1. The document provides an analysis of ABC Company's business environment, unit economics, and recommendations for improving profitability. 2. It finds that ABC has the highest fixed costs and lowest contribution per unit of the competitors analyzed, leaving it vulnerable. 3. To address this, it recommends strategies like reducing material, labor, and overhead costs through various efficiency improvements, as well as reducing fixed costs by rightsizing assets or outsourcing non-core functions. 4. If successful, these recommendations could lower ABC's break-even point and risk, allowing for smoother operations and improved financial results.

1. ABC COMPANY B.E.U ANALYSIS
RECOMENDATATION FOR
IMPROVEMENT
P.SHIYAM
PURCHASING MANAGEME
GDPSCM 2011-14
p_shiyam@yahoo.com

2. MARKET SHARE
Selling price
Fixed Cost
Variable cost Demand
15
100,000
10
30,000
Market
share
25%
Competitor 1 15
90,000
9
40,000
33.33%
Competitor 2 18
78,000
12
25,000
20.83%
others
88,000
11
25,000
20.83%
ABC
•
•
•
•
15
Few suppliers
Price Takers
High competition
Perfect oligapoly

3. SELLING PRICE
ABC
COMPETITOR 2
OTHERS
15
•
•
•
•
1.
2.
3.
4.
5.
6.
7.
8.
9.
COMPETITOR 1
15
18
15
79% of market at 15/= .
21% of market at 18/=.
20% of price increase compare with others.
Marketing mix to increase the market share
promotion
price discount
bundling
advertising
branding
direct selling
Warranty
options
Chanel

4. BREAK EVEN UNITE
• B.E.U= FIXED COST
CONTRIBUTION PER UNITE
CONTRIBUTION PER UNITE=SELL ING PRICE- VERIABLE COST PER
UNITE

6. FIXED COST
ABC
100,000
Competitor 1
90,000
Competitor 2
78,000
• ABC 100,000/= HIGHEST COST AT INDUSTRY
• C 1 90,000 IS SECOND LOWERST LESS THAN 10%
• C 2 78,000 IS LOWERST FC IN THE INDUSTRY
• C 2 LESS THAN ABC FIXED COST 22%
•
OTHERS 88,000 THIRD HIGHERST FIXED COST
• OTHERS COMPARE WITH ABC 12 % THAN ABC
Others
88,000

7. RECOMENDATAION FOR REDUCE FIXED
AT ABC
• If the companies have excess capacity of resource such as
machineries, factory space, vehicles, permanents labours can utilize
for the other purpose .
•
Company can outsource the less important activities this leads to
reduces company fixed cost . The company cannot outsource core
activities because all information technology will available with third
party it will be risk to the company.
• Company should re shift the fixed assets resources with more
technology advance, less waste and high
• The company should sell the fixed assets and these fixed buy for the
lease bases .when company uses the fixed assets at the lease base it
is easy to upgrade the machinery with technology when it was not
necessary we can stop the lease payment .

8. CONTRIBUTION PER UNITE
ABC
COMPETITOR 1
COMPETITOR 2 OTHER
SELLING PRICE
15
15
18
15
VARIABLE COST
10
09
12
11
CONTRIBUTION PER UNITE
5
6
6
4
• ABC CONTRIBUTION 5/= PER UNITE
• THIS IS 20 % LESS THAN C1,C2
• C 1 CONTRIBUTION PER UNITE 6/=
• HIGHERST CONTRIBUTION PER UNITE WITH LOWER PERCE
• C 2 CONTRIBUTION PER UNITE 6/=
• HIGHERST CONTRIBUTION PER UNITE WITH HIGHERST SELLING PRICE
• OTHER CONTRIBUTION PER UNITE 4/=
• LOWERST CONTRIBUTION PER UNITE IN THE INDUSTRY

9. VARIABLE COST
•
The variable cost is directly connection with production volume when production
increase the variable cost also increase and when production variable cost also
reduce variable cost are direct material ,direct labour ,direct over head
ABC
10
Competitor 1
9
Competitor 2
12
• C 1 IS LOWER VC IN THE INDUSTRY
• 10 % LESS THAN ABC
• C 2 IS HIGHST VC IN THE INDUSTRY
• 20% HIGHER THAN ABC
• OTHER IS SECOND HIGHST IN THE INDUSTRY
• 10% HIGH THAN ABC 1
• MATERIAL COST,LABOUR COST,OVER HEAD
other
11

