chapter 1 5 report

A Study on Cost Control analysis in Narayana

Health Care, Bangalore

T.JOHN INSTITUTE OF TECHNOLOGY, BANGALORE PAGE 1

CHAPTER-1

INTRODUCTION

1.1 INTRODUCTION ABOUT THE INTERNSHIP

An internship is a method of on-the-job training for white-collar and professional careers.

Internships for professional careers are similar in some ways to apprenticeships for trade and

vocational jobs, but the lack of standardization and oversight leaves the term open to broad

interpretation. Interns may be college or university students, high school students, or post-

graduate adults. These positions may be paid or unpaid and are usually temporary.

Generally, an internship consists of an exchange of services for experience between the

student and an organization. Students can also use an internship to determine if they have an

interest in a particular career, create a network of contacts or gain school credit. Some interns

find permanent, paid employment with the organizations for which they worked. This can be

a significant benefit to the employer as experienced interns often need little or no training

when they begin regular employment. Unlike a trainee program, employment at the

completion of an internship is not guaranteed.

It had been a great experience to work in the Narayana Health Care where i want to learn

many things about the functioning of an organization in accordance with the present market

trends. The main purpose of the internship was to make acquainted with the practical

knowledge about the overall functioning of the organization. It had helped me expose to the

work culture in the organization. Finally it was a greatest opportunity to study the cost control

analysis at Narayana Health Care in Bangalore.

1.2 STATEMENT OF THE PROBLEM

The problem faced by Narayana Health Care is excess of cost, which has got direct impact on

the profitability of the firm. The present study enabled and suggested effective measures to

control the cost as well as to prevent the cost for the future period.




The project titled as “A STUDY ON COST CONTROL ANALYSIS IN NARAYANA

HEALTH CARE, BANGALORE”.

1.3 NEED FOR THE STUDY

The aim is to analyze the excess cost and profitability position of the company by

using the cost tools.

The study of cost control analysis will determine current cost position of the

Narayana Health Care.

The study also reveals the performance of the Narayana Health Care and also helpful

for future prospect.

1.4 OBJECTIVES OF THE STUDY

1. To know the cost structure and techniques followed by the Narayana Health Care.

2. To assess the cost of goods and service expenses incurred by the Narayana Health

Care.

3. To evaluate the operating, administrative, selling and delivery of services expenditure

of the Narayana Health Care.

4. To suggest techniques to reduce cost.

1.5 SCOPE OF THE STUDY

The scope of the study is mainly concerned with the analysis of overheads of the Narayana

Health Care. The study helps the management in decision making and taking corrective

action accordingly. The statements showing estimated financial statements are collected and

analyzed for the period of 5 years (2008-09 to 2012-13). The study of cost control analysis is

depending on the information provided by the Narayana Health Care.

1.6 RESEARCH METHODOLOGY

1.6.1 Research Design

Research design can be defined as a particular procedure, the analysis of principles of

the enquiry in a particular field. It consists of blue print for the collection

measurement and data analysis. The type of research conducted is Descriptive

Research.




1.6.2 Method of Data Collection

Primary data: - primary data is that type of data which includes the first hand

information which is being collected during the course of training through

observation and discussion with departmental heads, accountants, assistants and

office personnel.

Direct interaction

Observation.

Secondary data: - secondary data was collected from books, articles, website

and financial statements of Narayana Health Care.

1.6.3 Tools Used

To make the analysis meaningful advanced statistical tools like- overheads

Percentages were applied by using MS Excel 2010 software, graphical

representation by using MS Word 2010, to test hypothesis correlation were

applied with the help of SPSS.21 software package.

1.7 HYPOTHESIS

HYPOTHESIS 1:

H0: There is no actual correlation between cost of materials consumed and profits of


H1: There is a correlation between cost of materials consumed and profits of


HYPOTHESIS 2:

H0: There is no actual correlation between finished goods and profits of Narayana

Health Care.

H1: There is a correlation between finished goods and profits of Narayana Health

Care.




HYPOTHESIS 3:

H0: There is no actual correlation between operating expenses and profits of Narayana

Health Care.

H1: There is a correlation between operating expenses and profit of Narayana Health

Care.

HYPOTHESIS 4:

H0: There is no actual correlation between administrative expenses and profits of


H1: There is a correlation between administrative expenses and profit of Narayana

Health Care.

HYPOTHESIS 5:

H0: There is no actual correlation between selling and delivery expenses and profits of


H1: There is a correlation between selling and delivery expenses and profit of


1.8 LITERATURE REVIEW

BARBOLE et al. (2013) Studied on impact of cost control and analysis of techniques on

manufacturing sector in Dspace. Objective of the study was to find the Cost Reduction and

Cost Control Techniques which are being used in the various stages and their effect on the

cost of material. They found that, when sales are reducing and uncertain every business must

adopt to cost reduction strategies as soon as possible to avoid the business running into

losses.

Jyoti G. Borade and Vikas R. Khalkar (2013) studied focused on the existing software

estimation methods also presented background information on software project models and

software metrics to be used for effort and cost estimation. No model can estimated the cost of

software with high degree of accuracy. Estimation was a complex activity that requires

knowledge of a number of key attributes. At the initial stage of a project, there was high

uncertainty about these project attributes. As they learned that BBNs were especially useful

when the information about the past and/or the current situation is vague, incomplete,




conflicting, and uncertain. Conventional estimation techniques focused only on the actual

development effort furthermore, this paper also described test effort estimation. In fact,

testing activities make up 40% total software development effort. Hence, test effort

estimation is crucial part of estimation process.

Sagar K. Bhosekar and Gayatri Vyas (2012) studied to present and discussed the main

parameters involved in the calculation of Earned Value Analysis (EVA) in the cost

management of civil construction projects. EVA was the most easily associated with the

monitoring and evaluation of project cost that were undertaken within an organization, it can

also be readily applied, with some adjustment, to the control of project cost that were

performed by contractors and vendors. In those circumstances, however, it must be

recognized that the client and contractor have differing perspectives on actual and budgeted

costs.

The two Projects were analyzed using the developed software and MS Project 2007 and

Primavera P6 based on Earned Value Analysis Method. CPI, PD, AD, CV, PV, AC, EV

variable were selected. The result shows a strong relation between each software. The final

result gives more than 99.5% accuracy. A new parameter SV (t) (Schedule Variances respect

to time) was identified and incorporated in developed software which were not in MS Project

2007 and Primavera 6. The final result gives almost 100% accuracy.

Stella Zounta1 and Michail G. Bekiaris (2009) studied on Greek luxury hotels that use

costing tools to allocate costs per profit centers and per cost centers, they did not allocate

costs per customer class, stay or room type. Only 12.2% of surveyed hotels allocate costs per

customer class. This was because such a cost allocation was predicated on Activity-based

Costing that was used only by 19.4% of the surveyed hotels. They given the importance of

the hotel sector in the global economy, it was necessary to apply management control

systems in hotel businesses. Hotel managers should monitor the external business

environment in order to define appropriate and effective strategies. Decision making should

be based on Managerial Accounting tools, including costing, budgeting and budgetary control

tools. Separating hotel operations into multiple parts and identifying costs for each part is a

way to analyze information on the performance, profitability and overall financial status of a

hotel. Using the appropriate costing system (Full Absorption Costing, Marginal Costing,




Activity-based Costing, and Standard Costing) they found the result in proper identification

of costs and profitability of hotel units.

Hui Li (2009) Studied on new cost control theory the cost engineers were professional

persons who undertaken cost estimates and cost control. The Tools undertaken by cost

engineers include such aspects as project management, project planning, progress

management and profitability analysis etc. of the project construction and its production

process. The cost control engineers found that when life cycle expenditure is more

constructions will come down. Cost engineers offered service for control over life cycle

expenditure, property facilities and production & manufacture of a construction project with

their management technique with an overall cost.

1.9 LIMITATIONS OF THE STUDY

1. It was difficult to obtain data from the concern department with a view point of

confidentiality.

2. The research was carried out in a short period of 12 weeks which is not sufficient for

in-depth analysis.

3. Overheads analyses are only the postmortem of what happened in the past.




CHAPTER 2

INDUSTRY PROFILE & COMPANY PROFILE

2.1 INDUSTRY PROFILE

2.1.1 INTRODUCTION TO INDIAN SERVICE SECTOR

In alignment with the global trends, Indian service sector has witnessed a major boom and is

one of the major contributors to both employment and national income in recent times. The

activities under the purview of the service sector are quite diverse. Trading, transportation

and communication, financial, real estate and business services, community, social and

personal services come within the gambit of the service industry. One of the key service

industries in India would be health and education. They are vital for the country‗s economic

stability. A robust healthcare system helps to create a strong and diligent human capital, who

in turn can contribute productively to the nation‗s growth.

The service industry forms a backbone of social and economic development of a region. It

has emerged as the largest and fastest-growing sectors in the world economy, making higher

contributions to the global output and employment. Its growth rate has been higher than that

of agriculture and manufacturing sectors. It is a large and most dynamic part of the Indian

economy both in terms of employment potential and contribution to national income.

In 2000/01 India‗s services sector accounted for around 49 per cent of GDP and employed

around 19 per cent of the total workforce (in 1999/00), which suggest that the sector‗s labour

productivity may be considerably higher than the national average. Other infrastructure

services, such as electricity, gas and water, accounted for 2.5 per cent of GDP. As a

significant and growing contributor to the economy, an efficient services sector is crucial for

economic growth. In India, growth rate of commercial services in the 1990s was 14.5 per

cent, more than double that of world trade of 6.4 per cent (WTO News, 2002). Services

negotiations offer real opportunities for all WTO members and more so for developing

countries.




The services sector has been at the forefront of the rapid growth of the Indian economy,

contributing nearly 63 per cent of the GDP in 2007-08. The sector has come to play an

increasingly dominant role in the economy accounting for 59.6 per cent of the overall average

growth in GDP in the last eight years between 2000-01 and 2007-08 (IBEF, 2010).

As per the Central Statistical Organization, the services sector has continued to grow in the

second quarter of 2009-10. Trade, hotels, transport and communication grew 8.5 per cent in

July-September 2009 from a year earlier. Financing, insurance, real estate and business

services grew at 7.7 per cent in July-September, 2009 from a year earlier. Community, social

and personal services grew at 12.7 per cent in July-September, 2009 from a year earlier

(Healthcare, CII, 2009, Delhi). Healthcare comes in the category of community, social and

personal services.

