Cost price analysis

Cost Volume Profit Analysis
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AN EXPERIENTIAL LEARNING PROGRAMME FOR
COST PRICE ANALYSIS IN
Tierra Food India Pvt Ltd
Submitted in partial fulfillment of the requirements for the award of
Degree in
MASTER OF BUSINESS ADMINISTRATION KERALA
UNIVERSITY
By Abhijith. JB
Abdhul Aziz Ibharim
Amal Nadh. M
Humayoon .N
Navaneeth Krishnan
Jishnu.J
TKM INSTITUTE OF MANAGEMENT
MUSALIAR HILLS,KOLLAM -691505
2017-2018 Under the guidance of Dr. NISA.S
Asst. professor-finance

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DECLARATION
We here by declared that the project entitled a project on Tierra food pvt ltd. is the report of the
original work done by us under the guidance of Dr. NISA .S (Assistant Professor finance ,
TKM Institute of Management) towards partial fulfillment of the requirements for the award
of Post graduate degree of MBA of University of Kerala during the period of study in TKM
Institute of Management Karuvelil.
We also declare that the report has not been submitted by us for the award of any
degree,diploma,and any other university earlier.
Abhijith. JB
Abdhul Aziz Ibharim
Amal Nadh. M
Humayoon .N
Navaneeth Krishnan
Jishnu.J
Place : kollam
Date : 17-11-2017

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ACKNOWLEDGEMENT
Above all the first I take this golden opportunity to express my personal gratitude to Dr. NISA .S
(Assistant Professor finance , TKM Institute of Management) I consider it is our privilege a few
words of gratitude and take these opportunities of do so. We wish to hearty thanks to everyone
who helped for completing this project
Above all I thank God almighty for giving courage, wisdom, and for the abundant grace that be
best owned upon me to complete this work successfully
Abhijith. JB
Abdhul Aziz Ibharim
Amal Nadh. M
Humayoon .N
Navaneeth Krishnan
Jishnu.J

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INDEX
SL
NO CONTENTS PAGE NO
1 INTRODUCTION 1
2 INDUSTRY PROFILE 3
3 COMPANY PROFILE 7
4 PRODUCT DETAILS 9
5 MANUFACTURING PROCESS 12
6 DEMAND ANALYSIS 14
7 COST ANALYSIS 15
8 CONCLUSION 17
9 BIBLIOGRAPY 18

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INTRODUCTION

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INTRODUCTION
OBJECTIVES
The projects aim at identifying a manufacturing unit and conducting a one day study at the unit.
The study includes identifying the various activities taking place in the unit and collecting
information about various products that are manufactured. Further the procedure for preparation
of most selling products is clearly studied. Then the details on various costs involved from
production till consumption of the product is studied and noted down. The demand of various
products and the factors affecting demand are then identified. Various factors for fixing the
selling price are then studied and finally the details are presented in the form of report.
SCOPE OF STUDY
• Identifying the various costs involved in production practically and connecting it with theories.
• Collecting information about procedure for manufacturing various products.
• Identifying the current market demand among the consumers.

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INDUSTRY PROFILE

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INDUSTRY PROFILE
INDUSTRY ; Food and Beverage
The companies that supply foodservice operators are called foodservice distributors Foodservice
distributors sell goods like small wares (kitchen utensils) and foods. Some companies
manufacture products in both consumer and foodservice versions. The consumer version usually
comes in individual-sized packages with elaborate label design for retail sale The foodservice
version is packaged in a much larger industrial size and often lacks the colorful label designs of
the consumer version.
Food and Beverage industry in global
The global food and beverage (F&B) market has seen healthy growth over the last ten years and
this is expected to continue. The proportion of comparison retail (clothing, footwear, white
goods) as a percentage of total retail is decreasing and is being partially replaced by F&B, leisure
and entertainment offerings in shopping malls, out-of-town retail parks and the main retail
thoroughfares. This is being driven by changing consumer shopping habits and the growth of
‘experience retailing’, reflecting consumers’ desire to enhance their physical shopping
experience with a social/leisure experience. This is being seen, not just in the more mature retail
markets in the US and Europe, but also in fast growing emerging markets in Asia Pacific and
Middle East & Africa. Consequently, new shopping centre developments, refurbishments and
extensions are increasingly being designed to include F&B and lifestyle areas, including stand-
alone food stalls and kiosks. By establishing and/or expanding the F&B footprint in retail
schemes, it provides landlords with an opportunity to increase footfall, consumer dwell time and,
ultimately, spend. This is particularly important considering the challenges faced by bricks and
mortar retailers from the growth in online retailing in recent years in some markets. Most
forecasters suggest that the share of online purchases will rise further, increasing the pressure on
landlords and retailers to be flexible and to develop new strategies to create shopping
experiences that cannot be replicated with purchases bought online, while also meeting
consumers desire for convenience and speed. This report looks at key trends in the global F&B

