Академический Документы
Профессиональный Документы
Культура Документы
***Included Rajiv Sharma in personnel cost because he will work full time as the project manager
Financial Structure:
***We are including the financial cost as part of our fixed cost for this project
Variable costs:
Depending on the production volume, the company will pay a varying amount of operating cost per month. The table
below is based on a production volume of 200,000 bricks per month
Initial Investment:
40,000
( 95,000+210,000+
)=138,000
74.50
interest
cost ( routine expenses+ personnel cost ) + Interest cost (loan)
Price per unitVariable cost per unit
= Quantity of bricks to
be sold per month
3. How many bricks need to be sold so as to earn a targeted income of Rs. 2 million per year?
In order to achieve a target income of Rs. 2,000,000, the Fly Ash project will need to sell 2,456,000 bricks per year.
This is very close to Rajiv Sharmas initial estimate of demand per year.
2,520,000+480,000
( 2,000,000+ 1,140,000+
)=2,456,000
74.50
99,000
$693,0
00
247,50
0
300,00
0
$145,
500
Percentage
108,90 119,79
Change
0
0
$762,3 $838,5
+/- (10%)
00
30
272,25 299,47
+/- (10%)
0
5
300,00 300,00
0.00
0
0
$190, $239,
+/050
055 ( ~30%)
The case discusses that the housing sector will experience a 20 million to 70 million shortage in home units, which
presents a ripe market for demand for the partners. If the partners are able to produce closer to the plants capacity
of 4 million bricks per year and take advantage of this increased demand then the project is sure to turn a profit within
a few years.
Since the partners can cover their operating and financing cost at present demand and demand is projected to
increase in the coming years, we suggest the partners take a gamble and proceed with the investment in the Fly Ash
Project.