2.1.2 HEALTHCARE SECTOR IN INDIA

Healthcare is part of the services sectors in India. Health has always been a high priority area

in any country. It has been recognized as an important component in the process of economic

and social development. It does not simply mean absence of diseases; rather it is a state of

complete physical, mental and social well-being. Sanitation and hygiene, nutrition as well as

safe drinking water are the basic determinants of good health. The indicators like infant

mortality and maternal mortality rates, life expectancy and nutrition levels, birth rate and

death rate, along with the incidence of communicable and non-communicable diseases reflect

the health status in an economy. The existence of proper and well-defined healthcare facilities

are vital not only for having a healthy productive workforce and promoting general welfare,

but also for attaining the goal of population stabilization as well as enhancing the overall

quality of life of people.

Over the years, India has built up a vast health infrastructure and manpower, with a wide

variety of hospitals and dispensaries being set up at different levels and run both by public

and private sectors. They are being managed by qualified doctors and trained nurses.

Expansion in access to healthcare services combined with technological advancements in this

field has resulted in substantial improvement in health indices of the population and a steep

decline in mortality rates. The health sector in India has been fragmented between the Centre

and the States. Items like public health, hospitals, sanitation, etc. comes under the State list of




the Constitution, while the items having wider ramification at the national level like

population control and family welfare, medical education, prevention of food adulteration,

quality control in manufacture of drugs etc. have been included in the concurrent list. At the

Central level, the Ministry of Health and Family Welfare is a nodal authority for the growth

and development of healthcare sector in the country.

The Indian healthcare system consists of medical care providers like physicians, specialist

clinics, nursing homes, hospitals and diagnostic service centers and pathology laboratories. It

also consists of medical equipment manufacturers, Contract Research Organizations (CRO's),

pharmaceutical manufacturers and third party support service providers (catering, laundry,

housekeeping, security, etc).

2.1.3 HEALTHCARE SECTOR AND ECONOMIC DEVELOPMENT

The most important objective of the government of any nation would be to achieve faster

economic development and to see that the benefits of economic development percolate to the

mass of people.

Two of the most crucial social inputs which may be considered as drivers of economic

development are health and education. As far as health is concerned it has bidirectional

causality with economic development i.e. economic development leads to better health status

of people and also improved health leads to economic development.

The state of health of Indian citizens is important since it reflects the quality of life of its

people and impacts economic development. Healthcare helps to enhance welfare of the

people. With provision of good healthcare by the nation it results in healthy citizens who can

contribute by giving more or increased man-days of work resulting in increased productivity

and earning thereby contributing more to the GDP of the nation.

Investment in health contributes directly to a nation‗s economic growth. The most direct

effect of improved heath is in terms of improved productivity and reduced absenteeism.

Improved health also increases the likelihood that children will enroll in and remain in school

and learn better and thus contributing indirectly to economic development via improved

educational status of people in the long run.




Improvement in survival rates and life expectancy, as a result of improved health, has other

benefits as well. As life expectancy increases, individuals save more in order to ensure their

income and quality of life after retirement. This increases the overall investment in a nation‗s

physical capital. In addition, when people live longer, investment in human capital, such as in

education, brings about an increase in per capita GDP growth. Therefore health can provide a

complimentary role with development process.

Sen., Amartya. (1999) in his writings on welfare economics, specifically said ―social choice,

distribution, and poverty, constitutes the analytical foundation and building blocks of

economy. Development as Freedom draws together a lifetime of scholarship spanning the

disciplines of ethics, economics, sociology, politics, demography, and moral philosophy into

a grand synthesis: social choice underpinned by substantive freedoms of individuals promotes

the development of economies and societies in their broadest sense. At the same time, he

states ―development should be seen as the expansion of real freedoms that people enjoy,

requiring, among other things, the removal of major sources of "unfreedom," including

poverty, tyranny, poor economic opportunities, neglect of public facilities, and intolerance.

Sen.‘s first major theme is that analysis of development should go beyond material progress

to encompass concerns of social development and social justice, which he argues can be done

by focusing on "functioning‗s" and "capabilities" of individuals. Functioning does can be

viewed as a person's states of being and doing, which include a broad range of individual

actions and conditions that a person has reason to value: being healthy and avoiding

premature mortality, among others. Capabilities can be viewed as all states of being and

doing available to a person. This notion of capabilities broadens the information base used to

assess economic welfare, while the "capability set" can be seen as a mathematical

representation of freedom for formal analysis. The extensive literature spawned by the

capability perspective is testimony to the practical and analytical reach of this concept in

development and welfare analysis.




2.1.4 FIVE YEAR PLANS RELATED TO HEALTHCARE

In India, Government health services follow a traditional model of health funding and

provision. The Government is both the financier and the provider of the public healthcare

facilities. The State governments determine health allocations according to their policies and

budgets. The states spend more than 80 per cent of the total expenditure on curative cure. The

Central Government spends more than 70 per cent of the total expenditure on preventive and

promotive healthcare (Prime Minister‗s Advisory Council on Trade and Industry, 2000). The

traditional model however has its limitations as it does not provide sufficient incentives for

efficiency and innovation. The performance of states in healthcare innovation has varied,

with some states showing more initiatives than others in devising new delivery and funding

models. Just as China, India uses a five-year planning process to determine national goals

and priorities. This process reinforces state dependence on the central government and

institutionalizes a top-down decision making process that sets priorities (World Bank, 1997);

implements centrally sponsored, vertical disease-control programmes; and creates plans for

healthcare personnel and facilities (Peters, D. H., K. S. Rao, R. Fryatt. 2003). As per Table

1.1 public spending on health in India gradually accelerated from 0.22 per cent in 1950-51 to

1.05 per cent during the mid-1980s, and stagnated at around 0.9 per cent of the GDP during

the later years (i.e. spending by only Central and State health departments). Of this, recurring

expenditures such as salaries and wages, drugs, consumables, etc. account for more than 90

per cent and is on the rise in recent years. In terms of per capita expenditure, it increased

significantly from less than Rs. 1 in 1950-51 to about Rs 215 in 2003-04. However, in real

terms, for 2003-2004 this is around Rs 120. Estimates, irrespective of the definition, reveal

that the per capita spending by the Government is far below the international aspiration of

US$12 recommended for an essential health package by the World Development Report

1993 and, again by the Commission on Macroeconomics and Health (World Health

Organization, 2001) for low-income countries. As a result of stagnant budgetary allocations,

the quality of care suffered substantially and adversely impacted on the utilization of

government services by households‗. Besides, health services that were earlier being

provided free were in some cases charged, forcing patients to seek private healthcare.




Table 2.1: Trends in Public Health Expenditure in India by the government (GDP is

at market price, with base year 1993-94)

FIVER YEAR PLANS YEAR

Health

Expenditure as

per cent of GDP

Per Capita Public

Expenditure on Health

(in Rs)

First Five Year Plan 1950-51 0.22 0.61

Second Five Year Plan 1960-61 0.63 2.48

Third Five Year Plan 1965-66 0.61 3.47

Fourth Five Year Plan 1970-71 0.74 6.22

Fifth Five Year Plan 1980-81 0.91 19.37

Sixth Five Year Plan 1985-86 1.05 38.63

Seventh Five Year Plan 1990-91 0.96 64.83

Eighth Five Year Plan 2000-01 0.9 184.56

Ninth Five Year Plan 2001-02 0.83 183.56

Tenth Five Year Plan 2002-03 0.86 202.22

Eleventh Five Year Plan 2007-2012 1.41 210.63

(Sources: Report on Currency and Finance, RBI, various issues; Statistical Abstract of India, Government of

India, various issues; Handbook of Statistics of India, RBI, India.)

2.1.5 PRESENT SCENARIO OF HEALTHCARE IN INDIA

The vast majority of the country suffers from a poor standard of healthcare infrastructure

which has not kept up with the growing economy. Despite having centers of excellence in

healthcare delivery, these facilities are limited and are inadequate in meeting the current

healthcare demands. Nearly one million Indians die every year due to inadequate healthcare

facilities and 700 million people have no access to specialist care and 80per cent of

specialists live in urban areas. Quality health-care remains inaccessible throughout the

country, despite the presence of a highly skilled and qualified medical workforce. The

hospital services market represents one of the most important segments of the Indian

healthcare industry. Various factors such as increasing prevalence of diseases, improving

affordability and rising penetration of health insurance continue to fuel growth in the Indian

healthcare industry.




Chronic disease care has also emerged as a major challenge for healthcare leaders struggling

to develop systems to deliver high-quality, cost-effective care (J.L. Wolff and C. Boult.

2005). Although chronic disease is a problem across the age span, the challenge of caring for

people with chronic illnesses will intensify as our society ages and the prevalence of chronic

disease increases (G.F. Anderson. 2000).

As per Technopak (2009) report Indian healthcare market is estimated to touch US$ 77

billion by 2013 and US$ 309 billion by 2023. Ernst and Young (2008) report states that

healthcare industry has accounted for 5.1 per cent of the country‘s GDP in 2006. The

healthcare sector is estimated at about US$ 38 billion and expected to grow at a compound

annual growth rate (CAGR) of 15 per cent for the next 15 years to reach 309 billion in the

year 2023. (IBEF and E&Y 2009). Nearly 90 per cent of this growth will come from the

private sector. Further, private hospitals in the country are expected to rake in $35.9 billion

(Rs 147,154.1 Corer) in 2012 compared to $15.5 billion (Rs 63,534.5 Corer) in 2006.

Correspondingly, along with a shift in emphasis from socialized to privatized healthcare, the

share of the private sector in India‗s healthcare industry is set for a quantum increase in the

coming decade.

It is envisaged that the value of healthcare market will almost double – from Rs. 100,000

Corers in 2005 to over Rs. 300,000 Corers by 2012. Largest component of healthcare

spending is from the private sector and by 2012 it is expected to rise from the current level of

Rs. 69,000 Corer to Rs. 156,000 Corer. In addition public spending could double from

current Rs. 17,000 Corers if the government reaches its target spending level of 2 per cent of

GDP, up from 0.9 per cent today (ASSOCHAM-YES Bank, 2009).