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market, beginning with how consumer demands have been evolving and how retailers and
shopping centre owners have responded to these changes. The report also provides an overview
of the eating out markets in the key global regions, along with expenditure forecasts, in addition
to summaries of prominent case studies. The report concludes with an outlook for the market and
looks at some of the potential impacts of these trends on retail property
Food and Beverage industry in India
India’s population is growing and so is the economy, and with that the resultant demand for food
and beverages is also increasing. This is driving the growth and expected growth of the
organized and packaged food and beverage sector. This is also an area where there is
considerable potential for innovation and value addition as also the scope for value creation
through reduction in waste. The new government has already identified this sector as one of its
priority areas. In its maiden Budget speech, Union Finance Minister Mr Arun Jaitley announced
allocation of INR 2,000 crore to meet the credit needs of food processing industry. Also, Ms
Harsimrat Kaur Badal, Union Minister for Food Processing Industries sees huge potential in the
sector. She has spelled out her plans to develop a national food map and wants to work closely
with states to resolve a host of issues faced by businesses operating in the sector. Food
processing in India was earlier limited to food preservation, packaging and transportation.
However, over the last two decades, certain sections of the industry have evolved to meet global
standards through technological advancements. Developments such as establishment of cold
storage facilities, food parks, packaging centers, irradiation centers and modernized abattoir have
helped the sector make significant strides but these still cater to a small fraction of the food
production. A number of policy and procedural initiatives are required to give impetus to this
sector. Despite constraints linked to infrastructure, market access and funding, dynamic
businesses operating in this sector have made their mark on the global stage. I am confident that
the next few years will be the golden years for the food and beverage sector. We have had some
clear success stories for example, in the dairy or poultry segment but the potential in these as also
other areas is significant. It is not just the domestic demand but the export potential as well that
makes this sector promising for investors. It also has the potential to generate employment for 48
million people (13 million directly and 35 million indirectly), according to India Brand Equity
Foundation. As fresh growth opportunities emerge on the horizon, this is an appropriate time for

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Grant Thornton and CII to jointly bring out this report, which aims to examine the growth
potential of the food processing industry looking at the current situation, scope for modernization
and the policies and regulations that govern the industry. The report also highlights the emerging
trends, opportunities and challenges in the key segments of the sector. These include the dairy
sector, cold storage, food retail and food services industry. The report has also captured the key
global trends in food sector and the investment scenario. The objective of the report is to serve as
a backdrop to the deliberations at the summit. We hope you will find the report useful and share
your feedback with us.
Food and Beverage industry in Kerala
Kerala has a history of spicing up the world's cuisines as in the fables have King Solomon's trade
agents collecting pepper and other spices from Kochi. That was about 3000 years ago. Today,
Kerala's food processing industry serves two markets - the fast emerging domestic market and
the steady-growing export market. The Government's industrial policy seeks to "convert Kerala
into a favoured destination for Agro Processing."
The availability of raw materials, especially spices and sea food; availability of skilled and
trained man power; availability of high quality water and power; very active local market; a
vibrant retail chain; successful track record of existing players and a very large expatriate
community, ensuring a captive market abroad are the Kerala advantage.
Infrastructure facilities so far developed in this sector are the 3 Food Parks at Kozhikode,
Ernakulam, Pathanamthitta districts, Seafood Park in Alappauzha district, Incubation Centre at
Kakkancherry, Kozhikode, Proposed Food Parks, Mega Food Park, Wayanad, Spices Park,
Idukki and two Quality Control Laboratories.
Kerala Industrial Infrastructure Development Corporation (KINFRA) is the nodal agency for the
promotion of food processing industry in Kerala.

