Report Chem 17 Assignment 4

UNIVERSITAS INDONESIA
ANTI-MOSQUITO AIR FRESHENER
Report Assignment 4
GROUP 17
GROUP PERSONNEL
HANNA JULIA
(1206202066)
JONATHAN
(1206202040)
MOHAMAD AMIRUDIN
(1206240650)
REXY DARMAWAN
(1206202103)
USWATUN NUR KHAZANAH
(1206201946)
CHEMICAL ENGINEERING DEPARTMENT

ENGINEERING FACULTY
UNIVERSITAS INDONESIA
DEPOK 2015
EXECUTIVE SUMMARY
In this report we will explain about our product supply chain and economic
analysis. We will distribute our product in Java Island which is divided into three
regions. There are West Java and DKI Jakarta as Region I, Central Java and DI
Yogyakarta as Region II and East Java as Region III. We distribute our product by
six trucks which is transport through North and South Java Beach Line. Which is
North line end up his transportation in Surabaya, while South line end up in Jember.
The distribution of our product will occur in every week with set percentage 40%
to Region I and 30% for each Region II and Region III. The marketing integration
of our product is we distribute all of our product to wholesaler in Java and promote
our product through media, radio and our website. We have three inventories there
are raw material inventory, work in process inventory and product inventory. This
inventory is use to if there is any accident that inhibit our production.
Our capital cost is about 5.316 Billion Rupiah; our operating cost per year
is about 54.032 Billion Rupiah and our revenue is about 70 Billion Rupiah per year.
The payback period of our plan tis about 4 years with the breakeven point about
87,000 packs of anti-mosquito air freshener. Our interest rate or IRR of 33%. Large
IRR is greater than a predetermined MARR which is 12%, this shows the air
freshener anti-mosquito products have a good level of economy.
The product price changing will affect IRR, NPV, and Payback Period
values significantly. For the raw material, the changes will affect less than the
product price changes. Meanwhile for operating labour, we can infer that their
changes will not significantly affect IRR, NPV, and Payback Period values.
ii
Universitas Indonesia
LIST OF CONTENTS
EXECUTIVE SUMMARY..................................................................................... ii
LIST OF CONTENTS ........................................................................................... iii
LIST OF FIGURES ............................................................................................... iv
LIST OF TABLES .................................................................................................. v
CHAPTER 8 : SUPPLY CHAIN ............................................................................ 1
8.1. Supply Chain .................................................................................................. 1
8.1.1. Plant Location ........................................................................................... 1
8.1.2. Raw Material Distribution ........................................................................ 3
8.1.3. Product Distribution and Distributing Product Method .......................... 11
8.1.4. Inventory ................................................................................................. 19
8.2.
Fluctuation in Raw Material and Products in the Distribution Center.... 21
8.3.
Marketing ................................................................................................ 24
8.3.1. Target Determination .............................................................................. 24
8.3.2. Marketing Integration ............................................................................. 25
CHAPTER 9 : ECONOMIC ANALYSIS ............................................................ 27
9.1.
Capital Investment (CAPEX) ................................................................. 27
9.1.1. Bare Modul Cost or Fixed Capital Cost .................................................. 28
9.1.2. Other Investment ..................................................................................... 34
9.2.
Operating Cost (OPEX) .......................................................................... 38
9.2.1. Manufacturing Cost ................................................................................ 38
9.2.2. General Expenses Cost ........................................................................... 44
9.3.
Economic Analysis ................................................................................. 53
9.3.1. Product Price Determination ................................................................... 53
9.3.2. Cash Flow Analysis ................................................................................ 54
9.3.3. Cost Breakdown ...................................................................................... 59
9.4.
Profitability Analysis .............................................................................. 59
9.4.1. Payback Period........................................................................................ 59
9.4.2. Breakeven Point ...................................................................................... 60
9.4.3. Internal Rate of Return (IRR) ................................................................. 61
9.4.4. Net Present Value (NPV) ........................................................................ 65
9.4.5. Sensitivity Analysis ................................................................................ 66
CHAPTER 10 : CONCLUSION........................................................................... 71
REFERENCE ........................................................................................................ 72
iii
LIST OF FIGURES
Figure 8.1 Plant Location ...................................................................................... 3

Figure 8.2. Packaging Our Products ...................................................................... 5
Figure 8.3 Map of Java ......................................................................................... 13
Figure 8.4 Alternatives Product Distribution ...................................................... 17
Figure 8.5 Alternatives of Route Distribution ..................................................... 18
Figure 8.6 Route Distribution ............................................................................. 18
Figure 8.7 Distribution Process by Truck ........................................................... 19
Figure 8.8 Product Inventory In Plant Graph ...................................................... 22
Figure 8.9 Product Inventory In Region I Wholesaler ........................................ 23
Figure 8.10 Product Inventory In Region II Wholeseller .................................... 23
Figure 8.11 Product Inventory In Region III Wholeseller .................................. 24
Figure 9.1 CiaoBellaTM Branding Logo .............................................................. 36
Figure 9.2 Cash Flow Graph ............................................................................... 58
Figure 9.3 Cost Breakdown Graph ...................................................................... 59
Figure 9.4 The Payback Period Graph ................................................................ 60
Figure 9.5. IRR Sensitivity Graph ....................................................................... 68
Figure 9.6. NPV Sensitivity Graph ..................................................................... 69
Figure 9.7. Payback Period Sensitivity Graph .................................................... 70
iv
LIST OF TABLES
Table 8.1 Data and Location Supplier.....................................................................4

Table 8.2 Modelling and Scenarios Supplier Our Products.................................. ..6
Table 8.3 List First and Second Supplier Our Products . 7
Table 8.4 Plan Consuming and Ordering Raw Materials ...9
Table 8.5 Scheduling Raw Material . 10
Table 8.6 The Cities Target on Each Province 14
Table 8.7 Percentage of Distribution on Each Region . 14
Table 8.8 Total Amount Wholesaler on Each Region ..15
Table 8.9 Total Amount Our Products in Each City per Week 16
Table 8.10 Percentage of Distribution ..25
Table 9.1 Bare Module Factor ..29
Table 9.2 Main Equipment Cost ...30
Table 9.3 Total Bare Module Cost Calculation 31
Table 9.4 Plant Rearrangement and Modification Cost ... 32
Table 9.5 Summary of Utility Installation Cost ... 32
Table 9.6 Supporting Equipment Cost . 33
Table 9.7 Market Research Cost .. 34
Table 9.8 Patent Fee Details .35
Table 9.9 Brand Fee Details . 36
Table 9.10 Total Permanent Investment and Fixed Capital Cost 37
Table 9.11 Total Capital Investment Calculation .38
Table 9.12 Number of Operator and Worker in Each Process . 40
Table 9.13 Total Direct Labor .. 40
Table 9.14 Total Raw and Packaging Material Cost 41
Table 9.15 Electricity Needs for Main Equipments . 42
Table 9.16 Annual Insurance Cost ... 44
Table 9.17 Annual Indirect Labors Cost .............................................................. 45
Table 9.18 Electricity Needs for Supporting Equipments 47
Table 9.19 Annual Cost of Water Consumption .. 48
v
Table 9.20 Annual Cost of Communication .48

Table 9.21 Annual Marketing Cost .. 49
Table 9.22 Annual Distribution Cost 50
Table 9.23 BCA Loan Payment 51
Table 9.24 Investor Loan Payment ...51
Table 9.25 Total Financial Interest ...52
Table 9.26 Total Operating Cost (TOC) ...52
Table 9.27 Determination of Product Price ..54
Table 9.28 Cash Flow for Ciao BellaTM Company .. 56
Table 9.29 Cash flow calculation . 63
Table 9.30.Cash flow calculation . 63
Table 9.31 .Cash flow calculation 63
Table 9.32.Cash flow calculation ......................................................................... 64
Tabel 9.33 .NPV Calculation 65
Table 9.34 Calculation for sensitivity .................................................................. 66
Table 9.35 Calculation for sensitivity analysis .67
Table 9.36 Calculation for sensitivity analysis .67
vi
CHAPTER 8
SUPPLY CHAIN
8.1. Supply Chain
Supply chain management is a cross-function approach include in managing
the movement of raw materials into an organization, certain aspects of the internal
processing materials into finished products, and the movement of finished products
out of the organization and toward the consumer. As organizations strive to focus
on core competences and becoming more flexible, it reduces its ownership of raw
materials sources and distibution channels. These functions are increasingly being
outsourced to other entities that can perform the activities better or more cost
effectively. The effect is to increase the number of organizations involved in
satisfying customer demand, while reducing management control of daily logistics
operations. Less control and more supply chain partners led to the creation of supply
chain management concepts. The purpose of supply chain management is to
improve trust and collaboration among supply chain partners, thus improving
inventory visibilty and the velocity of inventory movement.This chapter become
important because by the supply chain system we have anticipated the worse case
our production, so our production will not disrupt if anything else come.
The marketing of our product is relied on distribution from producers to the
consumer. We need some strategies to sell the product to get more profits. One of
the strategies is determined the distribution strategy. The marketing of our product,
we implement centralized distribution strategy. Centralized distribution is done by
delivering products directly to consumers through several wholesalers available in
spesific areas. We apply a distribution channel with a short groove. So that
manufacturers can more easily conduct surveillance. Short distribution channel we
use is a major manufacturer that sells products to wholesalers. Then, wholesaler
resell the product to the consumer or resell to the retailers.
8.1.1. Plant Location
Plant location is one of the most important factors that determine the
sustainability of entire physical activity in manufacturing our product that is started
from taking raw materials, manufacture processes until the distribution of the
product until reach consumers. Selecting the plant location requires careful
1
consideration because it can automatically reduce the manufacturing cost. There

are many factors can affect plant location selection. All factors that affect plant
location selection can be divided into two types are:
Primary Factors
Primary factors are factors needed by all types of industry. Primary factors
consist of closeness with raw material source location, closeness with product
market location, availability of transport facility, availability of labor, availability
of power
Secondary factors
Secondary factors are factors needed by some type of industry but not needed
by another type of industry. Examples of secondary factors are plant future plan.
Probability of plant extension, equipment service facility, land and building cost,
local regulations, environment condition, and climate.
From those considerations, we decide to choose our plant location in an
industrial area because the infrastructure available there are already settled and
close the suppliers of raw material our products so we can build our plant readily.
Locations accessibility our plant location must not be too far from the suppliers of
raw materials and the distributor s of our product. The main target for our market
are houses and boarding houses. So our plant location must be easy to access for
distributing our products to those areas
We choose on factory production activity at one location that is close to raw
materials, markets and ease of product distribution. Indonesia has Jabodetabek area
as the best infrastructure development area to support manufacturing activity since
it has critical infrastructure as electrical, water, gas, road access, workface quality
and port availabilities. Because of shortage industrial area and increasing land
prices, manufactures have to find relatively new industrial area with low land prices
and complete infrastructure. Based on list and industrial area average price we
choose Bogor region to build our plant. Specifically located in industrial area
Purbajaya, Cibinong, Bogor, West Java. Here the map of location our factory
Figure 8.1 Plant Location (Cibinong,Bogor,West Java)

(Source: Google earth,2015)
Cibinong has several benefits like relatively near to our raw material supplier in the
West Java Island and low land price too. Cibinong also is not far from capital city
like Bandung, Jakarta, Depok, Bekasi which are one of our consumer market target.
8.1.2. Raw Material Distribution
Distribution of raw materials is one of the essential things that need to be
considered in determining the location of the plant since it affects the costs to be
incurred and also the sustainability of production. There are three parameters that
need to be considered in determining supplier: price, distance and the availibily or
security of supply. It is important to mantain the smooth flow of raw materials and
ultimately a smooth of product to the consumer. The distribution of the raw
materials up to factory warehouse is assumed become the responsibility of supplier
and it is included at the signed contract. Before it is sent, we need to determine how
much the raw materials that should be ordered, the order time, and when will the
raw materials arrived at our factory. Besides all of that, we need to calculate storage
life of the raw materials so that ordered raw materials are not over storage capacity
or accumulated in storage room.
8.1.2.1. Raw Material Location

