Fly Ash Project_Final Assignment - EXECUTIVE SUMMARY Fly...

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EXECUTIVE SUMMARYFly Ash Brick Project is the brainchild of Rajiv Sharma (“Sharma”), which involves themanufacturing and selling of bricks made out of fly ash, a residue obtained fromcombustion of coal which is widely available in India due to the high utilisation of coalin the production of thermal power, its major power generation source. The projectrequires an initial investment of Rs.10million in which Rs.6 million is raised throughequity while the balance is to be obtained via a secured interest-bearing loan from abank. The idea gained the interest of his long-time friend Alok Gupta (“Gupta”).However, unlike Sharma who possess extensive years of experience in theconstruction industry and was rather confident in the idea, Gupta was rathersceptical on the feasibility of this project.The duo hired a consultant who used the cost-volume-profit (CVP) analysis to studythe feasibility of the project that estimated to sell 2.4 million fly ash bricks at anaverage selling price of Rs.7000 per 1000 bricks, meaning the selling price per brickis Rs.7.The total fixed cost (i.e. depreciation, administrative cost and interest charges)amounted to Rs 5.74 million per annum and the variable cost was Rs.4.50 per flyash brick, hence the contribution margin being Rs.2.50 (Rs.7- Rs.2.50). Hence, theCVP analysis indicated the project will break-even by selling 2.296 million bricks at acost of Rs.10.332 million with a generation of Rs.16.072 million sales revenue. Thus,the estimated sales of 2.4 million bricks exceeds the break-even volume enabling theproject to generate a profit of Rs.260,000. The analysis is further expanded toestimate sales volume to earn a targeted profit yearned by the duo.1
Fly ash brick project: Feasibility Study using CVP Analysis1.0Introduction1.1About Fly Ash Waste in IndiaIn India, million tons of fly ash are produced every year and this production isincreasing and growing as more thermal power plants are build up to meet theincreasing energy demands in the country. Other than the massive amount of fly ashwaste produced , the environmental problem, the other main problem in handling thefly ash waste was the required of massive amount of land as they are generallydumped on the ground as a waste material.Thus, looking at the massive volume produced and the fact that the waste willincrease in the future it was necessary to find a constructive uses and utilization ofthe fly ash waste. Exploitation of fly ashcan result not only in reducing or overcomethe problem encountered it is also can be exploit as raw material for value addedproducts ( to conserve traditional materials) and for extraction of valuable material.According to a research, fly ash is good to be used in a building materials such asbricks. Since there would be a shortfall in the production of bricks in India where theyestimated demand of 100 billion bricks per year in India by the turn of the centurythis will be a great opportunity to fully utilize the waste and for conserving thetraditional resources like cement and clay.

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Term
Fall
Professor
N/A
Tags
Fly ash, Ash Brick

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