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ORGANIZATIONAL PROFILE
Tierra Food India Private Limited is a Private incorporated on 06 November 2009. It is classified
as Non-govt company and is registered at Registrar of Companies, Ernakulam. Its authorized
share capital is Rs. 126,520,000 and its paid up capital is Rs. 104,045,632.It is involved in
Manufacture of other food products .Tierra Food India Private Limited's Annual General
Meeting (AGM) was last held on 30 September 2015 and as per records from Ministry of
Corporate Affairs (MCA), its balance sheet was last filed on 31 March 2015.
Directors of Tierra Food India Private Limited are Alex Thomas, Annie Alex, Prasad Parackal
Krishnankutty, Sathar Fazil Abdul and Karpaiah Satyaseelan Santanakumaran.
Tierra Food India Pvt Ltd was founded by Alex Thomas, a farmer turned entrepreneur, in 2012
to process the agricultural crops grown in Kerala into food products and market them across the
globe. Our slogan "here for a good time" emphasizes our approach of providing our consumers
great tasting, nutritionally superior and healthier food products that were traditionally a part of
our food palate while creating value for all the stake holders.
While there are a lot of players, organized and unorganized, offering products in the salty snack
category, there are very few that has built a brand around traditional snacking in the chips space.
We have explored the right vegetables those were traditionally used for chips making like
cassava, banana etc. And evolved a process that could value add to the end product making
Kappo, Banano & Tierra unique. The crinkle cut, the flavor, the packaging, the pack sizes and
the distribution made cassava and banana chips relevant and contemporary to the “youth”.
The produces are processed in a fully automated plant, using healthier oil and flavored with
spices of superior quality, carefully selected and blended, by international flavor experts.
Our full-fledged R&D department comprising of food technologists and food analysts strive to
deliver great tasting products of world class quality, delivered through research, superior
technology and innovation.

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We walk that extra mile in identifying the right variety and cultivar of banana and cassava, ideal
for chips making. It is then propagated among farmers with the help of extension experts for
ensuring continuous availability of superior quality raw material.
Innovation is the key to our progress and helps us to serve you better. Our dedicated consumer
panels continuously provide insights on our existing and new products.
VISION; Tierra shall be a globally renowned food company, serving consumers healthier food,
in a green environment and providing its farmers sustainable livelihoods.
MISSION; Tierra is committed to provide world class food products, leveraging superior
technology and continuous innovation, delivered through engaged associates driven by passion.

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PRODUCT DETIALS
KAPPO
Kappo, the “lite chip” is made from a special variety of cassava (identified with the support of
CTCRI – Central Tuber Crops Research Institute, Trivandrum), exclusively grown on the South
Eastern hillocks of Kerala. The “low carb” slices are processed in a fully automated plant, using
healthier oil and flavored with spices of superior quality, carefully selected and blended, by
international flavor experts, for your taste buds. In all, Kappo is a crackling chip with 20% less
fat than potato chips. It is also healthier as it doesn’t contain Transfats or added MSG. Crunch on
...Munch on.
A potato chip or crisp is a thin slice of potato that has been deep fried or baked until
crunchy. Potato chips are commonly served as a snack side dish, or appetizer. The basic chips
are cooked and salted; additional varieties are manufactured using various flavorings and
ingredients including herbs, spices, cheeses, other natural flavors, artificial flavors and additives
Potato chips are a predominant part of the snack food and convenience food market in Western
countries. The global potato chip market generated total revenues of US$16.49 billion in 2005.
This accounted for 35.5% of the total savory snacks market in that year ($46.1 billion).