To make sure our supply of components which are needed in order to make
our product, we have to know where we can get its component. Those components
as a raw material should be as near as possible from our plant location because if
we can get the component quite near from our plant, so the costs which will be paid
by us become lower than if raw material is quite far from our plant. We provide at
least two suppliers so that when there is congestion supply of the first supplier we
can direct back-up and the plant can continue to stay run
Table 8.1 Data and Location Supplier
No
Raw Material
Dried Orange
Peel (Citrus
Sinensis)
Lavender
Essential Oil
(Lavandula
Agustifolia)
BourbonMadagascar
vanilla
Ethanol 90%
Supplier 1
Location
Supplier 1
Supplier 2
Location
Supplier
2
CV. M&H
Farm
Bogor, West
Java, Indonesia
CV Herbal
Export
Jakarta,
Indonesia
CV. M&H
Farm
Bogor, West
Java, Indonesia
PT Sarana
Bela Nusa
Jakarta
Indonesia
PT Tripper
Nature
Jakarta,
Indonesia
PT Tripper
Nature,
Jakarta,
Indonesia
PD. Cipta
Bangun
Nauli
Bogor, West
Java, Indonesia
PT ICMI
Garut,
Indonesia
PT.
Hydrogel
Nalpreme
(Polyacrylamide) Technochem
Packaging (
Acrylic Jar)
Ningbo
Somewang
Packaging
Aluminium Foil
Circle
PT Alsinta
Karta
Surabaya,
Jakarta,
PT
East
Indonesia
Flowersouv
Java,
Indonesia
Taizhou
Zheijang
City,
Blue
Shanghai,China
Zhejiang
Dream Co.,
Province,
Ltd
China
PT Indo
Jakarta,
aluminium Cibitung,
Indonesia
Intikarsa
Bekasi
Industri
(Source: Authors Document)
The table above consist of raw materials and packaging our products, where
the numbers 1-5 is the main raw materials and the number 6-7 are packagaing on
our producs.The material used as our package is made from acrylic, in the previous
assginment we have already featured which is transparent and has holes with a
certain diamter so that the fragrance of hydrogel will be dispersed to the external
environment through the holes while the aluminium foil used as as sealer that the
fragrance is not dispersed when distributed.
Figure 8.2. Packaging Our Products

(Source: Alibaba.com)
8.1.2.2. Alternative Scenarios Modelling

In this section, we will develop model which can help us to determine the
best and effective scenario of put raw material distribution system. The model
which will be develop consist of supplier credibility, the distance needed to arrive
at our plant location, effectiveness of the pathway, the time needed to deliver to our
plant location and the minimum order from the supplier. The supplier credibility
become the most important factor because we will cooperate with these supplier for
at least 5 to 10 years, so we have to choose the supplier that have good credibility
to make sure the supply from them is always adequate. Other criteria is the distance
needed and path ways . Basically if the distance and the pathway is nearest so the
transportation cost become cheaper, and last but not least is the minimum order,
this is important because we do not always consume the minimum order that they
offer to us so we have to adjust our need and their supply in the table 8.1 to see the
modelling and the raw material distribution.
Table 8.2 Modelling and Scenarios Supplier Our Products
No
Raw Materials
Dried Orange
Peel (Citrus
Sinensis)
Lavender
Essential Oil
(Lavandula
Agustifolia)
Tahitian vanilla
Distance,
Distance, Time
Time
Minimum
Distribution,
Distribution,
Order
Price, Pathway
Price,
(S1)
(S1)
Pathway
(S2)
10.5 km, 1
52 km, 1
days, Rp
days, Rp
100,000100,000100 Kg
200,000/kg,
200,000/kg,
Truck
Truck
10.5 km, Rp
90,000/50
litres , 1 days,
Truck
58 km, 3 days,
Rp 300,000/kg
, truck
16,5 km, 1
days, R p
13,000/litres,
truck
69,5 km, 1
days, Rp
600,000700,000/kg,
truck
Ethanol 90%
Hydrogel
(Polyacrylamide)
Packaging
(Acrylic Jar)
4484 km, 4
weeks, $0,15/pcs, shipping
Aluminium Foil
Circle
55 km, 3 days,
Rp 10/pcs ,
truck
100 L
48 km, 1
days, Rp
90,000/50 L,
Truck
58 km, 1
days, Rp
50 Kg
300,000/kg,
truck
296 km, 3
days Rp
500 L
24,800/litres,
truck
823 km, 7
days, Rp
25 kg
700,000800,000/pcs,
truck
4219 km, 4
weeks,
5,000 pcs
$0,25/pcs
shipping
71 km, Rp
100,000
12/pcs, 1
pcs
days, truck
Minimum
Order
(S2)
150 kg
200 L
50 kg
500 L
30 kg
10,000
pcs
100,000
pcs
From the tables above, we can choose the priority of our future supplier.
Basically we do not have sufficient information to know the credibility of all the
supplier above, so we assume that all the suppliers above have good credibility.
Then, we have to consider the distance of the supplier, we have to choose the
supplier which have the nearest path. But we already see that in each raw material,
the location of those two supplier is almost same, so we have to choose the supplier
that offer the amount of minimum order less than other. In the terms of price offered
is less than the first supplier, so the second supplier will be the second option if the
first supplier unable to suppply the needs of our factory. In the packaging (acrylic
jar) supplier is the only supplier comes from abroad so we need to transport them
through the shipping. In the packaging also, the distance farther than the second
supplier but the price is cheaper and the minium order is also much smaller in the
first supplier. Based on the those 5 parameters, we can determine the priority of our
supplier.
Table 8.3 List First and Second Supplier Our Products
No
1
2
3
Raw Material
Dried Orange Peel
(Citrus Sinensis)
Lavender Essential Oil
(Lavandula Agustifolia)
Bourbon-Madagascar
vanilla or Tahitian
vanilla
Ethanol 90%
Hydrogel
(Polyacrylamide)
Packaging ( Acrylic Jar)
Aluminium Foil Circle
First Priority
CV. M&H
Farm
CV. M&H
Farm
Second Priority
CV Herbal
Export
PT Sarana Bela
Nusa
PT Tripper
Nature
PT Tripper
Nature,
PD. Cipta
Bangun
Nauli
PT.
Nalpreme
Technochem
Ningbo
Somewang
Packaging
PT Alsinta
Karta
PT ICMI
PT Flowersouv
Zheijang Blue
Dream Co., Ltd
PT Indo
aluminium
Intikarsa
Industri
8.1.2.3. Raw Material Supply Chain ad Scheduling

This section the discussion is directed to how we manage the supply of raw
material from supplier. The raw material that we order will be delivered from the
supplier from domestic and abroad. For domestic supplier, all the supplier is from
Jakarta and for abroad, all the suppliers are from China. For the suppliers located in
Jakarta which have distance only 10-50 km, the raw material is quite easy to be
delivered, the delivery of the raw materials will be carried by any land
transportation, such as large box truck. And for supplier from China, the delivery
of raw materials will be transported with ships across continents to Indonesias port,
Tanjung Priuk port, and then will be continued with the large box truck to reach our
plant location in Marunda industrial area. The cost of delivery up to the plant
warehouse assumed to be the responsibility of the suppliers and included in the
contract that were made. For some particular cases, there will also be an agreement
for who will pay the cost of delivery.
Before the raw material is arrived from the supplier, we have know how
long the delivery takes time, so when the plan stars up, the raw material is ready to
be used. It is also important to strategize how the raw materials will be kept and for
how long, so that the raw materials did not accumulate for too long. The time
needed for the raw materials are arrived in our plant for domestic supplier is one
day by large box transportation, so we have to order the raw material maximum one
day before the production starts up. While for supplier from China, the distribution
time is 4 weeks, so we have to order at least one month before production starts.
When we are going to order some amount of raw material, we have toadjust their
minimum order value. We do not have permitted to order less then their minimum
order value. For the first order, the amount of raw materials for the first production
are ordered 10-15% more from the initial amount to anticipate the disturbance in
first production. Thus if they come trouble when production start, the manufacture
process will not stopped because of the raw material has run out.
In this scheduling there are two steps, fisrt is order the materials, and second
is the time materials are received. We order raw material once a month for the
materials which are in Indonesia and once in 6 months
Table 8.4 Plan Consuming and Ordering Raw Materials
No
Raw
Material
Plant
Daily
Consu
m
Dried
Orange Peel
(Citrus
157 kg
Sinensis)
Lavender
Essential Oil
(Lavandula 161 kg
Agustifolia)
BourbonMadagascar
vanilla or
16 kg
Tahitian
vanilla
Ethanol 90%
1813
kg
Hydrogel
(Polyacryla
mide)
6,5 kg
Packaging
(Acrylic Jar)
Aluminium
Foil Circle
8467
pcs
8467
pcs
(d=10
0 mm)
Plant
1
Mont
h
First
Supplier
Minimu
m Order
Dist.
Time
(days
)
First
Order
100 Kg
5,000 kg
4710
kg
CV.
M&H
Farm
4830
kg
CV.
M&H
Farm
100 kg
480
kg
PT
Tripper
Nature
50 Kg
PD. Cipta
Bangun
Nauli
PT.
195 Nalpreme
kg
Technoch
em
Ningbo
254,0 Somewan
10
g
pcs Packaging
5439
0 kg
254,0
10
pcs
PT
Alsinta
Karta
500 L
25 kg
5,000
pcs
30
1,000
pcs
5,000 kg
500 Kg
55,000 kg
250 kg
255,000
pcs
255,000
pcs
10
Table 8.5 Scheduling Raw Material
N
o
Raw
Material
Dried
Peel
Orange
Lavender
Oil
Tahitian
Vanilla
Ethanol
90%
Hydrogel
Acrylic
Jar
Aluminiu
m Foil
Circle
Schedule
DESEMBER
I II I
I
I I V
January
I II I
I
I I V
February
I II I
I
I I V
March
I II I
I I V
I
I
April
II I
I V
I
I
May
II
I
I
V
I
I
June
II
I
I
V
Ordering
Consumi
ng
Ordering
Consumi
ng
Ordering
Consumi
ng
Ordering
Consumi
ng
Ordering
Consumi
ng
Ordering
Consumi
ng
Ordering
Consumi
ng
*ordered in every month

(Detail: Blue: Order to supplier; Green: Arrival Raw Material; Yellow: Distribution Materia; from supplier; Pink : Consumption Raw Material)
11
Our anti-mosquito air freshener product will be packaged by acrylic jar and
between the lid there is a circle of aluminum foil to prevent dispersion into the
environment, as in seal products we put in cardboard boxes and ready to be
distributed to wholesalers and retailers until finally arriving at the consumer. We
make a reservation in December because the plant will run from January 2015, due
to acrylic jar takes up to 4 weeks to arrive at the factory. Because we still do not
know the credibility of suppliers, we still place an order once a month during the
period of 2 years, after our factory has gained the advantage and was able to occupy
market, the scheduling of raw material is converted into once a year and also
increase the value of its products.
8.1.3. Product Distribution and Distributing Product Method