10. RECOMENDATATION FOR MATERIAL COST
REDUCTION
• Direct purchase from manufacturer reduce cost of production.
•
INTERNALY PRRODUCE THE RAW MATERIALS
( we can reuse cans baralles , palates ,plastic tubs. When we reduce the resource use for the production
can reduce the cost.)
•
03.Internaly produce reduce other cost Sseveral ways advertising , marketing, purchasing , transportation,
eliminate west ,well plan supply chain also reduces the cost in several ways.
•
04.intraduce the JET system( holding cost such as warehouse cost, insurance cost ,no cash flow held in raw
materials, less risk for the theft, damage.)
•
05. Use the less cost substitute raw material for the production process there for raw material cost will
reduce by ABC
•
06. The ABC can make forward contracting with supplier there for we can get the raw materials at the law
price with the specific quality. When ABC sigh with forward contracting it gives the assurance for purchase
for certain period .there for ABC can bargain the price.
•
06. Reduces the raw material west through proper production process. For examples reduce raw material
damages this will also add to the final product, optimize planning with in the production process such as
garment industry.
•
07. Produce the goods at the customer required quality or produce goods at different brands with different
quality. For example one company produce the tea with different brands and different quality

11. LABOUR COST
• The labour cost is the parts of the variable
cost so it can reduce through the well manage
labour force. Labaor force is managing the
other resources in the organization. To
increase the productivity the motivation is
very important to the company.

12. RECOMENDATIONFOR REDUCE LABOUR
COST
• Introduce the piece work system for the wages this will reduce the cost of
production and motivate people to the do more process in each department
• Introduce the incentive system for the labour force there for workers will
motivate to the job.
• Train the labor force according to the requirement, when ABC have train labour
force they can do the work more economically, efficiently, effectively.
• Introduce the welfare system for the ABC company with that explain the
company mission vision and goal so workers feel company thinks about them
self and they have to do something for company work force with hart smart.
• If ABC has excess labour capacity they can use for the other purpose of process
there for labour cost for particular process will reduce.
• Use the equipment and machines for the production process such as
automated machines convey, trolley for lift the goods. there for it will increase
the efficiency of work and reduce labour cost
• The company can outsource the labor force there for labour cost will reduce
labours hires only when required only.

13. VARIABLE OVERHEAD COST
• The overhead cost is cost incurred for the
business operation such as insurance,
maintenance, communication cost, security
cost, transportation cost, electricity cost,
water cost. When overhead cost is liner
connection with production process is known
as variable cost.

14. RECOMENDATAION FOR OVER HEAD
COST REDUCTION
• 1. Plan the transportation in the most utilize way with sales delivery and
same lorry will be collect raw materials from suppliers it will eliminate the
raw material transportation cost
• 2. For the lighting purpose use clear shit in the roof it will reduces the cost
electricity.
• 3. The maintenance can reduce through the properly maintain records .to
reduce the maintenance cost management implement the incentive
system.
• 4. At the production process reduce the idle time because at the idle time
all the cost will incurred such as labour wage.
• 5. Reuse materials when it can use for the other purpose such as packing
materials, rejects it will reduce the cost of production.
• 6. The waste, rejects damages garbage’s, are reuse or re cycle by the ABC
it will creates cost cutting and revenue creation for the company.

15. CONCLUTION
• The ABC Company in the strong completion market with major
competitors’ .The ABC company price is same with competitor 1 and
others. There for market is price taker. To improve the profit of the ABC we
have increase the contribution of the ABC .for that control the material
cost, labour cost, overhead cost. To control the each cost elements
recommendation is given above. Through that ABC can reduce the cost and
increase the contribution per unite or otherwise reduce the fixed cost for
the period. It will lead to reduce the break even unites and break value.
There for risk of the ABC also reduce and company will have smooth
operation.

16. THANK YOU