CHAPTER VI - Economies of the Project

(Technical & Financial Feasibility)

1 ACTIVITY FLOW
START FINISH
(A) Possession of Land after executing legal documents 0 4
(B) Start & Completion of Building Construction 4 15
(C) Placement of order for Plant and Machinery and its delivery 15 17
(D) Start and completion of installment of Plant and Machinery 17 21
(E) Procurement of Raw Materials & Commencement of Trial Production 21 22
(F) Commencement of Cmmercial Production 22 24

2 DETAILS OF PLANT AND MACHINERY

S.NO ITEM NEW / SECOND IMPORETED / SOURCE OF NO INSTALLED VALUE

HAND INDEGENOUS SUPPLY IN RUPEES

1 CORRUGATION MACHINE NEW MACHINE INDEGENOUS NATRAJ 1 265000.00

2 POWER SLOTTER NEW MACHINE INDEGENOUS NATRAJ 1 85000.00
3 DIE CUTTING MACHINE NEW MACHINE INDEGENOUS MICRO 1 300000.00
4 POWER CUTTER NEW MACHINE INDEGENOUS SAMRAT 1 175000.00
5 PASTING MACHINE NEW MACHINE INDEGENOUS SAMRAT 1 35000.00
6 STICHING MACHINE NEW MACHINE INDEGENOUS NEELAM 1 65000.00
7 BOARD CUTTING MACHINE NEW MACHINE INDEGENOUS VIKAS 1 30000.00
8 ROTARY MACHINE NEW MACHINE INDEGENOUS VIKAS 1 100000.00
9 TOOLS & TACKLES NEW MACHINE INDEGENOUS AS REQUIRED 25000.00
TOTAL Rs. 1080000.00
 3 REQUIREMENTS OF RAW MATERIALS AND CONSUMABLES
S.NO ITEM IMPORETED / SOURCE ANNUAL VALUE INVENTORY VALUE OF
INDEGENOUS OF SUPPLY IN Rs. PERIOD IN MATERIAL
WEEKS FOR INVENTORY
PERIOD IN Rs.
1 PAPER INDEGENOUS LOCAL MARKET 7000000.00 4 WEEK 538461.54

2 SILICATE INDEGENOUS LOCAL MARKET 800000.00 4 WEEK 61538.46

3 PASTING GUM INDEGENOUS LOCAL MARKET 800000.00 4 WEEK 61538.46

4 STICHING WIRE INDEGENOUS LOCAL MARKET 800000.00 4 WEEK 61538.46

5 HASIN & BINDING CLOTH INDEGENOUS LOCAL MARKET 480000.00 4 WEEK 36923.08

6 PLASTIC SUTLI INDEGENOUS LOCAL MARKET 320000.00 4 WEEK 24615.38

TOTAL Rs. 784615.38

SAY 800000.00

4 MANPOWER REQUIREMENTS
DUTIES ADMINISTRATION TECHNICAL TOTAL AVERAGE ANNUAL SALARY
Nos Nos Nos SALARY /WAGES

MANAGERIAL 1 1 2 30000.00 720000.00

SUPERVISORY - 1 1 20000.00 240000.00

SKILLED - 17 17 15000.00 3060000.00

SEMI SKILLED - 7 7 12000.00 1008000.00

UNSKILLED - 3 3 10000.00 360000.00

TOTALS 1 29 30 87000.00 5388000.00

ADD: BENEFIT @ 33 % OF TOTAL Rs 1778040.00

GRAND SALARY WITH BENEFITS Rs 7166040.00

5 COMPUTATION OF WORKING CAPITAL REQUIREMENTS

(A) Raw materials and consumables based on inventory period Rs 800000.00

(B) Monthly salary and wages Rs 597170.00
(C) Monthly power bill Rs 50000.00
(D) Half yearly insurance premium Rs 20000.00
(E) Monthly Repairs and Maintenance Rs 10000.00
(F) Monthly administrative exp including overheads Rs 20000.00
(G) Monthly Misc. and other expenses Rs 10000.00
TOTAL Rs 1507170.00

6 DETAILS OF MISCELLANEOUS FIXED ASSETS

(A) Furniture and fixtures l.s Rs 175000.00

(B) Vehicles l.s Rs 50000.00
(C) Equipment for testing and quality control l.s Rs 25000.00
(D) Generator for l.s. Rs 50000.00
(E) Miscellaneous Rs 25000.00

TOTAL Rs 325000.00

7 CAPITAL COST OF THE PROJECT

(A) Land 250 sq. mts. including conveyancing charges Rs 3850000.00

(B) Building Construction Including Boundry Wall, tank etc Rs 1625000.00
(C) Installed value of plant and machinery Rs 1080000.00
(D) Misc. Fixed Assets Rs 325000.00
(E) Security Deposit and estimate for utilities Rs 20000.00
(F) Preliminary and pre operative expenses Rs 10000.00
(G) Others Rs 5000.00