Selecting the best way in terms of distributing our product is one of the
biggest considerations that our group had to make a decision. By selecting the best
method in term of distribution method, later this decision will lead our factory to
gain more profits. Considering our products targeted to middle-income people and
easily found in supermarkets, minimarkets, up to the stalls, the distribution process
should be evenly but still considering a request from each region. Then our group
decide to use traditional distribution model as a starting point. The conventional
distributing model has three levels, which are the produce (our factory), the
wholesaler, and the retailer. This is a time-tested with many well-established
members at all levels. The conventional distribution model, however, calls for all
parties in the channel to protect their own best interest. Thus, retailers are pitted
against wholesalers, and wholesalers try to become the best producers to
consumers.
This web of conflicting interest sometimes works to the detriment of the
entire system. For instance a producer may try by pass the wholesaler and go
straight to retailers, prompting the wholesaler to retaliate by dropping the
producers products. One fact that surely we must accept is by bypassing the
wholesaler and go straight to retailers will lead us to gain a greater profit, and we
will fit a far greater benefits if we bypassing wholesaler and retailer at once and
decided to do a direct distribution method. By doing a direct distribution method it
12
calls for us to sell and deliver our own product using our own salespeople and
warehouses. Going direct can cut significant costs from the system because we dont
have to provide a profit for intermediaries such as wholesalers and retailers, but
slicing two steps from the traditional distribution channel tends to alienate
wholesalers and retailers.
So, before we decide to go direct, we have to make sure we dont need these
other channels of distribution later in the future, because if we decide to use them
later, they may not be available to us in the future. So by basing on the existing
theory, then our group decided to use a wholesaler and retailer roles as part of our
distribution method our products. If later on as time goes by we have found a pattern
of market demand for our products, then it will be the basis of a review of the redistribution method that we'll use later on the future. If we found that latter the
market demand for our product decreasing over a certain time, then we decided to
bypass one of the intermediaries whether its wholesaler or retailer. But if we found
that latter the market demand for our products turns out to be well accepted in the
market level, then we decided to continue the distribution method that we already
selected first.
8.1.3.1. Product Distribution Region
In distributing our sealt product, our group decided to distribute into certain
region. We choose 5 provinces are Jakarta, West Java, East Java, central Java and
Yogyakarta as our focus target region in distributing our sealt product. Of these
provinces we subdivide into cities: Jakarta, Depok, Bogor, Bekasi, Bandung,
Cirebon, Garut, Tasikmalaya, Ciamis, Cianjur, Karawang, Kuningan, Indramayu,
Majalengka, Purwakarta, Cimahi, Sukabumi. The city of Jakarta and West Java
serve as region 1 as closest to the plant, then we divide the second region into the
cities in Central Java and Yogyakarta: Semarang, Banjarnegara, Banyumas, Batang,
Blora, Boyolali, Brebes, Cilacap, Demak, Kebumen , Jepara, Klaten, Kudus,
Magelang, Pati, Pekalongan, Pemalang, Purbalingga, Purworejo, Rembang,
Sragen, Sukoharjo, Tegal, Wonogiri, Pekalongan, Salatiga, Surakarta, Sleman,
Yogyakarta and Bantul. The third region of the distribution of our products are
Banyuwangi, Surabaya, Blitar, Bojonegoro, Gresik, Jember, Jombang, Kediri,
13
Lamongan, Madiun, Malang, Mojokerto, Ngawi, Pacitan, Pasuruan, Probolinggo,

Sidoarjo, Blitar, and Probolinggo. Of the cities we reduce again by big cities and
some small cities that will be the target of the distribution of our product, because
our products are still not as big as the existing air fresehener in market such as
Stella, water wick, bayfresh and Glade. After we discuss, we decided to opt for
West Java and Jakarta as region 1, Central Java and Yogayakarta as East Java region
II and III seabagi region. Here is a map of Java where our plant is located in the
western part of the island of Java, thus closest to the plant is the region I, and the
farthest is the region III.
Figure 8.3 Map of Java

(Source: pixshark.com)
The first reason we choose five provinces because five of the province are
the provinces with the highest number of households and the city is a city that has
a university because our targets are also students who in boarding house also
considered, so it would be an attractive market for our products, and because our
product have anti mosquito in it is supported also by the data that the province is
the fifth highest population of patients with dengue fever, it means that the province
does require products which can repel and kill mosquitoes. In addition other
additional factors are the most steady economic growth and the number of middleincome population also comes at the most on the island of Java
Moving the last reason, which is about the effectivity to deliver our products
to consumer with considering about the plant location. As we first stated above,
where our plant location likely to be established in the area of industry in Bogor.
Here the summary of each region where our sealt product is distributed
14
Table 8.6 The Cities Target on Each Province
No
Provinsi
DKI Jakarta
Kabupaten/Kota
Jakarta Selatan, Jakarta Barat, Jakarta Timur,
Jakarta Pusat, Jakarta Utara
Bandung, Bogor, Bekasi, Cirebon, Depok,
West Java
Garut, Tasikmalaya, Indramayu, Cianjur,

Sukabumi, Karawang
Central Java
D.I Yogyakarta
East Java
Semarang, Purwokerto, Brebes, Solo, Demak,

Jepara, Kudus, Magelang, Tegal
Yogayakarta, Bantul, Sleman
Surabaya, Malang, Madiun, Tulungagung,
Jember
Cities in the above is the target of our distribution, on several considerations

such as the condition of the town, population and economy we decided to spread
out in the cities above as a distributor. We will cooperate with a spesific wholesaler
for each region in conducting our product distribution. Wholesaler itself means a
corporation that buys and sells a great amount of products with variative quality of
products and variative form. The wholesaler that we choose to distribute our
product is a well known wholesaler and also a wholesaler with an easily accesible
location, so that the consumer can easily obtain the target of our product, our
wholesaler such as Hero, LotteMart, Giant, Hypermart, Yogya Toserba, Surya
Toserba, and Carrefour.
Table 8.7 Percentage of Distribution on Each Region
Region
Percentage
40%
II
30%
III
30%
15
Table 8.8 Total Amount Wholesaler on Each Region
No
Region
Wholesaler
Amount
Hypermart
32
Giant
32
Lottemart
32
Carrefour
32
Toserba Yogya
42
Hero
30
Hypermart
25
Giant
25
Lottemart
25
Carrefour
25
Toserba Yogya
25
Hero
25
Hypermart
25
Giant
25
Lottemart
25
II
III
From the list above, wholesaler in each region will get a number of products
which will be adjusted for the percentage distribution of our products, because our
product still new in the market so we can not be evenly distributed in all the
distributors of the city that became the target of our products. Our group also
arranged for the distribution system above can be evenly distributed, the number of
wholesaler above also do not cover the total number of existing wholesaler, amount
of wholesaler above have been decided by a variety of considerations, according to
the conditions of each region. Additionally in the table 8.7 are described the number
of our product distribution division
16
Table 8.9 Total Amount Our Products in Each City per Week
No Region
1
I
II
III
Cities
Total Amount Distribution Our Product

(pcs/week)
Jakarta
20,340
Bandung
10,000
Bekasi
10,000
Bogor
10,000
Ciayumajakuning
15,207
Garut
5207
Tasikmalaya
5207
Cianjur
5207
Sukabumi
5207
Depok
10,000
Karawang
5207
Semarang
10,000
Solo
10,000
Purwokerto
5134
Brebes
5134
Demak
5134
Jepara
5134
Kudus
5134
Magelang
5134
Tegal
5134
Yogyakarta
10,000
Bantul
5134
Sleman
5134
Surabaya
22,861
Malang
22,861
Madiun
7620
Tulungagung
7620
Jember
15,240
17
Can be seen in the above data that the number of the deployment of our products
will be kept evenly but due consideration of a large number of requests in the area of a
particular area so that there are some areas the number of households, the condition of
the region, as well as our consumers' income. This proves that the area in need
compared to other regions.
8.1.3.2. Product Distribution Chain
The product that had been made will be saved in storage for distribution to
consumer. We will buy a truck with a number that has been considered to facilitate
the process of transportation, other than that this truck will be an investment for our
factory. That product then will be distributed to wholesaler by using some
alternatives below:
Plant Location
Bogor
(Industrial Area)
6 Supplier Local
Product
Distribution
Raw Material
Supplier
1 Supplier
Import
Route 1 (North)
Distribution
Route
Route 2 (South)
Figure 8.4 Alternatives Product Distribution
We decided to just use the truck as the truck has a large capacity, relatively
quick time to get to the distributor on time, and the distance between the plant with
distribution targets can still be reached using the strip of land, a reason not to use
the train because the train line is limited to city bypassed, and will give cost more
from the station to the location of distribution.
18
8.1.3.3. Distribution Route and Transportation

Below is the route to be traversed to get to the areas of distribution, there
are two routes that will be used. Both were selected based on the effectiveness of
time spent because it is in one lane. Of these cities will be distributed again to
retailers, they are who sell of these products in smaller quantities to the general
public. Afterwards, arrive to the consumer that the target market of our products are
households and students in boarding house
Figure 8.5 Alternatives of Route Distribution

Figure 8.6 Route Distribution ( Green Line: Route 1; Red Line: Route 2, Blue triangle: Plant
Location, Pink Triangle: Last Distribution City )
Previously has been explained briefly why our products use the truck as
transportation to deliver our products to the distributor. By using the first truck
departs from Bogor which the location of our factory is located, and then is
distributed by truck, after reaching the destination of such products is kept by a
19
wholesaler, direct sell to the consumer also depends on the decision of the
distributor, then to retailers who intend to resell it after buy from the wholesaler, so
as to reach the consumer user of our products can be directly from the distributor
or through the retailer first.
Figure 8.7 Distribution Process by Truck

Light blue above illustrates that consumers to get the our products either
through a retailer or directly from the wholesaler. Trucks that we use is a mediumsized truck with a capacity of 8,000 kilograms, if a box of our products contains 12
pieces weighing 2280 grams, so that the amount of load that can be carried by a
truck is 3508 pcs.
8.1.4. Inventory
8.1.4.1. Raw Material Inventory
The raw materials used in the production of Anti-Mosquito Air Fresheners
are mostly chemical compounds. Chemical compounds used in the production of a
diverse nature compounds derived from nature, characteristics and so compounds.
Given this diversity, it takes a special storage space for storing raw materials
production.
1.
Buffer Inventory
Inventory is sometimes used to protect against the uncertainties of supply and
demand, as well as unpredictable events such as poor delivery reliability or poor
20
quality of a supplier's products. Inventory is used to prevent any out of stock. So,
we can use raw materials that can replace the role of raw material stocks are
depleted.
2.
Anticipation Inventory
Anticipation inventory is used to prevent delaying on production as a result of
delays in the distribution of raw materials. Therefore, when the raw material is
delayed, it can be anticipated with the raw materials that are still present in the
storage room. In addition, anticipation inventory is also done in order to cope with
increasing demand. So that production can be enhanced Anti-Mosquito Air
Fresheners with stock material available backup in the storage room.
8.1.4.2. Work In Process Inventory
The uses of tool during the process also require an inventory. This is
because there is a certain period in an experienced maintenance tool that causes the
device to be replaced with another tool. In addition, the uses of tool during the
process cant separated from the time of usage. Therefore, when the uses of
production tools which has used intemperate use, it is possible that the device will
be damaged. This tool inventory can be called with Decoupling Inventory.
8.1.4.3. Product Inventory
Inventory the Anti-Mosquito Air Freshener products can be done by storing
the products in the storage room. We must keep this room dry and humidity.
Because the moisture will be maintained to minimize the possibility of experiencing
the process of hygroscopic tablets. The presence of the hygroscopic effect on the
structure of the tablet. The change will affect the structure of the tablet hardness of
tablets. Storage effervescent tablets must be in a condition that can be protected
from water and outside air.
Storage room should in a large area to keep the product for at least one
month. Storage is used to anticipate when there is an increasing of demand for raw
materials or shipping inhibited to make Anti-Mosquito Air Freshener products.
There are 2 types of inventory that can be done on Anti-Mosquito Air Freshener
products.
21
1. Cycle Inventory
Cycle inventory is inventory that is carried out in order to comply with the
request in accordance with the product order. Inventory capacity of the inventory
cycle has a value which is equal to the production capacity of a Plant where
production capacity is equal to xxx packages per month.
2. Safety Inventory
Safety inventory is used to anticipate the uncertainty of demand or delay on the
distribution of raw materials required for the production process. Anticipation of
demand uncertainty is because if the number of requests increases, we still find that
the stock has to fulfill the request. Inhibition of the distribution of raw materials can
have an impact on the production process is not running as much as possible so that
the resulting production decrease.
Anti-Mosquito Air Freshener product is produced from the plant does not have
a dependency on a specific time. This is because Anti-Mosquito Air Freshener
products are not seasonal. Anti-Mosquito Air Freshener products is a necessity of
everyday household, so the demand for Anti-Mosquito Air Freshener products tend
to be more stable than the products that use fruit as raw material production
8.2. Fluctuation in Raw Material and Products in the Distribution Center

