PowerPoint Presentation

Case Analysis of Pepe DenimSection:B Group:5

Pepe Denim was founded in 1984 by Bajaj brothersIn 1994, the company decided to go publicBy 2001, the company had 300 across the country and a workforce of 20,000It also started exporting its jeans to China, Brazil and NepalIntroduction2

Pepe Denim was doing good business till 2007 and sales were increasing every year.After 2007, the stock price of the company started to decline, even though sales were consistent.The company thought that this decline was because of the recessionBut even after 2007, the stock prices remained flat and profit continued to decline3The Case

4Suggestion & Estimate by Vipin

5Snehas SuggestionSince there was a decline in profit due to the competition, Mr. Bajaj asked Sneha for suggestions:Sneha suggested to Introduce 2 new products:Denim SkirtsDenim Handbags for WomenThese 2 products could easily be manufactured as they require the same raw materials and with the little training the same tailors could undertake the stitching activityMr. Bajaj accepted this suggestion as he thought the 2 products would be a good strategic fit for the existing product line

Gather Concrete Information

Decision Making ProcessDefine the Objectives of the Business or the GoalsIdentify the AlternativesComparison of the Alternatives

Choosing the Best OptionStep 1Step 2Step 3Step 4Step 56

7Total Cost of all 3 Products

8COGS Comparison

9Income Statement

10PAT Comparisons

11Are the Two New Products BeneficialYes it can be recommended to launch the two products as they will generate a greater income than that of the previous versions.The profit is greater by 8,38,50,000 i.e. 31.96%

12Net Profit Ratio

13Conclusion

Thank You14

Sheet1Costing in Pepe DenimExhibit 1:Calculations:325000000Q1.450001Production and sales1500000New production1999999.99999999324955000216.63666666672Sales1,500,000,000.00New sales1,486,818,333.33433273333.3333323Direct wages270000000New Direct wages216000000433318333.3333324Direct materials330000000Material rate2970000005Factory overheads325000000New Factory overhead4333183336Administration overheads205000000New Administration overhead1230000007Sales overhead90000000New sales overhead120000000

Profit on sales575,000,000.00New Profit540,500,000.00Selling Price/unit1000Selling Price/unit743.4091666667sales overhead/unit60sales overhead/unit60

Profit before tax297,500,000.00Tax @ 40%119,000,000.001,500,000,000.00Profit after tax178,500,000.00COGS925,000,000.00Gross Profit575,000,000.00295000000Net profit ratio before recommendations18.67%PBT280,000,000.00Net profit after vipin's recommendation19.83%112,000,000.00Net profit after sneha's recommendations21.86%PAT168,000,000.00JeansDenim SkirtsDenim Hand bagsCalculationsJeansDenim SkirtsDenim Hand bagsQ2.Stock of materials on April 1 201020000000000Stock of materials on March 31 20101500000007500000025000000Total Manufacturing cost992000000366400000266100000Material Purchases600000000300000000100000000Opening stock of WIP10000000000Cost of goods manufactured1057000000356400000261100000Closing stock of WIP35000000100000005000000Finished goods opening stock35000000000Finished goods closing stock450000000200000000120000000Cost of Goods sold957000000156400000141100000Repairs of plant & machinary800000040000001600000Rent, rates,taxes & insurance1200000060000002000000Total COGS1,254,500,000.00Productive wages300000000120000000180000000Dyeing and water charges30000001500000500000Managers salary1000000069000005000000Depreciation of plant and machinary90000003000000200000024002400000

JeansDenim SkirtsDenim Hand bagsIncome StatementAll figures in 000'sQ3.Salaries(Factories)15350100005000Sales2,000,000,000.00Office salaries25000150005000Less COGS1,254,500,000Carriage on purchases1200060002000Gross Profit745,500,000Carriage on sales1300050002000Less Periodic expenses308,250,000Cash discount allowed1800550400Profit before tax437,250,000Bad debts written off80001500500Rent, rates, taxes (office)2000700300Travelling expenses700050003000Tax @ 40%174,900,000travelers salary & commission20000130007000Profit after tax262,350,000Depreciation on office furniture1800400200Directors fees1500070003000Gas and water charges(office)850300100General charges1275050003000Managers salary(office)800050002000Advertising28000210008750Periodic ExpensesTotal308,250.00

Difference in profit83,850,000.0031.9611206404

Sheet2

Sheet3

Sheet1Costing in Pepe DenimExhibit 1:Calculations:325000000Q1.450001Production and sales1500000New production1999999.99999999324955000216.63666666672Sales1,500,000,000.00New sales1,486,818,333.33433273333.3333323Direct wages270000000New Direct wages216000000433318333.3333324Direct materials330000000Material rate2970000005Factory overheads325000000New Factory overhead4333183336Administration overheads205000000New Administration overhead1230000007Sales overhead90000000New sales overhead120000000

Profit on sales575,000,000.00New Profit540,500,000.00Selling Price/unit1000Selling Price/unit743.4091666667sales overhead/unit60sales overhead/unit60

