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A project on cost volume profit analysis Submitted by: Md Abul Hasnat Dept of commerce &business management Ranchi university

Introduction :

Introduction The Central Coalfields Limited is one of the subsidiaries of Coal India Limited (CIL), registered under the company’s act 1956 Established on: 1975 Entrusted to public sector organization (CIL) A company was formed by the name of M/S. Hindustan Collieries Pvt. Ltd. CCL is engaged in scientific and planned exploration of coal reserves with due regard to safety, quality and conservation to meet the national requirement of coal.

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VISION OF CENTRAL COALFIELDS LIMITED: "Committed to create eco-friendly mining" MISSION OF CENTRAL COALFIELDS LIMITED: "To become a World class, Innovative, Competitive & Profitable Coal Mining Operation to achieve Customer Satisfaction as top priority."

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OBJECTIVES OF CENTRAL COALFIELDS LIMITED: Coal mining through efficiently operated mines. Besides fulfilling coal needs of the customers in terms of quantity, focus on quality, value addition. Beneficiation to the satisfaction of the customers. Marketing of coal as main product. Trading of coal, coke and other by-products. Support market oriented reforms.


TYPES OF COAL & ITS CUSTOMERS TYPES OF COAL: Coking coal. Non-coking coal. CUSTOMERS : The following are the major consumers of coal in India: Power Plant Steel Plant Cement Industries Fertilizers Industries Brick Industries Paper Industries Sponge Iron Others.


COST VOLUME PROFIT ANALYSIS Cost Volume Profit Analysis shows the relationship of cost volume profit at different level of output. There are two ways of maximizing profit. By increasing selling price per unit. By decreasing cost price per unit.

Factors of cost volume profit analysis. :

Factors of cost volume profit analysis. Total volume of production : It is an amount of production which a firm produces for sales & for this it earns profit. Price per unit : It is a price of per unit. We can find it by dividing total sales with total volume of production. Variable cost: Variable cost is that costs which change with the change in production & per unit variable cost remains constant with each additional unit. Fixed Cost: Fixed cost is that cost which remains constant with change in production and per unit fixed cost decreases with each additional unit.

Break Even Analysis :

Break Even Analysis Break even analysis reveals the relationship between the volume and cost of production on the one hand, and the revenue and profit obtained from the sales on the other. It captures the relation of fixed costs, variable costs, the value of output, sales mix price, etc. to the profitability of the company. Break even analysis is the techniques which are applied for profit planning & control.

Break Even Point :

Break Even Point Break even point is that specific level of activity or volume of sales where the firm breaks even, that is the total cost equal total revenue. A point where losses cease to occur while profits have not yet begun It is considered to be that point where zero or no profit occurs. [Break even sales = fixed cost + variable cost]

CVP Graph or Break Even Chart :

CVP Graph or Break Even Chart

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Contribution Margin Contribution margin is the amount remaining from sales revenue after variable expenses have been deducted. [Sales revenue − Variable cost = Contribution Margin] [Contribution margin − Fixed cost = Net operating Income or Loss] Profit Margin Ratio (P/V Ratio): The contribution margin as a percentage of total sales is referred to as profit margin ratio (P/V Ratio) . [ P/V Ratio = Contribution Margin / Sales ]

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Assumption: It assumes that costs can be classified into fixed and variable costs, thus ignoring semi variable costs. Sale price of the product is assumed constant, thus giving linearity property to total revenue curve. It assumes constant rate of increase in variable costs, thereby imparting linearity to total cost curve. It assumes no improvement in technology and labour efficiency. Changes in input prices are also ruled out. Break Even analysis also assumes that the production and sales are synchronized, in the sense that there is no addition or subtraction from inventory.

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Advantages of Cost Volume Profit (CVP) Analysis: Cost volume profit analysis (CVP analysis) can be used to help find the most profitable combination of variable costs, fixed costs , selling price, and sales volume. Limitation: complexity in the analysis. static in nature, in the sense that it assumes a constant relationship of output to costs and revenue. The break even analysis, by assuming that profit are function of output alone, gives us only a partial view of the situation.

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CCL CVP REPORT Year 2010 The actual level of production is 470.83 lakh ton B.E.P is 438.33 lakh ton Variable cost is Rs.101289.05 lakh , Fixed cost is Rs.416642.1 lakh P/V Ratio is 81.54%. Year 2009 The actual level of production is 432.36 lakh ton B.E.P of that year is 451.63 lakh ton Variable cost is Rs.98747.32 lakh Fixed cost is Rs.441170.84 lakh P/V Ratio is 81.04%.

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PROJECT ANALYSIS From the study conducted above we have observe that: C.C.L has earned operating profit only in year 2010 and 2007 Operating cost of C.C.L is very high and it is increasing year by year, due to this rate of increasing Break Even Point production is higher than actual production except year 2010. In area wise production we have found that only Hazaribagh , Piparwar and Dhori are producing coal above break even point level of production and remaining areas are running under loss.

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SUGGESTION As we know that our country is moving towards globalization and privatization. All those sectors which were earlier fully public sector unit now moves towards privatization. Today Coal India Limited is a public sector unit and only producer of coal, but in future it can moves towards privatization and Govt. will allow other companies to enter in coal industries. To earn profit in coming future C.C.L should give some effort to decrease its overall cost to the minimum level.

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PROJECT : Under the guidance of Sir Ajay Deep Wadwa & Our faculty prevalence Mr. Amit Shekhar Tirkey . THANKYOU

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