Fluctuation of raw material and product in the plant can be estimated as
important for us to the ability of producers to meet the market demand at an time
given. In this section, fluctuation in raw material will not to be discussed because
our raw material of our products can be obtained at any time as long as we ordered
it with interval variation. Raw material is divided into 4 kinds there are dried orange
peel, vanilla and lavender essential oil and ethanol. Each of them is ordered with
interval variation, like 7 days for dried orange peel and every month for the essential
oils and ethanol. The fluctuation is already explain in the inventory section.
Basically, we use inventory because of the safety reason, we just prevent that our
raw material have broken when we shall use it, so in every order we buy more than
our need, to be save as our inventory.
22
This section will be focused to explain the fluctuation of our product in the
distribution center in each regions. This fluctuation projection is done with this
assumption below:
1. Production is done with capacity 100%
2. Product transportation to distribution is done in every 5 days
3. Market can receive the entire projection set in the initial for each distribution
center region
4. There is shipping in the first week to stock product
Here are the graphs showing fluctuations in the plant inventory and any existing
distribution center for each region.
80000
70000
60000
50000
40000
30000
20000
10000
0
0
10
15
20
25
30
35
Figure 8.8 Product Inventory In Plant Graph

Source : Authors Document
23
30000
25000
20000
15000
10000
5000
0
0
10
20
30
40
50
60
70
Figure 8.9 Product Inventory In Region I Wholesaler

20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
0
10
20
30
40
50
60
70
Figure 8.10 Product Inventory In Region II Wholeseller

24
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
0
10
20
30
40
50
60
70
Figure 8.11 Product Inventory In Region III Wholeseller

We can see that our plat distributing the product every 7 days or every wee.
There was a shipping since the first week because we have produced our product
in a week approximately 60000 packs.
8.3. Marketing
Marketing is defined as an activity that makes the availability of the product
and can satisfy consumers, and also provide benefits to companies that sells the
product. It is a science of choosing target market through market analysis and
market segmentation on the previous assignment before. Based on them, our
product marketing goal is to promote the product and purpose them to use antimosquito air freshener to freshen their room and make mosquito-free room. Beside
that
8.3.1. Target Determination

For planning and developing our marketing strategy, to determinate our
products target is a must in order to be more focused in the market in accordance
to our products specialty. Our marketing target is a student and household that are
in the upper-middle and lower middle society in Java Island. The reason why we
choose them as our main target is because our product is one of consumer goods in
daily life. So almost every day the consumers buy the new one of air freshener
25
product. The second reason why we choose just Java Island as our main market
because Java Island has a high population in Indonesia, beside that five region that
we choose has a high percentage of dengue patients. This reason is fit to our product
function that is to repel mosquito.
As we discuss above, we have set five region as our main market. There are
DKI Jakarta and West Java as Region I, Central Java and DI Yogyakarta as Region
II, and East Java as Region III. The target that will be set must be fulfill the
segmentation which is consist of geography, demography, psychographic and
behavior. The criteria that must be fulfill for each segmentation are possible to
measure, must be large enough to earn profit and must stable.
We set target for DKI Jakarta and West Java is 40% because it is near to our
plant location to distribute our product. Beside there is a lot of student life in West
Java and Jakarta, especially in Depok and Bandung. This region also has the highest
population in Java. Target for Region II or Central Java and DI Yogyakarta is 30%
because in this region have a second highest population and in this region there life
a lot of students since DI Yogyakarta has a nickname Kota Pelajar. For East Java,
we set 30% because although this province has a large area in Java Island, the
population of house hold and student in boarding house is not as high as in Jakarta,
West Java and Yogyakarta. Besides, to distribute and promote our product to this
region relative more difficult than in Jakarta, West Java, Central Java and
Yogyakarta.
Table 8.10 Percentage of Distribution
Province / Region
Target of Sales of Our Product
Jakarta and West Java/ Region I
40%
Central Java and DI Yogyakarta / Region II
30%
East Java / Region III
30%
(Source : Authors document)
8.3.2. Marketing Integration

The purpose of marketing integration is to create the good packaging
market, get the success vision mission fabric, and to give satisfied the consumers.
It is known as 4Ps, that are product, price, place and promotion strategy. A formal
26
approach to this consumer-focused marketing is known as SIVA (Solution,

Information, Value, and Access).
a) Product
This product name is Ciao Bella. The advantage of this product is can make the
consumer beautiful inside and outside through the function of this product. This
product is can freshen and relaxing the consumer through the fragrant its
contain. The relaxing agent will release anti-stress, anti-anxiety and antidepressant and will make the consumer beauty inside. Beside that, this air
freshener has a function as mosquito repellant. This function will make the
consumer beauty outside without mosquito bites on their body
b) Price
The price of Ciao Bella Anti-Mosquito Air Freshener is IDR 25.000,00. We
estimate that this price is affordable to compete with other air freshener product
and for our consumer to buy.
c) Place
Our product will be distribute through indirect route. We will work with a
variety of retail business and many mini markets and super markets such as
Giant, Alfamart, Indomaret, Carrefour, ACE Hardware and other small shop as
marketing media.
d) Promotion
The need of promotion of Ciao Bella Anti-Mosquito Air Freshener use to spread
information to general public about new air freshener. The promotion will be
done through thse deployment of advertises in television, radio and any other
media, product website, and grand launching.
CHAPTER 9
PRODUTION COST
Our product, CiaoBellaTM, is manufactured in Purbajaya Industrial Estate,
Cibinong, Bogor, West Java. With total area of 600 m2, the plant is intended to
produce about 8,467 CiaoBellaTM per day. To achieve this production target, our
plant operates 24 hours/day from Monday to Sunday (7 working days) with 3 shifts
working time.
A product needs to be good not only in technical aspect but in economical
aspect as well. Because the motivation behind starting a business or establish a plant
is of course to gain profit. Therefore, an accurate economic analysis needs to be
done before build a plant and manufacture a product to see whether it is
economically feasible or not. In the economic analysis, all costs which may affect
the selling price of a product should be taken into consideration. The selling price
of the product includes desired profit and taxes are determined as well. Component
costs are the factors which influence the price of the product the most. There are
two types of costs contained in component costs, fixed costs and operating costs.
Fixed costs are costs that are not influenced by the amount of production and tend
to be the same each year, such as marketing expenses (advertising and promotion),
administrative costs, indirect employee salaries (indirect labor), as well as other
costs that affect the price of the product (insurance, taxes, depreciation). While
operating costs are costs that will change depending on the amount of production
or needs, such as purchase of materials or cost of raw materials and employee
salaries (direct labor).
9.1. Capital Investment (CAPEX)

Total Capital Investment (TCI) or invested capital is all costs that are needed
to design, to build and to start the production. In another words, TCI represents the
total amount of cash needed to begin a product manufacture. TCI consists of fixed
capital cost and working capital cost. The source of fund for TCI can be obtained
from the investor, banks loan or self-raised. TCI itself can be calculated by several
methods. The method that we use to calculate TCI here is Guthrie method. Some
28
data and assumptions below are used in the upcoming section and subchapter to
help us analyze the economical aspect.
1 US$ = Rp 12,876.00 (www.bi.go.id, accessed on April 24th, 2015).
Some equipments have salvage value.
CiaoBellaTM plant will operate 24 hours each day, through 335 days of work
in one year.
Our plant rearrangement and equipment installation process will be finished in

3 months (October until December 2015). So our production process can be
started in the beginning of 2016.
The service life of PT CiaoBella Cantika Nusantara (n) is 10 years.
Depreciation will be conducted using declining balance method.

The Guthrie method to calculate Total Capital Investment (TCI) is shown in
Equation (9.1) below.

TCI = Fixed Capital (FC) + Working Capital (WC)
(9.1)
Where,
Fixed Capital = 1.18 CTPI
(9.2)
CTPI = (CTBM + Csite+building + Coffsite facilities + Cothers )
(9.3)
Therefore, we need to calculate fixed capital and working capital cost first in
order to get the TCIs value.
9.1.1. Bare Modul Cost or Fixed Capital Cost
Fixed capital cost in our company, PT CiaoBella Cantika Nusantara, is
consist of main equipment cost, plant rearrangement and modification cost, offsite
facilities cost, market research cost, and other costs such for patent & branding. All
will be described more detailed below one by one. Fixed capital then can be
calculated by using Equation (9.2) and Equation (9.3), explained earlier.
9.1.1.1. Main Equipment Cost

All the costs that are used to buy main equipments required in the production
process of PT CiaoBella Cantika Nusantara will be discussed in this section. The
cost of an equipment is depend on the type, characteristic, capacity, size or
dimesion, as well as brand/country of origin. Equipments from China are much
29
cheaper compared to Japans, Europes or Americas. So equipments that are made

in China, are more preferable for a starter like us.
Because we hire the plant location, not buy a land and then build it, plus if
everything goes smoothly, we have a plan to buy the equipments in the end of this
year. Hence, because the year in the website where the equipments are sold and the
year when we will purchase them is same, we do need Marshall and Swift Factor
or others similar factor to extrapolate our equipments price in the future.
Then, the result of total main equipment calculation can be seen in Table
9.2. But in Guthrie method, TCI calculation is conducted by adding some cost
calculated based as Bare Module Cost. The bare module factors included FOB
(Free on Board) purchase, equipment instruments and installations (piping,
concrete, steel, controllers, electrical, insulation, and paint), direct labor for
installation (material erection and equipment setting), and also indirect module
expenses (freight, insurance, taxes, construction overhead, and contractor
engineering expenses). TBM cost calculation of each module is multiplied by factor
that obtained from the literature (Table 9.1). For some tools that are not found in
the literature, we use the average of the bare module of all the tools to
marginalization because the tool is a batch chemical industrial, and is not listed in
the general list of existing modules bare. The result of TBM cost calculation of our
equipments can be seen in Table 9.3. We also add delivery cost calculation from
the port to our plant location because it is not included in the bare module factors.
Table 9.1 Bare Module Factor
(Source: Seider W. D., J. D. Seader, and D. R. Lewin. 2004. Product and Process Design Principles:
Synthesis, Analysis, and Evaluation, Second Edition. USA: Wiley. )
30
Table 9.2 Main Equipment Cost
Equip.
Cap.
Qty
Supplier
Jinan Tery
Machine
Co., Ltd.
Shanghai
Better
Industry
Co., Ltd.
Wenzhou
Flowtam
Light
Industry
Co., Ltd.
Staes.com,
Belgium
Price
per
Piece
(US$)
Price per
Piece (Rp)
Total Price
(Rp)
750
9,657,000
9,657,000
1,500
19,314,00
0
38,628,000
1,838
23,666,08
8
23,666,088
2,171
27,953,79
6
55,907,592
7,596,840
7,596,840
Grinder
150 kg/h
Extractor
400 L
(solvent)
150 kg
(feed)
Mixing
Tank
1500 L
Absorptio
n Tank
1500 L
50 L
590
100 L
1,179
200 L
2500 L
Storage
Tank
Sealing
Machine
180
pcs/min
Staes.com,
Belgium
1,255
2,524
Guangzho
u Shifeng
Electric
Appliance
Co., Ltd.
1,320
Total Main Equipment Cost
15,180,80
4
16,159,38
0
32,499,02
4
16,996,32
0
15,180,804
16,159,380
64,998,048
16,996,320
248,790,07
2
(Source: Authors personal data, gathered from many source)
31
Table 9.3 Total Bare Module Cost Calculation
Equip.
Qty
Price per
Piece (Rp)
Grinder
9,657,000
9,657,000
Extractor
19,314,000
38,628,000
Mixing
Tank
23,666,088
23,666,088
Absorptio
n Tank
27,953,796
55,907,592
7,596,840
7,596,840
Storage
Tank
Sealing
Machine
Total Price
(Rp)
15,180,804
15,180,804
16,159,380
16,159,380
32,499,024
64,998,048
16,996,320
16,996,320
Model
Equip.
Assumpt
ion
Crushers
Average
Module
Factors
Average
Module
Factors
Average
Module
Factors
BM
Factors
Bare
Module
Cost (Rp)
1.39
13,423,230
2.18
84,209,040
2.18
51,592,072
2.18
121,878,551
16,561,111
Average
Module
Factors
2.18
33,094,153
35,227,448
141,695,745
Average
Module
Factors
2.18
37,051,978
Total Bare Modul Cost
534,733,327
Delivery Cost
26,736,666
Total Main Equipment Cost
561,469,993
(Source: Authors personal data, gathered from many sources)
9.1.1.2. Plant Rearrangement and Modification Cost

