PROJECT REPORT

Skin Care (Pvt.) Pakistan

COST & MANAGERIAL ACCOUNTING
ATIF KHAN 53258
AZZEM AHMED
SHAHZAD AHMED - 58029
IFRAHZARNAWISH 5563
SUBMITTED TO
Sir. SHAHAM AHMED

TABLE OF CONTENTS
S. No.

Contents

Acknowledgement

Executive summary

Background of the Company

Objective of the report

Company profile

Mission, Vision

Products

Price

Pricing Strategies of Skin Care

10

Cost

11

Main costing Skin Care Company

12

Material Control

13

Marginal cost

14

Analysis of Marginal costing

15

Conclusion

ACKNOWLEDGMENT

Hard working is the key of success and struggle today better

existence for tomorrow, future will be bright.
First of all thanks to AlmightyALLAH, by the blessing of ALLAH. We
were able to think, plan and act accordingly which made me
possible to complete this project on time and then dedication
towards my teacher Sir Shaham Ahmedwho assigned us this
project report and improve our Financial skills there proper
instruction and guidance help us in professional life. We cannot
move a part forward without salute to our honorable teacher.

Scope of the Report

.

This project is base on the topic How to Control Material ,,which

is basic Accessory component of our course study of cost
accounting . Through this project we tremendously able to learn
all the steps involved in Material control in an Organization.
As this Project design for a famous skin care producing product
company skin Care Pakistan ,, so it highlighted all the
ingredients used in Skin care products , there cost control and
detailed material control process , simply we can say that this
project is an authority on material control process.
This analysis has been done on the basis of the information
gathered

from

primary

data

and

secondary

data

sources

(company website and other online resources and books and

articles)

BACKGROUND OF COMPANY
Skin Care Pakistan limited has marks its presence with significant
achievement and today commands market leadership status. The
story of success is based on dedication to nature. Corporate and
process hygiene dynamic leadership and commitment to the
partner and stack holder, SkinCare Pakistan limited is considered
as the leading consumer goods industries in Pakistan with a
turnover of RS 2834.11 crorefy 09 and the three strategic
business unit SBU consumer care division CHD international
business division IBD.. It has 17 ultra modern manufacturing units
spread around the globe. Product marketed over 60 countries;
wide and deep market penetration with 50 c&f agents. More than
5000 distributors and over 2.8 million retail outlets in all over
Pakistan.

Company profile
Skincare is one of the growing FMCG companies in Pakistan
serving in the category of cosmetic and toiletries products.
Launched in 2005, Skincare has taken a lead in the market with
some of its unique products positioned very differently from
competitors products. Our portfolio includes creams, lotions,
soaps, powders,
face washes and mens care products.
Through its well equipped R & D facilities, Skincare has been able
to establish itself as an innovative organization. The research
team of Skincare consists of chemists and scientists and their
focus is on product development using natural ingredients. In
addition to product research, Skincare strongly believes in market
research as well. All the product development is done based on
consumer insights. Our products are well experimented and full of
ingredients like goat milk, haldi and neem which provide the best
care for skin. The power brand of the company is Skin White.
Fairmenz is the pioneer in the fairness cream for men segment in
Pakistan.
We strive for excellence in everything that we do in the area of
our products and our people. We are continuously working to
provide our beauty conscious customers with the excellent quality
products accompanied by the long lasting effects.

VISION
We aim to become the best cosmetic and toiletries manufacturing
company in Pakistan. We want people to look good and feel more
confident by using our different brands which are there to spread
beauty everywhere.
4

MISSION
To maximize shareholders value, by offering superior quality nature based
products, that contributes in improving consumers life in Personal care, Health
Care and foods.

PRODUCTS
SOAPS CREAMS GEL LOTIONS FACEWASH MENS CARE POWDERS
MOSQUITO REPELLENT
PRICE

Price is normally expressed in monetary terms. It is worth of

a product or service in monetary terms. Price is the value which a
buyer passes on to the seller in lieu of the product or service
provided. Price is a crucial determinant of the fact whether the
exchange between the buyer and seller should materialize or not.
While pricing the products three main factors should be kept in
mind -:
1. Cost
2. Competition
3. Consumer demand
PRICING STRATEGIES OF SKIN CARE

Skin Care has stepped up the pace of new product launches

and is investing ad spend and marketing. The entire product
portfolio is also tweaked to include premium offerings such as
more variants under almost every category, like Whitening Soap
is available in 3 different versions.
5

Skin Care is today seen as far more proactive in the market.

Skin Care is now an external oriented company. Across the whole
organization the company have one definition of winning, and
that means not just growing, but growing completely. Over the
last two years, Skin Care has maintained its operating margins
through judicious price hikes across products and reduction in
pack sizes.
The three main factors affecting the pricing strategies have been
discussed below:
COST

One of the most important factors to take care while pricing is the
cost costs set the floor for pricing decisions. There are two types
of cost variable cost and fixed cost. It is important that the price
should recover all costs including a fair return for undertaking the
marketing effort and risk.

COMPETITION

Competition is another important consideration while pricing.

When a firm does not face any competition it can enjoy complete
freedom in fixing its price. But when there are competitors selling
the same or similar products, the pricing freedom is considerably
reduced. Its price must fall in line with the competitors. Similarly
Skin CarePakistan Limited also has many competitors. But Skin
Cares top selected competitors are:-

1.
2.
3.
4.

Unilever Limited
Proctor and Gamble P&G
Pepsi co.
Colgate Palmolive

CONSUMER DEMAND

Skin Care learned that the majority of Pakistan population tends

to go towards the natural and herbal products thus they made it
their USP. Skin Care is efficiently leading the market with this
product range, providing the customers with special products
easily.