TOTAL Rs 6915000.00
 8 TOTAL COST OF THE PROJECT

(A) Capital cost Rs 6915000.00

(B) Working Capital Rs 1507170.00

TOTAL Rs 8422170.00

9 MEANS OF FINANCING
(A) Promoter(s) Rs 6737736.00
(B) Long term loan Rs
(C) Short term loan Rs 1684434.00

TOTAL Rs 8422170.00

10 ANNUAL COST OF PRODUCTION

(A) Raw materials and consuables Rs 10200000.00

(B) Utilities Rs 600000.00
(C) Salary and wages including Benefits Rs 7166040.00
(D) Repairs and maintenance Rs 120000.00
(E) Administrative and sales overheads Rs 240000.00
(F) Interest on long term loan Rs 0.00
(G) Interest on short term loan Rs 202132.08
(H) Annual insurance premium Rs 40000.00
(I) Depriciation Rs 357000.00

TOTAL 18925172.08

FOR PRODUCING 1500000 units of CORRUGATED BOXES WITH PRINTING WHERE REQUIRED

UNIT COST OF PRODUCTION = Total of annual cost of production( item 16) = 12.62
Number of units produced annually
 11 Profitablilty

(A) Annual Sales revenue Rs 20250000.00

(B) Annual Expenditure Rs 18925172.08
(C) Profit before tax Rs 1324827.92
(D) Tax Rs 331207.00
(E) Profit after tax Rs 993620.92

Profit before Tax on Sales 6.54%

Profit after Tax on Sales 4.91%
Return on Investment 11.80%

For determination of total cost of production a statement showing the various elements of cost is prepared. This statement is called as a ‘statement of cost’ or ‘cost sheet.’ Cost
sheet is a statement, which provides for he assembly of the detailed cost of the total cost of job operation or order. It brings out the composition of total cost in a logical order,
under proper classifications and sub-divisions. The period covered by the cost sheet may be a week, a month or so. Separate columns are provided to show the total cost and cost
per unit. In case of multiple products a separate cost sheet may be prepared for each product. Alternatively, separate columns of total cost and unit cost may be provided for each
product in the same cost sheet. A cost sheet is prepared under output or unit costing method.

Here we have selected to show the alternate of considering total cost and then an average cost per unit on estimated basis.
 PROJECTED CASH FLOWS
RUPEES IN LAKHS
S.NO PARTICULARS 1st YEAR 2nd YEAR 3rd YEAR

OPENING CASH AND BANK BALANCE 0.00 6.71 16.59

ADD : CASH INFLOWS

1 Capital Inflow 69.15 0.00 0.00

2 Profit & Loss Account 18.26 18.44 18.63

3 Depriciation - Non Cash Expenditure 3.57 3.13 2.75

4 Preliminary Expenses W/O 0.00 0.00 0.00

5 Loan from Relatives & Friends 16.84 0.00 0.00

6 Increase in Current Liabilities 8.35 1.65 1.82

TOTAL CASH INFLOW 116.17 29.93 39.78

LESS : CASH OUTFLOWS

1 Increase in Fixed Assets 68.80 0.00 0.00

2 Repayment of Term Loan 3.37 3.47 3.47

Preliminary Expenses 0.10 0.00 0.00

Security Deposit & Other Expenses 0.25 0.00 0.00

3 Increase in Stocks 11.50 10.25 15.60

4 Increase in Debtors 14.70 4.22 4.64

5 Increase in Advance Recoverable 10.75 2.11 2.32

TOTAL CASH OUTFLOW 109.47 20.05 26.03

Cash / Bank at the close of the year 6.71 16.59 30.33

Depricition

Machinary 15% 1080000.00 162000 137700 117045

Building 10% 1625000.00 162500 146250 131625
Misc 10% 325000.00 32500 29250 26325
Misc 15% 0.00 0 0 0

357000 313200 274995

BROAD PARAMETERS

S.NO NO.

1 NO OF STICHING MACHINES 20
2 NO OF SKILLED WORKERS 16
3 NO OF WORKING DAYS IN A MONTH 24
4 NO OF WORKING DAYS IN A YEAR 288
5 PRODUCTION OF ONE SKILLED WORKER PER DAY 6
6 PRODUCTION PER DAY 96
7 PRODUCTION PER MONTH 2304
8 PRODUCTION PER YEAR 27648
9
10

ESTIMATION OF COST OF PRODUCTION

S.NO. PARTICULARS CLOTH THREAD BUTTON INTERLOCK BUKKRAM

1 REQUIREMENT FOR 1 2 0.5 12 2 0.2

SHIRT METER REEL NO METER METER

2 COST OF PRODUCTION 0.00 5.00 3.00 7.00 5.00

1 SHIRT

3 COST OF PRODUCTION 0.00 480.00 288.00 672.00 480.00

PER DAY

4 COST OF PRODUCTION 0.00 5760.00 3456.00 8064.00 5760.00

PER 15 DAYS

5 COST OF PRODUCTION 0.00 11520.00 6912.00 16128.00 11520.00

PER MONTH

6 COST OF PRODUCTION 0.00 138240.00 82944.00 193536.00 138240.00

PER YEAR

7 ANNUAL REQUIREMNENT 55400.00 13850.00 332400.00 55400.00 5540.00

IN UNITS METER REEL NO METER METER
PACKING BOX POLYTHENE TOTAL

1 1
NO NO

1.50 0.20 21.70

144.00 19.20 2083.20

1728.00 230.40 24998.40

3456.00 460.80 49996.80

41472.00 5529.60 599961.60

27700.00 27700.00
NO NO