We say plant rearrangement and modification cost because the location that
we chose is not an empty land, there is already a plant building standing over in a
total area of 600 m2 at Purbajaya Industrial Estate. So we dont have to build from
zero, just need to do little arrangement and modification at some points, make it
looks like our plants layout. To achieve this, we will just hire a few workers (20)
and an architect. And because we have just started, it is better for us to hire the
location first rather than buying it too. Hiring cost per year then will be categorized
as operating cost. By doing these (hiring an already-built plant), it will save time
(our plant can operate soon) and reduce our fixed capital cost. Thus, reduce amount
of money we need to loan from the bank. But of course, we dont intend to hire it
forever, we have a plan to buy it someday in the future when our financial state
already strong and stable.
32
As for the price estimation, we allocate Rp 500,000,000 for plant

rearrangement and modification. We assume the process only takes 1.5 month with
cost of worker per day is Rp 150,000 for each person (we hire 20) and the architects
salary is Rp 35,000,000. The summary list of price is shown in Table 9.4.
Table 9.4 Plant Rearrangement and Modification Cost
Cost Breakdown
Cost
Material and Others
Rp
500,000,000
Architect
Rp
35,000,000
Workers (20), for 45
Rp
150,000
days
(per person per day)
Hiring Cost (3 Months)
Total Plant Rearrangement Cost
Total Cost
Rp
500,000,000
Rp
35,000,000
Rp
135,000,000
Rp
Rp
100,000,000
770,000,000
9.1.1.3. Offsite Facilities Cost

Offsite facilities cost is the cost of support facilities installation at the plant
(such as the installation of water, electrical, etc) and cost of supporting equipments
that needed to accelerate production process that determined from the number of
employees and also their needs. Here is another advantage of choosing location in
an industrial estate area: we dont need to worry about the installation of electricity,
water, telecommunication, and waste treatment unit. All of them are already
provided by the developer as the infrastructure and facilities of the industrial estate.
So convenient and practical, right? The roads there are also wide and smooth, very
good for transportation.
Then, because our lovely company, PT CiaoBella Cantika Nusantara, is also
not too big, just 600 m2, so the supporting equipments needed are not plenty. The
detailed price and needs for offsite facilities is shown in Table 9.5 and Table 9.6.
Table 9.5 Summary of Utility Installation Cost
No
Component
Price (Rp)
Electrical Installation
Water Installation
Telecommunication Installation
Making Road
Internet Network Installation

Total Utility Installation Cost
Note
provided by the
infrastructure and
facilities of the
industrial estate
5,000,000
5,000,000
33
Table 9.6 Supporting Equipment Cost
No
Supporting Equipment
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
21
Computer (ASUS)
Faximile Machine
Fotocopy Machine (Canon IR 6070)
Receptionist Desk
Printer
Office Stationary
Clock
Office Table Desk
Office Chair Desk
Cabinet
Sofa
CCTV
Canteen Table + Chair Set
Meeting Desk + Chair Set
Meeting Instruments
Pantry Utensils Set
Dispenser
Toilet Set
Neon Lamp
Generator Set
Office Car (Avanza All New 1.5 G
M/T)
Recycle Bin
Air Conditioner 1 PK
Telephone
Television
22
23
24
25
26
15
1
2
1
2
1
5
15
15
5
3
10
15
1
1
1
3
10
40
1
Cost per
Piece (Rp)
5,000,000
2,100,000
19,000,000
1,500,000
1,200,000
2,000,000
50,000
650,000
300,000
998,000
1,700,000
1,500,000
600,000
5,000,000
4,000,000
2,500,000
500,000
5,500,000
25,000
150,000,000
Total Cost
(Rp)
75,000,000
2,100,000
38,000,000
1,500,000
2,400,000
2,000,000
250,000
9,750,000
4,500,000
4,990,000
5,100,000
15,000,000
9,000,000
5,000,000
4,000,000
2,500,000
1,500,000
55,000,000
1,000,000
150,000,000
186,100,000
372,200,000
18
7
4
4
35,000
2,400,000
450,000
1,120,000
630,000
16,800,000
1,800,000
4,480,000
Qty
Total Supporting Equipment Cost
784,500,000
9.1.1.4. Market Research Cost

One of the responsibilities of the marketers is to analyze the motivation and
behavior of today's consumers and potential consumers. Here are some basic
questions that must be answered by marketers in order to successfully market their
product:
34
What are their needs and desires?
How are the needs impact on the benefits of the product they are looking for
and what criteria that consumers use to choose products and brands?
What are the chances they react to certain price, promotion and service policy?
To answer these questions, marketers should have an idea of how
consumers making the decision to buy the product and how psychological factors
and social factors influence the decision. Market research is a systematic method of
gathering information about customers and markets that will be used by the
company in designing marketing strategies. It is important to know what consumers
or potential consumers need. Thus, market research is an important input in
designing marketing strategies. To perform this market research, it takes time but
not much cost. The total cost of market research for CiaoBellaTM is Rp 30,000,000.
Table 9.7 below shows the detailed cost of market research.
Table 9.7 Market Research Cost
No
Activity
Cost (Rp)
Survey
5,000,000
Online questionnaire
(own web development)
Consultant service
25,000,000
Total Market Research Cost
30,000,000
9.1.2. Other Investment

Besides the costs that have already explained above, there are some
investment costs that support the plant development, such as patent, licensing and
brand registration cost.
9.1.2.1. Patent Cost

Patent is a set of exclusive rights granted by a sovereign state to an inventor
or their assignee for a limited period of time, in exchange for the public disclosure
of the invention. Patent that will be registered by PT CiaoBella Cantika Nusantara
is the overall composition of CiaoBellaTM. Based on Direktorat Jenderal Hak atas
35
Kekayaan Intelektual, Ministry of Law and Human Rights, Republic of Indonesia,

the costs that charged for CiaoBellaTM patent are shown in Table 9.8.
Table 9.8 Patent Fee Details
No
Item
Unit
Cost (Rp)
Total (Rp)
Per request
575,000
575,000
Per request
40,000
40,000
Per request
200,000
200,000
Per request
2,000,000
2,000,000
Per request
250,000
250,000
Per certificate
250,000
250,000
Registration Fee
1
2
3
4
Patent request
Additional cost per
claim
Announcement
acceleration that held
as soon as 6 months
Substantive
inspection
Certification Fee
5
6
7
Request for letter of

priority right evidence
Cost for publishing
certificates
Cost for patent search that has been announced

a) Domestic
Per subject
250,000
250,000
b) Overseas
Per subject
1,287,600
1,287,600
Per request
1,000,000
1,000,000
Per request
3,000,000
3,000,000
Per request
100,000
100,000
License Fee
8
9
10
License agreement
registration fee
Request for
compulsory
licensing
Request for general
list excerpts of
patents
Total Cost for Patent
8,952,600
(Source: http://www.dgip.go.id/hak-cipta/tarif-biaya-hak-cipta, accessed on April 24th 2015)
Next is brand. Brand is a name, term, sign, symbol or design, or a

combination of them intended to identify the goods and services of one seller or
36
group of sellers and to differentiate them from those of other sellers. Therefore it
makes sense to understand that branding is not about getting your target market to
choose you over the competition, but it is about getting your prospects to see you
as the only one that provides a solution to their problem. PT CiaoBella Cantika
Nusantara will register CiaoBellaTM as an anti-mosquito air freshener product with
the following logo shown in Figure 9.1.
Figure 9.1 CiaoBellaTM Branding Logo
Table 9.9 below is describing about the detail of brand cost for CiaoBellaTM based
on law that applicable in Indonesia.
Table 9.9 Brand Fee Details
No
Item
Unit
Cost (Rp)
Total (Rp)
Request for trademark

registration
Per request
600,000
600,000
Additional cost per claim
Per request
50,000
50,000
Per certificate
2,000,000
2,000,000
Per certificate
100,000
100,000
Per request
500,000
500,000
Per request
250,000
250,000
3
4
5
6
Brand license
maintenance fee
Brand license publishing
costs
License agreement
registration
Cost for proof of
prioritytrademark
application copy
Total Cost for Brand
3,500,000
(Source: http://www.dgip.go.id/hak-cipta/tarif-biaya-hak-cipta, accessed on April 24th 2015)
9.1.2.2. Distribution Facility Cost

From supply chain analysis section, we decide to distribute our product
through the three region with 2 routes by trucks because it is cheaper and trucks are
37
flexible, they can reach wider area than plane, ship or train. So we will buy and
invest 6 trucks in order to reduce our distribution cost and make the distribution
easier. The truck that we will buy is HINO Dutro with capacity/load until 8 ton. The
price per unit is Rp 261,300,000. Then the total cost of buying 6 trucks are Rp
1,567,800,000.
9.1.2.3. Contingency
Contingencies are unanticipated costs incurred during construction of plant.
To account for the cost of contingencies, it is common to set aside 15% of the direct
permanent investment. And we use this assumption to determine cost for
contingencies because it is being an useful estimation when our team is unable to
make a better estimate. With that common rule, we get cost of contingency as much
as Rp 559,683,389.
Therefore, from all of the cost calculations that have been conducted, we
can finally calculate the Total Permanent Investment (TPI) and Fixed Capital Cost
by using Equation (9.2) and Equation (9.3). The result is shown in Table 9.10.
Table 9.10 Total Permanent Investment and Fixed Capital Cost
Cost Component
Main Equipment
Plant Rearrangement and Modification
Utility Installation
Supporting Equipment
Distribution Facility
Total Cost (Rp)

561,469,993
770,000,000
5,000,000
784,500,000
1,567,800,000
Market Research
30,000,000
Others (Patent + Branding)
12,452,600
Contingency
559,683,389
Total Permanent Invesment (TPI)
4,290,905,982
Fixed Capital Cost
5,063,269,059
(Source: Authors personal data)
38
9.1.3. Working Capital

Working capital is the fee paid in the first months of the production process.
These are costs that are paid by the company before the company earns
revenue/income from product sales. Components of working capital is the cost
required for monthly operating expenses such as employee salaries and operating
costs to be paid during production. Cost of working capital (WC) can be estimated
by the formulas in Equation (9.4).
= .
(9.4)
Where,
WC
= Working Capital
= 0.05 (for single product)
FC
= Fixed Capital
Therefore,
= (. )( , , , )
= , ,
After that, we can calculate the value of Total Capital Investment (TCI), using
Equation (9.1). The result is shown in Table 9.11.
Table 9.11 Total Capital Investment Calculation
Cost Component
Total Cost
4,290,905,982
Total Permanent Investment (TPI) Rp
Rp
5,063,269,059
Fixed Capital Cost
Rp
253,163,453
WC
TCI
Rp
5,316,432,512
Then, our company, PT CiaoBella Cantika Nusantara will have TCI value as big as
Rp 5,316,432,512.
9.2. Operating Cost (OPEX)
9.2.1. Manufacturing Cost
Manufacturing cost is one of the basic costs which must be taken into
account in economical aspect analysis of a product manufacture. Manufacturing
cost is one of the biggest key factors in determining the selling price of CiaoBellaTM.
Manufacturing cost itself consists of direct production cost, fixed cost, and plant
overhead cost. We can obtain the manufacturing cost by calculating those three
39
costs mention before, starting from direct production cost, fixed cost, and the last is
plant overhead cost.
9.2.1.1. Direct Production Cost

Direct production cost is an element of manufacturing cost, which is the
major contributor of factorys annual operating cost, that is directly related to the
costs that are changeable or unsteady for the next 10 years operations. To make it
simple, this kind of cost will be affected easily with the change of operating years.
In doing economical analysis, we use four elements of direct product costs as a
consideration, which are annual raw & packaging material costs, annual
direct/operating labour costs, annual utility costs, and annual maintenance costs. In
operation of the factory to produces 8467 packs of anti-mosquito air freshener per
day, a direct production cost must be calculated.
a)
Raw and Packaging Material Cost

Raw material cost is calculated based on the supply chain analysis and the
mass balances. The total units of raw materials are calculated based on the needs of
each material for the annual production. Four main factors that affect the price of
our raw material cost are their availability in Indonesia, distance from the supplier
to producer, cost to produce that raw material and the raw material quality. Because
raw material cost gives big contribution to manufacturing cost thus operating cost
of a plant per year, factors that affecting it must be maintained carefully.
Total annual raw material costs of our plant can be seen in Table 9.13. We
put packaging material also in the list because we do not produce the packaging by
ourselves but buying it from another company. As can be seen, most of our main
supplier location is near our plant location (Bogor and Jakarta) thus it will reduce
even eliminate the delivery cost because we buy in high amounts, the distance is
near and we tend to cooperate with them in long term. As for the plastic jar for
packaging, because we import it from China, we put the delivery cost into
consideration.
b)
Direct Labor Cost

