LIQUID CHEMICAL COMPANY

Make Containers & Perform Maintenance

Materials
Labour
Manager's salary
Depreciation of M/C
Maintenance of M/C
Other Expenses
Warehouse rent
Cost in each yr

Yr - 1
Yr - 2
Yr - 3
Yr - 4
7,000.00 7,000.00 7,000.00 7,000.00
5,000.00 5,000.00 5,000.00 5,000.00
800.00
800.00
800.00
800.00
1,500.00 1,500.00 1,500.00 1,500.00
360.00
360.00
360.00
360.00
1,575.00 1,575.00 1,575.00 1,575.00
850.00
850.00
850.00
850.00
17,085.00 17,085.00 17,085.00 17,085.00 68,340.00

Buy Containers & Buy Maintenance

Loss in sale of M/C

Loss in sale of GHL stock
Pension
Container contract
Maintenance contract
Cost in each yr

Yr - 1
Yr - 2
Yr - 3
Yr - 4
4,000.00
1,600.00
300.00
300.00
300.00
300.00
12,500.00 12,500.00 12,500.00 12,500.00
3,750.00 3,750.00 3,750.00 3,750.00
22,150.00 16,550.00 16,550.00 16,550.00 71,800.00

Buy Containers & Perform Maintenance

Loss in sale of M/C

Loss in sale of GHL stock
Material
Labour
Foreman's salary
Other Expenses
Container contract
Cost in each yr

Yr - 1
Yr - 2
Yr - 3
Yr - 4
4,000.00
1,600.00
700.00
700.00
700.00
700.00
1,000.00 1,000.00 1,000.00 1,000.00
500.00
500.00
500.00
500.00
650.00
650.00
650.00
650.00
12,500.00 12,500.00 12,500.00 12,500.00
20,950.00 15,350.00 15,350.00 15,350.00 67,000.00

Indian Electricals Ltd.

Year

Order
1964
1965
1966
1967
1968
1969
1970

250
750
1000
1000
1000
1000
1000

100%

In short term, we assume that only the 250 order has been received. The variable costs are only taken
into consideration.
Selling Price =

1,680.00
Variable costs
Material Costs
Labour + Manufacturing overheads
Labour + Assembly overheads
Electroplating
Change Giving Mechanism

Investment into tooling

Material
Opportunity costs (switch gear)
Other Equipments

Profit / Loss =

58.31
67.31
25.30
92.25
89.00
332.17

50,000.00 The direct labour & overheads are not taken

330,000.00 as there is idle capacity which has already been
39,000.00 accounted for.
419,000.00
( 103,042) If no subsequent order is received.

Long term
In long term, the resources will be utilized hence the overheads have to be taken into consideration.
The opportunity costs of switchgear is not taken as it is assumed that resources will be added to
compensate the constraint. Product overheads are not envisaged, hence not considered.
Material Costs
Labour & overheads manufacturing
Labour & overheads assembly
Electroplating
Ammortization on tooling M/C
Cost of Change giving Mechanism

Order contracted per yr =

ROI required =
ROI per machine =

Price per machine =

58.31
224.37
84.32
92.25
309.07
89.00
857.32
500
247,258.00 ROI required is 10% of 6.18lakh every yr. Tax
is 50% hence 20% taken in calculation
123.63 Every yr, the machines pay off certain the
investment, hence average is taken.
1,068.74 The initial loss is covered within 6 yrs & 5%
royalty

Indian Electricals Ltd.

Scenario Summary
Current Values:

Changing Cells:
order_qty
500
Result Cells:
Price_MC
1,068.74

250

400

500

750

250

400

500

750

1,235.03

1,110.31

1,068.74

1,013.31

Indian Electricals Ltd.

Quantity of Vending M/C

able costs are only taken

250

Material Costs
Labour & overheads manufacturing
Labour & overheads assembly
Electroplating
Investment on tooling M/C
Product Overheads
Cost of Change giving Mechanism
Opportunity Costs (Switchgear)

14,577.50
134,622.00
50,592.00
23,062.50
618,145.00
126,149.85
22,250.00
330,000.00
1,319,398.85

Selling Price of vending M/C

Sales Revenue =
Sales Pricing required for profit =

Cost per unit

58.31
224.37
84.32
92.25

89

1,680.00
420,000.00
5,277.60

Profit
Tax

- 899,398.85

Scenario Summary

our & overheads are not taken

e capacity which has already been

Changing Cells:
Qty
Result Cells:
Total_cost
Sales
Req_sell_Price

Current Values:

250

750

1000

250

250

750

1000

1,319,398.85 1,319,398.85 1,503,719.88 1,595,880.39

420,000.00
420,000.00 1,260,000.00 1,680,000.00
5,277.60
5,277.60
2,004.96
1,595.88

ken into consideration.

Fixed Costs
Overheads Manufacturing
Overheads Assembly
Investment in tooling
Opportunity costs (switchgear)
Product overheads (15%)

117794.25
44268.00
618145.00
330000.00
166531.09
1276738.34

s 10% of 6.18lakh every yr. Tax

20% taken in calculation
machines pay off certain the
ence average is taken.

Variable costs
Material costs
Labour + Overheads Manufacturing
Labour + Overheads Assembly
Electroplating
Change giving mechanism
Product overheads (15%)

58.31
67.31
25.30
92.25
89.00
41.08
373.25

is covered within 6 yrs & 5%

Quantity req. to make

it profitable
977

Indian Electricals Ltd.

1000
Created by Rahil on
20-11-2013

1000
985.59

Indian Electricals Ltd.

2000

2000
1,964,522.44
3,360,000.00
982.26

Quantity req. to make