FAUJI FERTILIZER COMPANY produces urea and DAP fertilizers. The company has a contribution margin of 60% and break-even sales of Rs. 5,206,1997. It currently has sales of Rs. 88,154,698 and a margin of safety of Rs. 36,092,701, indicating it is profitable and would need a sales decrease of over Rs. 36 million before reaching a loss-making position.

1. 1
Assignment of:
Cost Accounting
Submitted to:
Sir.AamirShaheen
Submitted by:
Zaid Ali (29)
MasabFrooq (10)
FAHAD SATTAR (06)
Class:
BBA(HONS) 4th
R1
Date:
17-12-2012

2. 2
Table of Contents
Sr.No Details Page
1 Summery 3
2 Introduction To Company 4
3 Organizational chart 6
4 Contribution Income Statement 7
5 Contribution Income Ratio 8
6 Breakeven Point 8
7 Margin of safety 9
8 Annexures 10

3. 3
Summary
This report is on FAUJI FERTILIZER CARPORATION and consists of contribution income
statement. In this report we have calculated the total fixed cost and total variable cost of this
company, contribution margin, contribution margin ratio, breakeven point sales, margin of
safety.
First of all in this report we have included the introduction of FAUJI FERTILIZER COMPAN.
Which consists of the history, its products its business projects and its mission and vision? This
company is earning a large profit and running successfully. Company is producing DAP and
Urea fertilizer. It is also working in new plants of steel billets and electric Arc Furnace. It is also
working on the wind power project in its Bin Qasim project.FFC's vision is to play a leading role
in the industrial and agricultural advancement of the country pursuing new growth opportunities
offering the convenience of multiple products, brands and channels within and beyond the
territorial limits of Pakistan, to the benefit of our customers and our shareholders, elevating our
image as a socially responsible and ethical company that is watched and emulated as a model of
success.
FFC's vision is to play a leading role in the industrial and agricultural advancement of the
country pursuing new growth opportunities offering the convenience of multiple products,
brands and channels within and beyond the territorial limits of Pakistan, to the benefit of our
customers and our shareholders, elevating our image as a socially responsible and ethical
company that is watched and emulated as a model of success.
We have made its contribution income statement and computed its net operating
profit which shows that company is performing very well and is earning profit this is it growth
period and it is very much success full to cover its fixed cost and is going in right direction.
Its margin of safety is high which shows that company has no chance of loss yet
and is performing its operations in a right direction.

4. 4
Introduction:
With a vision to acquire self - sufficiency in fertilizer production in the country, FFC was incorporated in
1978 as a private limited company. This was a joint venture between Fauji Foundation and HaldorTopsoe
A/S of Denmark.The initial share capital of the company was 813.9 Million Rupees. The present share
capital of the company stands above Rs. 8.48 Billion. Additionally, FFC has more than Rs. 8.3 Billion as
long term investments which include stakes in the subsidiaries FFBL, FFCEL and associate FCCL.FFC
commenced commercial production of urea in 1982.
Products:
FFC participated as a major shareholder in a new DAP/Urea manufacturing complex with participation of
major international/national institutions. The new company Fauji Fertilizer Bin Qasim Limited (formerly
FFC-Jordan Fertilizer Company Limited) commenced commercial production with effect from January
01, 2000. The facility is designed with an annual capacity of 551,000 metric tons of urea and 445,500
metric tons of DAP, revamped to 670,000 metric tons of DAP.
Business Development:
FFC on Course to develop 50 MW Wind Power Project & Evaluating Other
Diversification Options:
The feasibility study to set up steel billets plant of 1.2 million billets per year in progress. The billets are
primarily used for production of re-bars and structural steel. In Pakistani market quality steel billets are
short and generally available at high premium.For producing steel billets the Electric Arc Furnace (EAF)
route has been selected over the conventional route (blast furnace) considering the economy of scale. The
flow diagram illustrates of the EFA process. Pakistan is a country which seriouslylacks in steel
production compared to other developing countries. This project, facility of our country after Pakistan
Steel Mills which was set up 40 years ago.The decision to invest in this venture will be taken up by the
board after the study is completed and financial aspects are factored in.FFC Wind Power Project