Direct labors or operating labors are type of labors who get involved directly
in the production processes. Direct labors are needed to maintain and make sure the
40
continuity of the production process. There are operator, worker, shift coordinator,
warehouseman, and process controller.
Operator is the person with the duty to watch and keep an eye to the raw
material supply and process in the process equipments. Worker is the one who do
the filling, labeling, sealing and storing process. Process controller will stay in the
control room and keep eyes on the overall process, and make sure everything is
going alright. Shift coordinator is the one who coordinates the rotation of each shift.
Meanwhile warehouseman is the person who secures and keeps eyes on the raw
material and final product storage in the plant.
In Table 9.12 and Table 9.13, we can see the list, the number of operator
and worker in each process as well their salary per month. We use Upah Minimum
Kabupaten Bogor as a reference there. As we can see there is also a variable cost
contained in the table, the variable cost taken is 20% of the amount of total costs. It
is needed for the extra costs for the bonuses such as Tunjangan Hari Raya,
Overnight Bonus, Yearly Bonuses, etc.
Table 9.12 Number of Operator and Worker in Each Process
No
1
2
3
4
5
Production
Process
Grinding + Extraction
Mixing + Absorption
Filling + Packaging
Sealing + Packing
Storing
Total Operator + Worker
Total Operator
4
4
25
2
2
37

Table 9.13 Total Direct Labor Cost
No
1
2
3
4
Position
Salary/Month/Person
Operator + Worker Rp
2,590,000
Process Controller Rp
2,590,000
Shift Coordinator
Rp
2,590,000
Warehouseman
Rp
2,590,000
Total Labour Cost
Variabel Cost
Total Labour Cost per Month
Total Labour Cost per Year
Amount
(Person)
37
2
2
2
Total Salary
Rp
Rp
Rp
Rp
Rp
Rp
Rp
Rp
95,830,000
5,180,000
5,180,000
5,180,000
111,370,000
22,274,000
133,644,000
1,603,728,000
41
Table 9.14 Total Raw and Packaging Material Cost
No
Material
Lavender Essential Oil
2
3
4
5
No
1
2
Supplier
Raw Material
Needs
Location
per Day
128.06
Bogor
kg
155.92
Bogor
kg
CV M & H
Farm
CV M & H
Dried Citrus Peel
Farm
PT Tripper
Vanillin
Jakarta
16.01 kg
Nature
PD Cipta
2329.00
Ethanol
Bogor
Bangun Nauli
L
PT Nalpreme
Hydro Gel
Jakarta
6.40 kg
Technochem
Total Raw Material Cost Per Year
Packaging Material
Needs
Material
Supplier
Location
per Day
PT Alsinta
Aluminium Foil
Jakarta
8467 pcs
Karta
Ningbo
Shanghai,
Packaging (Jar)
Somewang
8467 pcs
China
Packaging
Delivery Cost (Jar)
Total Packaging Material Cost Per Year
Order
per Year
Price (Rp)
Order Cost per Year (Rp)
42902 kg
650,000/kg
27,885,894,192
52234 kg
15,500/kg
809,624,176
5363 kg
60,000/kg
321,760,318
780215 L
13,000/L
10,142,795,000
2146 kg
600,000/kg
1,287,041,270
40,447,114,956
Order
per Year
2836445
pcs
2836445
pcs
Price (Rp)
Order Cost per Year (Rp)
15/pcs
42,546,675
1,300/pcs
3,687,378,500
36,873,785
3,766,798,960
42
c) Plant Utility Cost (Main Equipment)

Utility can be defined as supporting input/material that is needed by the main
equipments usually steam, water, or electricity so that they can and will operate
smoothly. Then, because our production does not require water or anything else in
the process, just electricity, hence, our plant utility cost only consists of the
electrical consumption cost of the main equipment. From PLNs website, we are
told that for the medium industry with electrical power of 3500 VA until 14 kVA,
the electricity cost is equal to Rp 1,112 per kWh. Based on that data and our
equipments power load, we can calculate the utility cost, the result is presented in
Table 9.15. Because only electricity, plus our plant does not have many
equipments, and the power consumption of existing equipments also not big, no
wonder that the annual plant utility cost is cheap.
Table 9.15 Electricity Needs for Main Equipments
N
o
1
2
3
4
Main
Amo
Equipme
unt
nt
Time
Used/
Day
(h)
Grinder
1
1.5
Extractor
2
3
Mixing
1
0.67
Tank
Sealing
1
0.79
Machine
Total Cost per Day
Total Cost per Year
Total
Machine
Power
Cost per
Power
per
kWh
Load (kW)
Day
(kWh)
5.5
8.25
Rp 1,112
11.5
69
Rp 1,112
Cost per
Day
Rp 9,174
Rp 76,728
1.7
1.139
Rp 1,112
Rp 1,267
2.5
1.975
Rp 1,112
Rp 2,196
Rp
Rp
89,365
29,937,197
d) Maintenance Costs
The last cost of our direct cost component is maintenance cost. Maintenance is
expensive but has a great benefit for the future. Maintenance can prevent production
failure in the plant, and also helps extend the age of the equipments as long as
possible. There are many types of maintenance, the common twos are the
maintenance that is done when the equipment has already broken and a scheduled
maintenance. The one that can be maintained is of course tangible assets like
machines and buildings. But because we hire our building plant, the maintenance
in our plant mostly referred to production and supporting equipments. Usually
43
maintenance cost is used to buy the spare parts required and to pay the technician
fee. Based on rule of thumb, maintenance cost is 10% from fixed capital cost (FC).
Because our FC is Rp 5,063,269,059, then our annual maintenance cost is Rp
506,326,906.
9.2.1.2. Fixed Charge

In contrary with the direct production cost, fixed charge or fixed cost is a
type of operational cost which is not easily shaken by any change as if in the direct
production cost. The value of fixed cost tends to be constant and its value can be
directly controlled by the company. Fixed cost itself consists of: (1) Plant Rent Cost
(only if we are hiring the location); (2) Insurance Cost; (3) Depreciation Cost; and
(4) Earning Tax Cost. So in order to determine the value of fixed cost itself then we
must calculate those four categories of fixed cost. But for depreciation and tax, we
will not calculate them in this section, they will be explained, explored and
calculated in economic analysis chapter.
a)
Hiring Costs of Plant Location

As already informed that we decide to not buy a land and build it for the
location of our plant and office. We just simply hire an already built plant with total
area of 600 m2 in Purba Jaya Industrial Estate, Cibinong, Bogor, West Java.
Because we pay rent fee for each year, then it is categorized as operating cost, fixed
charges specifically. With hiring a plant in an industrial estate area, it gives us many
benefits and advantages thus reducing the capital cost of our plant. According to
the website, the rent fee per year is Rp 400.000.000.
b)
Insurance Costs
Insurance is one of the important aspect that we will need to spend our money
at. It is because insurance will support and reduce our plant financial loss when
unwanted and terrible incident happened. Insurance is not only for the building and
equipments, it is also given to all of our employees for their benefit in working
contract. So they will feel happy, relieved, and no need to worry in working with
us, because their life is covered by the insurance.
According to the rule of thumb, the amount of plant insurance cost per year
that we need to pay is 1% of our Fixed Capital Cost (FC). For the life insurance for
44
the indirect labors, we choose the amount of Rp 200.000 per person, however we
pay Rp 500.000 per person for direct labors because they tend to have higher risk
than the indirect labors, therefore need higher premium cost. Total of direct labors
are 43 people meanwhile indirect labors are 76 people. Total annual insurance cost
can be seen in Table 9.16.
Table 9.16 Annual Insurance Cost
Insurance Type
Measure
Price (Rp)
Plant Insurance
1% of FC cost
50,632,691
Workforces Life Insurance (Direct Labor)
Rp 500.000/person 21,500,000
Workforces Life Insurance (Indirect Labor) Rp 200.000/person 15,600,000

ANNUAL INSURANCE COST
87,332,691
9.2.1.3. Plant Overhead

Plant overhead costs consist of general overhead, safety service, canteen,
laboratories, etc. Based on the rule of thumb of operation cost estimation, the plant
overhead cost is equal to 50-70% from operating labor cost. We decide to use 50%
as a basis of calculation of our plant overhead costs. Then, from there, we get the
result of our plant overhead costs are equal to Rp 801,864,000 per year
9.2.2. General Expenses Cost

9.2.2.1. Indirect Labor Cost
Other than the operating or direct labors, a plant will also need employees
to run the marketing process and administratives. Those employees consists of
leaders to staffs that works together to maximize the selling rate of the products.
All employees of course will get the benefits from the profit of the plants selling.
The salaries and wages of course will depend on the position and their job titles.
The breakdown and details of the annual indirect labor cost (executive salaries and
clerical wages) can be seen in Table 9.17.
Since our company is new, we try to recruit not too many amount of
employees, due to place limitation too. The total of our indirect workers are 76
people. Like in calculation of direct labor cost, we use UMK Bogor as a reference
45
for some lower position (security, driver, OB, staff, etc). The wages also used a
variable cost which is 20% of the total wages for the THR, yearly bonuses, etc.
Table 9.17 Annual Indirect Labors Cost
Indirect Labors Cost

N
Salary/month/
Department
Position
o
person (Rp)
President
1
25,000,000
Director
Vice
2
President
20,000,000
Director
Secretary of
3
President
5,000,000
Director
General
4
9,000,000
Supervisor
Finance
5
Accounting
12,000,000
Manager
Accounting
Finance
6
5,000,000
Analyst
Department
Budget and
7
Planning
5,000,000
Coord.
Product
Planning
8
and
10,000,000
Developme
Product
nt Manager
Planning
Product
and
9 Developmen Promotion
2,590,000
Staff
t
Department
Product
10
2,590,000
Design Staff
Packaging
11
2,590,000
Design Staff
Supply
General
12
Chain
10,000,000
Support
Manager
and Service
13 Department
Driver
2,590,000
Amount
(person)
Total (Rp)
25,000,000
20,000,000
5.000.000
9,000,000
12,000,000
10,000,000
5,000,000
10,000,000
5,180.000
5,180,000
5,180,000
10,000,000
15,540,000
46
Table 9.17 Annual Indirect Labors Cost (Continue)
N
o
14
15
16
17
18
Department
General
Support
and Service
Department
19
20
HRD
Department
21
22
23
HES
Department
24
25
26
Sales and
Marketing
Department
27
28
29
30
31
32
Production
Department

Salary/month/
Position
person (Rp)
Security
2,590,000
Receptionist
2,590,000
Cleaning
2,590,000
Service
Office Boy
2,590,000
IT Specialist
5,000,000
HR
10,000,000
Manager
Training &
Recruitment
4,000,000
Coordinator
Community
Developme
4,000,000
nt
HES
10,000,000
Manager
Safety and
Environmen
6,000,000
tal Engineer
Marketing
10,000,000
Manager
Customer
3,000,000
Service
Sales
4,000,000
Coordinator
Sales/Promo
2,590,000
ter
Market
3,000,000
Researcher
Production
10,000,000
Manager
Process
7,000,000
Engineer
QC
6,500,000
Manager
QC Staff
2,590,000
Amount
(person)
2
2
Total (Rp)
5,180.000
5,180.000
12,950,000
5
1
12,950,000
5,000,000
10,000,000
8,000,000
4,000,000
10,000,000
6,000,000
10,000,000
9,000,000
4,000,000
12,950,000
6,000,000
10,000,000
14,000,000
6,500,000
7,770,000
47
Table 9.17 Annual Indirect Labors Cost (Continue)
N
o
33
34
35

Salary/month Amount
Department
Position
/person (Rp) (person)
Maintenanc
12,000,000
1
e Manager
Maintenanc
Electrical
7,000,000
2
e
Engineer
Department
Mechanical
7,000,000
2
Engineer
Total per Month
76
Variable Cost
Total per Year
Total (Rp)
12,000,000
14,000,000
14,000,000
369,710,000
73,942,000
5,323,824,000
9.2.2.2. Office Utility Cost

