May 16, 2024

A Report on Comprehensive Analysis on Data Structure,

Profitability & CVP of Premier Cement Mills Limited

Submitted to

Nusrat Jahan Benozir

Assistant Professor
Department of Finance and Banking
University of Barishal

Submitted by
Ashraful Siddique
20 FIN 024
3rd year 2nd semester;
Admission Session: 2019-20
Exam Session: 2021-2022
Department of Finance and Banking
University of Barishal
Date of Submission:16/05/2024

1
 Letter of Transmittal
16 May, 2024
To,
Nusrat Jahan Benozir
Assistant Professor
Dept. of Finance and Banking
University of Barishal

Subject: Submission of report on Assessing the Data Structure, Profitability & CVP of
Premier Cement Mills Limited

Madam,
We are pleased to submit our report on “Data Structure, Profitability & CVP Analysis”.
This is submitted under the requirement of B.B.A. program (Course Code: F-310) Department
of Finance and Banking. University of Barishal.

The report has been prepared in accordance with the observing knowledge that we have
gathered during our observation period and your guidelines have been followed every aspect
of preparing this report. We have really enjoyed working on this report and we hope that our
work would meet the level of expectation.

We have tried to make this report precise the prime focus the report is to give a clear concept
of “Costing and CVP Analysis”. However, we will always be ready to provide any further
clarification that you may require.

Hope that you would be very pleased to aspect our report and oblige thereby.

Sincerely yours,
Ashraful Siddique
ID: 20 FIN 024
3rd Year, 2nd Semester
Department of Finance and Banking.
University of Barisal.

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 Acknowledgement

First of all, we would like to express our gratitude to almighty Allah for enabling us to
complete this report on the Data Structure, Profitability & CVP of Premier Cement Mills
Limited. Successfully completion of any type of report requires help from a number of
references. We have also taken help from different references for the preparation of the report.
Now there is a little effort to show our deep gratitude to that helpful person. We convey our
sincere gratitude to our course instructor Nusrat Jahan Benozir, Assistant professor of
department of Finance and Banking, University of Barishal. Without her kind direction and
proper guidance this study would have been a little success. In every phase of the report, her
supervision and guidance shaped this report to be completed perfectly.

3
Executive summary:

This report presents a comprehensive analysis of Premier Cement Mills Limited's financial
health for the fiscal year ending June 30, 2023. We leverage data from their annual report to
assess profitability, cost structure, and efficiency through various financial metrics and costing
methods.

Our investigation begins with a deep dive into Premier Cement's income statement. By
calculating key profitability ratios, we'll uncover their ability to generate profits. This includes
metrics like gross margin, operating margin, and return on equity, providing a clear picture of
their financial performance. Further analysis involves comparing absorption costing and
variable costing methods. This sheds light on how cost behavior impacts their bottom line and
future decisions. To understand the interplay between cost, production volume, and profit, a
Cost-Volume-Profit (CVP) analysis will be conducted. This analysis will determine the break-
even point, contribution margin ratio, and operating leverage, revealing how volume
fluctuations affect profitability.

Ultimately, this report aims to be a valuable resource for investors, creditors, and company
management. By providing insights into Premier Cement's financial health, we empower them
to make informed decisions that will ensure the company's continued success in the ever-
growing construction industry.

