Break Even Analysis (Atul)

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A
PROJECT
ON
“BREAK EVEN ANALYSIS”
Of “GIMA Tex Ind. Pvt. Ltd. Hinganghat”
Submitted to RTM Nagpur University, Nagpur in partial fulfilment of

the requirement for the degree Master of Business Administration.
Submitted By
Mr. Atul R. Gaulkar
Under the guidance of

Prof. R. B. Gajbhiye
DEPARTMENT OF MANAGEMENT STUDIES

Bapurao Deshmukh College of Engineering, Sevagram.
(Session 2010-2011)
Department Of Management Studies, BDCE, Sevagram.

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DEPARTMENT OF MANAGEMENT STUDIES

B. D. College of Engineering, Sevagram
CERTIFICATE
This is to certify that Mr. Atul R. Gaulkar is a bonafied student of M.B.A.

IV Semester in Department of Management Studies, Bapurao Deshmukh
College of Engineering, Sevagram for the Session 2010-2011 has
completed his project work entitled “BREAK EVEN ANALYSIS OF GIMA
TEX. IND. PVT. LTD, HINGANGHAT” under the guidance of Prof. R. B.
Gajbhiye.
The Project Report is being submitted to Rashtrasant Tukadoji Maharaj

Nagpur University, Nagpur in partial fulfilment of the requirement for the degree
of Master of Business Administration.
Dr. S. S. Khandare
Principal
(B.D.C.E SEVAGRAM)
Prof. Dr. S. V. Deshmukh Prof. R. O.Panchariya

Co- ordinator Project In-charge
(D.M.S.B.D.C.E SEVAGRAM) (D.M.S.B.D.C.E SEVAGRAM)
Date: ___/___/2011
Place: SEVAGRAM

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DECLARATION
I hereby declare that the project work entitled “BREAK EVEN ANALYSIS
OF GIMA TEX. IND. PVT. LTD, Hinganghat” submitted to the Rashtra Sant
Tukdoji Maharaj Nagpur University, Nagpur, is a record of an original work
done by me under the guidance of Prof. R. B. Gajbhiye, Bapurao Deshmukh
College of Engineering, Department of Management studies, Sevagram, and
this project work has not performed the basis for the award of any Degree or
diploma/associate ship/fellowship and similar project if any
Mr. Atul R. Gaulkar
NU/A7/42728
ACKNOWLEDGEMENTS

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“I owe a great many thanks to a great many people who have helped and
Supported me during the making of my Project “
I derive immense pleasure in expressing my sincere gratitude to my project

guide and faculty Prof R. B. Gajbhiye for giving his valuable time and
attention towards successful completion of my project. He has taken pain to
go through the project and make necessary correction as and when needed.
I would also like to extend my deepest thanks to Prof. Dr. S.S.Khandare

(Principal, BDCOE) and Prof. Dr. S.V. Deshmukh (Co-ordinator, DMS,
BDCOE) without whose kind permission it would not have been possible to
complete my project.
This project bears an imprint of many people. Thus, I extend my heartfelt

thanks to Mr.S.N Pathre (Finance Manager, Gimatex Ind. Pvt. Ltd
Hinganghat)
Mr. Vinit Kumar Mohota (Director, Gimatex Ind. Pvt. Ltd Hinganghat) for
their kind attention and continues support towards my project.
Atul R. Gaulkar

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EXECUTIVE SUMMARY
The project report covers all the aspects relating to financial decision making
through the eye of Break-even-analysis this has become imperative as the
Gimatex Industries Pvt.Ltd is plunging headlong into a plus area that is profit.
Break even analysis is an important technique in profit planning and managerial

decision making. It is based on the relationship between sales, revenue, and
variable cost to determine the level of operation. The point to be reached is a
state where the cost equalizes sales revenue and the result is no profit or no loss.
The employees of the Gimatex Industries have passed the management or the
management has passed the employees or both have passed with a support of
Gimatex Industries which is a profit making organization. To begin with
information was collected from primary and secondary sources. In the case of
Gimatex Industries, the Break Even point which generally is usual in a profit
making organization could not be reached as it is loss incurring organization
because of actual sales is greater than BEP sales it indicates that the profitability
of an organization. Financial statement of the organization bear testimony to what
has been stated above enclosed.
INDEX

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CHAPTER I
INTRODUCTION
CHAPTER PARTICULAR PAGE NO.
NO.
1. INTRODUCTION
2. COMPANY PROFILE
3. OBJECTIVE
4. HYPOTHESIS
5. NEEDS AND SCOPE OF STUDY
6. RESEARCH METHODOLOGY
7. BREAK EVEN CHART
8. BREAK EVENPOINT
 FACTORS
 TOOLS
9. DATA ANALYSIS AND
INTERPRETATION
10. RESULT ANALYSIS
11. CONCLUSION
12. SUGGESTIONS
13. BIBLIOGRAPHY
Break Even Analysis
Break even analysis is a popular form of cost – volume – profit

relationship. Sometimes the words break even analysis and ‘cost - volume - profit
analysis are used interchangeably, as some of the cost – accountants consider
the analysis beyond the determination of break – even point as ‘cost – volume –

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profits analysis’. This system in its narrower sense restricts itself only to the
determination of ‘no profit – no loss’ or ‘break – even points’, while in its broader
sense it covers the determination of profits at any level of activity. A break even
analysis indicates at what level cost and revenue are in equilibrium. It is a simple
and easily understandable.
Break even analysis refers to ascertainment of level of operations
where total revenue equals to total costs. It is an analysis used to determine the
probable profit or loss at any levels of operations. Break – even analysis is a
methods of studying the relationship among sales revenue, variable cost and
fixed cost to determine the level of operation at which all the costs are equal to its
sales revenue and it is the no profit no loss situation. This is an important
technique used in profit planning and managerial decision making. Break even
analysis is also known as cost volume profit analysis. The analysis is a tool of
financial analysis whereby the impact on profit of the changes in volume, price,
cost and mix can be estimated with reasonable accuracy.
The break - even point and break even chart are to by –products of break
even analysis. In a narrow sense, it is concerned with the break even point and a
broad sense; it is concerned with break even chart. Break even analysis is also
known as cost volume profit analysis. The analysis is a tool of financial analysis
whereby the impact on profit of the changes in volume, prices, cost can be
estimated with reasonable accuracy. Break even point is equilibrium point or
balancing point of no- profit no- loss. This is a point at which loss cases and profit
begins. This point is where income is exactly equal to expenditure.