If plant utility costs are categorized as manufacturing cost (direct cost), the
office utility costs are categorized as general expenses cost. They are consists of
supporting equipment electricity consumption and water consumption for employee
(AQUA gallon) as well for hygiene and sanitation purpose. The price per kWh for
electrical power is the same like in main equipments utility cost calculation, Rp
1,112 per kWh. For the water because we have 3 dispensers, we assume that daily
consumption of AQUA is 3 gallons/day with per gallon is Rp 15,000. For sanitation
& hygiene, we are referred to the price given by PDAM Tirta Kahuripan, Bogor.
The result for electricity cost can be seen in Table 9.18 meanwhile the result for
water cost can be seen in Table 9.19.
Table 9.18 Electricity Needs for Supporting Equipments
N
o
1
2
Equip.
Fotocopy
Machine
Printer
Machine
Qty
Total
Power/
Power
Unit
Load
(kW)
(kW)
Total
t Power
(h) /Day
(kWh)
Cost per
kWh
Cost/Day
1.2
2.4
9.6
Rp 1,112
Rp
10,675
0.05
0.1
0.4
Rp 1,112
Rp
445
48
Table 9.18 Electricity Needs for Supporting Equipments (Continue)
N
o
3
4
5
6
7
8
9
Equip.
Total
Power/
Power
Unit
Load
(kW)
(kW)
Qty
Total
t Power
(h) /Day
(kWh)
Faximile
1
0.3
0.3
4
1.2
Machine
Dispenser
3
0.25
0.75
24
18
Neon Lamp
40
0.014
0.56
24 13.44
Computer
15
0.35
5.25
9 47.25
Television
4
0.074 0.296
12 3.552
AC 1 PK
7
0.5
3.5
20
70
CCTV
10
0.05
0.5
24
12
Total Cost for Supporting Equipment per Day
Total Cost for Supporting Equipment per Year
Cost per
kWh
Cost/Day
Rp 1,112
Rp
1,334
Rp 1,112
Rp 1,112
Rp 1,112
Rp 1,112
Rp 1,112
Rp 1,112
Rp
20,016
Rp
14,945
Rp
52,542
Rp
3,950
Rp
77,840
Rp
13,344
Rp
195,092
Rp 65,355,654

Table 9.19 Annual Cost of Water Consumption
No
1
2
Water Needs
Employee
Hygiene and Sanitation
Total Cost for Water
Cost per Year

Rp
Rp
Rp
15,075,000
23,952,500
39,027,500
9.2.2.3. Communication Cost

The company also need to connect to suppliers to get the raw materials and
also to connect to the distributor, consumer, government, and other third parties.
Therefore the company will have to pay for the communication cost annually. The
communication cost consists of telephones and internet. As can be seen in Table
9.20, the total amount is not big. It is because we assume that cable telephone is not
too popular nowadays, most of our employees are using social media and email as
a way to communicate.
Table 9.20 Annual Cost of Communication
Component
Cost per Month

(Rp)
1,500,000
Telephone
Internet (Biznet MetroNET 12
3,000,000
Mbps)
Total Communication Cost/Year
Cost per Year

(Rp)
18,000,000
36,000,000
54,000,000
49
9.2.2.4. Marketing Cost

As a new comer and player, good marketing strategy is a weapon to
introduce and raise the popularity of our product. By the means of radio advertising,
printed media advertising (like in newspaper or magazine page), and online
advertisement, we hope that they will raise the peoples awareness toward our
product and hence increasing our selling rate. We will do product launching too in
some lucky, selected distributor partner, like Carrefour, Lotte Mart and Giant. We
will give discount and promo in the first month of CiaoBellaTM launching to the
market like buy 1 get 1, buy 2 get 1, or beautiful souvenirs for example. The
allocated budget for each type of marketing per year can be seen in Table 9.21. The
marketing costs are not to big because like the communication cost, we will focus
more on online way, online advertising in popular websites and social medias where
the fee is cheap but effective.
Table 9.21 Annual Marketing Cost
Marketing Types
Product Launching
Radio
Printed Media
Advertising Online
ANNUAL MARKETING COST
Cost
Rp
Rp
Rp
Rp
Rp
58,000,000
50,000,000
50,000,000
25,200,000
183,200,000
9.2.2.5. Distribution Cost

Like the name, distribution cost covers the fuel, driver, transportation and
toll fee involved when we distribute our products to the target area (distribution
center, wholesaler or retailer). It depends on how we distribute it, with a truck, train,
ship or plane? Based on the supply chain analysis done in the previous chapter, our
company has 3 region of targeted market area and there are two distribution routes,
route 1 from Bogor to Jember and route 2 from Bogor to Surabaya, each passing by
our big and smaller city target. These are done by using 6 trucks with distribution
time is once per week. Then, because the trucks are ours and the drivers are paid
monthly (in indirect labor cost section). So, the twos that remain are fuel and toll
fee. From HINO truck website, it is said that HINO Dutro (truck that we bought)
fuel consumption is 3.5 km/L, with diesel cost equal to Rp 6,900/L in May 2015,
50
we can calculate the annual distribution cost by knowing the distance for each route
+ toll fee. The result can be seen in Table 9.22.
Table 9.22 Annual Distribution Cost
Route
Bogor Jember
Bogor Surabaya
Fuel
Distance Consum
(km)
ption
(km/L)
847
3.5
679
Diesel
Cost (Rp)
Amount
of
Truck
6,900
per liter
Cost per Week

Cost per Year
Toll Fee per Year
Total Distribution Cost
Total Cost
Rp
5,009,400
Rp
4,015,800
Rp
9,025,200
Rp 433,209,600
Rp
21,660,480
Rp 454,870,080
9.2.2.6. Research and Development Cost

Innovation plays an important role especially in a consumer goods company
like us. Even though there are some loyal customers out there but people tend to get
bored to a consumer product as time passing by. They want something new, fresh
and unique. That is why we must never stop innovating and for that, our company
allocates budget for research and development. The purpose is to maintain and keep
increasing the quality of CiaoBellaTM or even creating a new anti-mosquito air
freshener variant that has better efficiency.
According to the the rule of thumb, estimation cost for R & D is as much as
5% of the Total Operating Cost (TOC) annually. TOC can be calculated by sum all
of manufacturing costs, fixed charges and general expenses that have been
explained above. But because our TOC is quite big (Rp 53,763,379,943), we worry
that we will overestimate it. So we decide to reduce the percentage from 5% to just
0.5%. From that method, we get annual R & D as much as Rp 268,816,900.
9.2.2.7. Financial Interests

There are two main sources of funding in developing our company and
manufacturing CiaoBellaTM. They are Bank Central Asia (BCA) and investor.
51
There are two sources or borrowers of the funding because most bank and investor
do not want to carry the risk alone. Higher numbers of bank, borrower, or investor
mean lower risk. As for the reason, why we choose BCA than any other bank in
Indonesia is because after we do some comparison, BCAs interest rate is one of
the lowest compared to other banks like BNI, Bank BJB, etc. The interest rate of
BCA is 10.25% per year (www.bca.co.id) and investors interest rate is 13%.
As common rule, investor rate must be higher that bank deposits rate ( 68%) so they will prefer to invest their money in our company rather than save it in
the bank. The rate usually must be greater than MARR too to be attractive. As
general consideration, minimum MARR is usually around 12%.
Table 9.23 BCA Loan Payment
Year
Oct15
Oct16
Oct17
Oct18
Initial Loan
(Rp)
Loan
Interest
(Rp)
Total
Payment
(Rp)
Payment
(Rp)
3,189,859,507
Loan after
Payment
(Rp)
3,189,859,507
3,189,859,507 326,960,599 1,063,286,502 1,390,247,102 2,126,573,005

2,126,573,005 217,973,733 1,063,286,502 1,281,260,235 1,063,286,502
1,063,286,502 108,986,866 1,063,286,502 1,172,273,369
Because BCAs interest rate is lower, we loan bigger amount of money from
BCA than the investor with percentage 60%:40%. We do not want to have debt, so
we have desire to return the loan not more than 3 years. The financial interest and
total loan payment to BCA and the investor from year 1 until 3 can be seen in Table
9.23, Table 9.24, and Table 9.25.
Table 9.24 Investor Loan Payment
Year
Oct15
Oct16
Oct17
Oct18
Initial Loan
(Rp)
Loan
Interest
(Rp)
Payment
(Rp)
Total
Payment
(Rp)
2,126,573,005
Loan after
Payment
(Rp)
2,126,573,005
2,126,573,005 276,454,491 708,857,668 985,312,159 1,417,715,337

1,417,715,337 184,302,994 708,857,668 893,160,662
708,857,668
92,151,497 708,857,668 801,009,165
708,857,668
-
52
Table 9.25 Total Financial Interest
Year
1
2
3
Total
Rp
Rp
Rp
Rp
Financial Interest
603,415,090
402,276,727
201,138,363
1,206,830,180
We have already known all of the required cost needed to calculate the operating
cost. So all we need to do just sum them all. The result of total operating cost per
year can be seen in Table 9.26.
Table 9.26 Total Operating Cost (TOC)
No
1
2
3
4
5
6
7
Operating Cost Component

Cost/year (Rp)
MANUFACTURING COSTS
Raw Material
40,447,114,956
Packaging Material
3,766,798,960
Direct/Operating Labour
1,603,728,000
Plant Utility (Main Equipment)
29,937,197
Maintenance
506,326,906
Direct Costs
46,353,906,019
Rent (Plant Location)
400,000,000
Insurance
87,332,691
Fixed Charges
487,332,691
Plant Overhead
801,864,000
Table 9.26 Total Operating Cost (TOC) (Continued)
No
Operating Cost Component
Cost/year (Rp)
GENERAL EXPENSES
8
9
10
11
12
13
14
Indirect Labour (Executive Salaries

& Clerical Wages)
Office Utility (Electrical + Water)
Communication
Marketing
Distribution
Financial Interest
TOC
Research & Development (GE)
TOC + R & D
5,323,824,000
104,383,154
54,000,000
183,200,000
454,870,080
53,763,379,943
268,816,900
54,032,196,843
53
9.3. Economic Analysis

After calculated all of the total capital investment and the operating cost, now
we can analyze the economic aspect of our plant. This analysis consist of determine
the product price per pack, cash flow and cost breakdown of our company.
Determine the price of our product is one of the most important part that can decided
whether our production will get a profit or not. The main aim of this economic
analysis is to get summary about flow of money in one year basis and get the whole
picture of cash flow that happen in the company
9.3.1. Product Price Determination

Product price is one of aspect that decided whether our product can survive
at the market and make the costumer interested in. This is the section where the
price of the product determined to cover all the operation cost of the product and
get the profit. The product price could be determined by noticing at two factors.
Those are the minimum product price and the rate of return value, which the rate of
return value should be desired by the investor or the factorys owner. This rate of
return would make the investor interested to join at the project if the number is
attractive enough for them.
At this Calculation we would put the second factor aside, so that we would
focus on determining the minimum product price. The second factor will explain at
the next sub-chapter. The minimum product price that we provided in the market
can attract the costumer to try our product and used it in daily life. From the capital
investment and operational cost above we get the total outcome. This total outcome
must firstly be added by interests of loans (from bank and investor). And after that
we will calculate our production capacity for a full 10 years of operation time. We
take assumption that the production process is about 10 years caused in this modern
era, a lot of people want to try a new think every time. As the first for several years
after the start up will be fractions from the full capacity of our plant that can sold
out at the market. From there we can know the minimum price of our product for
each unit because the total selling income will be just as much as to pay back the
total outcome plus loan interest from bank and investor that invest the money to our
company.
54
Table 9.27 Determination of Product Price
Sales Volume (pack/year)

Operational Cost
2836445 unit
Rp 54,032,196,843
Capital Investment
Rp 5,316,432,512
Total Cost
Rp 54,696,750,907
Expected Sales Revenues (Total Cost + interest)
Rp 62,901,263,543
Gross Value (in Rp/pack)
Rp 22,176
Net Value (PPN 10%)
Rp 24,394
(Source : Authors Personal Data and Gather from Any Source)
9.3.2. Cash Flow Analysis