4
Contents
Letter of Transmittal ............................................................................................................................ 2
Acknowledgement ................................................................................................................................. 3
Executive summary: ............................................................................................................................. 4
1. Introduction ....................................................................................................................................... 6
1.2 Origin of the Report: ..................................................................................................................... 6
1.3 Objective of this study: ................................................................................................................. 7
1.4 Methodology of the report ............................................................................................................ 7
1.5 Data collection method ................................................................................................................. 8
2. Organisation profile .......................................................................................................................... 9
2.1. Premier Cement Mills Limited: ................................................................................................... 9
2.2 Vision: ......................................................................................................................................... 10
2.3 Mission........................................................................................................................................ 10
2.4 Our Values .................................................................................................................................. 10
2.5 Awards ........................................................................................................................................ 11
3. The Variable and Absorption Cost Analysis ................................................................................ 12
3.1 Organizational Income Statement ............................................................................................... 12
3.2 Organisational Balance sheet ...................................................................................................... 13
3.3 Calculated Data from analysis .................................................................................................... 14
3.4 Absorption Costing Income Statement ....................................................................................... 15
3.5 Variable Costing Income Statement ........................................................................................... 16
3.6 Interpretation of Premier Cement Mills Limited's Costing Results ............................................ 17
4. Cost-Volume-Profit (CVP) Analysis.............................................................................................. 18
4.1 Why do companies use CVP analysis? ....................................................................................... 18
4.2 Required information for CVP analysis ...................................................................................... 18
4.3 CVP Analysis in Equation Form................................................................................................. 19
4.4 Contribution Margin Ratio (CM Ratio) ...................................................................................... 19
4.5 Variable Expense Ratio............................................................................................................... 20
4.6 Break- Even Analysis ................................................................................................................. 20
4.7 The Margin of Safety .................................................................................................................. 21
4.8 Operating Leverage ..................................................................................................................... 21
4.9 Interpretation of Premier Cement Mills Limited's CVP Analysis: ............................................. 22
5. Conclusion & Recommendations: ................................................................................................. 23
Reference list ....................................................................................................................................... 24

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 1. Introduction

The ever-growing construction industry demands a steady supply of cement, making Premier
Cement Mills Limited a key player in this dynamic market. To understand their financial
wellbeing, this report delves into their annual report for the year ending June 30th, 2023. We'll
dissect their income statement, analyze costing methods, and explore the crucial relationship
between cost, production volume, and profit. Through profitability ratios, cost comparisons,
and break-even analysis, we'll gain insights into Premier Cement Mills' financial health. This
comprehensive examination aims to equip investors, creditors, and company management with
valuable data for informed decision-making, ensuring the continued success of Premier Cement
Mills Limited.

1.2 Origin of the Report:

This report originates from a financial analysis of Premier Cement Mills Limited, a prominent
player in Bangladesh's booming construction industry. Their annual report for the fiscal year
ending June 30, 2023, serves as the foundation for this comprehensive examination. The report
sheds light on the company's financial health through various metrics and costing methods.

Our exploration dives into Premier Cement's income statement data, meticulously dissecting
profitability and efficiency. We will compare and contrast absorption costing and variable
costing approaches, revealing their impact on the company's bottom line. Further, a Cost-
Volume-Profit (CVP) analysis will be conducted, scrutinizing the critical relationship between
production volume, costs incurred, and the ultimate profit generated.

By employing profitability ratios, cost structure comparisons, and a breakdown of the break-
even point, this report aims to paint a clear picture of Premier Cement's financial standing. This
valuable information empowers investors, creditors, and the company's management to make
informed decisions that will solidify Premier Cement's position in the competitive construction
market.

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1.3 Objective of this study:

 To comprehensively assess the financial health of Premier Cement Mills Limited. This
will be achieved by analyzing their income statement data, profitability ratios, and costing
methods.
 To provide valuable insights for stakeholders. This includes investors, creditors, and the
company's management. The report aims to equip them with the information needed to
make informed decisions that will ensure Premier Cement's continued success in the

1.4 Methodology of the report

The methodology employed in this report relies on a multi-pronged approach to analyze the
financial health of Premier Cement Mills Limited:

1. Financial Statement Analysis: The core of this analysis will be the examination of
Premier Cement's annual report for the fiscal year ending June 30, 2023. This includes
a thorough review of the income statement, balance sheet (if available), and cash flow
statement (if available).
2. Profitability Analysis: Key profitability ratios will be calculated and analyzed to
assess Premier Cement's ability to generate profits. This may include metrics like gross
margin ratio, operating margin ratio, net profit margin ratio, and return on equity
(ROE).
3. Costing Analysis: We will delve into Premier Cement's costing methods, comparing
and contrasting absorption costing and variable costing. This will highlight how cost
behavior impacts net operating income and decision-making.
4. Cost-Volume-Profit (CVP) Analysis: This analysis will explore the critical
relationship between cost, production volume, and profit. We will calculate the break-
even point, contribution margin ratio, and operating leverage to understand how
changes in volume affect profitability.
5. Benchmarking: If industry data is available, we might compare Premier Cement's
financial ratios to industry benchmarks to assess their relative performance.

