1
D.G. Khan Cement Company Limited
2011
MANAGERIAL ACCOUNTING
2
D.G. Khan Cement Company Limited
SUPERIOR UNIVERSITY
FINAL PROJECT
MODULE:
MANAGERIAL ACCOUNTING
GROUP ASSIGNMENT:
COST VOLUME PROFIT ANALYSIS on
D.G. Khan Cement Company Limited
COURSE INSTRUCTOR:
SIR SAEED
SUBMITTED BY:
LEADER-
MC 11321
MC 11315
MC 11353
MC 11338
MC 11316
PROGRAM:
M.com 2-A
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D.G. Khan Cement Company Limited
DEDICATION
ALL PRAISES FOR ALMIGHTY GOD ,THE
CREATOR OF THE WORLD AND THE
HEAVEN..... WE DEDICATE THIS FEEBLE
WORK TO OUR BELOVED PARENTS AND
LIVING LEGENDS OF EXCELLENCE, FOR
OUR LIVES WITHOUT THEIR KNOWLEDGE
AND WISDOM AND GUIDANCE WE WOULD
NOT BE ABLE TO ACHIEVED THE GOAL WE
HAVE STRIVED FOR….AND TO ALL THOSE
WHO PRAY FOR US…
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D.G. Khan Cement Company Limited
Acknowledgement
Project in any field of study is the kind of
achievement for which every student is looking
for and thinking upon throughout his academic
session that what it should be & how should it
be completed. It is definitely a keen desire of
every student to full fill his requirement. It needs
through study untiring efforts, hard work with
full devotion towards the cause and last but not
the least proper guidance and corporation from
seniors and instructors.
We extend our gratitude to “Sir Saeed” whose
guidance, broadened vision and his ample
experience throughout the project served as a
lighthouse
in
this
incredible
completion of the project.
venture
for
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D.G. Khan Cement Company Limited
COMPANY PROFILE
NISHAT GROUP
Nishat Group is one of the leading and most diversified business groups in South East Asia. With
assets over PRs.300 billion, it ranks amongst the top five business houses of Pakistan. The group
has strong presence in three most important business sectors of the region namely Textiles,
Cement and Financial Services. In addition, the Group has also interest in Insurance, Power
Generation, Paper products and Aviation. It also has the distinction of being one of the largest
players in each sector. The Group is considered at par with multinationals operating locally in
terms of its quality of products & services and management skills.
Mian Mohammad Mansha, the chairman of Nishat Group continues the spirit of
entrepreneurship and has led the Group successfully to make it the premier business group of the
region. The group has become a multidimensional corporation and has played an important role
in the industrial development of the country. In recognition of his unparallel contribution, the
Government of Pakistan has also conferred him with “Sitara-e-Imtiaz”, one of the most
prestigious civil awards of the country.
D.G. Khan Cement Company:
D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the largest cementmanufacturing unit in Pakistan with a production capacity of 5,500 tons clinker per day. It has a
countrywide distribution network and its products are preferred on projects of national repute
both locally and internationally due to the unparallel and consistent quality. It is list on all the
Stock Exchanges of Pakistan.
DGKCC was established under the management control of State Cement Corporation of Pakistan
Limited (SCCP) in 1978. DGKCC started its commercial production in April 1986 with 2000
tons per day (TPD) clinker based on dry process technology. Plant & Machinery was supplied by
UBE Industries of Japan.
Acquisition of DGKCC by Nishat Group:
Nishat Group acquired DGKCC in 1992 under the privatization initiative of the government.
Starting from the privatization, the focus of the management has been on increasing capacity as
well as utilization level of the plant. The company undertook the optimization by raising the
capacity immediately after the privatization by 200tpd to 2200tpd in 1993.
Capacity Addition:
To meet the increasing demand and to capitalize on its geographic location, the management
further expanded the capacity by adding another production line with a capacity of 3,300 tons per
day in year 1998. Design of the new plant is based on latest dry process technology, energy
efficient and environmental protection from particulate pollution according to the international
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D.G. Khan Cement Company Limited
standards. The plant and machinery was supplied by M/s F.L. Smidth of Denmark. As a result,
DGKCC emerged as the largest cement production plant in Pakistan with annual production
capacity of 1,650,000 M tons of clinker (1,732,000 M.Tons Cement) constituting about 10%
share of the total cement production capacity of the country. The optimization plan is still
underway to increase the total capacity of the two units to 6700 TPD by mid of 2005 from 5500
TPD at present.