5. 5
development activities continued to progress at full pace. The highlight are in succeeding pares. A new
Company “FFC Energy Limited” has been incorporated for the Wind Power Projects.
FFCEL Project Team along with legal &Financial consultant negotiated the Energy Purchase Agreement
(IA) with NTDC & AEDB respectively. Upon agreement by Lenders of these contracts, same were
finalized and initialed by FFCEL.FFCEL presented the Grid Studies to the CEO NTDC and NTDC Power
Planning Division which have been approved.FFCEL participated in Grid Code Review Panel meeting
arranged by NTDC. The grid Code amendments to address specific requirement of Renewable Energy
Power Plants have been approved by NEPRA.
Vision:
In a nation of increasing population, we believe there is substantial opportunity of growth for FFC
in the years to come.
FFC's vision is to play a leading role in the industrial and agricultural advancement of the country
pursuing new growth opportunities offering the convenience of multiple products, brands and channels
within and beyond the territorial limits of Pakistan, to the benefit of our customers and our shareholders,
elevating our image as a socially responsible and ethical company that is watched and emulated as a
model of success.
Mission:
FFC is a market-focused, process-centered organization delivering successful performance through
a strong focus on quality.
Our mission is to stand above the competition and provide our customers with premium quality fertilizer
products in a safe, reliable, efficient and environmentally sound manner, deliver exceptional services and
unparalleled customer support, produce predictable earnings for our shareholders, and provide a dynamic
and challenging environment for our employees.

6. 6
Organizational Chart
CHIEF
EXECUTIVE
Chief
Financial
Officer
GM
Technology
&
Engineering
GM
Manufacturig
& Operations
GM
Marketing
GM Plant
(Goth
Machhi)
GM Plant
(Mirpur
Mathelo)
ZM
North
ZM
Central
ZM
South
RM
Bhawalpur
RM
D.G.Khan
RM
Multan
RM
Vehari
RM
Lahore
RM
Faisalabad
RM
Sahiwal
RM
Peshawar
RM
Hyderabad
RM
Sukkur
RM
Nawabshah
Sales
Officers
Sales
Officers
Sales
Officers
Sales
Officers
]Sales
Officers
Sales
Officers
Sales
Officers
Sales
Officers
Sales
Officers
Sales
Officers
Sales
Officers

7. 7
Contribution income statement:
Fauji Fertilizer Company
Contribution income statement
for the year ended December 31, 2010
Details Rs.
Sales 88,154,698
Less: Variable Cost (35,240,997)
Contribution Margin 52,913,701
Less: Fixed Cost (31,237,198)
Net Operating Profit 21,676,503

8. 8
Contribution margin ratio:
Contribution margin ratio=contribution margin/total sales
=52913701/88154698
=0.60
This contribution margin ratio shows that each successive unit which we
produce will participate 0.60 or 60% to cover the fixed cost and will lead the
company towards the profit by decreasing its fixed cost.
Break even sales:
Break even sales= total fixed cost / contribution margin ratio
= 31237198 / 0.6
= 52061997
Breakeven sales are the sale at which company gains no profit. At this point sales
of FAUJI FERTILIZER COMPANY are 52061997 and company is not gaining
no profit and it is only covering its total fixed and variable cost. If sales increase
from this point then company will earn profit and if the sales decreases from this
point company will move towards the loss.

9. 9
Margin of safety:
Margin of safety= Actual sales – Breakeven sales
= 88154698 – 52061996.67
= 36092701.33
Difference between actual sales and breakeven sales is margin of safety if the
sales are in the range of margin of safety then then company will not be in loss. If
the sales of FAUJI FERTILIZER COMPANY decreases 36092701 rupees then the
company will not be in loss. This is secure range of the company. But if the sales
decreases more than the margin of safety of the company then it will be in loss.
Degree of leverage:
Degree of leverage = Contribution Margin / Operating Profit
= 52913701 / 21676503
= 0.244

10. 10
Annexures
FIXED COST:
Product transportation 4,548,162
Salaries, wages and benefits 1,368,001
Rent, rates and taxes 103,276
Insurance 8,214
Technical services 13,540
Travel and conveyance 134,267
Sale promotion and advertising 61,039
Communication and other expenses 187,736
Warehousing expenses 82,456
Depreciation 47,394
Administrative expenses732,244
Mark – up on long term financing and murabaha827,558
Mark – up on short term borrowings 1,134,890
Exchange loss – net 21,558
Bank charges 16,102
Research and development 286,586
Workers’ Profit Participation Fund 1,384,969
Adjustment in WPPF relating to prior year charge (199,097)
Workers’ Welfare Fund 517,865
Loss on disposal of property, plant and equipment 86,866
Auditors’ remuneration
Audit fee 2,184
Fee for half yearly review, audit of consolidated accounts
and certifications for Government and related agencies 7,040
Out of pocket expenses 150
Raw materials consumed 31,655,000
Fuel and power 8,478,880
Chemicals and supplies 441,999
Salaries, wages and benefits 4,359,503

11. 11
Training and employees welfare 467,625
Rent, rates and taxes 48,474
Insurance 230,677
Travel and conveyance 312,285
Repairs and maintenance 1,854,773
Depreciation 2,469,561
Communication and other expenses 1,200,
VARIABLE COST:
Interest on wppf1247
Raw material 31655000
Less :Difference in WIP opening and ending inventory (15242)
Difference in opening and ending of finished goods inventory (109925)
Purchases for resale 3709917
Total 35240997