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1.5 Data collection method

The data collection method for this report is primarily focused on secondary data sources.
Here's a breakdown:

Annual Report: The primary source of data will be Premier Cement Mills Limited's annual
report for the fiscal year ending June 30, 2023. This report should contain the income statement,
and potentially the balance sheet and cash flow statement, which will provide the financial data
needed for analysis.

Industry Data (if available): Depending on the availability, industry reports or databases
might be consulted to obtain benchmark financial ratios for the cement industry. This allows
for comparison of Premier Cement's performance against its competitors.

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 2. Organisation profile

2.1. Premier Cement Mills Limited:

Premier Cement Mills Limited is one of the most innovative cement manufacturers in
Bangladesh. It manufactures products with the best quality raw materials and technical
excellence for ensuring dependability and premium quality. It is one of the fastest growing
cement companies in Bangladesh. It was incorporated back in October 14, 2001 as a private
limited company. Their motto is to always strive to ensure good quality and we market our
product under the brand name “Premier Cement”. Premier Cement, one of the leading cement
manufacturers in Bangladesh, started commercial production back in March 2004. The
company has been sponsored by a group of renowned businessmen having vast experience in
trading, manufacturing and services covering various economic sectors of the national
economy. The Board of Directors consists of members from three leading group of companies
in Bangladesh, namely, "T. K. Group", “Seacom Group" and "GPH Group". Their Dhaka plant
located in a strategically advantageous position is accessible from both land and river. On the
front side of our plant is Dhaka-Munshiganj highway and on the rear side is the Shitalakhya

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river. Due to this advantageous location we can transport raw materials and finished good in
an efficient and cost-effective way.

 Incorporated in Bangladesh on 14 October 2001 as a Private Limited Company.

 Start commercial production on 12th March 2004.
 First Export of cement on 26th April 2008.
 Converted to Public Limited Company on 16th April 2010.
 700 employees in operation at home and abroad- Bangladesh, India, Myanmar, etc.
 Nature of Business: Manufacturing and Marketing.
 Annual production capacity of 2.4 million tons (8,000 tons per day).
 Enlisted with Dhaka Stock Exchange and Chittagong Stock Exchange.

2.2 Vision:
Work towards the development of society through sustainable growth and excellence in
performance.

2.3 Mission
To become a market leader in the cement industry by satisfying the customers through
excellence in production, competitive pricing and adding value for our stakeholders.

2.4 Our Values

The core values of Premier Cement Mills Limited lies on ensuring highest standards of Ethics
in business integrity and process for the best interests of all our stakeholders - not just the
customers - But also the shareowners, workforce and external parties. Consequently, they strive
to build sustainable customer relations, built on mutual trust, respect and loyalty. Their efforts
are focused to constantly strive to improve and add value for our stakeholders. It follows
rules/obey the laws, produce safe & environment-friendly products, protect the environment,
and practice equal employment and fair labour policies. Company believe that we are socially
responsible for protecting and preserving our communal environment.

