1 / 20
Case Study Presentation

Sabar Aart Farmer
Enterprise Producer
Company Ltd.

Using Process Costing to Set a Price

Presented by
Abhishek• Ayush• Aditya
Management Accounting  |  Ivey Publishing Case Study
About the Organisation

Introduction
to SAFE

Sabar Aart Farmer Enterprise Producer Company Ltd. — a pioneering Farmer Producer Organisation transforming rural livelihoods in Gujarat.

🌾
FPO
Farmer Producer Organisation
📍
Founded in Gujarat
Tribal belt region
👩‍🌾
3,400 Women Farmers
Tribal community members
🌿
Organic Farming
Focus on sustainable practices
Key Person

Shrikant Patel

Visionary manager of SAFE who transformed the organisation's approach to farming and value creation.

💡
Visionary Leadership
Identified value-addition opportunities in turmeric processing
👩‍🤝‍👩
Women Empowerment
Championed economic independence for tribal women farmers
🌱
Multicropping
Promoted diverse crop cultivation for income stability
The Challenge

Problem
Faced

SAFE faced a critical bottleneck that threatened farmer income and product viability.

01
40,000 kg turmeric produced — no cold storage available
02
Low income from selling raw turmeric at market price
03
Risk of spoilage — fresh turmeric deteriorates rapidly
04
No value addition — selling raw commodity at low margins
The Strategy

Solution Taken

🌿
Raw Turmeric
40,000 kg
→
⚙️
Processing
4 Stages
→
📦
Turmeric Powder
500g Packets
→
💰
Higher Income
+34% Retail Margin
✅ Increased Value Addition
✅ Improved Profitability
✅ Reduced Spoilage Risk
✅ Better Market Access
Study Framework

Objectives of Study

01
📊
Understand Process Costing
Learn the costing method for continuous production processes
02
🧮
Calculate Production Cost
Determine cost per kg at each processing stage
03
💲
Determine Selling Price
Set competitive wholesale and retail pricing
04
📈
Improve Farmer Income
Maximise profitability for tribal women farmers
Concept

Process Costing

"

A costing method used for continuous or mass production where costs are accumulated by process or department and averaged over all units produced.

🧹
Process 1
Cleaning
2% loss
▶
🔥
Process 2
Boiling
—
▶
☀️
Process 3
Drying
76% loss
▶
⚙️
Process 4
Grinding
5% loss
▶
📦
Final
Powder
4,469 kg
Process 01

Cleaning

Initial preparation of raw turmeric rhizomes before processing begins.

2% Process Loss
💧
Washing — Remove soil and dirt from turmeric roots
✂️
Trimming — Remove rotten roots and leaves
🪣
Equipment — Cleaning vessels and water supply
👷
Labour — Manual cleaning by women workers
📉
Output — 40,000 kg → 39,200 kg after cleaning
Process 02

Boiling

Thermal treatment to achieve uniform colour, texture, and quality in turmeric.

🔪
Slicing — Turmeric cut for uniform boiling
🫕
Boiling Vessels — Large pots with controlled heat
🪵
Wood Logs — Fuel source for boiling process
⚡
Electricity — Additional energy cost component
🎨
Result — Uniform golden colour and quality
Process 03

Drying

The most critical stage — removes moisture to prepare turmeric for grinding.

76% Evaporation Loss
☀️
Solar Drying — Natural sun-drying process
📅
10–15 Days — Duration of drying process
🌡️
Moisture Removal — 76% weight lost as water vapour
🏗️
Solar Dryer — Equipment cost included in costing
📉
Output — 39,200 kg → ~9,408 kg dry chips
Process 04

Grinding &
Packaging

Final stage converting dry turmeric chips into market-ready powder packets.