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RAW MATERLAS
Cassava : Cassava is the third-largest source of food carbohydrates in the tropics,
after rice and maize Cassava is a major staple food in the developing world, providing a basic
diet for over half a billion people. It is one of the most drought-tolerant crops, capable of
growing on marginal soils. Nigeria is the world's largest producer of cassava, while Thailand is
the largest exporter of dried cassava.
Tierra purchases cassava from local farmers because cassava available in plenty. The fluctuation
of demand for cassava is different in season sometimes the price of the tapioca become low
down in that cases farmer didn’t make interest to cultivate the tapioca so sometimes there will be
some shortage of raw material but we make a forecast and buy more materials. Before accepting
cassava the company under go different test mechanism they test the cassava in their labs to
check the quality. The peeling of cassava is done manually by the employees.
Palm oil : Palm oil is naturally reddish in color because of a high beta-carotene content. It is
not to be confused with palm kernel oil derived from the kernel of the same fruit. or coconut
oil derived from the kernel of the coconut palm The differences are in color (raw palm kernel oil
lacks carotenoids and is not red), and in saturated fat content: palm mesocarp oil is 49%
saturated, while palm kernel oil and coconut oil are 81% and 86% saturated fats, respectively.
However, crude red palm oil that has been refined, bleached and deodorized, a
common commodity called RBD palm oil, does not contain carotenoids
Salt : Salt is processed from salt mines and by the evaporation of seawater and mineral-rich
spring water in shallow pools. Its major industrial products are caustic soda and chlorine salt is
used in many industrial processes including the manufacture of polyvinyl chloride plastics paper
pulp and many other products. Of the annual global production of around two hundred
million tones of salt, only about 6% is used for human consumption. Other uses include water

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conditioning processes, de-icing highways, and agricultural use. Edible salt is sold in forms such
as sea salt and table salt which usually contains an anti-caking agent and may be iodised to
prevent iodine deficiency. As well as its use in cooking and at the table, salt is present in many
processed foods.
Flavors
The company buys flavors from P&L Company. Tierra produces cassava products in different
flavors like masala, chilly, sweet etc.
Fuel
Petrol : Is a transparent, petroleum-derived liquid that is used primarily as a fuel in internal
combustion engines. It consists mostly of organic compounds obtained by the fractional
distillation of petroleum, enhanced with a variety of additives. On average, a 42-gallon barrel of
crude oil (159 L) yields about 19 US gallons (72 L) of gasoline when processed in an oil refinery
though this varies based on the crude oil source's assay
Current : An electric current is a flow of electric charge In electric circuits this charge is often
carried by moving electrons in a wire It can also be carried by ions in an electrolyte or by both ions
and electrons such as in an ionised gas

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The manufacturing process
 When the cassavas arrive at the plant, they are examined and tasted for quality. A half
dozen or so buckets are randomly filled. Some are punched with holes in their cores so
that they can be tracked through the cooking process. The cassavas are examined for
green edges and blemishes. The pile of defective cassavas is weighed; if the weight
exceeds a company's preset allowance, the entire truckload can be rejected.
 The cassavas move along a conveyer belt to the various stages of manufacturing. The
conveyer belts are powered by gentle vibrations to keep breakage to a minimum.
Destoning and peeling : The cassavas are loaded into a vertical helical screw conveyer which
allows stones to fall to the bottom and pushes the cassavas up to a conveyer belt to the automatic
peeling machine. After they have been peeled, the cassavas are washed with cold water.
Slicing: The cassavas pass through a revolving impaler/presser that cuts them into paper-thin
slices, between 0.066-0.072 in (1.7-1.85 mm) in thickness. Straight blades produce regular chips
while rippled blades produce ridged cassava chips
Frying and salting : The slices pass under air jets that remove excess water as they flow into 40-
75 ft (12.2-23 m) troughs filled with oil. The oil temperature is kept at 350-375°F (176.6-
190.5°C). Paddles gently push the slices along. As the slices tumble, salt is sprinkled from
receptacles positioned above the trough at the rate of about 1.75 lb (0.79 kg) of salt to each 100
lb (45.4 kg) of chips.
Cooling and sorting : At the end of the trough, a wire mesh belt pulls out the hot chips. As the
chips move along the mesh conveyer belt, excess oil is drained off and the chips begin to cool.
They then move under an optical sorter that picks out any burnt slices and removes them with
puffs of air

