:

We continuously strive to improve our internal quality and operating systems by educating
Milk Producers and motivating work force to achieve customer satisfaction.

AREA OF OPERAION(NATIONAL)

Nandini (KOMUL) has a long traditional of maintain the highest quality standards, rights
from selection of raw milk to processing and packaging of the end products.

KOMUL comprises of Kolar-Chikkaballapura district 11 taluks with a total of 2919 revenue

villages.

The reason why its products are much in demand nationally and are exported regulary to
states like Andhra Pradesh, Tamil Nadu, Kerala, Maharashtra, Goa and all over the

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Karnataka. In many 2008 kolar milk union stated to exported good life milk with a shelf life
of 1 year to Singapore and in September 2008 union started good life milk to Indian army.

OWNERSHIP PATTREN

KOMUL builds and runs under the co-operative institutions such as:

Dairy co-operative society (DCS)

DCS organization: The member producers and their Dairy co-operative societies
(DCS) are the vital constituents of the Union and their progress is the judging
yardstick on the efficiency of the unions operation.
National dairy development board (NDDB): National dairy development board
(NDDB) was established in 1965 under the societys registration act, the charitable
trust act and the public trust act, to fill the vacuum of national- level organization to
replicate Anand model dairy co-operatives throughout the country and to make
available multi disciplinary, professional dairy expertise to dairies in the public and
co-operative sectors.

INFRASTRUCTURAL FACILITIES:

Dispatching of milk from the remote area.

Providing hospital facility to the employees.
Giving quarters to the employee.
Well organized machinery.

DAILY ACTIVITIES OF THE UNION

Under CO-operative sector, Kolar-Chikkabalapura Milk Union Limited (KOMUL) is totally

autonomous organization. It functions through elected management committee. Operational
area of union restricted only to Kolar district comprising of 11 Taluks. In order to give more
importance to dairy farming activities in rural area in turn to bring overall improvement in
production and development, the Union is functioning with the following set of objectives
they are:

a) To improve dairy farming activities in rural area by establishing Milk producers co-
operative societies (MPCS) under co-operative principles.
b) To provide assured and remunerative market round the year for the Milk produced by
the producer members
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c) To provide necessary training for Dairy co-operative Society (DCS) staff and
members of management committee.
d) To eliminate middleman by organizing DSC owned and managed by producers
themselves.
e) To provide quality milk and milk products to urban consumers at reasonable price.
f) Finally, to provide contact between producers in the village and consumers in the
town , this acts as a bridge to bring society economics and changes in the society.

3.3 PRODUCT PROFILE

MILK is almost a complete food, with a very high nutritive value. It provides body
building proteins, energy giving lactose and milk fat, bone-forming minerals and health
giving vitamins. All these nutrients are present in an easily digestible and assimilable
form in milk and is therefore a very important food, especially for children. It is also
important for the elderly, the sick or the pregnant women. Milk comprises of water, fat
and solid-not-fat (SNF). Milk is nutritionally balanced when fat and SNF are in the right
proportions. SNF is made up of proteins, lactose and minerals. Normal cow milk
contains about 4% fat and 8.5% SNF while buffalo milk contains about 7% fat and 9%
SNF. Of the average daily human requirements, a glass of milk (about 200ml)
provides:16% protein, 30% calcium, 11% potassium, 20% Riboflavin, Vitamin, B-12 and
25% vitaminD.

Milk Sales
The marketing area includes entire Kolar, Chikkaballapura districts and parts of Bangalore
urban and rural districts. The Union sells following varieties of milks
1. Toned Milk
2. Homogenized Cow Milk
3. Shubam Milk
4. Special Milk
5. Samruddhi Milk.
6. Double Toned milk.

The other products being manufactured and marketed includes UHT milk, Butter Milk, Curd,
Ghee, Peda and Cheese. Besides this, the Union routes products of Nandini Milk products, a
unit of K.M.F. The Union is increasing its market share steadily.

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The average milk sale during the month of Feb-17 is 2.96 lakh litres per day through 918
retailers. During this year the Union registered record milk sales of 3.19 lakh kgs and it is
recorded as highest milk sales for a single day.