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These three elements are important for determining the break – even analysis.
BREAK EVEN
ANALYSIS
VARIABLE
SALES FIXED COST
COST
Break-even analysis is a technique widely used by production

management and management accountants. It is based on categorizing
production costs between those which are "variable" (costs that change when the
production output changes) and those that are "fixed" (costs not directly related to
the volume of production).
Break-even analysis is another accounting tool developed by business

owners to help plan and control the business operations. Thus, this analysis
shows the relationship between cost profit and volume clearly, which is very
helpful for profitability analysis. For this reason this analysis also known as cost –
volume – profit analysis.

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ADVANTAGES OF BREAK EVEN ANALYSIS
 Break even analysis will show the variable costs, fixed costs and total
costs.
 Sales can be known.
 Margin of safety can be known.
 Profit or loss can be known.
 It is useful for forecasting plans and profit.
 Inter- firm comparison is possible.
 It is helpful for cost control.
 To decide changes in capacity.
 To measure the effect of changes in profit factors.
 To choose the most profitable alternative.
 To determine the sales required to offset price reduction.
LIMITATIONS OF BREAK EVEN ANALYSIS
 The break – even analysis requires that all costs should be separated into
fixed and variable components.
 It is assumed that all fixed cost remain constant at various level of activity
But in practice, it may not be fixed in the long-run.
 Another assumption is that variable costs are really variable and changes
in direct proportion to the volume of output. It means that variable cost per
unit of product remain constant- in practice variable cost are not necessary
strictly variable with output.
 Break – even analysis ignore the capital employed in business, which is
one of the important fact in determination of profitability of the organisation
and its products.
 It is assumed that productivity , operating efficiency, product specification
and method of manufacture sale will not under go any change – in actual
situation, the operating efficiency and productivity depends upon the man
power, it is impractical to assume that this factor remain constant.

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ASSUMPTION OF BREAK EVEN ANALYSIS
There are several assumption of Break even analysis. These are as follows.
 Cost can be classified into fixed and variable categories.
 The principle of cost variability is valid.
 Fixed cost will remain constant at all levels or volumes and variable costs
will fluctuate in direct proportion to volume.
 There is a linear relationship among different costs.
 Selling price will remain constant get full volume of sales.
 Price of input factors will remain the same.
 Cost control will be neither weakened not strengthened.
 Market is sufficient to absorb to entire output.
 Either there is only one product or if several products are being
manufactured and sold the sale mix will remain constant.

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a) Industrial Profile-
India Textile Industry is one of the leading textile industries in the world. Though
was predominantly unorganized industry even a few years back, but the scenario
started changing after the economic liberalization of Indian economy in 1991. The
opening up of economy gave the much-needed thrust to the Indian textile
industry, which has now successfully become one of the largest in the world.
India textile industry largely depends upon the textile manufacturing and export.
It also plays a major role in the economy of the country. India earns about 27%
of its total foreign exchange through textile exports. Further, the textile industry of
India also contributes nearly 14% of the total industrial production of the country.
It also contributes around 3% to the GDP of the country. India textile industry is
also the largest in the country in terms of employment generation. It not only
generates jobs in its own industry, but also opens up scopes for the other
ancillary sectors. India textile industry currently generates employment to more
than 35 million people. It is also estimated that, the industry will generate 12
million new jobs by the year 2010.
Various Categories:
Indian textile industry can be divided into several segments, some of which can
be listed as below:
 Cotton Textiles
 Silk Textiles
 Woollens Textiles
 Readymade Garments
 Hand-crafted Textiles
 Jute and Coir
The Industry
India textile industry is one of the leading in the world. Currently it is estimated to
be around US$ 52 billion and is also projected to be around US$ 115 billion by
the year 2012. The current domestic market of textile in India is expected to be
increased to US$ 60 billion by 2012 from the current US$ 34.6 billion. The textile
export of the country was around US$ 19.14 billion in 2006-07, which saw a stiff
rise to reach US$ 22.13 in 2007-08. The share of exports is also expected to
increase from 4% to 7% within 2012. Following are area, production and
productivity of cotton in India during the last six decades:

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Area in lakhs Production in lakhs bales of Yield kgs per

Year
hectares 170 kgs hectare
1950-51 56.48 30.62 92
1960-61 76.78 56.41 124
1970-71 76.05 47.63 106
1980-81 78.24 78.60 170
1990-91 74.39 117.00 267
2000-01 85.76 140.00 278
2001-02 87.30 158.00 308
2002-03 76.67 136.00 302
2003-04 76.30 179.00 399
2004-05 87.86 243.00 470
2005-06 86.77 244.00 478
2006-07 91.44 280.00 521
2007-08 94.39 315.00 567
2008-09 93.73 290.00 526
Though during the year 2008-09, the industry had to face adverse agro-climatic
conditions, it succeeded in producing 290 lakhs bales of cotton comparing to 315
lakhs bales last year, yet managed to retain its position as world's second highest
cotton producer.
Strengths:
 Vast textile production capacity

 Large pool of skilled and cheap work force
 Entrepreneurial skills
 Efficient multi-fibre raw material manufacturing capacity
 Large domestic market
 Enormous export potential
 Very low import content
 Flexible textile manufacturing systems

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Weaknesses:
 Increased global competition in the post 2005 trade regime under WTO
 Imports of cheap textiles from other Asian neighbours
 Use of outdated manufacturing technology
 Poor supply chain management
 Huge unorganized and decentralized sector
 High production cost with respect to other Asian competitors
Cotton Exports from India
Year Quantity (in lakhs bales of 170 kgs) Value (in Rs./Crores)
1996-97 16.82 1655.00
1997-98 3.50 313.62
1998-99 1.01 86.72
1999-00 0.65 52.15
2000-01 0.60 51.43
2001-02 0.50 44.40
2002-03 0.83 66.31
2003-04 12.11 1089.15
2004-05 9.14 657.34
2005-06 47.00 3951.35
2006-07 58.00 5267.08
2007-08 85.00 8365.98
2008-09 50.00 N.A.
Current Facts on India Textile Industry
 India retained its position as world’s second highest cotton producer.