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Packaging : The chips are conveyed to a packaging machine with a scale. As the pre-set weight
of chips is measured, a metal detector checks the chips once more for any foreign matter such as
metal pieces that could have come with the potatoes or been picked up in the frying process
The bags flow down from a roll. A central processing unit (CPU) code on the bag tells the
machine how many chips should be released into the bag. As the bag forms, (heat seals the top of
the filled bag and seals the bottom of the next bag simultaneously) gates open and allow the
proper amount of chips to fall into the bag
The filling process must be accomplished without letting an overabundance of air into the bag,
while also preventing the chips from breaking. Many manufacturers use nitrogen to fill the space
in the bags. The sealed bags are conveyed to a collator and hand-packed into cartons.
QUALITYCONTROL
Taste samples are made from each batch throughout the manufacturing process, usually at a rate
of once per hour. The tasters check the chips for salt, seasoning, moisture, color, and overall
flavor. Color is compared to charts that show acceptable chip colors.
Preventing breakage is a primary goal for potato chip manufacturers. Companies have installed
safeguards at various points in the manufacturing process to decrease the chances for breakage.
The heights that chips fall from conveyer belts to fryers have been decreased. Plastic conveyer
belts have been replaced with wide mesh stainless steel belts. These allow only the larger chips
to travel to the fryers and the smaller potato slivers to fall through the mesh.

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Demand analysis
The concept of demand is the basic concept in modern economics which acquaints a manager
with the relationship between the price of a commodity and its quantity which could be
purchased at a given price by consumers. The study of such a relationship provides the manager
with necessary facts which could be analyzed for measuring the forces that influence sales
volume.
This study is known as demand analysis which serves the following objectives:
(1) It aids in forecasting sales and revenues.
(2) It provides guidance for manipulation of demand.
(3) It provides basis for analyzing market influences on different products manufactured by a
business unit and helps in adjusting and adapting such influences.
(4) It provides basis for appraising salesman’s performance and for setting his sales quote.
(5) It is also used to match the competitive strength of a business unit
(6) It also helps in planning for inventory control, and assessing working capital requirements.
Demand analysis of Tierra foods
Demand analysis was conducted to find a small assumption or the aids to forecast sales and
revenue. In Tierra foods they have already forecasted their demand for the product “kappo and
bannano” by conducting market study. The demand for bannano is onam seasons were the
customer demand increases and the time the cost of raw materials also increases. So finding that
threat they plan and start their work before actual season. To create demand among consumers
they have give more offers to them and increase in the quantity of things contained in it.

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Cost Analysis
During purchasing, there will be instances where a specific cost breakdown of a process or
product is mandatory. Cost analysis is a more complex strategy than price analyses, because it
involves applying direct (traceable) and indirect (all other non-direct expenses) costs into
formulas for what is essentially a comprehensive breakdown of the product. A cost analysis is
also useful when a price quote cannot be accessed from the manufacturer directly and the
procurement is not easily comparable to others or is considered “unique.”Additionally, when
producing an item internally, this method may be applied.
Workings for flavouredCassava Chips
Items
Rate per
KG of out
put
Unit of
Raw
Materials
required
for 1 Kg of
Out put
Rate per
Unit of
Raw
material
Cassava 53.6 3.6 Kg 15.0
Palmoil 34.0 0.4 L 85.0
Flavor(Salt) 63.0 0.2gm 350.0
Fuel 17.9 0.3 L 64.0
Power 5.0
Maintenance &Consumables 3.2
Labour 22.0
Transportation 30.0
Cost of packing 25.0
Cost perKg 253.7
Margin 38.1
Total CostperKg 291.7
GST @12% 35.0
SELLING PRICE 326.8

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The cost of production for making 1 Kg cassava chips is Rs 253.7 the selling price per product of
1 Kg is Rs 326.8. There is a profit of Rs 73.1. The major part of the cost is required for cassava
and flavors. Fluctuations in cost price due to the availability of raw material and seasonal change
in price of cassava
Eg: Demand and price of cassava will go rise in festival season. In that time the cost price will
change than older price. The cost of cassava K5 product is Rs 5 per unit they don’t change the
price of the product even from starting because people in brand value and also there is
competitors like lays etc…
The company didn’t enter into a breakeven point at this time company is struggling to achieve
the breakeven point they said that it is happened soon.

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CONCLUSION
The project on analyzing the cost, demand and profit of products was carried out successfully.
Interaction with the company owner helped in understanding the various types of products
available in Tierra foods products and also familiarized the preparation of these products. There
are different types of cost involved in production. The pricing of various items required for
production was also identified and the process of fixing the selling price was also studied. The
demand for different cassava products sold in the market was collected and the reasons for this
demand were studied. Finally the information collected is studied and presented in the form of a
report for future reference.

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BIBLIOGRAPHY
 www.tierra.in
 www.google.com
 www.tradeindia.com

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