It is estimated that Indian healthcare market is estimated to touch US$ 77 billion by 2013

(IBEF and E&Y, 2009). It is expected to generate employment opportunities for nine million

people by 2012. Private healthcare is to form a large share of the healthcare spend, and would

increase to US$ 33.6 billion in 2010 from US$ 14.8 billion in 2002.

The health sector has registered a growth of 9.3 per cent annually between 2000-2009,

comparable to the sectoral growth rate of other emerging economies such as China, Brazil

and Mexico (ASSOCHAM YES Bank 2009). The growth in the sector would be driven by




healthcare facilities, both private and public sector, medical diagnostic and pathology labs

and the medical insurance sector.

The Indian healthcare sector has immense opportunities for growth by providing affordable

quality healthcare facilities. As the healthcare sector will develop, it will create new growth

avenues for players with innovative products and business models. (RNCOS, 2010).

These facilities are part of a tiered healthcare system that funnels more difficult cases into

urban hospitals while attempting to provide routine medical care to the vast majority in the

countryside. Primary health centers and sub centers rely on trained paramedics to meet most

of their needs.

Table 2.2: Public Healthcare Infrastructure in India

Category Number Percentage

Primary Health Centres 22669 72.06

Community Health Centres 3190 10.14

District Hospitals 4,400 13.99

State Owned Hospitals 1,200 3.81

Total 31459 100

(Source: India Chronicle: 2007, Fostering quality healthcare for all, Ernst and Young, 2008)




Figure2.1: Growth drivers for Indian Healthcare

Source: CRISIL Research 2009

As per (IBEF and E&Y 2010) the increase in the incidence of lifestyle-related diseases

among Indians has triggered a demand for specialized treatment. A higher proportion of the

Indian population is living in urban areas, where the propensity to seek treatment for ailments

is higher. This is primarily due to easy access to healthcare facilities and higher disposable

income to undergo expensive treatments. Lifestyle-related diseases are likely to assume a

greater share of the healthcare market .In-patient revenues of hospitals have increased since

expenditure on lifestyle-related diseases has risen substantially lifestyle-related diseases has

risen substantially.

2.1.6 DIFFERENT HEALTHCARE SYSTEMS IN INDIA

The Indian System of medicine is of great antiquity. It is the culmination of Indian thought of

medicine which represents a way of healthy living valued with a long and unique cultural

history, as also amalgamating the best of influences that came in from contact with other

civilizations be it Greece (resulting in Unani Medicine- so-called Galenic medicine of herbal

medical practice.) or Germany (Homeopathy) or our scriptures/sages which gave us the

science of Ayurveda (meaning science of life), Siddha as also Yoga and Naturopathy. Like

the multifaceted culture in our country, traditional medicines have evolved over centuries

blessed with a plethora of traditional medicines and practices.




As per a report generated by government of India (Ayush, 2008), it enumerates all the

different types of Indian recognized systems of medicine known as alternative medicine.

Ayurveda is perhaps as old as our civilization. This ―Science of Life‖ (Ayu +Veda) takes an

integrated view of the physical, mental, spiritual and social aspects of human beings, each

impinging on the others. Ayurvedic was referred to in the Vedas (Rig-Veda and Atharvveda)

and around 1000 B.C. the knowledge of Ayurveda was comprehensively documented in

Charak Samhita and Sushrutha Samhita.

The Siddha System is one of the oldest systems of medicine in India and is practiced in the

Tamil speaking parts of India and abroad. The Siddha system of Medicine emphasizes that

medical treatment is oriented not merely to disease but has to take into account the patient,

the environment, age, sex, race, habits, mental frame, habitat, diet, appetite, physical

condition, physiological constitution, etc.

The Unani System of Medicine, which originated in Greece and passed through many

countries before establishing itself in India during the medieval period, is based on well-

established knowledge and practices relating to the promotion of positive health and

prevention of diseases. The Unani System has grown out of the fusion of the traditional

knowledge of ancient civilizations like Egypt, Arabia, Iran, China, Syria and India.

Yoga is primarily a way of life, first propounded by Patanjali in systematic form. It consists

of eight components namely, restraint, observance of austerity, physical postures, breathing

exercise, restraining of sense organs, contemplation, meditation and Samadhi. These steps in

the practice of Yoga have the potential to improve social and personal behavior and to

improve physical health by encouraging better circulation of oxygenated blood in the body,

restraining the sense organs and thereby inducing tranquility and serenity of mind.

Naturopathic medical system is rooted in the healing wisdom of many culture and times. The

principles and practices of Naturopathy are integrated in the life style if Indians which

continue to grow and evolve, incorporating elements that advance knowledge of mechanism

of Natural healing and therapeutics.




The physicians from the time of Hippocrates (around 400 B.C.) have observed that certain

substances could produce symptoms of a disease in healthy people similar to those of people

suffering from the disease. Dr. Christian Friedrich Samuel Hahnemann, a German physician,

scientifically examined this phenomenon and codified the fundamental principles of

Homoeopathy.

Homoeopathy was brought into India around 1810 A.D. by European missionaries and

received official recognition by a resolution passed by the Constituent Assembly in 1948 and

then by the Parliament (Ayush, 2008b).

The Amchi system also known as Tibetan system of medicine (Bodh-Kyi Sowa– Rig-pa),

traces its origin to Ayurvedic system of India. Tibetan medicine is a science, art and

philosophy that provide a holistic approach to healthcare on the basis of principles which are

systematically enumerated and logically framed, based on an understanding of the body and

its relationship to the environment.




2.2 COMPANY PROFILE

2.2.1 HISTORY

The Bangalore cardiac unit of Narayana Health (previously Narayana Hrudayalaya now

Narayana Institute of Cardiac Sciences) is one of the world's largest heart hospitals. It is the

brainchild of a cardiac surgeon, Dr. Devi Prasad Shetty. World's most economical healthcare

service providers is set to emerge as a global industry model for its ability to reconcile

quality, affordability, scale, transparency, credibility and sustainable profitability. Equipped

with all super-specialty and tertiary care facilities that the medical world has to offer, it is

now a one-stop destination for any healthcare requirement a common man needs. It may be

noted that the affluent come here for the world's best healthcare and the poor come here for

the focused attention they can get from a private hospital. No one is refused treatment due to

lack of funds. From a humble beginning of a 300 beds hospital in 2001, Narayana Health has

grown to a 6000 beds healthcare conglomerate in 2013 with 17 hospitals present in 13

locations within the country. The group has already established its presence in Bangalore,

Kolkata, Ahmedabad, Hyderabad, Jaipur, Raipur, Jamshedpur, Guwahati, Mysore, Dharwad,

Kolar, Shimoga and Davangere.

With 120 major surgeries performed every day and 80,000 OPD patients attended per month,

Narayana Health offers super-specialty tertiary care facilities across areas of specialization




including cardiac surgery, cardiology, gastroenterology, vascular, endovascular services,

nephrology, urology, neurology, neurosurgery, paediatrics, obstetrics & gynaecology,

psychiatry, diabetes, endocrinology, cosmetic surgery and rehabilitation, solid organ

transplants for kidney, liver, heart and bone marrow transplant as well as general medicine.

They also have oncology services for most types of cancer including head, neck, breast,

cervical, lungs and gastro intestinal.

2.2.2 MILESTONES

Narayana Health was founded in 2000 by Dr. Devi Shetty under the aegis of the Asian Heart

Foundation (AHF). Since then it has expanded its presence to 23 hospitals in 14 cities.

2010

Rotary Narayana Multispecialty Hospital in Kolkata

Malla Reddy Narayana Multi-specialty Hospital in Hyderabad

Heart center at RL Jalappa Hospital, Kolar

2011

Multi-specialty Hospital at Jaipur

Modern Medical Institute (MMI) Narayana Multispeciality Hospital at Raipur

Narayana Institute of Cardiac Sciences, Bangalore received prestigious JCI

accreditation

NABH accreditation for 2 Units of Narayana Health - Mazumdar Shaw Medical

Center, Bangalore and Rabindranath Tagore International Institute of Cardiac

Sciences, Kolkata

2012

NH Jaipur received JCI accreditation

Multi-speciality Hospital at Ahmedabad

Signed an agreement with Ascension Health Alliance to set up a Health City in

Cayman Islands

Superspeciality hospital at Shimoga

Multi-specialty hospital at Mysore

Multi-specialty hospital at Durgapur




Heart Centre at Davangere

2013 & Ahead

Narayana Hrudayalaya Pvt. Ltd. changed its brand name to Narayana Health.

NH Hyderabad received NABH accreditation

Superspeciality hospital at Guwahati

Superspeciality hospital at Whitefield Bangalore

Multispecialty hospital at HSR Layout Bangalore

Heart Centre at Bangalore, Kuppam, Chittradurga, Howrah & Bijapur

Another 5 New Hospitals in 5 new locations in the pipeline - Mumbai, Siliguri,

Tumkur, Bhubaneshwar & Lucknow

Two international units are in the pipeline - Malaysia & Cayman Islands.

2014

Started work for 1,000-bed hospital at Bhubaneshwar

Heart Centre launched at Jodhpur - JMCH Narayana Heart Centre, Rajasthan

2.2.3 ACHIEVEMENTS

Conducts 40 heart surgeries every day

Expertise in liver transplants on babies less than 10 kg weight with 95% success rate

First heart hospital in Asia to Implant an artificial heart

Performed combined kidney and pancreas transplant Offers formal training program

for pediatric cardiac surgery

Narayana Foundation conducts 61 training programmes and is short-listed by the

University Grant Commission (UGC) for the status of a Deemed University

Thrombosis Research Institute, Bangalore a division of Narayana Health is working

towards discovering a vaccine to prevent heart attack. The Institute has come up with

markers to diagnose heart disease early.




2.2.4 AWARDS AND ACCOLADES

2014

1. NABH and JCI

2013

1. NICS, Bangalore Ranked Best Private Cardiac Hospital in India - "The Week Nielsen

Best Hospital Survey, 2013.

2. Financial Times Arcelor Mittal Boldness in Business Awards.

3. Good Company Award, Philanthropy Awards 2013, Forbes India.

4. Corporate Responsibility/environment category Porter Prize for Industry Architectural

Shift Inc. Innovative 100 award, 2013.

