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

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.
Administrative 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
PERCENTAGES
YEARS
PERCENTAGE OF MATERIALS
PERCENTAGE OF
MATERIALS

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
8.00
6.09
5.68 6.24
4.98 5.16
PERCENTAGES
YEARS
PERCENTAGE OF FINISHED GOODS
PERCENTAGE OF FINISHED
GOODS

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
PERCENTAGES
YEARS
PERCENTAGE OF OPERATING EXPENSES
PERCENTAGE OF
OPERATING 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
PERCENTAGES
YEARS
PERCENTAGE OF ADMINISTRATIVE
EXPENSES
PERCENTAGE OF
ADMINISTRATIVE 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
PERCENTAGES
YEARS
PERCENTAGE OF SELLING AND DELIVERY
EXPENSES
PERCENTAGE OF SELLING
AND 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
PERCENTAGES
YEARS
PERCENTAGE OF OPERATING EXPENSES
PERCENTAGE OF OPERATING
EXPENSES

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
PERCENTAGES
YEARS
PERCENTAGE OF ADMINISTRATIVE
EXPENSES
PERCENTAGE OF
ADMINISTRATIVE 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
PERCENTAGES
YEARS
PERCENTAGE OF SELLING AND DELIVERY
EXPENSES
AND 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
PERCENTAGES
YEARS
PERCENTAGE OF MATERIALS COST
PERCENTAGE OF MATERIALS
COST

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
PERCENTAGES
YEARS
PERCENTAGE OF PRIME COST
PERCENTAGE OF PRIME
COST

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
PERCENTAGES
YEARS
PERCENTAGE OF ADMINISTRATIVE COST
PERCENTAGE OF
ADMINISTRATIVE 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
PERCENTAGES
YEARS
PERCENTAGE OF
ADMINISTRATIVE COST

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
12.00
10.14
9.32
11.53
8.75
0.91
PERCENTAGE
YEARS
PERCENTAGE OF
ADMINISTRATIVE COST

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
PERCENTAGES
YEARS
PERCENTAGE OF SELLING EXPENSES
EXPENSES

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
PERCENTAGES
YEARS
PERCENTAGE OF SELLING EXPENSES
EXPENSES

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
Administrative expenses
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.

Chapter 1 5 report

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Chapter 1 5 report