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2.5 Awards

 ICSB Award for Corporate Governance Excellence for consecutive two (2) times
 Won ICMAB Award for Best Corporate Governance -2014
 Best Customer Award-2015 by Munshiganj Palli Bidyut Samity
 ICMAB Award for Best Corporate Governance -2016
 ICAB Award for Best Presented Annual Report- 2015
 ISO 9001: 2008 certification
 National Productivity and Excellency Award -2016
 Best Customer Award-2018 by Munshinganj Palli bidyut Samity

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 3. The Variable and Absorption Cost Analysis

3.1 Organizational Income Statement

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 30 June 2023

30 June 2023 30 June 2022

Particulars Notes
Taka Taka

Revenue 25.00 21,832,963,082 14,234,460,854

Cost of sales 26.00 (19,817,711,967) (12,991,476,374)
Gross profit 2,015,251,115 1,242,984,480

Other income/(Expenses) 27.00 58,506,217 47,059,567

Administrative expenses 28.00 (150,850,743) (113,709,003)

Selling & distribution expenses 29.00 (751,898,375) (573,439,322)
Profit before interest and tax 1,171,008,214 602,895,721

Share of profit from associate company 7.01 3,031,326 (10,597,373)

Exchange Loss (1,045,046,501) (1,080,154,688)
Finance costs 30.00 (682,808,381) (570,103,651)
Contribution to WPPF - -
Profit before tax (553,815,342) (1,057,959,991)

Current tax expenses 23.00 (131,348,816) (85,689,123)

Deferred tax income/(expenses) 14.00 (155,063,174) (8,703,580)
Profit for the year (840,227,332) (1,152,352,693)

Other comprehensive income

Revaluation of property, plant & equipment - -
Income tax on other comprehensive income - -
- -

Total comprehensive income for the year (840,227,332) (1,152,352,693)

Basic earnings per share (par value of Taka 10) 31.00 (7.97) (10.93)

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 3.2 Organisational Balance sheet

Statement of Financial Position

As at 30 June 2023

30 June 2023 30 June 2022

Particulars Notes
Taka Taka
ASSETS

Non-current assets
Property, plant and equipment 1.00 21,460,197,784 8,983,221,723
Intangible assets 2.00 2,268,327 2,079,923
Right of use assets 3.00 24,306,245 11,188,667
Financial assets 4.00 2,404,562 2,248,640
Capital work -in - progress 5.00 1,127,804,588 11,338,586,004
Investment in subsidiary 6.01 48,000,000 48,000,000
Investment in associate 7.01 241,043,620 112,508,363
22,906,025,126 20,497,833,319
Current Assets
Inventories 8.00 2,351,539,649 1,157,965,676
Trade and other receivables 9.00 1,489,874,384 2,681,566,681
Advances, deposits and pre-payments 10.00 5,755,053,840 4,178,962,148
Current account with associate (NCML) 7.02 181,670,764 22,680,886
Investment in FDR 11.00 566,295,790 7,985,482
Cash and bank balances 12.00 292,984,654 211,384,324
10,637,419,082 8,260,545,198
Total assets 33,543,444,208 28,758,378,517

EQUITY AND LIABILITIES

Equity
Share capital 13.00 1,054,500,000 1,054,500,000
Revaluation reserve 3,063,469,462 3,070,208,371
Share Premium 441,835,000 441,835,000
Retained earnings 1,267,750,438 2,081,184,928
Total Equity 5,827,554,899 6,647,728,299

Non-current liabilities
Deferred tax liabilities/(assets) 14.00 1,039,826,234 884,763,060
Long term loan 15.02 5,933,596,294 2,667,902,847
Lease Liability - Long term portion 17.01 19,141,140 11,346,323
Loan from Directors 24.00 240,000,000 240,000,000
Redeemable Preference Share 16.00 1,510,420,000 1,510,420,000
Defined contribution obligations (Gratuity) 18.00 192,799,775 157,969,950
8,935,783,443 5,472,402,180
Current-liabilities
Trade and other payables 19.00 3,023,071,889 605,608,363
Unclaimed dividend 20.00 1,888,555 2,637,434
Short term bank loan 21.00 13,521,999,500 13,747,746,354
Current portion of long term loan 15.02 894,524,704 1,086,053,928
Lease Liability - Current portion 17.01 8,705,419 2,534,598
Current account with subsidiary (PPGL) 6.02 344,498,766 341,875,781
Liability for other finance 22.00 16,614,948 14,338,311
Provision for taxation 23.00 968,802,085 837,453,269
18,780,105,866 16,638,248,039
Total liabilities 27,715,889,310 22,110,650,219
Total equity and liabilities 33,543,444,208 28,758,378,517

Net assets value per share 37.00 55.26 63.04

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3.3 Calculated Data from analysis

This section presents the data required to create an absorption costing income statement and a
variable costing income statement. This data was gathered and calculated from Premier Cement
Factory's annual report 2022-23.