2012

1. Scored 36th rank amongst "World`s 50 most innovative companies" by Fast

Companies.

2. Frost & Sullivan India Healthcare Excellence Awards: Healthcare Service Provider

Company of the Year (Revenue between INR 500-1000 Cr).

3. FICCI Healthcare Excellence Award for addressing Industry Issues

Finalist in Namma Bengaluru Awards 2012 for CSR category.

2011

1. India Shining Star CSR Award for the exceptional CSR work in health sector

2010

1. Best Hospital by CNBC & ICICI Lombard




2.2.5 PROMOTERS / OWNERSHIP PATTERN:

Bangalore-based hospital group Narayana Hrudayalaya Pvt. Ltd (NHPL) for Rs 400 corer.

The two leading individual promoters of NHPL are Narayana Hrudayalaya founder Dr Devi

Shetty and Biocon Ltd chairman and managing director Kiran Mazumdar-Shaw.

2.2.6 VISION, MISSION & CORE VALUES

VISION

Narayana Health‘s vision is to provide high quality health care, affordable quality healthcare

for the masses Worldwide with care and compassion at an affordable cost on a large scale.

MISSION

A dream to making quality healthcare accessible to the masses worldwide

Provide holistic, timely patient care

Continually upgrade the knowledge and technology in patient care

Enhance customer relationships and provide an enriching experience

THE CORE VALUES OF THE ORGANIZATION ARE REPRESENTED BY THE

ACRONYM iCare

i –Innovation and efficiency: To continuously reduce the cost of delivery of

healthcare and improve reach

C -Compassionate Care: To provide accessible care that makes a difference to our

patients

a – Accountability: To honor our commitments with integrity and transparency to

our patients, employees and investors

r - Respect for all: To recognize the contribution of every employee and respect

the rights and the dignity of every patient and employee

e - Excellence as a Culture: To create a culture of ensuring the highest quality of

consistent and reliable services to our patients and sustainable value for our

stakeholders




2.2.7 AREAS OF OPERATIONS

Narayana Health is a chain of multispecialty hospitals located in Bangalore, Kolkata,

Jamshedpur, Guwahati, Durgapur, Raipur, Jaipur, Ahmedabad, Hyderabad, Mysore,

Dharwad, Kolar, Shimoga, Davangere and Kuppam. This multispecialty chain is expanding

its presence nationally with upcoming national projects in Lucknow, Mumbai, Siliguri,

Bhubaneswar and internationally at Cayman Islands, Kualalumpur and Malaysia. At Cayman

Islands Narayana Health is establishing a Healthcity in association with Ascension Health

Alliance.

The Bangalore cardiac unit of Narayana Health (previously Narayana Hrudayalaya now

Narayana Institute of Cardiac Sciences) is one of the world's largest heart hospitals. It is the

brainchild of a cardiac surgeon, Dr. Devi Prasad Shetty. Narayana Health also receives

patients from outside India, and it has created a record of performing nearly 15,000 surgeries

on patients from 25 foreign countries.

2.2.8 SERVICES PROFILE

There are performing averages of 150 surgeries every day and an average of around 80,000

outpatients are seen every month. It caters to the super specialty tertiary care services of the

Indian populace.

Apart from cardiology and cardiac surgery, the hospital focuses on provision of

comprehensive super specialty services in: neurosciences, neurosurgery and neurology,

oncology, medical and surgical gastroenterology, organ transplant transplants – kidney

(renal), liver, heart & bone marrow, urology, nephrology, oncology head & neck surgery,

breast & oncoplastic surgery, medical oncology, pain & palliation oncology,

haematooncology, pediatric oncology, radiation oncology, gynecology – oncology, obstetrics

& gynaecology and orthopaedics. other standard services provided in most specialty areas

include, general surgery, dental sciences, nuclear medicine, paediatrics, paediatric surgery,

pathology, pulmonology, internal medicine, reproductive medicine, rheumatology, thoracic

surgery, vascular surgery, ophthalmology, anesthesia & critical care, emergency medicine,

psychiatry & clinical psychology, diabetology, endocrinology, plastic surgery, cranio-maxillo

facial surgery, dermatology & cosmetology, ENT, family medicine, genetics, infectious

diseases, physiotherapy and rehabilitation. It also provides 24 x 7 services of Emergency




Care, Blood bank, Laboratory and Radiology. Also, in close association with ISRO,

Narayana Health has pioneered some of the aspects of Telemedicine.

2.2.9 INFRASTRUCTURE FACILITIES

Spread over 25 acres (100,000 m2), it is located in the Bommasandra Industrial Area

on Hosur Road in Bengaluru.

NH Health City consists of a 1000 bedded cardiac care hospital (24 operation

theatres) and a 1400-bed multi-specialty hospital, which has one of Asia's most

advanced Cancer Care facility and India's largest Bone Marrow Transplant Unit.

A full-fledged 1,400-bed hospital that handles Neurosurgery, Neurology, Pediatrics,

Nephrology, Urology, Gynecology, Gastroenterology and Ear-Nose-Throat cases.

500 bed orthopedic & Trauma hospital, it is the largest dedicated specialty hospital for

Orthopedics, plastic reconstructive and maxillo-facial surgery, delivering outstanding

results using the best available technology and skills.

Narayana Health in association with Mrs. Kiran Mazumdar Shaw of Biocon has

launched World‘s largest cancer hospital ―Mazumdar Shaw Medical Center ― which

hosts the latest infrastructure and equipments, internationally acclaimed faculty and

affiliations with global centers of excellence in cancer care.

The state-of-the-art Cancer Center is established to provide comprehensive and

dedicated cancer care of the highest international standards with 20 operation theaters,

three Elekta linear accelerators, brachytherapy, IMRT, IGRI & VMAT.

Apart from this Narayana Health City provides many facilities to its employees,

patents as well as to the doctors they are:

Computerized database system for record keeping & billing

Canteen facility

Parking

Security systems (cameras, emergency exists, fire alarm & extinguish)

Library

Waiting room and Rest rooms

http://en.wikipedia.org/wiki/Bommasandra

http://en.wikipedia.org/wiki/Hosur_Road

http://en.wikipedia.org/wiki/Kiran_Mazumdar_Shaw

http://en.wikipedia.org/wiki/Biocon




2.2.10 COMPETITORS INFORMATION

Jayadeva Hospital: Sri Jayadeva Institute of Cardiovascular Sciences & Research is

a Government owned Autonomous Institute and is offering super specialty treatment

to all Cardiac patients. It has got 600 bed strength with State of Art equipment‘s in the

form of 5 Cathlabs, 7 Operation Theaters, Non-Invasive Laboratories and 24 hours

ICU facilities. Presently on an average 800-1000 patients are visiting this hospital

every day and annually 25,500 In patients are treated. About 3000 Open Heart

Surgeries, 10500 Coronary Angiograms, 4000 Procedures including Angioplasties

and Valvuloplasties are done in this hospital.

Apollo Hospital: The Apollo Hospitals Group is the pioneer of integrated healthcare

delivery in India. With over 8500 beds across 50 hospitals within and outside India,

the Apollo Hospitals Group is one of the largest healthcare groups in Asia and has

some of the best hospitals in India. The legacy of touching lives stems from the four

pillars of our philosophy - experience, excellence, expertise and research. We pride

ourselves for constantly being on the cutting edge, and going the extra mile to stay

relevant and revolutionary.

Mallya Hospital: Mallya hospital is located in the heart of the Bengaluru city and has

grown over the years with substantial increase in bed strength, infrastructure and an

assurance of quality patient care with human touch using state-of-the art technology.

The multidisciplinary approach to diagnosis and care is designed to have a continuum

of safe and high-quality care for patients – all services under one roof. Mallya hospital

has to its credit as the first Multispecialty hospital in the country received the coveted

ISO-9002 certification award which has been recently upgraded to ISO 9001:2008.

Manipal Hospital: Manipal Hospitals is part of the Manipal Education and Medical

Group (MEMG), which pioneers in the field of education and healthcare delivery.

Manipal Hospitals has a special significance in the overall healthcare industry of India

and particularly in South India. A social seed sown more than five decades ago is

today the country‘s third largest healthcare group with a network of 15 hospitals

and three primary clinics providing comprehensive care that is both curative and




preventive in nature for a wide variety of patients not just from India but also from

across the globe.

Columbia Asia Hospital: Columbia Asia's highly skilled doctors and nurses deliver

care in modern hospitals located close to where people live and work. Columbia Asia

hospitals are specifically designed for the needs of patients and built for maximum

comfort and efficiency. Patients benefit from advanced medical diagnostics, treatment

and the personal care that only comes in facilities where the focus is on each patient.

2.2.11 SWOT ANAYESIS

A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to

evaluate the strengths, weaknesses, opportunities, and threats involved in a project or in a

business venture. A SWOT analysis can be carried out for a product, place, industry or

person. It involves specifying the objective of the business venture or project and identifying

the internal and external factors that are favorable and unfavorable to achieve that objective.

Strengths: characteristics of the business or project that give it an advantage over others.

Weaknesses: characteristics that place the business or project at a disadvantage relative to

others

Opportunities: elements that the project could exploit to its advantage

Threats: elements in the environment that could cause trouble for the business or project




Strengths

Strong Management: Strong management can help Narayana hrudayalaya reach its

potential by utilizing strengths and eliminating weaknesses.

Cost Advantages: Lower costs lead to higher profits for Narayana hrudayalaya A low

cost leader can undercut rivals on price.

Brand Name: A strong brand name is a major strength of Narayana hrudayalaya.

This gives Narayana hrudayalaya the ability to charge higher prices for their products

because consumers place additional value in the brand.

Technology: Superior technology allows Narayana hrudayalaya to better meet the

needs of their customers in ways that competitors can‘t imitate.

Weaknesses

High Debt Burden: A high debt burden increases the risk that Narayana hrudayalaya.

Increasing risks can increase Narayana hrudayalaya‘s debt interest payments.

High Staff Turnover: High staff turnover can hurt Narayana hrudayalaya‘s ability to

compete, because replacing valuable staff is expenses.

Customer Service: Weak customer service hurts Narayana hrudayalaya‘s reputation

and causes customers to flee to competitors, who are more respondent.