 Acreage under cotton reduced about 1% during 2008-09.
 The productivity of cotton which was growing up over the years has
decreased in 2008-09.
 Substantial increase of Minimum Support Prices (MSPs).
 Cotton exports couldn't pick up owing to disparity in domestic and
international cotton prices.

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 Imports of cotton were limited to shortage in supply of Extra Long staple

cottons.
b) ORGANISATION
PROFILE –
Gimatex Industries Pvt Ltd. (Erstwhile RSR, Wani unit) was set up 1994 as a
sister concern to “The Raisaheb Rekhchand Mohota Spg. & Wvg. Mills Ltd.
(Popularly known as RSR)” in central part of India at Hinganghat. It germinated
with a vision to provide premium quality textile products to its customers using the
latest in textile technology.
An ISO 9000: 2001 Gimatex industries manufacture premium quality of varieties
of yarns and fabrics suitable for ready made garments.
The Mohota group commenced its operation in the year 1898 by setting up its
flagship company Raisaheb Rekhchand Mohota Spg. & Wvg. Mills Ltd. in the
cotton belt of central India. This integrated company converting the basic fibre to
rich fabrics is one of the very few composite units to withstand all the challenges
and threats thrown at it for more than 100 years. In the recent management
restructuring, part of RSR Mohota Mills has been separately formed into a new
company rechristened as Gimatex Industries Pvt. Ltd. Administered by a highly
dynamic and experienced management and executed by a strong skilled
workforce of 3000 people.
In the year 1994, Gimatex industries (Erstwhile RSR Wani) embarked on its
mission by commencing operations at multiple state-of-the-art manufacturing
locations. It has continuously pioneered in improvement of its processes and
systems and today with implementation of ERP the company has successfully
streamlines its operations. Its ceaseless drive to cater to quality conscious buyers
with multiple choices of products has helped company carve a niche in the yarn
manufacturing arena.
The group is a firm believer in the values of innovation, quality, and ethical
practices. Gimatex has thrived using these concepts as pillars of growth.
Organizations, business and people dealing with Gimatex continue their dealing

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with the Company on a long term basis. The relationship flourishes in the
environment of mutual trust that reciprocates between the company and its
business allies. Our ever-growing sales figures and export demand is a testimony
to our customer-centric approach
The Reasons for the success of the mill are:-
 Our loyal employee

 Standard new work norms
 Effective HR policy
 Various welfare schemes for the workers.
 Implementation of ERP
OBJECTIVES OF Gima Tex Pvt. Ltd.
The main objectives of the company can be generally stated as manufacturing

and selling of cotton yarn and cotton fabrics.
 To manufacture and market cotton yarns.

 To manufacture and market cotton fabrics.
 To protect the interest of the employees through welfare measures.
 To modernize the mills and its systems including computerization.
Corporate Social Responsibility
We believe that all the achievements that we have attained are a result of steady
enduring support from the society. Acknowledging this fact, the company engages
into the development of civilization by providing better infrastructure for
education, fairs, awarding scholarship for bright students, arranging health camps
etc. Also the company understands its responsibility towards maintaining a clean
and balanced eco-friendly environment and hence performs treatment of all the
outgoing water, maintains pollution levels below the statutory norms etc with the
aid of proper effluent treatment plants.
Following are the charitable institutions run by the group
• Seth Mathuradas Mohota religious and charitable trust

• Seth Mathuradas Mohota Science College, Nagpur
• Gangabai Bulakidas Mohota High School, Hinganghat
• Shrimati Sirekunwar Devi Mohota Kanya Vidyalaya, Hinganghat
• Shrimati Sirekunwar Devi Mohota memorial charitable trust

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Plant and Machinery
In sync with its policy to deliver high value added quality products to discerning
customers, Gimatex has always opted for the latest technologies with state of the
art machineries imported from Europe & Japan. The working environment is
specifically controlled with the aid of advanced humidification and air conditioning
systems. Our testing facility houses best in class quality control laboratory which
ensures defect free end product. These products are then packed in suitable
packaging material to deliver on our promise of right product every time.
Our TMC approved Ginning and Pressing unit is fully modernized to cater to the
requirement of high quality, contamination free, low trash Cotton bales. These
cotton bales along with other man made fibers are used in our existing spinning
facilities having total production capacity of 15000 tonnes / annum of yarns in
various varieties.
Carding Machine
Our quest for quality production continues a step further into weaving with our
production capacities being 4 million meters / annum of fabrics. These capacities
are continuously augmented with major expansion plans.
Yarn Division
Blowroom – LMW & Trutzchler with Automatic Bale Plucker, Unimix, CVT
Contamination Detector - Uster Securomat SP-S
Carding – LMW 300 A& Trutzchler DK 800

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Drawing – LMW RSB 851 & Reiter RSB D-35

Combing - LMW LK 250 & Reiter E65
Speed Frame - LMW LF 1400 A & Zinser 68i
Ring Frame - LMW LR6/S & Reiter COM 4
Humidification – Luwa
Testing – UT-4, Uster Classimat Quantum, HVI, Statex Strength system.
Packing – Pallete packing , Carton packing
Fabric Division
Warping – Beninger
Sizing – Beninger
Looms – Toyoda JAT 710
Humidification – Luwa
Ring Frame Machine
Quality Assurance
Gimatex Industries Pvt Ltd, Hinganghat is a ISO 9001 – 2000 certified company.
Our quality policy is to consistently meet or exceed our customer's expectation for
quality product & performance by continual improvement of our processes &
systems.
 This is achieved through Implementing & maintaining ISO 9001-2000

Quality Management System through out the organization.
 Creating and nourishing competencies among the people to increase
awareness, motivation and involvement.
 Encouraging questioning of status quo and establishing continual
improvement as an objective for improved result.
 Planning for changing customer needs, innovating new product and
upgrading technology to meet the desired result.

