Q1) COST STRUCTURE of the firms of YOUR group members in the same industry.
The cost structure for the fast-moving consumer goods (FMCG) industry typically includes both fixed and
variable costs.
Fixed costs are those expenses that do not change with changes in production or sales volume. Examples of
fixed costs for FMCG companies include:
Rent for manufacturing and office facilities
Salaries for managers and administrative staff
Insurance
Research and development expenses
Depreciation on long-term assets such as buildings, equipment, and vehicles
Advertising and marketing expenses
Variable costs, on the other hand, are costs that change in proportion to the level of production or sales.
Examples of variable costs for FMCG companies include:
Raw materials and packaging used to produce products
Labour costs for production staff
Transportation costs for delivering products to retailers and customers
Logistics and distribution expenses such as warehouse and inventory management
Sales commissions
The proportion of fixed costs to variable costs can vary depending on the specific FMCG company and product.
For example, for a company that produces perishable goods, the variable costs may be higher than fixed costs,
as the cost of raw materials and packaging may be more significant. Whereas for a company that produces
non-perishable goods, the fixed costs may be higher than variable costs.
In summary, the cost structure for the FMCG industry is composed of a mix of fixed and variable costs, and the
proportion of these costs can vary depending on the specific company and product.
COMPANY FIXED COST VARIABLE COST
Marico rent for manufacturing and office facilities, salaries cost of raw materials and packaging used to
for managers and administrative staff, and produce their products, labour costs for
insurance, advertising and marketing expenses, production staff, and transportation costs for
legal and accounting fees, and research and delivering products to retailers and customers,
development expenses. sales commissions, as well as costs associated
with logistics and distribution, such as
warehouse and inventory management
expenses.
ITC rent for office and factory facilities, salaries for cost of raw materials and packaging used to
management and administrative staff, insurance, produce their products, labour costs for
and legal and accounting fees, research and production staff, and transportation costs for
development for new products and technologies delivering products to retailers and customers,
and also for the improvement of existing products sales commissions, as well as costs associated
and services. with logistics and distribution, such as
warehouse and inventory management
expenses, costs associated with the raw
materials and other inputs required for its
paperboards and agri-business operations.
Colgate Palmolive rent for office and factory facilities, salaries for cost of raw materials and packaging used to
management and administrative staff, insurance, produce their products, labour costs for
and legal and accounting fees, research and production staff, and transportation costs for
development for new products and technologies
delivering products to retailers and customers,
and also for the improvement of existing products
logistics and distribution, such as warehouse
and services, depreciation on long-term assets and inventory management expenses,
such as buildings, equipment, and vehicles. advertising and promotional expenses.
PepsiCo rent for office and factory facilities, salaries, cost of raw materials and packaging used to
insurance, and legal and accounting fees, research produce their products, labour costs for
and development for new products and production staff, and transportation costs for
technologies and also for the improvement of delivering products to retailers and customers,
existing products and services, depreciation. costs associated with logistics and distribution.
Unilever Rent, salaries for management and administrative the cost of ingredients and packaging materials
staff, insurance, and legal and accounting fees, used to produce food products, the cost of raw
research and development, depreciation on long- materials used to produce personal care
term assets. products, and the cost of labour required to
manufacture and distribute, logistics and
distribution, such as transportation costs and
warehouse and inventory management
expenses.
Yili Group Rent, Wages, insurance, advertising and marketing Raw materials, packaging, labour,
expenses, legal and accounting fees, and research transportation, warehouse and inventory
and development expenses, technology and management, and sales commissions, logistics
equipment for the dairy production process. and distribution, such as transportation costs
and warehouse and inventory management
expenses. Also, the cost of feed and other
inputs required for the dairy farming operations
Mention different components of cost pools like the cost of sales, cost of goods manufactured, product cost
and period cost across group firms.
In the fast-moving consumer goods (FMCG) industry, cost pools refer to the various types of costs that a
company incurs in order to produce and sell its products. The main components of cost pools include:
1. Cost of Sales: This includes all the costs directly associated with the sale of goods or services, such as
freight and handling costs, sales commissions, and discounts.
2. Cost of Goods Manufactured (COGM): This includes all the costs associated with the production of
goods, such as raw materials, direct labor, and overhead costs.
3. Product Cost: This includes the cost of goods manufactured and any additional costs incurred in
bringing a product to market, such as research and development expenses, and advertising and
marketing expenses.
4. Period Cost: These are costs that are not directly related to the production of goods and services, such
as selling, general and administrative expenses (SG&A) such as salaries, rent and office expenses.
It's worth noting that, these costs are not mutually exclusive, some costs may be included in multiple pools and
can be allocated to specific products or business units. Additionally, it's important to understand that the cost
structure of a FMCG company can vary significantly depending on the company's specific products, industry,
and target market.
The product cost and period cost across group firms are attached in the Excel sheet.