Total Sales units 2,828,919 and Production unit 2,870,616. (according to the annual report 2022-23)

Particulars Amount Amount (In Unit)

Direct Material 11,918,635,816 4151
Direct Labour 6,816,186,128 2,374
Fixed Manufacturing overhead 818,046,087 0
Variable Manufacturing overhead 1,082,890,023 377
Fixed Administrative expense 82,669,426 0
Variable Administrative expense 68,181,317 24
Fixed Selling & Distribution Expenses 258,164,879 0
Variable Selling & Distribution Expenses 493,733,496 175

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3.4 Absorption Costing Income Statement

In the Absorption Costing approach, the fixed amount of manufacturing overhead is included
in the product cost. So, these are the unit product costs under absorption costing.

Particulars Amount (per unit)

Direct Materials 4151
Direct labor 2,374
Variable manufacturing overhead 377
Fixed manufacturing overhead (818,046,087/2,870,616) 285
Absorption costing unit product cost 7,187

Premier Cement Mills Limited

Absorption Costing Income Statement
As at 30 June 2023

Particulars Amount
Revenue 21,832,963,082
Cost of Goods sold (7,187*2,870,616) (20,631,117,192)
Gross margin 1,201,845,890
Administrative Expenses (82,669,426+68,181,317) (150,850,743)
Selling & Distribution Expenses (258,164,879+493,733,496) (751,898,375)
Net operating Income 299,096,772

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3.5 Variable Costing Income Statement

The formula for calculating includes costs such as direct labour, overheads, and direct material
costs, which are then divided by the total number of units produced.

Particulars Amount (per unit)

Direct Materials 4151
Direct labor 2,374
Variable manufacturing overhead 377
Variable costing unit product cost 6,903

Premier Cement Mills Limited

Variable Costing Income Statement
As at 30 June 2023

Particulars Amount (per unit)

Revenue 21,832,963,082
Variable Expenses:
Variable cost of goods sold (6,903*2,870,616) 19,815,862,248
Variable Administrative expense (24*2,828,919) 67,894,056
Variable Selling & Distribution Expenses (175*2,828,919) 495,060,825
Total Variable Expenses 20,378,817,129
Contribution Margin 1,454,145,953
Fixed Expenses:
Fixed Manufacturing overhead 818,046,087
Fixed Administrative expense 82,669,426
Fixed Selling & Distribution Expenses 258,164,879
Total Fixed Expenses 1,158,880,392
Net operating income 295,265,561

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3.6 Interpretation of Premier Cement Mills Limited's Costing Results

The net operating income (NOI) under absorption costing (Tk 299,096,772) is higher than the
NOI under variable costing (Tk 295,265,561) by Tk 3,831,211. This difference arises from the
way each costing method treats fixed overhead costs.

Variable Costing: Fixed overhead costs are expensed in the period they are incurred,
regardless of production volume. This means they are not included in the product cost.

Absorption Costing: Fixed overhead costs are allocated to units of production and become
part of the product cost. This allocation is typically done using a predetermined overhead rate
based on budgeted production or direct labour hours.

Because absorption costing includes fixed overhead costs in the product cost, the NOI appears
higher than under variable costing when production is below budget.

Impact on Decision Making

The difference in how costing methods treat fixed overhead costs can influence decision-
making, particularly regarding:

 Production Levels: Variable costing might suggest profitability at lower production

levels than absorption costing due to the lower reported costs. This can be misleading
in the short term as fixed costs will still need to be paid.
 Pricing: Absorption costing can lead to higher product prices to cover the allocated
fixed overhead costs. This can be beneficial in the long term for covering all costs, but
may affect competitiveness in the short term.