Environmental Management:
DG Khan Cement Co. Ltd., production processes are environment friendly and comply with the
World Bank’s environmental standards. It has been certified for “Environment Management
System” ISO 14001 by Quality Assurance Services, Australia. The company was also certified
for ISO-9002 (Quality Management System) in 1998. By achieving this landmark, DG Khan
Cement became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO
14001.
CORPORATE PROFILE
Board of Directors
Mrs. Naz Mansha
Mian Raza Mansha
Mr. Khalid Qadeer Qureshi
Mr. Zaka-ud-Din
Mr. Muhammad Azam
Mr. Inayat Ullah Niazi
Officer
Ms. Nabiha Shahnawaz Cheema
Chairperson
Chief Executive
Mr. Khalid Qadeer Qureshi
Mr. Muhammad Azam
Ms. Nabiha Shahnawaz Cheema
Member/Chairman
Member
Member
Chief Financial
Audit Committee
Company Secretary
Mr. Khalid Mahmood Chohan
Bankers
Allied Bank Limited Habib Metropolitan Bank Limited
Askari Bank Limited MCB Bank Limited
Bank Alfalah Limited NIB Bank
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D.G. Khan Cement Company Limited
Bank Islami Pakistan Limited Meezan Bank Limited
Barclays Bank Plc National Bank of Pakistan
Citibank N.A. Royal Bank of Scotland
Deutsche Bank AG Samba Bank Limted
Dubai Islamic Bank Standard Chartered Bank (Pakistan)
Faysal Bank Limited Limited
First Women Bank Limited Silk Bank Limited
Habib Bank Limited The Bank of Punjab
HSBC United Bank Limited
External Auditors
KPMG Taseer Hadi & Co, Chartered Accountants
Cost Auditors
Avais Hyder Liaquat Nauman, Chartered Accountants
Legal Advisors
Mr. Shahid Hamid, Bar-at-Law
Registered Office
Nishat House, 53-A, Lawrence Road,
Lahore-Pakistan
Phone: 92-42-6367812-20
UAN: 111 11 33 33
Fax: 92-42-6367414
Email: info@dgcement.com
web site: www.dgcement.com
Factory
1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan
Phone: 92-641-460025-7
Fax: 92-641-462392
Email: dgsite@dgcement.com
2. 12, K.M. Choa Saidan Shah Road,
Khairpur, Tehsil Kallar Kahar,
Distt. Chakwal-Pakistan
Phone: 92-543-650215-8
Fax: 92-543-650231
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D.G. Khan Cement Company Limited
Mission
To provide quality products to customers and explore new
markets to promote/expand sales of the Company through
good governance and promote a sound and dynamic team,
so as to achieve optimum prices of products of the Company
for sustainable and equitable growth and prosperity of the
Company.
Vision
To transform the Company into a modern and dynamic
cement manufacturing company with qualified professionals
and fully equipped to play a meaningful role on sustainable
basis in the economy of Pakistan.
D.G. Khan Cement Company Limited
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COST CLASSIFICATION
S.
NO
Expenses
Variable
Cost
Fixed Cost
Product
Cost
Period
Cost
Cost of goods sold
1
2
1
Raw and packing
materials consumed
1,912,808
Salaries, wages and
other benefits1
Product cost
Period cost
695,739
3
Electricity and gas2
1,991,243
4
Furnace oil and coal
6,100,305
5
Stores and spares
consumed
6
Repair, maintenance
Product cost3
Product cost4
1,096,570
165,951
Product cost5
Period cost6
Salaries, wages and other benefits are semi variable so we have treated it as fixed cost.
Electricity and gas are semi variable so we have treated it as variable cost.
3
Electricity and gas are product and period cost, why product cost because it is related with production. And why
period cost because it is indirect expense.
4
Furnace oil and coal are product and period cost, why product cost because it is related with production. And why
period cost because it is indirect expense.
5
Stores and spares consumed are product and period cost, why product cost because it is related with production.
And why period cost because it is indirect expense.
6
Repair and maintenance are product and period cost, why product cost because it can be related with production
e.g. if there is any sort of machinery issue may be repair and maintenance will be required. And why period cost
because it is indirect expense and can be occurred in administration regarding office chairs repairs and maintenance.
2
D.G. Khan Cement Company Limited
10
7
Insurance
8
Depreciation on
property, plant and
equipment
Period cost
1,379,750
Period cost
9
Royalty
185,052
10
Excise duty
34,839
11
Vehicle running
12
Postage, telephone
and telegram7
4,829
13
Printing and
stationery
4,821
14
15
7
52,727
Legal and
professional charges
21,041
Product cost
Period cost
Period cost
2,079
Traveling and
conveyance
8,652
16
Estate development
12,514
17
Rent, rates and
taxes8
18
Freight charges
Period cost
Period cost
Period cost
1,492
4,924
Product cost9
Product cost
Postage, telephone and telegram are semi variable and treated as fixed cost.