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The group has carved a niche for itself by investing in lean manufacturing
processes appropriate information technology tools & operation research tools.
Further, state-of-the-art manufacturing facility and quality monitoring system
ensures the delivery of superior total value to the customer.

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Certification

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Our quality assurance personnel are well qualified & experienced in quality
control and are devoted all the time for collecting & analyzing data from online
and offline quality monitoring system.

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 Focus on quality right from incoming materials to the delivery of product to the
customer.
 Appropriate Fibre sourcing from quality conscious suppliers domestically and
internationally.
 Inspection test plans devised statistically such that all the potential vulnerable
points are checked for quality within a short period.
 100% bales of contamination-free cotton fibre testing before taking them for
mixing.
 Consistent fibre selection for manufacturing a particular count to avoid any
variation over a span of time.
 Systematic productive and preventive maintenance to avoid exigencies.
 100 % online quality monitoring with all the Autoconers connected through
Conerpilot to clear objectionable faults.
 Final physical inspection by quality assurance personal of every cone prior to
packing with the aid of UV light
Along with this a 24 feeder single jersey knitting machine is used to verify the
performance of the yarn in knitting application.
Export Markets

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 Our Export Market expands to the following countries:
United Kingdom , Italy , Portugal , Poland , Brazil , Turkey , Egypt , Israel

Kenya , Mauritius , Oman , Korea , Vietnam , Sri Lanka , Bangladesh , Nepal ,
Argentina
Domestic Markets

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 Our Local Market expands mainly to the following locations in India:
Siyaram Silk Mills Mumbai

Reliance Industries Ltd.
S Kumar’s Nationwide
Reid & Taylor
Doner Industries Ltd. Mumbai
Banswara Syntex Ltd.
BSL Ltd. Bhilwara
Bombay Dying & Mfg. Co. Ltd. Mumbai
Suzuki Textiles, Bhilwara
Arwind Mills Ltd, Ahmadabad
Yarn Syndicate Ltd, Mumbai
Sangam Spinners, Bhilwara
Euro Vista Trading Co.Ltd. Mumbai
GHCL Ltd.
Alok Industries Ltd.
Nahar Textiles, Mumbai
Santosh Fine Fab Ltd. Mumbai
Alicom Synthetics, Mumbai
ATF Clothing Pvt. Ltd. Mumbai
Mahajan Silk Mills, Mumbai
Park Synthetics, Mumbai
Arviva Industries(Ind.) Ltd. Mumbai
Ambika Synthetics, Mumbai
Lamos(Ind.)Export Pvt. Ltd. Mumbai
Subh Laxmi Syntex Ltd. Bhilwara
Baldva Textiles Ltd. Bhilwara
Chhabra Syncotex, Bhilwara
Selection Synthetics, Bhilwara
Swagat Synthetics, Bhilwara
Titan Tex Fab Pvt. Ltd. Bhilwara
Sharda Spuntex(P) Ltd. Bhilwara
Ranjan Suitings Pvt. Ltd. Bhilwara
Trilobal Textiles, Bhilwara
Ashok Synthetics, Ludhiana

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 Management Body –
Basant Kumar Mohota ( Chairman ) +91-9326800006 bkmohota@gimatex.co.in

Prashant Kumar Mohota ( MD ) +91-9326111103 prashant@gimatex.co.in
Vineet Kumar Mohota ( Director) +91-9373107411 vineet@gimatex.co.in
A.K. Barik (Vice President) +91-9370012059 akbarik@gimatex.co.in
C. L. Parikh ( AVP- Yarn Sales) +91-9322284359 mho@gimatex.co.in
Girish Kochar ( AVP - Yarn Sales ) +91-9326800009 gkochar@gimatex.co.in
Dwarkadas Daga ( GM - Fabric Sales +91-9326810003
) ddaga@gimatex.co.in
G.K.Rajpuria (DGM – Cotton sales) +91-9422140760 info@gimatex.co.in
Rajiv Sharma (HR Manager) +91 -9325378319 hrd@gimatex.co.in
e-mail:info@gimatex.co.inmho@gimatex.co.in
Branches of Gimatex-
Factory At Hinganghat Mumbai Office

Gimatex Industries P. Ltd Gimatex Industries P. Ltd
Post Box No.1, Block No. 15,
Hinganghat - 442301 3RD Floor, Gate No.2,
Maharashtra (India) DevKaran Mansion,
Phone :+91-7153-320969 63,Princess Street
Fax : +91-7153-245158 Mumbai - 400 002 ( India)
Email : info@gimatex.co.in Phone : +91-22-22014711, +91-22-
22019541
Factory At Wani Fax : +91-22-22081556
Gimatex Industries P. Ltd Email : mho@gimatex.co.in
7 km. Mile Stone,
N. H. No. 7, Nagpur office
Village - Wani, Gimatex Industries P. Ltd
Tah. Hinganghat 12, Popular Cloth Market,
Dist.Wardha (M.S.)-442301 Gandhibagh, Nagpur 02,
Phone :+91-7153-320799 Phone : +91-712-2768410
Fax : +91-7153-256341
Email : info@gimatex.co.in