Lack of Scale: A lack of scale means Narayana hrudayalaya‘s cost per unit of output

is very high. Increasing volume, while maintain quality, would help reduce those

costs.

Opportunities

Fragmented Market: Fragmented markets provide many opportunities for Narayana

hrudayalaya to expand and increase market share. Fragmented markets have many

small competitive who lack the cost advantages of larger companies.

Innovation: Greater innovation can help Narayana hrudayalaya to produce unique

products and services that meet customer‘s needs.

Loosening Regulations: Looser regulations allow Narayana hrudayalaya to perform

in a way that is most advantages for them and their customers.

New Products: New products can help Narayana hrudayalaya to expand their

business and diversity their customer base.




Threats

Intense Competition: Intense completion can lower Narayana hrudayalaya‘s profits,

because competitors can entice consumers away with superior products.

Govt. Regulations: Changes to government rules and regulations can negatively

affect Narayana hrudayalaya.

2.2.12 FUTURE GROWTH AND PROSPECTS

NHPL‘s expansion plan, all the new state hospitals will have an in built health

insurance scheme.

The group has started construction of a 1,000-bed cardiac hospital on a 40-acre plot in

Jaipur, and has been offered 37 acres in Ahmedabad by the Gujarat government and

25 acres by a private builder in Delhi. It is ramping up its Kolkata facility with a new

25-acre campus with 5,000 additional beds.

The group is looking at around a 10-fold larger investment in the next few months.

They will create 5,000-bed hospitals in most state capitals, reaching 20,000 beds

within five years.




2.2.13 FINANCIAL STATEMENT

Table 2.3: BALANCE SHEET AS ON 31st MARCH 2013

(Amount in Rs.)

Particulars 31/03/2013 31/03/2012

Equity and Liabilities

Shareholder’s funds

share capital 3,254,140 3,254,140

Reserves and surplus 5,458,574,267 5,198,443,554

Non-current liabilities

Long term borrowings 1,731,892,675 1,112,666,161

Deferred tax liabilities (net) 254,418,273 200,058,617

Long term provisions 54,504,693 48,014,172

Current Liabilities

Short term borrowings 225,183,030 183,030

Trade payables 742,301,783 672,165,785

Other current liabilities 900,661,232 572,253,662

Short term provisions 25,831,682 36,851,925

Total 9,396,621,775 7,843,891,046

ASSETS

Non-current assets

Tangible assets 5,044,086,595 4,110,540,923

Intangible assets 51,035,270 4,396,181

Capital work-in-progress 444,519,307 794,310,456

Non-current investments 314,258,945 125,371,197

Long term loans and advances 1,680,430,438 1,533,487,407

Other non-current assets 13,401,460




Current assets

Inventories 364,017,032 271,410,470

Trade receivables 1,045,350,053 705,456,942

Cash and cash equivalents 161,036,863 138,112,496

Short term loans and advances 204,062,552 116,212,840

Other current assets 74,423,260 44,592,134

Total 9,396,621,775 7,843,891,046

Source: Annual reports of Narayana Health Care.




Table 2.4: PROFIT AND LOSS ACCOUNT FOR THE YEAR 2012-13

(Amount in Rs.)

Particulars 2012-13 2011-12

Income

Revenue from operations 8,248,697,927 6,470,565,693

Other income 24,789,724 23,773,996

Total revenue 8,273,487,651 6,494,339,689

Expenses

Cost of materials consumed 2,308,576,508 1,945,929,425

Employee benefits expenses 1,545,439,413 1,108,331,894

Other expenses 3,441,591,851 2,558,557,191

Total operating expenses 7,295,607,772 5,612,818,510

P B I T D A A 977,879,879 881,521,179

Finance cost (156,781,687) (87,040,375)

Depreciation and amortization expenses (422,607,822) (341,731,824)

Profit before tax 398,490,370 452,748,980

Tax expenses:

Current tax (84,000,000) (106,000,000)

Deferred tax (54,359,657) (33,466,532)

Profit for the year 260,130,713 313,282,448

Source: Annual reports of Narayana Health Care.




ANALYSIS OF FINANCIAL STATMENT

The analysis of financial statements is a process of evaluating relationship between

component parts of financial statements to obtain a better understanding of the firm‘s position

and performance. The first task of the financial analysis is to select the information relevant

to the decision under consideration from the total information contained in the financial

statements.

The net increases in fixed assets of Narayana Health Care Rs.980,184,761 Compared

to the year 2012-13.

The current assets as increased Rs.697, 406,128 Compared to the year 2012-13.

The loan funds as increased of Rs. 146,943,031 Compared to the year 2012-13.

The net increases in Investments of Narayana Health Care is Rs.188,887,748

Compared to the year 2012-13.

In balance sheet current and non-current liabilities as increased Rs.1,292,600,016


In profit and loss account the income from operations and other incomes as increased

to Rs. 1,779,147,962 Compared to the year 2012-13.

The cost of materials consumed as increased to Rs.362,647,083 Compared to the year

2012-13.

In profit and loss account under surplus/loss as decreased to negative Rs. (53,151,735)


In profit and loss account the current tax rates decreased to Rs.22,000,000 Compared

to the year 2012-13.

The expenses from operating as increased to Rs. 1,682,789,262 Compared to the year

2012-13.




CHAPTER 3

THEORETICAL BACKGROUND OF THE STUDY

3.1 INRODUCTION

Cost control is a comprehensive process that allows a company to request, authorize, process,

monitor, record and report expenses activities. Cost control is defined as the guidance and

regulation by executive action, by cost of operating an undertaking. Cost control plays its part

at the discretion of the management, who wish to maintain the cost within a specified limit. It

aims to improve performance to achieve the target. Cost control can be secured through

setting up standards for expenses and production, finding out differences of actual against

standards, analyzing the differences (variance) with reasons.

Cost planning helps organizations use a driver-based approach to align management decision

and action with future overhead expenditures to ensure accuracy, reliability, and control.

3.2 ELEMENT OF COSTS

3.2.1 Material cost

The material cost is the cost of commodities supplied to an undertaking. The material cost has

two types i.e. direct materials cost and indirect materials cost.

Direct materials cost: - direct material cost is the cost of those materials which enter

into and form part of the operations or services.

Indirect materials cost: - indirect materials cost is the cost of those materials which

do not form part of the operations but which help the services.

3.2.2 Expenses or Overheads

The aggregate of indirect material cost, indirect labour cost and indirect expenses is termed as

―overheads‖. For the proper inference of cost, the term overheads may be further classified as

below.




Operating expenses

Administrative expenses

Selling and distribution expenses.

Operating expenses

These expenses consist of all overhead costs incurred from the stage of input of materials into

till the stage of delivery of goods and services. It includes indirect materials, indirect labour

and indirect expenses.


These expenses consist of all overheads costs incurred for the overall administration of the

Hospital.it includes indirect materials, indirect labour and indirect expenses.

Selling and delivery of goods and services expenses

These expenses consist of all overheads costs incurred from the stages of final goods and

services. It includes indirect material, indirect labour and indirect expenses.

3.2.3 Absorption of overhead

The total overhead cost pertaining to a service department or cost centre is then charged to or

absorbed in the cost of the services or cost units passing through that center. This is known as

absorption.

The absorption of overheads is the last step in the distribution plan of overheads. It is defined

as charging of overheads to cost units.

3.3 THE PLANNING PROCESS IS CHARACTERIZED BY SEVERAL

ELEMENTS

To coordinate and establish a consensus expense forecast between sales, finance,

human resources, marketing and operations.

To understand the critical business metrics that drive expense.

To synchronize the revised expense forecast with the corporate profit and loss

statement.




3.4 IMPORTANCE OF COST CONTROL

It enables the firm to achieve its defined objectives.

It leads to proper utilization of the firm's resources

It ensures the survival and growth of a firm by preserving its competitive

capability.

3.5 COST CONTROLLING PROCESS

Steps involved in cost control are:

Suitable cost accounting system: cost control requires that adequate and correct

cost data is generated for actual cost and should be cost of each activity or

production. The cost accounting system should be appropriate, efficient and cost-

effective in view of the nature and size of the organization.

Division of organization: the organization should be divided into various

segment called responsibility centers. The head of each responsibility centers

should be held accountable for the performance of the segment directly.

Determine controllability of cost: cost should be classified into controllable and

non- controllable. For each executive, it should be ascertained as to who can

influence which cost and to what extent.

Determine budgets and targets: for each responsibility centers realistic budgets

and targets should be pre-determined after due consultation with the executive

responsible for implementing the budgets.

Fix standards for cost elements: standard costing is an effective tool of a cost

control. Variances should be ascertained periodically after comparing actual cost

and pre-determined standard cost.

Regular accurate cost reporting: reports relating to deviation from budget and

variance from standard should be accurate and comprehensive. These should be

prepared without delay and submitted to the appropriate authority for a timely

action.

Fixation of responsibility: head of a responsibility center should be held

accountable for costs incurred in the segment under his control. All deviations

should be reported and analyzed segment wise.




Corrective executive action: after thorough analysis and investigation into

deviation necessary corrective action should be taken by senior executive as well

as segmental heads so that incurrence of wasteful expenditure is avoided in future.

Regular review of cost control mechanism: various control system, such as,

budgets, standards, targets, from and content of reports, segmentation in the

organization, etc, should be continuously reviewed and modified in the light of

experience gained and change in circumstances so that control mechanism

continues to function efficiently and effectively.

3.6 COST CONTROLLING DRIVERS

Cost controls starts by the businesses identifying what their costs are and evaluate whether

those costs are reasonable and affordable. It includes some Drivers:

Physician, facility and drug costs. Data from the Organization for Economic

Cooperation and Development have consistently showed the average unit

costs for U.S. physicians, hospitals, facilities and drugs are the highest in the

world.

Expensive technologies and procedures. When Americans do receive

treatment, they often choose the most expensive technologies and procedures.

For example, MRIs in the United States occur twice as often compared with

the average country in OECD data.

Fragmented and uncoordinated care. Because care providers often treat the

same patient with little consultation, unnecessary care, errors and

dissatisfaction proliferates.

Lack of cost consideration from patients. There is an assumption among

patients that the most expensive care leads to the best quality, but expensive

care has no correlation with quality. Patients have limited capabilities to

participate in the cost decision making process of their care.