The Average milk sales per day for the last 5 years are as follows

Year 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Avg Milk sales
2,22,530 2,36,950 2,43,833 2,66,969 2,87,901
per day
%Growth 15.63 6.48 2.9 9.5 7.27

Profit and Loss:

During 2015-16, the union turn over Rs 1096.25 crores with provisional profit of Rs. 3.18
crores. In this financial year, the union paid an average of Rs 22.80 per kg of milk to milk
producers.

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Turn Over(Rs in
545.52 666.02 827.56 1035.89 1096.3
Crores)

KOMUL PRODUCT RANGE

The products produced by komul are:

MILK
CURD
BUTTER MILK
PEDA
GHEE
CHEESE

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GUBAL JAMOON MIX

MYSORE PAK
PANEER
FLAVOURED MILK
KHOVA
BUTTER

Nandini Homogenised
Pasteurised
shubham Double Toned Cow's Pure Goodlife Milk
Toned Milk
Milk Milk

Sampoorna
Goodlife Slim Smart Double Goodlife UHT
Standardised
Milk Toned Milk Long Life Milk
Milk

1. TONED MILK: Karnatakas most favourite Nandini toned milk. Pure milk
containing 3.0% fat and 8.5% SNF. This is available in 500ml and 1 liter paks.
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2. SHUBHAM MILK: Nandini Shubham milk is nutrious creamy milk with 4.5% fat
and 8.5% SNF suitable for all the purposes. This is available in 500ml and 1 liter
packs.

3. HOMOGENIZED MILK: Nandini homogenized molk is pure milk which is

homogenized and pasteurized. Consistent right through, it gives you more cups of tea
or coffee and is easily digestible. This is available in 500ml and 1 liter packs.

4. CURDS: Nandini curds are made out of pure milk. It is thick and delicious, giving
all the goodness of homemade curds. It is available in 200gms and 500gms.

5. GHEE: Nandini ghee is made from pure butter. It is fresh and pure butter. It is
fresh and pure will a delicious flavor. Hygienically manufactured and packed in a
special pack to retain the goodness of pure ghee. Shelf life of 6 months at ambient
temperature. This is available 5 liter tins and 15kg.

6. BUTTER: Rich, smooth and delicious, nandini butter is made out of fresh
pasteurized milk cream. Any preparations made from this will be a delicious treat. It
is available in 100gms (salted), 200gms and 500gms cartoons both salted and
unsalted.

7. MASALA BUTTER MILK: Masala butter milk is manufactured and sold in the
summer season, especially from month of march to july, the only period during which
it gets demand. On an average the selling mounts to about 1000liters per day in
250ml sachets.

8. PANEER: Nandini paneer is very tasty, wholesome and nutrious supplement for a
variety of dishes.

9. CHEESE: Nandini cheese is creamy, soft fresh, cheddar cheese made from pure
whole milk comes in an easy-to-grate block. It is available in 1 kg and 200gms packs.

10. KHOVA: Nandini pure milk Khova adds richness and increases the taste in the
preparations like carrot halwa, be stored for 30 days when kept frozed.

11. PEDA: peda is sweetened heat desiccated product obtained from milk. It is rich in
fat, proteins, lactose and minerals especially iron content. On an average 25kg peda is

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produced and sold in units of 25gms box. Each box contains 10 pedas weighing
25gram each.

UHT MILK Speciality Of KOMUL

In order to meet the requirement of different segment of consumers and their convenience,
KOMUL introduced UHT milk variants in Tetra pak packs to the market. During the process
of UHT, milk is sterilsed at temperature of 137 oC for 4 seconds and cooled instantly which
retains all the vitamins and nutritional value of milk providing zero bacteria product which
needs no boiling for use. The milk is packed in 6-layer tamper proofed Tetra-pack packaging
which ensures freshness retaining purity of milk. The milk can be stored without refrigerating
for 60 days in fino-packaging and 120 days in brik packaging. The average sales of UHT
milk during the year 2015-16 is 2.14 Litres per day

Year 2011-12 2012-13 2013-14 2014-15 2015-16

UHT sales ltrs 1,77,517 1,82,134 2,49,221 2,42,368 2,14,317
%Growth 23.28 2.6 36.83 16 -13.09

UHT sales ltrs

300000 249221 242368 214317
177517 182134
200000
100000
0
2011-12 2012-13 2013-14 2014-15 2015-16