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c) Product profile-
Gimatex Industries has a state of art manufacturing unit for making grey fabric.
Building upon its strength in yarn manufacturing the weaving division was set up
in the year 2006 with versatile and latest machine largely imported from Japan,
Europe.
Gimatex engages into the activity of manufacturing premium quality of cotton

bales, yarns and fabrics for domestic as well as export markets. The facilities
have been arranged to ensure capability to provide wide variety of products
suitable for divergent needs of the customer. An ISO 9000: 2001 Gimatex
industries manufacture premium quality of varieties of yarns and fabrics suitable
for ready made garments.
A. Yarn
Gimatex engages into the activity of manufacturing premium quality of cotton

bales, yarns and fabrics for domestic as well as export markets. The facilities
have been arranged to ensure capability to provide wide variety of products
suitable for divergent needs of the customer.
Organic Cotton mixings, imported cotton mixings along with various cottons
available domestically particularly DCH, MCU, S-6, Bunny etc. are used for
cotton yarns depending on the end use.
Semi Dull, Optical white, SHT, Micro Denier, Cationic are the different varieties of
Polyester that are used for polyester yarns and blends.
Modal, Viscose-Plus and Viscose find their application in all our viscose yarns
and blends with other fibre.
These yarns are prepared in the following shades
• Grey
• Black
• Mélange
Following types of yarn are produced in various count and blend ranges in single
or multiple plies
• Cotton
• Polyester
• Viscose
• Polyester / Viscose
• Polyester / Cotton
• Cotton / Modal
• Cotton / Viscose
• Poly / Viscose / Texturised

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Fabric
Gimatex Industries has a state of art manufacturing unit for making grey fabric.
Building upon its strength in yarn manufacturing the weaving division was set up
in the year 2006 with versatile and latest machine largely imported from Japan,
Europe.
Also special attention is given to developing procedures and systems to match
the service requirements of the biggest fabric buyers in the world.
Intensive Quality Control Procedures & Systems also ensure total customer
satisfaction. Training programmes are conducted aiming on educating the staff on
Total Quality Management & First Time Right method of working.
Gimatex makes Bottom weights and shirting fabric catering to the growing
demands of the top end of apparel and r m g segment
We manufacture fabric from count range of 10 to 100s counts with weight from 75
gsm to 400 gsm.
We have in-house designing and desk loom for sampling.
Laboratory for checking various fabric parameters.
Advantages of Sourcing Fabric from Gimatex
 In-house yarn manufacturing which helps in controlling contamination and

other quality parameters
 Strong team of professionals from Indian Textile Majors
 Short lead time
Quality Control
 Yarn testing carried out before utilization to check for all critical parameters
 Fabric inspected as per norms of American 4 point system.
 Systematic Machine maintenance with the aim of manufacturing defect

free fabric
Fabric Manufacturing Machinery
 Looms - Toyota Airjets JAT 710 , Picanol Gamma Rapiers
 Sizing - Benninger

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 Warping - Beninger
 Humidification - LUWA
Fabric Product Mix
 Varieties - Cotton / PC / Cotton Flax / Cotton Lycra / Dobbies
 Types - Griege
 End use - Shirts / Trousers
 Maximum width - 69” grey
 Packing - Roll form
 Inspection - American 4 point system
 Annual production - 8.5 million mts p.a of which the capacity for Dobby
fabric being 1.5 million mts p.a.
Fabric Processing Unit

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OBJECTIVES
The objectives are:-
 To study of Break – even point analysis.
 To analyse various parameters of BEP.
 To study the Break even analysis and chart.
 Estimation of break even point of GIMA Tex Ind. Pvt. Ltd. Hinganghat.

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HYPOTHESIS
The hypotheses are:-
 All cost and expenses can be separated into fixed and variable
components.
 Variable cost is directly proportional to the volume of production.
 The fixed cost is also fluctuating on yearly basis.
 Profit volume ratio depends upon the contribution of the firm.

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NEED OF STUDY
Gimatex industry is profit making organisation. Break even analysis is one of the
methods by which the financial health of the organisation can judged. With the
help of break even analysis the level of sales can be measured to shoot up the
sales step can be measured.
The present study has been undertaken to analyse the working of Gimatex
industry Pvt. Ltd. Hinganghat. It’s a profit making organisation and this is enquiry
into the reasons therefore. Break even analysis is a tool or a plank used to
enquire into the reasons for continued profit from year to year and a plus area
does not seem to be insight whether the conversion from loss to profit is not
impossible. Every aspect has been thoroughly analysed and keeping in view the
financial health of the company and its vision suggestions have been made.
SCOPE OF THE STUDY
The scope of the project is intended to cover the terms connected with
break - even analysis and to co - relate them with the GIMA Tex Ind. Pvt. Ltd.
Hinganghat.

31
RESEARCH METHODOLOGY
DATA COLLECTION
The study is primarily based on secondary data. The information of GIMA
Tex Ind. Pvt. Ltd. Hinganghat. Is of present project is carried on with the co-
operation of the management of the GIMA Tex Ind. Pvt. Ltd. Hinganghat, who
permitted me to carry out study to provide with the requisite data. The data is
collected from two sources.
 PRIMARY DATA
The data collected self by the researchers is the primary data.
The information related to GIMA Tex Ind. Pvt. Ltd. Hinganghat. is collected
from the internal interview and discussion and concerned execution of
account department.
 SECONDARY DATA
Secondary data may be defined as data that has been collected
earlier for some purpose other than the purpose related object of present
study. Any data that is available prior to the commandment of the research
project is secondary data.
The information of study is collected from the various books of
financial management and also, the information collected from Audited
report from 2006 – 2008.
 RESEARCH DESIGN
In this case, the in depth studies of the break even analysis of GIMA Tex
Ind. Pvt. Ltd. Hinganghat.
 TYPE OF RESEARCH STUDY

The research shall be explorative in nature.

32
 EXPLORATORY RESEARCH DESIGN
The primary objective of exploratory research is to provide insights into,

and an understanding of problem confronting the researcher. Exploratory
research is used in cases when you must define the problem more precisely,
identify relevant courses of action, or gain additional insights before an approach
can be developed. The information needed is loosely defined at this stage, and
the research process that is adopted is flexible and unstructured. For example, it
may consist of personal interviews with organisation experts. The samples,
selected to generate maximum in sights is ' small and non-representative. The
primary data are qualitative in nature and are analyzed accordingly.
Period of Study-
The duration used for this project report is two & half month.