Fee-for-service. Hospitals and physicians are reimbursed for every service

they provide, which often leads to a focus on volumes instead of a focus on

care.




High administrative expenses. The morass of health insurers and billing

processes cost the U.S. healthcare system billions in wasted costs every year.

Unhealthy behaviors. Chronic illnesses — like heart disease, cancer and

diabetes — cause about 70 per cent of all deaths in the United States, and they

are the most expensive to treat. A majority of chronic illnesses stem from

unhealthy behaviors.

Expensive end-of-life care. The last year of an American's life is the most

expensive for medical treatment, and the unnecessary procedures and repeated

hospitalizations provide little value to the patient and the system at large.

Provider consolidation. Hospitals and health systems are merging and

acquiring each other at a feverish pace, and the same goes for physician

groups. Studies have shown that although provider consolidation leads to

some economies of scale, the increased market power leads to higher prices

and oligopolistic behaviors.

3.7 CONCEPTUAL DEFINITIONS OF THE OVERHEADS USED IN THE STUDY

3.7.1 MATERIAL COST

The material cost is also dependent on purchase price, but the cost may decrease as total

volume increases if there are reduced prices for bulk purchases, as is often the case. There

are links available to many sites to gather material cost for wide range materials: electronics,

plastics, metals and wood, and the come in various shapes and sizes: pellets, tubes, and sheets

etc. Bulk order prices are not always made available, but they can be accurately extrapolated

from the pricing information provided by applying trade line or line fit.




3.7.2 FINISHED GOODS AND SERVICES

Finished goods are goods that have ready to sale but not yet been distributed or delivered to

the end user. Finished goods relative term in a supply chain management flow, the finished

goods received from the supplier and that treating as a finished products in the organization.

3.7.3 OPERATING EXPENSES ON DIRECT WAGES




3.7.4 ADMINISTRATIVE EXPENSES ON WORK COST



3.7.5 SELLING AND DELIVERY OF SERVICES EXPENSES ON WORK COST

These expenses consist of all overheads costs incurred from the stages of final goods and

services. It includes indirect material, indirect labour and indirect expenses.




3.7.6 OPERATING EXPENSES ON COST OF SALES AND SERVICES




3.7.7 ADMINISTRATIVE EXPENSES ON COST OF SALES ANS SERVICES



3.7.8 SELLING AND DELIVERY OF SERVICES EXPENSES ON COST OF SALES

AND SERVICES

This method is recommended when the concern is selling and rendering products and

services. A percentage of selling and service costs to selling and delivery of services price is

ascertained from an analysis of past records. Percentage rate is computed by the following

formula.

3.7.9 ABSORPTION OF OVERHEAD

The total overhead cost pertaining to a service department or cost centre is then charged to or

absorbed in the cost of the services or cost units passing through that center. This is known as

absorption.

The absorption of overheads is the last step in the distribution plan of overheads. It is defined

as charging of overheads to cost units.




Method of absorption of operating overhead

Direct material cost percentage method.

Prime cost percentage method.

a) Direct material cost percentage method

Under this method, the amount of overheads to be absorbed by a cost unit is determined by

the cost of materials consumed in.

b) Prime cost percentage method

This method is based on the premise that both materials and labour gives rise to operating

expenses and thus total of two.

3.7.10 ABSORPTION OF ADMINISTRATIVE COST

Office or administrative costs generally constitute a small portion of the total cost as

compared to operating costs. For the purpose of absorption of these costs, a single cost rate is

computed by any one of the following methods.

Percentage of work cost

Percentage of sales and services

As a percentage of conversion cost.

a) Percentage of work cost

Administrative costs are generally absorbed as a percentage of work cost. Such a rate is

computed by the following formula.




b) Percentage of sales




formula.

c) Percentage of conversion cost

Conversion cost is the cost of converting raw materials into finished goods and services. It

includes cost of direct labour and operating expenses.

Conversion cost = (operating expenses + direct labour)

3.7.11 ABSORPTION OF SELLING AND DELIVERY OF SERVICES COSTS

A percentage of selling price

A percentage of work cost.

a) A percentage of selling price




formula.




b) Percentage of work cost

In this method a percentage of selling and services costs to work cost is ascertained. This

percentage rate is applied for the absorption of selling and delivery of services cost. The

percentage rate is computed by the following formula.

3.8 CONCEPTUAL DEFINITIONS OF STATISTICAL TOOLS USED IN THE

STUDY

a) Correlation

The correlation term is used when both variables are random variables and the end goal is

simply to find a number that expresses the relation between the variables.

b) Types of Correlation

There are two important types of correlation. They are

Positive and Negative correlation and

Linear and Non – Linear correlation

∑ ∑ ∑

√ ∑ ∑ ∑ ∑

When r= +1, means there is perfect positive relationship between the variables.

When r= -1, means there is perfect negative relationship between the variables.

When r= 0, means there is no relationship between the variables.

The closer r is to +1 or -1, the closer the relationship between the variables and the

closer r is to 0, the less is the relationship.




CHAPTER-4

ANALYSIS AND INTERPRETATION OF DATA

TABLE: 4.1 SHOWING THE MATERIALS COST PERCENTAGE

(Amount in Rs)

YEARS MATERIALS

CONSUMED

COST OF SALES

AND SERVICES

PERCENTAGE

OF MATERIALS

2008-09 919,703,186 2,196,631,049 41.87

2009-10 1,065,860,971 2,752,414,853 38.72

2010-11 1,521,340,390 4,035,406,439 37.70

2011-12 1,945,929,425 5,447,937,120 35.72

2012-13 2,308,576,508 7,049,536,498 32.75

Source: Cost sheets and annual reports of Narayana Health Care.

Graph- 4.1

INTERPRETATION:

From the above table 4.1 reveals the materials consumed and cost of sales and services was

increased gradually from 2008-09 to 2012-13 in absolute terms but percentage of materials

decreased from 41.87 per cent to 32.75 per cent. This indicated that the firm consumption of

materials is decreased.

41.87 38.72 37.70

35.72 32.75

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

2008-09 2009-10 2010-11 2011-12 2012-13

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF MATERIALS

PERCENTAGE OFMATERIALS




Table –4. 2: SHOWING THE FINISHED GOODS PERCENTAGE

(Amount in Rs)

YEARS FINISHED

GOODS

COST OF SALES

AND SERVICES

PERCENTAGE OF

FINISHED GOODS

2008-09 133,727,885 2,196,631,049 6.09

2009-10 156,451,293 2,752,414,853 5.68

2010-11 251,870,685 4,035,406,439 6.24

2011-12 271,410,470 5,447,937,120 4.98

2012-13 364,017,031 7,049,536,498 5.16

Source: cost sheets and annual reports of Narayana Health Care.

Graph -4.2

INTERPRETATION:

From the above table 4.2 reveals the finished goods and cost of sales and services was

increased from 2008-09 to 2012-13 in absolute terms but in the year 2011-12 the percentage

of finished goods decreased to 4.98 per cent and in the remaining years it was increased to

5.16 because the finished goods & cost of sales and services also increased gradually.

0.00

2.00

4.00

6.00

8.006.09

5.68 6.24

4.98 5.16

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF FINISHED GOODS

PERCENTAGE OF FINISHEDGOODS




Table –4.3: SHOWING THE OPERATING EXPENSES PERCENTAGE

(Amount in Rs)

YEARS OPERATING

EXPENSES

DIRECT WAGES PERCENTAGE OF

OPERATING

EXPENSES

2008-09 731,100,412 412,744,845 177.13

2009-10 992,337,787 534,336,622 185.71

2010-11 1,524,321,908 724,674,127 210.35

2011-12 2,186,422,300 1,025,390,750 213.23

2012-13 2,908,018,609 1,424,651,263 204.12

Source: Cost sheets and annual reports Narayana Health Care.

Graph -4.3

INTERPRETATION:

From the above table 4.3 reveals the operating expenses and direct wages were increased

from 2008-09 to 2012-13 but the percentage of operating expenses increased to 177.13 per

cent to 213.23 per cent from 2008-09 to 2011-12, in the year 2012-13 decreased to 204.12 per

cent, from the above we can reveal that there was overall increase trend in operating expenses

to direct wages ratio.

0.00

50.00

100.00

150.00

200.00

250.00

177.13 185.71 210.35 213.23

204.12

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF OPERATING EXPENSES

PERCENTAGE OFOPERATING EXPENSES




Table –4.4: SHOWING THE ADMINISTRATIVE EXPENSES PERCENTAGE

(Amount in Rs)

YEARS ADMINISTATIVE

EXPENSES

WORK COST PERCENTAGE OF

ADMINISTRATIVE

EXPENSES

2008-09 115,983,494 2,063,548,443 5.62

2009-10 142,350,176 2,592,535,380 5.49

2010-11 259,239,246 3,770,336,425 6.88

2011-12 281,096,734 5,157,742,475 5.45

2012-13 395,671,957 6,641,246,380 5.96

Source: cost sheets and annual report Narayana Health Care.

Graph -4.4

INTERPRETATION:

From the above table 4.4 reveals the administrative expenses and work cost was increased

from 2008-09 to 2012-13 in absolute terms but in the year 2011-12 the percentage of

administrative expenses decreased to 5.45 per cent and in the remaining years it was

fluctuating from 5.49 to 6.88 per cent. This indicated that Narayana Health Care is spending

huge cost to its administrative department.

5.62 5.49

6.88

5.45 5.96

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

2008-09 2009-10 2010-11 2011-12 2012-13

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF ADMINISTRATIVE EXPENSES

PERCENTAGE OFADMINISTRATIVE EXPENSES




Table – 4.5: SHOWING THE SELLING AND DELIVERY OF SERVICES EXPENSES

PERCENTAGE

(Amount in Rs)

YEARS SELLING AND

DELIVERY

EXPENSES

WORK

COST

PERCENTAGE OF

SELLING AND

DELIVERY EXPENSES

2008-09 23,273,727 2,063,548,443 1.13

2009-10 28,943,742 2,592,535,380 1.12

2010-11 50,737,337 3,770,336,425 1.35

2011-12 82,440,695 5,157,742,475 1.60

2012-13 123,035,637 6,641,246,380 1.85

Source: cost sheets and annual reports Narayana Health Care.