PRESENT VARIENTS OF UHT MILK

100ml Fino Packing Good life Cow Milk [3.6% FAT & 8.5% SNF]
200ml Fino Packing Good life Cow Milk [3.6% FAT & 8.5% SNF]
500 ML Fino Packing Good life Cow Milk [3.6% FAT & 8.5% SNF]
Smart Milk [1.5% FAT & 9.0% SNF]

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Slim Milk [0.5% FAT & 9.0% SNF]

200 ML Brik Packing Good Life Cow Milk [3.6% FAT & 8.5% SNF]
500 ML Brik Packing Good Life Cow Milk [3.6% FAT & 8.5% SNF]
Smart Milk [1.5% FAT & 9.0% SNF]
Slim Milk [0.5% FAT & 9.0% SNF]
Sampoorna (Std.) [4.5% FAT & 8.5% SNF]
1000 ML Brik Packing Good Life Cow Milk [3.6% FAT & 8.5% SNF]
Smart Milk [1.5% FAT & 9.0% SNF]
Slim Milk [0.5% FAT & 9.0% SNF]
Sampoorna (Std.) [4.5% FAT & 8.5% SNF]

MILK PRODUCT PRICE LIST

PRICE LIST:
The cost per kg of Milk is calculated based on Fat and SNF quality of milk. Basic
price is calculated for 3.5% Fat and 8.5% SNF. At present Milk is
purchased from DCS at price of Rs 24.05 and DCS pays Rs 23.00
to Producers. In 2016-17 the Union has paid Rs 774.86 crores to
milk producers. In Feb-2017 Union has paid Rs 61.98 crores

3.4 COMPETITORS

[Link] COMPANY NAME COMPANY LOGO

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1. NESTLE

2. SWASTIK

3.

TIRUMALA

4. DODLA

5. AROKYA

6. HERITAGE

7. AMUL

3.5 SHARE CAPITAL

Union started with a Share Capital of Rs.8.56 Lakhs, which was transferred from Bangalore
District Milk Union. The Share Capital of the Union as on 2015-16 is Rs.3408.9 Lakhs.

Membership and Share Amount:

Union was started in the year 1987 with 460 functional DCS, as at the end of Feb 2017
Union has 2060 Registered Dairy Co-operative Societies and Commissioned 2043 DCS, of
which 1796 DCS are functional. Total Members enrolled are 2,78,878 of which 95,150 are
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Small Farmers, 95,451 are Marginal Farmers, 50,199 are Agri Labourers, 38,078 are Others.
70,904 are Women Members 41,295 are Schedule Caste 28,134 are Schedule Tribe, and 1499
are OBC members.

2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

District
Comm. Func. Comm. Func. Comm. Func. Comm. Func. Comm. Func.
s
DCS DCS DCS DCS DCS DCS DCS DCS DCS DCS
Kolar
915 795 935 813 936 817 975 826 994 843
Dist
CB Pur
889 851 920 875 927 880 986 896 1005 907
Dist
GRAN
D
1,804 1,646 1,855 1,688 1,863 1,697 1,961 1,722 1,999 1,750
TOTA
L
%DCS
IN 50.72 48.29 50.4 48.16 50.24 48.15 49.72 47.97 49.72 48.17
KLR
% DCS
IN 49.28 51.71 49.59 51.84 49.76 51.85 50.28 52.03 50.28 51.83
CBP
Commissioned and Functional Societies for the last 5 years are as follows.

3.6 KOLAR-CHIKKABALLAPURA MILK UNION MILESTONES

27.03.1987 Bifurcation of the district from an operational area of Bangalore Milk Union
Ltd.,(BAMUL) to form a separate milk union with 422 functional DCS and Rs 8.56
Lakhs Share Capital.
1987 Establishment of first Women Dairy Co-operative Society in the Union.
1989 Inauguration of Sadali chilling center.
1990 Initiation of milk marketing at Inter-dairy rate.
1991 Inauguration of Gowribidnur chilling center.