33
BREAK EVEN CHART
The break - even chart and breakeven point are to by –products of break
even analysis. In a narrow sense, it is concerned with the breakeven point and a
broad sense; it is concerned with break even chart.
The Break-Even Chart
Break even chart indicates approximate profit or loss at variable costs and
sales volume within a limited range. The break – even chart shows at what
volume the firm first covers all cost with revenue of break – even. The break-
even chart shows the profitability or otherwise of an undertaking at various level
of activity, and indicates the point at which neither profit or nor loss is made.
Breakeven point is known as “No profit no loss point”. So the chart is also known
as break - even chart. At this point, the total costs are recovered and profit
business.
In its simplest form, the break-even chart is a graphical representation of
costs at various levels of activity shown on the same chart as the variation of
income (or sales, revenue) with the same variation in activity. The point at which
neither profit nor loss is made is known as the "break-even point" and is
represented on the chart below by the intersection of the two lines:
The Essential Factors to prepare break even chart
 BREAK EVEN POINT :-

Break – even point is a point where the total sales are equal to total cost.
In this point there is no profit or loss in the volume of sales. Total variable and
fixed costs are compared with sales revenue in order to determine the level of
sales volume, sales value or production at which the business makes neither a
profit nor a loss (the "break-even point").

34
 FIXED COST :-
The fixed cost is a cost that tends to be a unaffected by changes in the

level of activity during a given period of time. The fixed costs remain constant in
total regardless of changes in volume up to a certain level of output. There are
not affected by changes in the volume of production. There is an inverse
relationship between volume and fixed cost per unit.
 VARIABLE COST:-
The variable cost is a cost that tends to very in accordance with level of
activity within the relevant range and within a given period of time. The prime
product cost i.e.: direct material, direct labour and direct expenses tend to very in
direct proportion to the level of activity an increase in the volume means a
proportionate increase in the total variable cost and a decrease in volume while
lead to a proportionate decline in the total variable cost.
 TOTAL COST:-
Expenditure incurred in production of material for the purpose of sale can

be divided into fixed cost or variable cost. Total of variable cost or fixed cost is
total cost.
 SALES:-
The exchange of anything for money is called sale. After goods or

manufactured they are sold with a view to earning profit and cover the cost
incurred in the process. The result may be a profit or a loss. To find out the
breakeven point sale is an important aspect. The result of sales enables an
organisation to find out whether there is profit or loss. This is directly connected
with the ascertainment of breakeven point.

35
BREAK EVEN CHART

36
SIGNIFICANCE OF BREAK EVEN CHART
 It will show the variable costs, fixed costs and total costs.
 Sales and value can be known.
 Profit or loss can be known.
 Margin of safety can be known.
 Angle of incidence or the intersection of sales line with costs line can also
be known. Thus, it is very useful for managerial decision.
LIMITATIONS OF BREAK EVEN CHART
 Exact and accurate classification of cost into fixed and variable is not
possible.
 Detailed information cannot be known from the chart. To known all the
information about fixed cost, variable cost and selling price, a number of
charts must be drawn.
 Constant selling price is not true.
 No importance is given to opening and closing stocks.
 Cost, volume and profit relation can be known; capital amount, market
aspects, effect of govt. policy etc, which are important for decision -
making cannot be considered from break – even chart.

37
BREAK –EVEN- POINT
Definition of break - even point
Break – even point is a point where the total sales are equal to total cost.
In this point there is no profit or loss in the volume of sales.
The breakeven point is that point of sales volume at which total revenue is
equal to total cost. It is a no profit, no loss point.
This is a result indicates where there is no profit or loss is called BEP.
Where sales total is equal to total cost that point is Called break even point there
may be some profit which is including in total cost.
Introduction of break - even point
Break - even point helps in assessing the viability of the organization and
to take the decision in profit planning and cost control. Break - even point is the
point of zero income I.e., the level of sales is just equal to its costs. Cost includes
both fixed and variable costs. It is used as a useful tool in financial planning to
recover cost and maximize profits. The changing in operating condition such as,
sales, fixed cost, and variable cost will change the break - even point.
The Factors of the break-Even Point
The break-even point is the point at which the income from sales will cover
all costs with no profits. The business owner or manager usually considers
several factors when studying break-even analysis:
 The capital structure of the company.
 Fixed expenses such as rent, insurance, heat, and light.
 Setup of the organization.

38
 Variable expenses.
 The inventory, personnel, and space required to operate properly.
The study of these factors will inform the business owner of the
possibilities of lowering the break-even point and increasing the gross profit
margins. When attempting to determine the prospect of success for a new
operation, the analysis of the break-even point may indicate the advantages or
disadvantages in modifying the proposed level of operation.
The break-even point informs the business owner of the level of sales at
which the business will realize neither a profit nor a loss. It can be expressed in
numbers or by the use of graphs. To arrive at the break-even point using either
method, we need to calculate the projected and fixed manufacturing, selling, and
administrative expenses, and the expected ratios of sales for each category of
expenses.
Break-Even Point Formulas:-
To determine the break-even point, we should use the following formula:
Breakeven point = Fixed cost
Profit volume ratio
OR
Breakeven point (In unit) = Fixed cost
Contribution per unit
OR
Breakeven point = Fixed cost

(×) Total sale
Total contribution

39
TOOLS OF BREAK EVEN POINT
 PROFIT VOLUME RATIO OR P/V RATIO
Definition of profit volume ratio
Profit volume ratio commonly known as P/v ratio is the ratio of contribution
to sales. This ratio is known as “marginal income ratio” ‘contribution ratio’ or
‘Variable profit ratio’.
The ratio may be expressed in terms of percentages (%) indicating the

relative profitability of different products. The profit of a business can be
increased by improving P/V ratio. As such management will make efforts to
improve the ratio. A higher ratio means a greater profitability and vice versa. So
management will increase the P/V ratio. How to improve profit volume ratio:-
PVR ratio is an index of sound financial health of company’s product. Profit
volume ratio can be improved, if contribution is improved. Contribution can be
improved by taking any of the following steps.
 By increasing selling price.
 By decreasing variable cost.
 By increasing the production of product which is having a high P/V ratio

and vice versa.
Profit volume ratio is very important in decision making. It can be used for
the calculation of B.E.P and in problems regarding profit sales relationship.