Graph -4.5

INTERPRETATION:

From the above table 4.5 reveals the selling and delivery of services expenses and work cost

was increased from 2008-09 to 2012-13 in absolute terms. From the above we can reveal that

there was overall increase trend in selling and delivery of services expenses to work cost ratio

because there is proper up gradation in the marketing strategies.

0.00

1.00

2.00

1.13 1.12 1.35

1.60 1.85

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF SELLING AND DELIVERY EXPENSES

PERCENTAGE OF SELLINGAND DELIVERY EXPENSES




Table –4.6: SHOWING THE OPERATING EXPENSES PERCENTAGE ON COST

OF SALES AND SERVICES

(Amount in Rs)

YEARS OPERATING

EXPENSES

COST OF SALES

AND SERVICES

PERCENTAGE

OF OPERATING

EXPENSES

2008-09 731,100,412 2,196,631,049 33.28

2009-10 992,337,787 2,752,414,853 36.05

2010-11 1,524,321,908 4,035,406,439 37.77

2011-12 2,186,422,300 5,447,937,120 40.13

2012-13 2,908,018,609 7,049,536,498 41.25


Graph -4.6

INTERPRETATION:

From the above table 4.6 reveals the operating expenses and cost of sales and services was

increased from 2008-09 to 2012-13 in absolute terms and the percentage also increased by

increasing cost of sales and services. It was a very huge loss for Narayana Health Care. They

incurred very huge expenses on machinery, equipments, materials, labour charges and

professional fees in the year 2012-13.

33.28 36.05

37.77 40.13 41.25

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

2008-09 2009-10 2010-11 2011-12 2012-13

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF OPERATING EXPENSES

PERCENTAGE OF OPERATINGEXPENSES




Table –4.7: SHOWING THE ADMINISTRATIVE EXPENSES PERCENTAGE ON

COST OF SALES AND SERVICES

(Amount in Rs)

YEARS ADMINISTATIVE

EXPENSES

COST OF SALES

AND SERVICES

PERCENTAGE OF

ADMINISTRATIVE

EXPENSES

2008-09 115,983,494 2,196,631,049 5.28

2009-10 142,350,176 2,752,414,853 5.17

2010-11 259,239,246 4,035,406,439 6.42

2011-12 281,096,734 5,447,937,120 5.16

2012-13 395,671,957 7,049,536,498 5.61


Graph -4.7

INTERPRETATION:

From the above table 4.7 reveals the administrative expenses and cost of sales and services

was increased from 2008-09 to 2012-13 and the percentage of administrative expenses also

increased to 6.42 per cent in the year 2010-2011 but in the remaining years its fluctuating

from 5.16 per cent to 5.61 per cent. The Narayana Health Care is spending huge cost to its

administrative departments during the study period.

0.00

5.00

10.00

5.28 5.17 6.42

5.16 5.61

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF ADMINISTRATIVE EXPENSES

PERCENTAGE OFADMINISTRATIVE EXPENSES




Table –4.8: SHOWING THE SELLING AND DELIVERY EXPENSES

PERCENTAGE ON COST OF SALES AND SERVICES

(Amount in Rs)

YEARS SELLING AND

DELIVERY

EXPENSES

COST OF SALES AND

SERVICES

PERCENTAGE OF

SELLING AND

DELIVERY EXPENSES

2008-09 23,273,727 2,196,631,049 1.06

2009-10 28,943,742 2,752,414,853 1.05

2010-11 50,737,337 4,035,406,439 1.26

2011-12 82,440,695 5,447,937,120 1.51

2012-13 123,035,637 7,049,536,498 1.75


Graph -4.8

INTERPRETATION:

From the above table 4.8 reveals the selling and delivery of services expenses and cost of

sales and services was increased from 2008-09 to 2012-13 in absolute terms and also the

percentage of selling and delivery of services expenses increased by increasing cost of sales

and services to 1.06 per cent to 1.75 per cent because the Narayana Health Care providing

high quality services at an affordable price.

1.06 1.05 1.26

1.51

1.75

0.00

0.50

1.00

1.50

2.00

2008-09 2009-10 2010-11 2011-12 2012-13

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF SELLING AND DELIVERY EXPENSES

PERCENTAGE OF SELLINGAND DELIVERY EXPENSES




Table –4.9: SHOWING THE MATERIALS COST PERCENTAGE ON OPERATING

EXPENSES

(Amount in Rs)

YEARS OPERATING

EXPENSES

DIRECT

MATERIALS

PERCENTAGE

OF MATERIALS

COST

2008-09 731,100,412 919,703,186 79.49

2009-10 992,337,787 1,065,860,971 93.10

2010-11 1,524,321,908 1,521,340,390 100.20

2011-12 2,186,422,300 1,945,929,425 112.36

2012-13 2,908,018,609 2,308,576,508 125.97


Graph -4.9

INTERPRETATION:

From the above table 4.9 reveals the operating expenses and direct materials consumed

increased gradually from 2008-09 to 2012-13 in absolute terms and the percentage of

materials also increased to 79.49 per cent to 125.97 per cent by increasing operating

expenses. From the above we can reveal that there was overall increase trend in material cost

to operating expenses ratio.

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

79.49 93.10 100.20

112.36 125.97

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF MATERIALS COST

PERCENTAGE OF MATERIALSCOST




Table – 4.10: SHOWING THE PRIME COST PERCENTAGE ON OPERATING

EXPENSES

(Amount in Rs)

YEARS OPERATING

EXPENSES

PRIME COST PERCENTAGE OF

PRIME COST

2008-09 731,100,412 1,332,448,031 54.87

2009-10 992,337,787 1,600,197,593 62.01

2010-11 1,524,321,908 2,246,014,517 67.87

2011-12 2,186,422,300 2,971,320,175 73.58

2012-13 2,908,018,609 3,733,227,771 77.90


Graph -4.10

INTERPRETATION:

From the above table 4.10 reveals the operating expenses and prime cost were increased from

2008-09 to 2012-13 and the percentage of prime cost increased to 54.87 per cent to 77.90 per

cent by increasing operating expenses. This is an indication that the firm increase trend in

operating expenses to prime cost ratio to meet its obligations.

0.00

20.00

40.00

60.00

80.00

54.87 62.01

67.87 73.58 77.90

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF PRIME COST

PERCENTAGE OF PRIMECOST





WORK COST

(Amount in Rs)

YEARS ADMINISTATIVE

EXPENSES

WORK

COST

PERCENTAGE OF

ADMINISTRATIVE

EXPENSES

2008-09 115,983,494 2,063,548,443 5.62

2009-10 142,350,176 2,592,535,380 5.49

2010-11 259,239,246 3,770,336,425 6.88

2011-12 281,096,734 5,157,742,475 5.45

2012-13 395,671,957 6,641,246,380 5.96

Source: cost sheets and annual report Narayana Health Care.

Graph -4.11

INTERPRETATION:

From the above table 4.11 reveals the administrative expenses and work cost were increased

from 2008-09 to 2012-13 13 in absolute terms but in the year 2011-12 the percentage of

administrative expenses decreased to 5.45 per cent and in the remaining years it was

fluctuating with 5.49 to 6.88 per cent. This indicated that Narayana Health Care is spending

huge cost to its administrative departments.

0.00

2.00

4.00

6.00

8.00

5.62 5.49

6.88

5.45 5.96

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF ADMINISTRATIVE COST

PERCENTAGE OFADMINISTRATIVE COST





COST OF SALES AND SERVICES

(Amount in Rs)

YEARS ADMINISTATIVE

EXPENSES

COST OF SALES

AND SERVICES

PERCENTAGE OF

ADMINISTRATIVE

EXPENSES

2008-09 115,983,494 2,196,631,049 5.28

2009-10 142,350,176 2,752,414,853 5.17

2010-11 259,239,246 4,035,406,439 6.42

2011-12 281,096,734 5,447,937,120 5.16

2012-13 395,671,957 7,049,536,498 5.61


Graph -4.12

INTERPRETATION:

From the above table 4.12 reveals the administrative expenses and cost of sales and services

was increased from 2008-09 to 2012-13 and the percentage of administrative expenses also

increased to 6.42 per cent in the year 2010-2011 but in the remaining years its fluctuating

with 5.16 per cent to 5.61 per cent. This indicated that the Narayana Health Care is spending

huge cost to its administrative departments during the study period.

4.79 4.61

6.01

4.81 5.32

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2008-09 2009-10 2010-11 2011-12 2012-13

PER

CEN

TAG

ES

YEARS






Table –4.13: SHOWING THE ADMINISTRATIVE EXPENSES ON CONVERSION

COST (Amount in Rs)

YEARS ADMINISTATIVE

EXPENSES

CONVERSION

COST

PERCENTAGE OF

ADMINISTRATIVE

COST

2008-09 115,983,494 1,143,845,257 10.14

2009-10 142,350,176 1,526,674,409 9.32

2010-11 259,239,246 2,248,987,035 11.53

2011-12 281,096,734 3,211,813,050 8.75

2012-13 395,671,957 43,322,669,872 0.91


Graph -4.13

INTERPRETATION:

From the above table 4.13 reveals the administrative expenses and conversion cost was

increased from 2008-09 to 2012-13 and the percentage of administrative expenses was

decreased to 0.91 per cent in the year 2012-13 and the remaining years its fluctuating with

11.53 per cent to 8.75 per cent. From the above we can reveal that there was overall cost

increase on its administrative departments, operations and direct labour during the study

period.

0.00

2.00

4.00

6.00

8.00

10.00

12.0010.14

9.32

11.53

8.75

0.91

PER

CEN

TAG

E

YEARS






Table –4.14: SHOWING THE SELLING AND DELIVERY OF SERVICES

EXPENSES PERCENTAGE ON COST OF SALES AND SERVICES

(Amount in Rs)

YEARS SELLING AND

DELIVERY

EXPENSES

COST OF SALES

AND SERVICES

PERCENTAGE OF

SELLING AND

DELIVERY EXPENSES

2008-09 23,273,727 2,196,631,049 1.06

2009-10 28,943,742 2,752,414,853 1.05

2010-11 50,737,337 4,035,406,439 1.26

2011-12 82,440,695 5,447,937,120 1.51

2012-13 123,035,637 7,049,536,498 1.75


Graph -4.14

INTERPRETATION:

From the above table 4.14 reveals the selling and delivery of services expenses and cost of

sales and services was increased from 2008-09 to 2012-13 in absolute terms and also the

percentage of selling and delivery of services expenses increased by increasing cost of sales

and services from 1.06 per cent to 1.75 per cent because the Narayana Health Care providing

high quality services at an affordable price.