MAIN COSTING SKIN CARE COMPANY

Costing is the technique of ascertaining cost .A cost sheet is

statement of cost prepared at given interval of time showing and
various element of cost of a product produced or service rendered
during a particular period this statement gives about detail total
cost and cost per unit at different stages of production for
SkinCare Pakistan limited.
IMPORTANT COMPONENTS OF COST ARE
Prime cost= direct material cost+ direct labor
Work cost = prime cost factory over head
Cost

of

production

work cost+ office and administrative

overhead
7

Total cost (cost of sales) = cost of production+ selling and

distribution overhead
From the balance sheet of Skin CarePakistan Ltd as on 2011 and
with the help of schedule to accounts and notes to schedules we
have prepared the cost sheet.
WE HAVE ASSUMED THE FOLLOWING FOR THE PREPARATION OF
COST SHEET

1.
2.
3.
4.

Rent has been assumed to be factory rent

Insurance has been taken of building
We assumed that the land is used only for factory purpose
As the company have variant products. The selling price
per unit cannot be estimated so all the calculation of
sales has been limits to sales in rupees,

ANALYSIS OF COST SHEET

1. Fright and forwarding charges from about 12.08% for

selling and distribution over head
2. Advertisement expense constituent about 74.586% i.e.
the company focuses more on advertisement.
3. General expense accounts to major portion

for

administrative overhead which is 52.1%

4. Direct material constitute 5.91% of the prime cost while
direct labor constitute only 12.12%
5. The factory overhead consisted mainly on power and fuel
which is36.08% and followed by processing charges which

is 17.19%. Depreciation forms the major part of the

factory overhead which is 24.84%
6. Rents paid for the building constitutes 12.07%
7. Profit margin is32.0456% of net sales
1
2
3

Factory over head as % of direct labor

65.23

Administrative OH as a% of work cost

11.52

Selling oh as a % of cost production

29.65

Material Control
Material control is a systematic control over purchasing, storing
and consumption of materials, so as to maintain a regular and
timely

supply

of

materials,

at

overstocking.
Steps in Material Control

Stock Level
Safety Stock
Ordering cost
Lead Time
Turn Over of inventories
Carrying cost
9

the

same

time,

avoiding

 Price factor

PROCUREMENT PROCEDURE

MATERIAL CONTROL
Following are the steps taken in Material
Control

10

INVENTORY CONTROL

INVENTORY MANAGEMENT

11

The Economic Order Quantity

The Economic Order Quantity (EOQ) is the order quantity that
minimizes total variable costs of inventory (holding and ordering
Costs). EOQ gives the optimal quantity that a company is to order
every time when replenishing its stock. This quantity gives a good
Indication of whether or not current order quantities are
reasonable.

Following are the Materials that skin care used to making

their products.
12

Material for Soap

Goat Milk
Olive oil moisturizing
Coconut oil for good lather
Palm oil for a firm bar
Shea butter moisturizing
Sodium Hydroxide
Water
Honey
Sales of Soap = 20000 units per month
INGREDIENTS

QTY

COST PER UNIT TOTAL COST

Goat Milk

50 Liter

80 P/ liter

4000

Olive Oil

25 Liter

60 P/L

1500

Coconut Oil

25 Liter

70 P/L

1750

Pam oil

20 Liter

50 P/L

1000

Shea Butter

5 kg

200 P/Kg

1000

Sodium Hydro
oxide

15 kg

100 P/Kg

1500

Water

500 Liter

60 P/L

30000

Honey

10 Kg

200 P/kg

2000

13

TOTAL

42750

MARGINAL COST

Marginal cost is ascertainment by differentiating b/Skin Care

fixed cost and variable cost of marginal cost and of the effect
on profit changes in volume and type of output
Its not a system of ascertaining cost but a special technique,
which is concerned with the change in cost resulting from the
change in volume or range of output
THE TECHNIQUE OF MARGINAL COST INVOLVE

1. Differentiate SkinCarePakitan Ltd fixed and variable cost

2. Ascertainment of marginal cost
3. Ascertaining the effect on profit due to change in volume
i.e cost volume profit analysis
TOOLS OF MARGINAL COSTING INVOLVE

1.
2.
3.
4.

Contribution
P/V ratio
Breakeven point
Margin of safety

ANALYSIS OF MARGINAL COSTING

Margin of safety is an advantage to the company it indicate the extra profit the
company earns over the breakeven point debur most is 60.38% which is high this

14

means that the firm will earn profit if there is a alight fall in production or in sale.
This also contribute to a high angel of incidence
BEP sales is Rs. 129336.24 crore which is extremely low in comparison to current
sales (Rs. 326437 crore)
Bep analysis will help the banker in appraisal of actual projected performance of
the borrower it also acts a sensitivity analysis tool to judge the projected
performance.
For the company to reach a profit value of RS 150000 it has to improve its sales by
Rs. 110184 crore.
CONCLUSION:

It was really a very great experience to study this FMCG Company

Skin CarePakistan Limited. After going into all its aspects i.e.its
marketing strategies, policies, pricing strategies etc. we can
conclude that the company is excellent on all the fronts. The
companys different projects like Sundesh and its social initiatives
in Nepal etc. indicates that the company is also loyal towards the
society, and all such social responsibilities are very necessary to
build a strong customer base and brand loyalty.
Through its comprehensive range of products it touches the lives
of all consumers, in all age groups, across all social boundaries.
And this legacy has helped them develop a bond of trust with our
consumers. That guarantees us the best in all products carrying
the Skin Care name. Skin Care has Strong distribution network.
Skin Care is the Fourth largest FMCG Company of Pakistan. Skin
Care is one of the most trusted brands.
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