40
The formula for computing the P/V ratio is given below.
Profit volume ratio = Sales (-) Variable cost

× 100
Sales
OR
Profit volume ratio = Contribution

× 100
Sales
OR
Profit volume ratio = Fixed cost (+) Profit

×100
Sales
Application of profit volume ratio
A Profit volume ratio may be used for the following.
 Ascertaining B.E.P. and margin of safety.
 Ascertaining the variable cost for any volume of sales.
 Fixing the selling price
 Ascertaining profit for a particular volume of sales.
 Ascertaining the volume of sales for a desired profit.

41
 Selecting the most profitable lines of products particular when there is
no key factor.
CONTRIBUTION
Definition of contribution
Contribution is the difference between sales and variable cost or marginal

cost of sales. It may also be defined as the excess of selling price of variable cost
per unit. Contribution is also known as “contribution margin” or Gross margin”
contribution being the excess of sales over variable cost is the amount that is
contributed towards fixed expenses and profit.
Contribution formulas:-
Contribution = sales (-) marginal cost
Contribution = sales (-)Variable cost
Contribution = Fixed cost (+) Profit
Contribution = Fixed cost (- ) Loss
Contribution (per unit) = Selling price (-) Variable or (marginal cost per unit)
Advantages of contribution
 It helps the management in the fixation of selling price.
 It assists in determining the break - even - point.
 It helps management in the selection of a suitable, product mix for profit
maximization.

42
 It helps in choosing from among alternative methods of production the
method which gives highest contribution per limiting factor is adopted.
It helps in taking a decision as regards to adding a new product in the market.
MARGINAL COSTING
The term ‘Marginal costing’ is comparatively new area in the field of

accounting. It is becoming gradually a more popular term. So it is very important
and essential in the business for studying marginal cost. Marginal cost is also
known as ‘Direct cost’, ‘Variable cost’, etc.It is a only technique to be used in
taking managerial decisions.
Meaning of marginal costing
The term ‘marginal costing’ makes it necessary to distinguish between

fixed and variable costs. The behavior of variable cost is similar to marginal cost.
Two types of expenses are incurred in the production of any commodity. These
are fixed and variable expenses. Fixed expenses are those which do not vary
with the increase or decrease in the volume of production. These remain constant
regardless of the level of output. On the other hand, variable expenses very in
direct proportion to the volume of output. If the production comes down, they also
come down.
Definition of marginal costing
The institute of cost and Management Accountant (ICMA) London has

define marginal costing as, “The ascertainment of marginal costs and of the effect
on profit of changes in volume or type of output by differentiating between fixed
costs and variable costs”
According to Dr. Joseph, “Marginal costing is a technique of determining
the amount of change in the aggregate costs due to an increase of one unit over
the existing level of production. As such, it arises from the production of the
behaviors of costs with changes in the volume of output.

43
Marginal costing formula:-
“Marginal costing” is a technique to determine “Marginal cost”. This concept of

marginal cost can easily be explained with following equation.
Marginal cost = Prime cost (+) Total variable overheads
Marginal cost = Total cost (-) Fixed cost
Features of marginal costing
 Marginal costing is a technique or working of costing which is used to
conjunction with other methods of costing.
 Fixed and variable costs are kept separate at every stage. Semi – variable
costs are also separated into fixed and variable.
 When evaluation of finished goods and work in progress are taken into
account they will be only variable cost.
 As fixed costs are period costs, they are charged to profit and loss account
during the period in which they are incurred. They are not carried forward
to the next year’s income.
 Marginal income or marginal contribution is known as income of the profit.
 The difference between the contribution and fixed costs is the net profit or
loss.
 Fixed costs remain constant, irrespective of level activity.
 Sales price and variable cost per unit remain the same.

44
 Cost volume profit (CVP) relationship is fully employed to reveal the state
of profitability at various level of activity.

45
Merits of Marginal costing
The following are the main merits of marginal costing.
 No doubt marginal costing is easy and simple to understand and produces

a better performance. If the same is used with the help of standard costing
and budgetary control.
 Such fixed overheads are excluded from marginal cost; greater control
over cost is possible. Thus the management can concentrate on marginal
cost which is nothing but a constant ratio.
 As fixed cost are excluded it eliminates the difficulties which allocating

apportioning and absorbing overheads, so under and over recovery of
fixed overheads will not create any complication.
 Need less to mention that if different varieties of product are manufactured

a comparative profitability statement can be prepared with the help of
marginal costing which help the management to take proper decision
about the products.
 Marginal costing also helps the management to take any valuable decision
like price, to make or buy, selecting the more profitable product etc.
 Other advantages to be taken – (1) Introducing a new products( 2)

Reduction of price during depression or competition (3)Selecting the most
profitable product (4) Alternative course of action (5)Profit planning with
the help of break even chart (6) Selecting the most profitable activity etc.

46
Demerits of marginal costing
The following are the demerits of marginal costing.
 It is not an easy task to segregate the overheads into fixed and variable
due to the fact that many overheads considered to be fixed or variable
may not exactly be the same at various level of production.
 We know that in marginal costing, concept of semi variable overheads
which are segregated into fixed and variable is absent. There it is very
difficult to segregate semi – variable overheads.
 Sometimes decision taken on the basis of marginal costing is found to be
dangerous.
 Another significant factors which is totally neglected in marginal costing.
 Another significant snag of marginal costing is the procedure of valuation
of inventories i.e. work in progress, finished goods and transfer from one
process to another etc.
 Standard costing and budgetary control technique also help to control
cost. Standard costing with the help of volume variances. Show the effect
of changes in output on fixed cost and as such variation of cost is found.