5% Process Loss
⚙️
Grinding Machine — Converts dry chips to fine powder
📦
500g Packets — Consumer-ready packaging
🏷️
Labelling — SAFE brand organic turmeric
🔢
Final Output — 4,469 kg turmeric powder
🛒
Market Ready — Wholesale & retail distribution
Exhibit 1 — Ivey Publishing

Data for Four Processes

Cost Item 🧹 Cleaning 🔥 Boiling ☀️ Drying ⚙️ Grinding
Raw Material (₹)8,00,000———
Labour Wages (₹)25,00030,00015,00020,000
Electricity (₹)2,0005,000—8,000
Wood Logs (₹)—18,000——
Packaging Material (₹)———45,000
Seed Revenue (₹)6,50,000———
Process Loss2%—76%5%

Source: Ivey Publishing Case Study — Exhibit 1

Exhibit 2 — Ivey Publishing

Equipment Costs

🪣
Cleaning Vessels
₹ 15,000
Life: 5 yrs
Dep: ₹ 3,000/yr
🔪
Slicing Machine
₹ 25,000
Life: 5 yrs
Dep: ₹ 5,000/yr
☀️
Solar Dryer
₹ 1,50,000
Life: 10 yrs
Dep: ₹ 15,000/yr
⚙️
Grinding Machine
₹ 80,000
Life: 8 yrs
Dep: ₹ 10,000/yr
📦
Packaging Machine
₹ 60,000
Life: 6 yrs
Dep: ₹ 10,000/yr
📌 Depreciation = Cost ÷ Useful Life (Straight Line Method)

Source: Ivey Publishing Case Study — Exhibit 2

Exhibit 3 — Ivey Publishing

Overhead Expenses

🏢
Rent Expense
₹ 36,000
💡
Office Electricity
₹ 12,000
🧹
Sweeper Salary
₹ 18,000
📋
Accountant Salary
₹ 30,000
🤝
Salesperson Salary
₹ 24,000
🚚
Distribution Expense
₹ 21,000
Total Overhead: ₹ 1,41,000

Source: Ivey Publishing Case Study — Exhibit 3

Calculation

Production & Loss Flow

Raw Turmeric
40,000 kg
−2% (800 kg)
↓
After Cleaning
39,200 kg
Boiling
↓
After Boiling
39,200 kg
−76% (29,792 kg)
↓
After Drying
9,408 kg
−5% (470 kg)
↓
Final Powder
≈ 4,469 kg
Total Input40,000 kg
Total Loss~35,531 kg
Final Output4,469 kg
Financial Analysis

Cost & Revenue Analysis

💰
Raw Material Cost
₹ 8,00,000
40,000 kg × ₹20/kg
🌱
Seed Revenue
₹ 6,50,000
By-product income
🏪
Wholesale Margin
4%
Profit on cost
🛒
Retail Margin
34%
Profit on cost
Impact

Benefits of Value Addition

💵
Higher Farmer Income
34% retail margin vs raw commodity prices
👩‍🌾
Women Empowerment
3,400 tribal women gain economic independence
📊
Better Market Value
Processed goods command premium pricing
🌿
Organic Demand
Growing consumer preference for organic products
🏘️
Rural Employment
Processing creates local jobs in tribal areas
Limitations

Challenges Faced

⚔️
Market Competition
Competing with established turmeric brands in retail market
🏷️
Branding Problems
Limited brand recognition and marketing budget
🏭
Storage Limitations
No cold storage — forces immediate processing
💻
No Online Platform
Missing e-commerce and digital sales channels
📦
Packaging Challenges
Maintaining quality and shelf life in packaging
Key Takeaways

Conclusion

01
Process costing enables accurate pricing decisions for multi-stage production
02
Value addition transforms raw commodity into premium product with 34% retail margin
03
SAFE empowered 3,400 tribal women farmers through organised processing
04
Organic turmeric has strong and growing market potential in India and globally
🌿

Thank You

Questions & Answers

Abhishek• Ayush• Aditya
References
📚 Ivey Publishing Case Study — SAFE Process Costing
🏛️ Government of India — FPO Policy Framework
🌿 National Horticulture Board — Organic Turmeric Reports