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 4. Cost-Volume-Profit (CVP) Analysis

CVP analysis is a method used to understand the relationship between a company's cost,
volume of production, and profit. It helps businesses assess how changes in selling price,
variable costs, and fixed costs will affect profit.

4.1 Why do companies use CVP analysis?

Companies use CVP analysis for several reasons:

 Planning and Budgeting: It helps with setting sales targets, production levels, and pricing
strategies to achieve desired profit goals.
 Cost Control: It helps identify areas where costs can be reduced to improve profitability at
different sales volumes.
 Short-Term Decision Making: It helps evaluate the impact of short-term changes like price
discounts, marketing campaigns, or production volume adjustments on profit.
 Break-Even Analysis: CVP analysis is essential for calculating the break-even point, which
is the sales volume at which a company neither makes a profit nor incurs a loss.

4.2 Required information for CVP analysis

Particulars Amount Amount (Per Unit)

Sales 21,832,963,082 7,718
Variable Expenses 20,378,817,129 7,204
Fixed Expenses 1,158,880,392 ---
Contribution Margin 1,454,145,953 514
Net operating income 295,265,561 ---
Total Sales units 2,828,919 and Production unit 2,870,616. (according to the annual report 2022-23)

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4.3 CVP Analysis in Equation Form

Particulars Amount
Sales 21,832,963,082
Less: Variable Expenses (20,378,817,129)
Less: Fixed Expenses (1,158,880,392)
Profit 295,265,561

4.4 Contribution Margin Ratio (CM Ratio)

Contribution Margin
𝐂𝐌 𝐑𝐚𝐭𝐢𝐨 =
Sales

The Contribution Margin Ratio is the product revenue remaining after deducting all variable
costs, expressed on a per-unit basis. The contribution margin ratio, often abbreviated as “CM
ratio”, expresses the residual profits generated from each unit of product sold, once all variable
costs are subtracted from product revenue.

1,454,145,953
Premier Cement Mills Limited's CM Ratio =
21,832,963,082

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4.5 Variable Expense Ratio

Variable Expense
𝐕𝐚𝐫𝐢𝐚𝐛𝐥𝐞 𝐄𝐱𝐩𝐞𝐧𝐬𝐞 𝐑𝐚𝐭𝐢𝐨 =
𝑆𝑎𝑙𝑒𝑠

Variable expense ratio expresses variable expenses as a proportion of a company’s sales. To

calculate the variable expense ratio, simply divide the company’s total variable expenses by
the company’s total net sales.

20,378,817,129
Premier Cement Mills Limited's Variable Expense Ratio =
21,832,963,082

=93.34%

= 6.66%

4.6 Break- Even Analysis

Fixed Expense
𝐔𝐧𝐢𝐭 𝐬𝐚𝐥𝐞𝐬 𝐭𝐨 𝐛𝐫𝐞𝐚𝐤 − 𝐞𝐯𝐞𝐧 =
Unit CM
Fixed Expense
Dollar sales to break-even =
CM Ratio

Break-even analysis is a small-business accounting process for determining at what point a

company, or a new product or service, will be profitable. It's a financial calculation used to
determine the number of products or services you must sell to at least cover your production
costs.

1,158,880,392
Premier Cement Mills Limited's Unit sales to break-even =
514

=2,254,631

1,158,880,392
Premier Cement Mills Limited's Dollar sales to break-even =
0.0666

= 17,400,606,486

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4.7 The Margin of Safety

Margin of safety is a principle of investing in which an investor only purchases securities when
their market price is significantly below their intrinsic value. In other words, when the market
price of a security is significantly below your estimation of its intrinsic value, the difference is
the margin of safety.