Profit before tax297,500,000.00Tax @ 40%119,000,000.001,500,000,000.00Profit after tax178,500,000.00COGS925,000,000.00Gross Profit575,000,000.00295000000Net profit ratio before recommendations18.67%PBT280,000,000.00Net profit after vipin's recommendation19.83%112,000,000.00Net profit after sneha's recommendations21.86%PAT168,000,000.00JeansDenim SkirtsDenim Hand bagsCalculationsJeansDenim SkirtsDenim Hand bagsQ2.Stock of materials on April 1 201020000000000Stock of materials on March 31 20101500000007500000025000000Total Manufacturing cost992000000366400000266100000Material Purchases600000000300000000100000000Opening stock of WIP10000000000Cost of goods manufactured1057000000356400000261100000Closing stock of WIP35000000100000005000000Finished goods opening stock35000000000Finished goods closing stock450000000200000000120000000Cost of Goods sold957000000156400000141100000Repairs of plant & machinary800000040000001600000Rent, rates,taxes & insurance1200000060000002000000Total COGS1,254,500,000.00Productive wages300000000120000000180000000Dyeing and water charges30000001500000500000Managers salary1000000069000005000000Depreciation of plant and machinary90000003000000200000024002400000

JeansDenim SkirtsDenim Hand bagsIncome StatementAll figures in 000'sQ3.Salaries(Factories)15350100005000Sales2,000,000,000.00Office salaries25000150005000Less COGS1,254,500,000Carriage on purchases1200060002000Gross Profit745,500,000Carriage on sales1300050002000Less Periodic expenses308,250,000Cash discount allowed1800550400Profit before tax437,250,000Bad debts written off80001500500Rent, rates, taxes (office)2000700300Travelling expenses700050003000Tax @ 40%174,900,000travelers salary & commission20000130007000Profit after tax262,350,000Depreciation on office furniture1800400200Directors fees1500070003000Gas and water charges(office)850300100General charges1275050003000Managers salary(office)800050002000Advertising28000210008750Periodic ExpensesTotal308,250.00

Difference in profit83,850,000.0031.9611206404

Sheet2

Sheet3

Sheet1Costing in Pepe DenimExhibit 1:Calculations:325000000Q1.450001Production and sales1500000New production1999999.99999999324955000216.63666666672Sales1,500,000,000.00New sales1,486,818,333.33433273333.3333323Direct wages270000000New Direct wages216000000433318333.3333324Direct materials330000000Material rate2970000005Factory overheads325000000New Factory overhead4333183336Administration overheads205000000New Administration overhead1230000007Sales overhead90000000New sales overhead120000000

Profit on sales575,000,000.00New Profit540,500,000.00Selling Price/unit1000Selling Price/unit743.4091666667sales overhead/unit60sales overhead/unit60

Profit before tax297,500,000.00Tax @ 40%119,000,000.001,500,000,000.00Profit after tax178,500,000.00COGS925,000,000.00Gross Profit575,000,000.00295000000Net profit ratio before recommendations18.67%PBT280,000,000.00Net profit after vipin's recommendation19.83%112,000,000.00Net profit after sneha's recommendations21.86%PAT168,000,000.00JeansDenim SkirtsDenim Hand bagsCalculationsJeansDenim SkirtsDenim Hand bagsQ2.Stock of materials on April 1 201020000000000Stock of materials on March 31 20101500000007500000025000000Total Manufacturing cost992000000366400000266100000Material Purchases600000000300000000100000000Opening stock of WIP10000000000Cost of goods manufactured1057000000356400000261100000Closing stock of WIP35000000100000005000000Finished goods opening stock35000000000Finished goods closing stock450000000200000000120000000Cost of Goods sold957000000156400000141100000Repairs of plant & machinary800000040000001600000Rent, rates,taxes & insurance1200000060000002000000Total COGS1,254,500,000.00Productive wages300000000120000000180000000Dyeing and water charges30000001500000500000Managers salary1000000069000005000000Depreciation of plant and machinary90000003000000200000024002400000

JeansDenim SkirtsDenim Hand bagsIncome StatementAll figures in 000'sQ3.Salaries(Factories)15350100005000Sales2,000,000,000.00Office salaries25000150005000Less COGS1,254,500,000Carriage on purchases1200060002000Gross Profit745,500,000Carriage on sales1300050002000Less Periodic expenses308,250,000Cash discount allowed1800550400Profit before tax437,250,000Bad debts written off80001500500Rent, rates, taxes (office)2000700300Travelling expenses700050003000Tax @ 40%174,900,000travelers salary & commission20000130007000Profit after tax262,350,000Depreciation on office furniture1800400200Directors fees1500070003000Gas and water charges(office)850300100General charges1275050003000Managers salary(office)800050002000Advertising28000210008750Periodic ExpensesTotal308,250.00

Difference in profit83,850,000.0031.9611206404

Sheet2

Sheet3