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1991 KMF handed over chilling centers at Kolar, Sadali, Chintamani and Gowribidnur to
Kolar Milk Union Ltd.,
1994 Inauguration of full-fledged dairy at Kolar with a processing capacity of 1.0 lakh
Liter per day.
1994 Union started liquid milk marketing under the brand name of Nandini in Polythene
Packets.
1995 Inauguration of Administrative Building in the Dairy campus.
1998 Inauguration of Cheese Plant.
1999 For the first time in Karnataka State Union started marketing Nandini UHT milk in
the name of Good life,Slim and Smart.
1999 Expansion of processing capacity of Chintamani chilling center.
2000 Outside the state, entry into the Chennai for Milk marketing.
2001 Kolar Dairy certified for ISO-9002 Quality Management System.
2001 Installation of AMC Units at DCS level.
2001 Union started marketing Masti Dahi.
2001 Expansion of UHT Unit in KOMUL.
2002 Started implementation of TIFAC Project.
2007 UHT Processing Capacity was increased from existing 0.4 LLPD to 1.5 LLPD.
2008 Union started to export Goodlife milk with a shelf life of 1year to Singapore.
2008 Union started to supply Goodlife milk to Indian army.
2008 Our Union was renamed to KOLAR CHIKKABALLAPURA COOPERATIVE
MILK PRODUCERS SOCIETIES UNION LTD.
2009 Introduced Goodlife milk 200ml Fino packets to market.
2009 Launched New 1000ml Brik UHT variant Milk called Sampoorna with Fat 4.5%
& SNF 8.5% to market.
2010 Enhanced UHT plant for 2.5 lakhs ltrs per day packing capacity.

ACHIEVEMENTS

Second in Procurement among KMF unions.

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1994-95 Union was the first to Introduce the Operation Theileriasis vaccination program
in India.
1999 Installation of AMC Units at DCS level and For the first-time in the history of
Karnataka, inauguration of BMC centers in the jurisdiction of KOMUL
2001 Inauguration of Animal Disease Diagnostic Laboratory at Chintamani chilling center
campus..
2002-03 Inauguration of Community Machine Milking Parlors (centers) first of its kind in
India.
2003-04 started Clean Milk Program for the first time in Karnataka.
2003-04 started mass vaccination programs for Foot and Month Disese in coordination with
Animal Husbandry department,Govt of Karnataka.
2006 Producer welfare trust was started.

Awards

2003 Union bagged National Productivity Council Award 2nd Place.

2004 Union bagged National Productivity Council Award 2nd Place.
2006 Union bagged Best Co-operative Union Award in the state.
2008 Union received Energy Conservation Award both from Central and Sate
Governments in Dec .
2009 Union got 1st Place in National Energy Award and 2nd place in State Energy
Conservation Award

3.7 CORPORATION SOCIAL RESPONSIBILITY

TECHNICAL INPUT PROGRAMMES:
Technical input programme is one of major component of union activity for enhancing the
milk production as well to get good quality raw milk that used for production of quality
products KOMUL has well-established input section to cater to the needs of the member
producers. Procurement and input (P&I) activities of the union is decentralized.

First aid facility:

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Union is supplying drugs related to First-Aid service as per need of the DCS. Emergency
service of a qualified Veterinarian is made available at the DCS level. During 2016-17 as on
Feb17 2,967 animals have been treated first aid and 10,500 emergency cases were attended.

Artificial insemination activities:

To improve the local breeds and to enhance
milk production Union is operating Artificial
Insemination (AI) centers through Single AI
and Cluster AI concept. In Cluster AI concept
a trained Inseminator discharges his service at
the doorsteps of member producers. As on
Feb-17, 157 single AI centres and 153 cluster
AI centres are in operation covering 1796 societies. As on Feb17 38,313 artificial
inseminations have been done. During the year 15-16 a total of 1,54,940 calves were born.

Vaccination Programme:
During 2015-16, in association with Government Veterinary department, 3,34,972 F & M
vaccination were carried out. The Union carried out 950 Theileriasis vaccinations.

Feeds and Fodder

During 2016-17 as on Feb-17, 5,857 MT of cattle feed and 30,600, Kg of Mineral mixture
was sold to MPCS. As on Feb - 2017, 23.7 plots were raised. As per the demand of producers
1,35,000 non legume root slips and 1,020 Kg of fodder seeds were distributed to producers at
50% subsidy.