47
MARGIN OF SAFETY (M.S)
Definition of margin of safety
The total sales minus the sales at Break – even – point is known as the
margin of safety.
That is margin of safety is the excess of normal or actual sales over sales
at Break – even –point. In other words sales over and above break even sales
are known as Margin of safety. The margin of safety refers to the amount by
which sales revenue can fall before a loss incurred. That is, it is the difference
between the actual sales and sales at B.E.P. If the margin of safety is large, it is a
sign of soundness of the business and vice versa. The margin of safety serves as
a guide is a reliable indicator of the business strength and soundness. Margin of
safety can be expressed in absolute sales amount or in percentage.
High margin of safety indicates the soundness of a business because
even with substantial fall in sale or fall in production, some profit shall be made.
Small margin of safety on the other hand is an indicator of the weak position of
the business and even small reduction of the business. Margin of safety can be
increased by:-
 Decreasing the fixed cost
 Decreasing the variable cost
 Increasing the selling price
 Increasing output and sales
 Changing to product mix that improve P/V ratio

48
Margin of safety can be computed with the help of following formulae.
Margin of safety = Actual Sales (-) Sales at B.E.P
OR
Margin of safety = Profit

Contribution
OR
Margin of safety = Profit

P/V Ratio
Margin of safety can also express as percentage on sales:-
Margin of safety = Margin of safety

× 100
Total sales

49
DATA ANALYSIS & INTERPRETATION
GIMA TEX IND. PVT. LTD. HINGANGHAT.
SALES
Particular 2007-08 2008-09 2009-10

(Rs in crore) (Rs in crore) (Rs in crore)
Yarn-Domestic 90.85 124.17 147.39
Yarn-Export 34.15 24.01 31.10
Grey cloth Domestic 20.52 34.05 35.02
Grey cloth Export ----- 0.29 0.37
TOTAL SALE 145.52 182.52 213.88
258.83
211.61
180.78 Interpretation:- sales in the year 2009 is greater than the sales in the year 2008 and sales
in year 2008 is greater than sales in the year 2007, so it indicates that sales increases in
every year.

50
VARIABLE COST
Particular 2007 2008 2008

Variable Expenses 112.17 134.11 150.82
Total (in Rs. Crore) 112.17 134.11 150.82
Interpretation -
The variable cost has increased in every year.

51
FIXED COST

Fixed Expenses 21.47 27.85 33.83
Total (in Rs. Crore) 21.47 27.85 33.83
Interpretation:-
The fixed cost increased in the year 2009 as compare to the year 2007 and 2008.

52
PROFIT VOLUME RATIO
Profit volume ratio is the ratio of contribution to sales. PVR ratio is an index of sound
Financial health of company’s product.
Profit volume ratio = Sales – Variable cost

× 100
Sales

P.V.R. 22.76% 26.52% 29.48%
Interpretation: -
The profit volume ratio is fluctuating every year. So the organisation should
try to maintain p .v. ratio.

53
BREAK – EVEN POINT

Where sales total is equal to total cost that point is Called break – even point
there may be some profit which is including in total cost.
Break - even point = Fixed cost
P.V Ratio

B.E.P (Rs. In Crore) 94.33 105.02 114.76
Interpretation: -
The sale of the organisation in the year 2007 is greater than B.E.P. and also
in the year 2008 or 2009 the sale is greater than B.E.P. Hence, in the year 2007,
2008 and 2009 the organisation was in profit.

54
RESULT ANALYSIS
 The sales in year 2009 is greater than the sale in year 2008 and sales in the
year 2008 is greater than year 2007.This may be because of decreased
price of product or more demand for products or any other factors.
 Variable cost is directly related to no. Of unit produced .The V. C. has

increased by 38.65 crore in year 2009 and by 21.94 crore in year 2008 as
compare to year 2007, and this may be because of increased price of raw
material or increased labour cost.
 Fixed cost has increased in the year by year. This may be because of
management has given the bonus or any other monetary benefits to the
worker of an organisation.
 The profit volume ratio is fluctuating every year. Because of the P.V.R has
increased in past three year. A higher P.V R means higher profitability.
 The sales of the organisation in the year 2007 is greater than B.E.P. and also
the year 2008 & 2009, the sale is greater than B.E.P. which suggest to
makes it profit making organisation.
 B.E.P sales in year 2007 was 94.33 crore and it increased in 2008 by 10.69
crore which was 105.02 crore and it again increased in 2009 by 9.74 crore
which was 114.76 crore.

55
CONCLUSION
After the analysis it is found that the gross profit of the organisation is high
due to that profit volume ratio is also high. Hence, the break even sale is less than
the actual sale of an organisation which indicates that the organisation is in the
profit from last three years.
Hence the organisation tries to maintain the same position in the future and
company should concentrate on increasing their sales and to earn more profit.

56
SUGGESTIONS
 The organisation should maintain their organisational developing policies.
 The organisation should try to improve profit volume ratio, because a

higher profit volume ratio means higher profitability.
 Organisation should increase its sales.

.
 Organisation should reduce its variable cost.
 The organisation should try to increase publicity.
 The organisation should provide quality product at reasonable price to the

customer.

57
BIBLIOGRAPHY
 Cost management accounting - Ravi M. Kishore
 Management accounting - R.S .N Pillai & Bagavathi
 Research Methodology - C.R. Kothari
 www.gimatex.co.in
 Final accounts of organisation Profit & Loss Account and Balance Sheet
for the Accounting Year 2006-07, 2007-08, 2008 – 2009.

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1

Submitted to RTM Nagpur University, Nagpur in partial fulfilment of

Under the guidance of

DEPARTMENT OF MANAGEMENT STUDIES

Department Of Management Studies, BDCE, Sevagram.

DEPARTMENT OF MANAGEMENT STUDIES

This is to certify that Mr. Atul R. Gaulkar is a bonafied student of M.B.A.

The Project Report is being submitted to Rashtrasant Tukadoji Maharaj

Prof. Dr. S. V. Deshmukh Prof. R. O.Panchariya

Department Of Management Studies, BDCE, Sevagram.

Mr. Atul R. Gaulkar

Department Of Management Studies, BDCE, Sevagram.

I derive immense pleasure in expressing my sincere gratitude to my project

I would also like to extend my deepest thanks to Prof. Dr. S.S.Khandare

This project bears an imprint of many people. Thus, I extend my heartfelt

Department Of Management Studies, BDCE, Sevagram.

Break even analysis is an important technique in profit planning and managerial

Department Of Management Studies, BDCE, Sevagram.

5. NEEDS AND SCOPE OF STUDY

7. BREAK EVEN CHART

10. RESULT ANALYSIS