FLY Ash 5.0.docx - ACC7101 ACCOUNTING FOR DECISION MAKING...

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ACC7101 ACCOUNTING FOR DECISIONMAKINGCOST-VOLUME-PROFIT ANALYSIS: FLY ASH BRICKSLECTURER: DR. AHMED RAZMAN ABDUL LATIFNAMEMATRIC NUMBER1.FAHAD IBRAHIM ALFADDAA2.AIMAN HAMZAH BIN ABDUL HALIM3.YAO YUE4.TAN YUN QIANPBS18311154PBS18312124PBS18311127PBS18310140
1.0INTRODUCTIONIn 2013, Rajiv Sharma had a business idea of starting a fly ash bricksmanufacturing unit in India. Marketing research done by Sharma showed apotentially profitable project. There are several other factors thatencourage Sharma to start the business.Firstly, there is a huge demand for fly ash bricks since they are acheaper alternative of clay bricks. The preliminary market analysis showedthat they can generate a sale of 2.4 million bricks per annum with a costof Rs7 per brick. Other than the rising demand, there are other beneficial factors forstarting this manufacturing unit. According to the research, there is amassive amount of fly ash dumped on the ground as waste material. Aslong as the combustion of coal maintains to be the major source of energyin India, the source of this material will keep continuing for a long time. Next, due to the dumping fly ash causes the waste of usable landand the fertility of the land will be leeched by the production of clay brick,the government has been encouraging fly ash brick manufacturer. With the preliminary figures and reports, Sharma started toconvince his friend Alok Gupta to join as a business partner of this project.Gupta was skeptical and doubting but after Sharma handed him themarketing research, he came around and begin to see the feasibility ofthis project. Hence, based on the available financial data and informationprovided in the case study, an evaluation of the feasibility using Cost-Volume-Profit analysis will be demonstrated in this report. 1
2.0 ANALYSIS AND COMPUTATIONThis section will be demonstrated in three parts –cost calculation (2.1),cost-volume-profit calculation (2.2), target profit analysis (2.3) and impactof volume increment on growth profit margin (2.4). Cost calculation is tosupport the calculation of cost-volume-profit and target profit analysis,hence not much analysis or remarks will be given. 2.1 Cost Calculation2.1.1 Fixed Cost (FC)The tables below show the fixed costs in detail. All fixed cost is calculatedon a monthly basis, annually basis and five-year basis to approach aproper analysis of the project.Table 1: Fixed Routine Expenses (in Rs)Routine ExpensesCost perMonthCost perAnnumCost forFive YearsBuilding Rent50,000600,0003,000,000Administrative Cost10,000120,000600,000Office Supply5,00060,000300,000Electricity (Lighting)10,000120,000600,000Miscellaneous20,000240,0001,200,000Total Routine Cost (Rs)95,0001,140,0005,700,000Table 2: Fixed Personnel Expenses (in Rs)PersonnelCostExpensesCost perMonthCost perAnnumCost forFive YearsWorkers100,0001,200,0006,000,000Office Assistance20,000240,0001,200,000Watchman15,000180,000900,000Drivers25,000300,0001,500,000ProductionManager(Sharma)50,000600,0003,000,000Total Personnel Cost(Rs)210,0002,520,00012,600,000Table 3: Interest on Loan (in Rs)InterestExpensesInterest perMonthInterest perAnnumInterest For 5Years12% Rate40,000480,0002,400,000Table 4: Total Fixed Cost (in Rs)2
Cost perMonthCost perAnnum

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