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CATTLE FEED SALES OF PREVIOUS FIVE YEARS IS AS FOLLOWS

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Cattle feed sales 45,210 50,282 49,890 54,941 60,554
% Growth -9.34 11.22 -0.78 10.12 9.27
BALANCED CATTLE FEED:

This contains required levels of all nutrients with calculated amount of

total digfestible nutrients, proteins, fat, minerals, trace elements and
vitamins.

CLEAN MILK PRODUCTION(CMP) PROGRAMME:

As the KOMUL started UHT milk plant and cheese plant in 1997, it
embarked upon CMP ProgramMes, as both the products require high.

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QUALITY RAW MILK:

Initially it chalked out ten routes covering more than one hundred MPCS
for CMP programme. The raw milk that is being received from these
routes amounts to about 35,000 LPD that gives 70% alcohol test negative.
Under the programme DCS staffs have given training regarding clean milk
production. Member producers have been given steel carriers freely by
the respective societies.

COMMUNITY MILKING PROGRAMME:

Under the programme, milking machines have been provided to the

societies at a cost of Rs. 1.45 Lakh each interest free loan that will be
recovered over a period of seven years.

BULK MILK COOLER (BMC) PROGRAM:

The progeramme has been taken up to improve the quality of incoming

raw milk. Chilling the milk immediately after reception at village level will
arrest the growth of bacteria thereby minimizing the deterioration in
quality. Under the programme, BMCs have been installed at ten MPCSs
at the cost of Rs. 3.75 Lakh each. An average of about eight thousand
liters per day is being procured from these BMCs KOMUL is the first union
to start BMC for getting good quality raw milk. They are tonned milk with
3% FAT and 8.5% SNF (Solids non FAT) and full cream Milk with 6% and 9%
SNF. Both are packed in the units of liter and 1 liter. Fluid milk is solid
in bulk to others dairies both inside and outside the state.

3.8 SWOT ANALYSIS

SWOT analysis is tool for auditing an organization and its environment. It

is the first stage of planning and helps marketers to focus on key issues.

SWOT stands for

Strengths
Weaknesses

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Opportunities
Threats

STRENGHTS:

Customers satisfaction
Quick availability of raw materials
Strategically located in the kOMUL
Popular brand known from many years
Milk and milk products are available at competitive prices
KOMUL has very good infrastructure
KOMUL attends to the complaints of consumers immediately
New technology implemented for production of milk
Ability to maintain uniform quality
Timely delivery
Raw milk handling needs is upgrade in terms of physico-chemical
and microbiological attributes of the milk collected.
KOMUL pays the highest price for the milk collected from farmers in
India and loyally among customers for the brand

WEAKNESS:

Freezing of marketable area

Lack of flexibility in system
Rivalry among sister unions
Lack of personalized service to channel members
High overheads
Return are not expected

OPPORTUNITIES

Expansions of operations to rural areas

Already planned for introducing some new products in means future
to cater to new segments of business.

THREATS:

Entry of MNCs into dairy industry

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Lack of proper promotions for the KOMUL range of products

Competitions from private dairy companies
Unawareness about the various products of KOMUL among the
people.

BOARD OF DIRECTORS

SI NO Names Designations

1 Sri N G Bytappa President

2 Sri K V Nagaraju Director, CBpura Tq

3 Sri Jayasimha Krishnappa Director, Bangarpete Tq

4 Sri Ashwath Reddy Director, Gudibande Tq

5 Sri R Ramkrishne Gowda Director, Kolar Tq

6 Sri K Y Nanjegowda Director, Malur Tq

7 Sri M Byrareddy Director, SVpura Tq

8 Sri R R Rajendra Gowda Director, Mulbagal Tq

9 Sri Y B Ashwathnarayana Director, Chinthamani Tq

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10 Sri Muniyappa Director, Shidlaghatta Tq

11 Sri K Prabakara Reddy Director, Bagepalli Tq

12 Smt Parvathamma Director, Kolar Dist

13 Smt Sunandamma Director, CB pura Dist

14 Sri J Kantharaj Director, Gowribidanur Tq

15 Sri Panduranga Garg RCS Representative

16 Sri [Link] NDDB Representative

17 Dr Channakeshavaiah Dept. of AH Representative

18 Dr H VThippa Reddy KMF Representative

19 Sri N Hanumesh Managing Director

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