Rent, rate and taxes are semi variable and treated as fixed cost.
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Rent, rate and taxes are product and period cost, why product cost because it is related with production. And why
period cost because it is indirect expense
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D.G. Khan Cement Company Limited
11
19
Other expenses
19,834
Period cost
Administrative expenses
20
Salaries, wages and
other benefits10
21
Electricity, gas and
water11
3,868
22
Repair and
maintenance
6,052
23
Insurance
24
Depreciation on
property, plant and
equipment
Period cost
Product cost12
Period cost13
1,596
Period cost
11,538
Vehicle running
26
Postage, telephone
and telegram14
9,568
Period cost
27
Printing and
stationery
5,716
Period cost
Legal and
5,252
Period cost
25
28
10
91,633
8,478
Product cost
Period cost
Salaries, wages and other benefits are semi variable so we have treated it as variable cost.
Electricity and gas are semi variable so we have treated it as fixed cost
12
Electricity and gas are product and period cost, why product cost because it is related with production. And why
period cost because it is indirect expense.
13
Repair and maintenance are product and period cost, why product cost because it can be related with production
e.g. if there is any sort of machinery issue may be repair and maintenance will be required. And why period cost
because it is indirect expense and can be occurred in administration regarding office chairs repairs and maintenance.
14
Postage, telephone and telegram are semi variable and treated as fixed cost.
11
D.G. Khan Cement Company Limited
12
professional charges
29
Traveling and
conveyance
4,983
Period cost
30
Rent, rates and
taxes15
31
Entertainment
32
School expenses
33
Fee and subscription
4,948
Period cost
34
Other expenses
4,540
Period cost
1,480
Product cost16
1,492
Period cost
11,292
Period cost
Selling and distribution expenses
15
35
Salaries, wages and
other benefits17
36
Electricity, gas and
water18
37
Repair, maintenance
54,149
Period cost
1,100
557
Product cost19
Period cost20
Rent, rate and taxes are semi variable and treated as fixed cost.
Rent, rate and taxes are product and period cost, why product cost because it is related with production. And why
period cost because it is indirect expense
17
Salaries, wages and other benefits are semi variable so we have treated it as variable cost
18
Electricity and gas are semi variable so we have treated it as fixed cost.
19
Electricity and gas are product and period cost, why product cost because it is related with production. And why
period cost because it is indirect expense.
20
Repair and maintenance are product and period cost, why product cost because it can be related with production
e.g. if there is any sort of machinery issue may be repair and maintenance will be required. And why period cost
because it is indirect expense and can be occurred in administration regarding office chairs repairs and maintenance.
16
D.G. Khan Cement Company Limited
13
21
38
Insurance
238
Period cost
39
Depreciation on
property, plant and
equipment
40
Vehicle running
41
Postage, telephone
and telegram21
2,400
42
Printing and
stationery
2,240
43
Rent, rates and
taxes22
3,520
44
Legal and
professional charges
1,276
2,736
Period cost
Product cost
Product cost
Period cost
Product cost23
16
Period cost
45
Traveling and
conveyance
2,079
46
Entertainment
578
47
Advertisement and
sales promotion
48
Freight charges –
local
49
Other expenses
Period cost
Period cost
5,271
70
1,213
Product cost
Product cost
Period cost
Postage, telephone and telegram are semi variable and treated as fixed cost.
Rent, rate and taxes are semi variable and treated as fixed cost.
23
Rent, rate and taxes are product and period cost, why product cost because it is related with production. And why
period cost because it is indirect expense
22
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D.G. Khan Cement Company Limited
Other operating expenses
50
Workers' profit
participation fund
51
Donations
52
Worker welfare fund
53
Exchange loss
20,251
Product cost
351
26,353
142,060
10452539
Total
Period cost
Period cost
3681525
DATA:
Sales
=
16,275,354
Total variable
=
10452539
Total fixed cost
=
3681525
CONTRIBUTION MARGIN
Contribution margin =
Product cost
Sales – variable
=
16275354 – 10452539
=
5822815
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D.G. Khan Cement Company Limited
CONTRIBUTION MARGIN RATIO
Contribution margin ratio
=
contribution
Sales
=
5822815
16275354
=
0.357768
or
35%
BREAK EVEN SALES
Break event sales
=
Fixed cost
Contribution margin ratio
=
3681525
0.357768
=
10290257.93
MARGIN OF SAFETY
Margin of safety
=
sales – Break even sales
=
16275354 - 10290257.93
=
5985096.07