0.00

0.50

1.00

1.50

2.00

0.96 0.94 1.18

1.41 1.66

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF SELLING EXPENSES

PERCENTAGE OF SELLINGEXPENSES




Table –4.15: SHOWING THW SELLING AND DELIVERY OF SERVICES

EXPENSES PERCENTAGE ON WORK COST

(Amount in Rs)

YEARS SELLING AND

DELIVERY

EXPENSES

WORK COST PERCENTAGE OF

SELLING AND

DELIVERY EXPENSES

2008-09 23,273,727 2,063,548,443 1.13

2009-10 28,943,742 2,592,535,380 1.12

2010-11 50,737,337 3,770,336,425 1.35

2011-12 82,440,695 5,157,742,475 1.60

2012-13 123,035,637 6,641,246,380 1.85


Graph -4.15

INTERPRETATION:

From the above table 4.15 reveals the selling and delivery of services expenses and work cost

was increased from 2008-09 to 2012-1313 in absolute terms. From the above we can reveal

that there was overall increase trend in selling and delivery of services expenses to work cost

ratio from 1.13 per cent to 1.85 per cent because there is proper up gradation in the marketing

strategies and the firm providing good quality services.

1.13 1.12

1.35

1.60

1.85

0.00

0.50

1.00

1.50

2.00

2008-09 2009-10 2010-11 2011-12 2012-13

PER

CEN

TAG

ES

YEARS

PERCENTAGE OF SELLING EXPENSES

PERCENTAGE OF SELLINGEXPENSES




HYPOTHESIS 1:

H0: There is no actual correlation between cost of materials consumed and profits of


H1: There is a correlation between cost of materials consumed and profits of Narayana Health

Care.

Table-4.16: Showing cost of materials consumed and profits

(Amount in Rs)

Years Cost of materials consumed Profits

2008-09 919,703,186 202,743,819

2009-10 1,065,860,971 309,031,987

2010-11 1,521,340,390 227,567,781

2011-12 1,945,929,425 313,282,448

2012-13 2,308,576,508 260,130,713

Source: Data compiled from annual reports of Narayana Health Care.

Table-4.17 Correlations

Cost of materials consumed Profits

Cost of

materials

consumed

Pearson Correlation 1 .302

Sig. (2-Tailed) .622

N 5 5

profits

Pearson Correlation .302 1


N 5 5

**. Correlation is significant at the 0.01 level (2-tailed).

(Data compiled by using SPSS)

Interpretation:

Note: If p-value is less than 0.05, reject the null hypothesis and accept the alternative

hypothesis.

Table 4.16 shows Null hypothesis is not rejected as Pearson correlation is 0.302 and p =

0.622 (p>0.05) at confidence level of 0.01. Since p more than 0.05, indicates there is low

positive correlation between cost of materials consumed and profits of Narayana Health Care.

Hence null hypothesis is accepted.




HYPOTHESIS 2:

H0: There is no actual correlation between finished goods and profits of Narayana Health

Care.

H1: There is a correlation between finished goods and profits of Narayana Health Care.

Table-4.18: Showing finished goods and profits.

(Amount in Rs)

Years Finished goods Profits

2008-09 133,727,885 202,743,819

2009-10 156,451,293 309,031,987

2010-11 251,870,685 227,567,781

2011-12 271,410,470 313,282,448

2012-13 364,017,031 260,130,713



Finished goods Profits

Finished goods



N 5 5

profits



N 5 5


Interpretation:


hypothesis.


0.767(p>0.05) at confidence level of 0.01. Since p more than 0.05, indicates there is very low

positive correlation between finished goods and profits of Narayana Health Care. Hence null

hypothesis is accepted.




HYPOTHESIS 3:

H0: There is no actual correlation between operating expenses and profits of Narayana Health

Care.

H1: There is a correlation between operating expenses and profit of Narayana Health Care.

Table-4.20: Showing operating expenses and profits.

(Amount in Rs)

Years Operating

expenses

Profits

2008-09 731,100,412 202,743,819

2009-10 992,337,787 309,031,987

2010-11 1,524,321,908 227,567,781

2011-12 2,186,422,300 313,282,448

2012-13 2,908,018,609 260,130,713



Operating expenses Profits

Operating expenses



N 5 5

Profits



N 5 5


Interpretation:


hypothesis.


0.618(p>0.05) at confidence level of 0.01. Since p more than 0.05, indicates there is low

positive correlation between operating expenses and profits of Narayana Health Care. Hence

null hypothesis is accepted.




HYPOTHESIS 4:

H0: There is no actual correlation between administrative expenses and profits of Narayana

Health Care.

H1: There is a correlation between administrative expenses and profit of Narayana Health

Care.

Table-4.22: Showing administrative expenses and profits.

(Amount in Rs)

Years Administrative expenses Profits

2008-09 115,983,494 202,743819

2009-10 142,350,176 309,031,987

2010-11 259,239,246 227,567,781

2011-12 281,096,734 313,282,448

2012-13 395,671,957 260,130,713



Administrative expenses Profits




N 5 5

Profits



N 5 5


Interpretation:


hypothesis.


0.776(p>0.05) at confidence level of 0.01. Since p more than 0.05, indicates there is very low

positive correlation between administrative expenses and profits of Narayana Health Care.

Hence null hypothesis is accepted.




HYPOTHESIS 5:

H0: There is no actual correlation between selling and delivery expenses and profits of


H1: There is a correlation between selling and delivery expenses and profit of Narayana

Health Care.

Table-4.24: Showing selling and delivery of services expenses and profits.

(Amount in Rs)

Years Selling and delivery expenses Profits

2008-09 23,273,727 202,743,819

2009-10 28,943,742 309,031,987

2010-11 50,737,337 227,567,781

2011-12 82,440,695 313,282,448

2012-13 123,035,637 260,130,713


TABLE-4.25 Correlations

Selling and delivery

expenses

Profits

Selling and

delivery

expenses



N 5 5

Profits



N 5 5


Interpretation:


hypothesis.


0.679(p>0.05) at confidence level of 0.01. Since p more than 0.05, indicates there is low

positive correlation between selling and delivery of services expenses and profits of Narayana

Health Care. Hence null hypothesis is accepted.




CHAPTER-5

SUMMARY OF FINDINGS, SUGGESTIONS &

CONCLUSION

5.1 FINDINGS

The material cost and cost of sales and services has increased during the study period,

it happens because of the firm consumption of materials cost percentage has

decreased to 41.87 per cent to 32.75 per cent.

The percentage of finished goods on cost of sales and services has increased to 6.24

per cent in the year 2010-11 heavily but in the remaining years it is fluctuating from

4.98 per cent to 6.09 per cent because the finished goods & cost of sales and services

increased.

The finished goods has increased to Rs.364,017,031 and cost of sales & services

increased to Rs. 7,049,536,498 in the year 2012-13, because the company providing

high quality services at affordable price.

The operating expense has increased to Rs. 2,908,018,609 in the year 2012-13,

because of huge expenses on operations & services.

During the study period the administrative expenses was increased to Rs. 395,671,957

in the year 2012-13 heavily, because the company spending huge cost to its

administrative departments.

The telephone and communication expenses were also heavily increased from Rs.8,

355,433 to Rs.26, 651,604 in the year2008-09 to 2012-13.

The advertisement and business promotion expenses were increased from Rs.23,

273,727 to Rs.123, 035,637 in the year 2012-13, because there is proper up gradation

in the marketing strategies.

There is low positive correlation between cost of materials consumed and profits of


There is very low positive correlation between finished goods and profits of Narayana

Health Care.




There is low positive correlation between operating expenses and profits of Narayana

Health Care.

There is very low positive correlation between administrative expenses and profits of


There is low positive correlation between selling and delivery of services expenses

and profits of Narayana Health Care.

There is an Unfavorable or critical economic condition of the Narayana Health Care,

because the company didn‘t maintain enough cash balances.




5.2 SUGGESSIONS

It is suggested to the management to initiate the departments heads to send material

requirements early to the purchase department to make consolidated purchase budgets

to reduce cost and time in materials purchases.

It is suggested to the concerned departments by proper and judicious usage of

consumables and other indirect materials it can meet its current obligations.

It is strongly suggested to the company can produce in factory itself rather than sub-

contracting, so that the subcontracting & processing charges will come down and the

in house capabilities and the facilities can utilize to the maximum extent.

It is suggested to the company follow Proper preventive maintenance for the

equipments and machinery rather than repairing after the breakdown, because

preventive maintenance is always better than the breakdown maintenance.

It is suggested to the company to maintain sufficient cash balance to reduce

unfavorable or critical economic condition.

It is suggested to the company to formulate a budget for each department or person

and monitor the same, so as to control the telephone and communication expenses.




5.3 CONCLUSION

Narayana Health Care was well established private limited company which has made a

sufficient name and fame in the minds of public for the quality of services offered. Narayan

Health Care has a very good reputation for its brand name and quality of service. It is

providing high quality services at affordable price.

Based on the evaluation method the project may be concluded that cost control analysis i.e.

overheads Analysis, correlation, etc. has helped in analyzing its performance by using various

statistical tools.

From the above overheads analysis it is clear that the Company didn‘t followed proper cost

controlling techniques to control its costs and it didn`t maintained enough cash balances to

meet its current obligations.

The study undertaken has helped a lot in gaining knowledge of the service sector.

The concerted efforts put in by the management and staff of the Narayana Health Care

has helped in achieving remarkable progress in almost all important parameters.

The Narayana Health Care is marching ahead in the direction of achieving the number

one position in the service sector.

The performance soundness of the Narayana Health Care is satisfactory but the

Narayana Health Care has the capability to improve its present state.

However the overall financial status of Narayana Health Care is satisfactory. We also see that

the management is implementing effective business strategies, acting as a favorable sign.

Overall company is performing well but the company has to take care about the net profit in

the future.