Premier Cement Mills Limited's Margin of safety in dollar and percentage

Particulars Amount
Sales 21,832,963,082
Less: Break-even sales 17,401,242,058
Margin of safety in dollars (b) 4,431,721,024
Margin of safety percentage (b/a) 20.30%

4.8 Operating Leverage

Contribution Margin
𝐷𝑂𝐿 =
Net operating income

Operating leverage is a cost-accounting formula (a financial ratio) that measures the degree to
which a firm or project can increase operating income by increasing revenue. A business that
generates sales with a high gross margin and low variable costs has high operating leverage.

1,454,145,953
Premier Cement Mills Limited's Operating leverage =
295,265,561

= 1.28

21
4.9 Interpretation of Premier Cement Mills Limited's CVP Analysis:

This CVP analysis paints a picture of Premier Cement Mills Limited's cost structure,
profitability, and sales efficiency. Here's a breakdown of the key metrics and their
interpretation:

Profit (295,265,561): This indicates a healthy level of profit after covering all variable and
fixed costs.

Contribution Margin Ratio (CM Ratio) 6.66%: This is a relatively low contribution margin,
meaning a large portion (over 93%) of each sales dollar goes towards variable expenses. A
higher contribution margin would be ideal for better profitability leverage.

Variable Expense Ratio 93.34%: This confirms the high dependence on variable expenses
like raw materials, direct labor, and utilities. The company might benefit from exploring ways
to optimize these costs.

Unit Sales/Dollar Sales to Break-Even (2,254,631 units / 17,400,606,486): These values

show the sales volume or revenue required to cover all costs and reach zero profit.

Margin of Safety in Dollars/Percentage (4,431,721,024 / 20.30%): This indicates a

comfortable margin of safety, meaning the company can experience a 20.3% decline in sales
before dipping into losses.

Operating Leverage (1.28): A value close to 1 suggests a relatively balanced cost structure.
However, a slightly higher operating leverage indicates a somewhat greater sensitivity to
changes in sales volume.

Overall Analysis:

Premier Cement Mills Limited seems to be profitable with a decent margin of safety. However,
the low contribution margin and high variable expense ratio highlight areas for improvement.
Optimizing variable costs and potentially increasing selling prices could enhance profitability.
The balanced operating leverage suggests the company can manage moderate sales fluctuations
without significant impact on profits.

22
 5. Conclusion & Recommendations:

This financial analysis of Premier Cement Mills Limited, based on their 2023 annual report,
provides valuable insights into their financial health and performance. The profitability
analysis revealed key metrics, while the costing analysis highlighted the impact of costing
methods on net income. Through CVP analysis, we explored the critical link between cost,
volume, and profit, gaining a deeper understanding of Premier Cement's profit generation
potential.

The report identified areas for improvement, such as potentially optimizing variable costs or
considering strategic pricing adjustments. The analysis also suggests a relatively balanced
operating leverage, indicating moderate sensitivity to sales fluctuations. Overall, Premier
Cement appears to be in a healthy financial position with a comfortable margin of safety.

This information empowers investors to make informed investment decisions, creditors to

assess creditworthiness, and company management to develop effective strategies for
continued growth and profitability in the competitive construction market. By implementing
the recommendations presented and closely monitoring financial performance, Premier
Cement Mills Limited can solidify its position as a key player in Bangladesh's construction
industry.

Recommendations:

 Explore cost reduction strategies for variable expenses.

 Evaluate opportunities to increase selling prices or introduce premium product lines.
 Continuously monitor cost structure and adjust pricing strategies as needed.

23
 Reference list

Garrison, R.H., Noreen, E.W. and Brewer, P.C. (2020). Managerial accounting. New York,
Ny: Mcgraw-Hill Education.

Horngren, C.T., Datar, S.M. and Rajan, M.V. (2019). Cost accounting: a managerial emphasis.
Uttar Pradesh, India: Pearson India Education.

Investopedia (2023). Absorption Costing Explained, With Pros and Cons and Example.
[online] Investopedia. Available at: https://www.investopedia.com/terms/a/absorp
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