In this section would be explained the calculation that we did in the cash
flow. Cash flow contains of annual money in-flow and out-flow. In-flow comes
from income before and after taxes and residual value or salvage value from all of
the assets that we has. Cash flow out of our company is the cost of investment,
operation, maintenance, and payment of the investor loan for several years until
the payback time has achieved.
Interest
The loans, that we used to built this plant, is comes from a bank. We will take
loans from Bank Central Asia (BCA) so the total outcome can be covered. Every
bank has a different interest rate, so we must calculate it first. We choose this bank
as a partner caused it has a minimum interest rate for the debtor that used the money
to start a company. The interest is 10.25%. Composition of the loan money that we
get is 40% come from the investor while the rest is come from the bank. The interest
will be paid every year and is estimated by the end of fourth years all of loan has
been already paid.
Depreciation and Salvage Value

Based on the explanation of our lecturer and the experience of our self we
choose a declining balance method to calculate the depreciation that occurs at our
company assets. This method gives us the biggest depreciation value at the several
years after start up. It can be an advantage for our company caused we will only
pay the minimum tax for the income that we get. In other hand, we only get the
minimum depreciation value at the last operation time. So the salvage value is worth
55
enough. Based on the literature that we get the depreciation factor for process
equipment is 10%, 5% for the supporting equipment for the company, and about
3% for the building that build. The equation used in this declining balance method
of depreciation is: (Blank & Tarquin: 5th edition. Ch.16 Authored by Dr. Don
Smith, Texas A&M University)
= 2(1)
(9.5)
= 2(110)
= 0,20
= (1 )
= 1 (1 )1
Where :
dmax = maximum depreciation rate
BVt = book value for t-years
dt = depreciation rate for t-years
t = years of depreciation
At this calculation we classify the equipment based on the function of that item
for our company. There are main equipment depreciation, supporting equipment
depreciation, distribution facilities, and installation of internet network building.
The detail result of the calculation can be seen at the excel that provided by us.
From all of the aspects above now we can make cash flow table for our company
during ten years operation times.
56
Table 9.28 Cash Flow for Ciao BellaTM Company
Volume of
Year
Selling per
Year
Product
Price
Revenue
Operating Cost
Maintanance
Cost
Cash Expenses
Depreciation
5,316,432,512
1843689.25
25,000
46,092,231,250
54,032,196,843.12
506,326,906
54,538,523,749
84,263,007
2127333.75
25,000
53,183,343,750
54,032,196,843.12
506,326,906
54,538,523,749
79,141,586
2410978.25
25,000
60,274,456,250
54,032,196,843.12
506,326,906
54,538,523,749
74,432,911
2836445
25,000
70,911,125,000
54,032,196,843.12
506,326,906
54,538,523,749
70,098,702
2836445
25,000
70,911,125,000
54,032,196,843.12
506,326,906
54,538,523,749
66,104,415
2836445
25,000
70,911,125,000
54,032,196,843.12
506,326,906
54,538,523,749
62,418,875
2836445
25,000
70,911,125,000
54,032,196,843.12
506,326,906
54,538,523,749
59,013,939
2410978.25
25,000
60,274,456,250
54,032,196,843.12
506,326,906
54,538,523,749
55,864,194
2127333.75
25,000
53,183,343,750
54,032,196,843.12
506,326,906
54,538,523,749
52,946,690
10
1843689.25
25,000
46,092,231,250
54,032,196,843.12
506,326,906
54,538,523,749
50,240,695
57
Table 9.28 Cash Flow for Ciao BellaTM Company(Continue)
Gross Profit
Net Profit Before Tax
Income Tax
Net Profit After

Tax
Cash Flow
Cumulative
- 5,316,432,512
- 5,316,432,512.07
- 5,316,432,512.07
- 5,316,432,512.07
- 8,446,292,499
- 8,530,555,506
- 8,530,555,506.23
- 8,446,292,499.03
- 13,762,725,011.11
- 1,355,179,999
- 1,434,321,586
- 1,434,321,585.51
- 1,355,179,999.03
- 15,117,905,010.14
5,735,932,501
5,661,499,590
1,415,374,897.38
4,246,124,692.15
4,320,557,603.58
- 10,797,347,406.55
16,372,601,251
16,302,502,549
4,075,625,637.27
12,226,876,911.82
12,296,975,613.70
1,499,628,207.14
16,372,601,251
16,306,496,836
4,076,624,208.94
12,229,872,626.82
12,295,977,042.03
13,795,605,249.17
16,372,601,251
16,310,182,376
4,077,545,593.90
12,232,636,781.71
12,295,055,657.07
26,090,660,906.24
16,372,601,251
16,313,587,312
4,078,396,828.04
12,235,190,484.11
12,294,204,422.93
38,384,865,329.17
5,735,932,501
5,680,068,307
1,420,017,076.75
4,260,051,230.26
4,315,915,424.22
42,700,780,753.39
- 1,355,179,999
- 1,408,126,689
- 1,408,126,689.36
- 1,355,179,999.03
41,345,600,754.36
- 8,446,292,499
- 8,496,533,194
- 8,496,533,194.05
- 8,446,292,499.03
32,899,308,255.32
58
From the table above we know the depreciation for all of the equipment and
building that we used in the company for 10 years operation times. This annual cash
flow contain of income flow and expenses flow. The income flow is from product
selling before and after tax and also salvage value in the last year period. The tax
rate that we used in this calculation is based on UU No. 36 from 2008 at pasal 17
ayat 1. In this regulation, governance gave us the classification of tax for the
different income. The income that has more than five hundred million rupiahs must
pay the tax at the rate 30 %. While, the expenses flow is from investment (fixed
capital) cost, operation cost, maintenances cost and loan payment in 4 years.
Because our product is a new product, so we assume in first 3 years production
capacity is not sold out. In first year, the capacity production is only sold out for
65% of the production and the next year until the third year increase 10% to become
maximum and stable at the fourth year. The cash flow figure for every year can be
seen from figure below.
20,000,000,000
15,000,000,000
Income
10,000,000,000
5,000,000,000
NPBT
1
10
11
NPAT
(5,000,000,000)
(10,000,000,000)
(15,000,000,000)
Time (Year)
Figure 9.2 Cash Flow Graph

We also assume that at the several years before the operation time of our
company closed, the cash flow per year is minus. So the stakeholder thinks that the
product is no longer attractive for the costumer outside there.
59
9.3.3. Cost Breakdown

Cost breakdown purposes to get information about presentation value of
expenses that we do. With using cost breakdown diagram, we and the investors can
know about the biggest variable that can affect the production expenses. We could
also see which variable that has the smallest affect by seeing which one has the
smallest percentage. This diagram shown to us that the biggest cost is for raw
material 81.67% and the minimum cost is for utility is only about 0.06%.
1% 2%
0% 0%
0%
1%
Raw Materials
11%
Labour Wages
3%
Utility
Maintenance
Insurance
Plant Overhead Cost
Executive Salaries
82%
Distribution Cost
R&D Cost
Figure 9.3 Cost Breakdown Graph

This result made us realize that the ingredient of our product, such us
lavender oil, is expensive enough. So for the next year production process, we plan
to make a process by ourselves to fulfill our needed.
9.4. Profitability Analysis

9.4.1. Payback Period
The payback period is an estimated time for the revenues, savings, and any
other monetary benefits to completely recover the initial investment plus a stated
rate of return i. There are two types of payback analysis as determined by the
required return. No return; i=0% :Also called simple payback, this is the recovery
of only the intial investment. Discounted payback; i >0%; The time value of money
is considered in that some return, for example, 10 % per year, must be realized in
addition to recovering the intial investment.
60
(. . ) + (. . )
(. + . )
After np years, the cash flows will recover the investment in year 0 plus the
required return of i %. If the alternative is used more than np years, with the same
or similar cash flows, a larger return results. If the estimated life is less than np
years, there is not enough time to recover the investment and i % return. It is
important to understand that payback analysis neglects all cash flows after the
payback period of p years. Consequently, it is preferable to use payback as an initial
screening method or supplemental tool rather than as the primary means to select
an alternative. Below is our payback period graph (Figure 9.4)
50,000,000,000.00
Cumulative cash flow
40,000,000,000.00
30,000,000,000.00
20,000,000,000.00
pay-back
time
10,000,000,000.00
Cumulative Cash Flow
0.00
0 1 2 3 4 5 6 7 8 9 10
-10,000,000,000.00
-20,000,000,000.00
years
Figure 9.4 The Payback Period Graph
(Source : Authors Document )
Based on cumulative cash flow relationship with the operation years of the project
is obtained payback period of 3 years 10 months. The payback period is less than
the specified period (10 years), the project is acceptable. So, this project investment
can be returned when plant has been operated for 3 years 10 months. From the
calculation, we can know that this project is feasible and can generate profit.
9.4.2. Breakeven Point

Break Even Point (BEP) is a analysis to define and find amount of goods or
services that must be sold to the consumer with certain price to cover the costs that
emerge and to get profit. So, in few of years of our operation, it is important to
61
know accurately how many units of products we must manufacture and sell to the
consumers so that we can have the payback of all our total investment, expenses,
loan interest and all kinds of economical value depreciation. Calculating to find the
BEP is:

= ( )
(9.4)
Total fixed cost is amount of cost that have stable value and it is not
influenced by the total production and variable cost depends on number of goods
produced. In this case, BEP can be determined from payback period graphic. Where
the cumulative PW become positive. So, we achieve the BEP is happened in 3 years
10 months. And because from the 1st year we have had 65% production capacity,
and for the 2nd year we have had 75% production capacity, and the 3rd year we
have had 85 % and for 4 th year we have had 100% production capacity, so the
calculation of the production capacity when we started to have positive worth is :
BEP = (0.65x8467
packs 335day
packs 335day
x
) + (0.75x467
x
)
day
year
day
year
+ (0.85x467
packs 335day
packs 275day
x
) + (8467
x
)
day
year
day
year
BEP = 8,700,000 packs

9.4.3. Internal Rate of Return (IRR)
Internal rate of return (IRR) is the rate paid on the unpaid balance of
borrowed money, or the rate earned on the unrecovered balance of an investment,
so that final payment or receipt brings the balance to exactly zero with interest
considered. The internal rate of return or rate of return (ROR) is expressed as a
percent per period. Internal rate of return is the interest rate that makes the present
worth or annual worth of cah flow series exactly equal to 0.
The formula used for calculating the IRR is:
= =
=1 (1+) = 0
(9.6)
Where r value in the formula is value of IRR. The other simple formula is :
PWi*(+ cash flows) PWi*( - cash flows) = 0
(9.7)
Where i* is the value of IRR. First thing we have to do is to determine how

much the value of MARR. MARR can be determined in two ways, which is from
62
objectivity of the company and from search results of WACC value. To get more
accurate, then we use WACC way. When WACC > deposit shows that the project
is feasible. The projects that have a good IRR value at least equal to the MARR
large. The greater the value of IRR compared to MARR the project more attractive
to run. If the IRR of a project under the MARR, the project is not economiclly
viable. The difference with a positive value between IRR and MARR is the margin
of the company. In determining WACC calculation or MARR performed as
follows:
= + + + (1 )
(9.8)
Where :
E = market value of the companys equity
D = Market value of the companys debt
Re = cost of equity
Rd = cost of debt
T = tax rate
WACC value is based on the type of field projects respectively. For air
freshener anti-mosquito products entered in the field of diversified chemical
products. Based on data as of the date of January 5, 2015 (Aswath
Damodaran.2015) is obtained:
= 75.08%(18.31)% + 24.92% (12%)(1 25)% = 16 %
To determine the IRR obtained from the table below (Table 9.29). By
determining the value of interest rate cash flow which makes PV becomes 0,
obtained interest rate or IRR of 33%. Large IRR is greater than a predetermined
MARR, this shows the air freshener anti-mosquito products have a good level of
economy.
63
Table 9.29 Cash flow calculation
Year
0
1
2
3
4
5
6
7
8
9
10
Volume of Product
Selling per
Price
Year
(Rp)
1843689,25 25.000
2127333,75 25.000
2410978,25 25.000
2836445
25.000
2836445
25.000
2836445
25.000
2836445
25.000
2410978,25 25.000
2127333,75 25.000
1843689,25 25.000
Revenue (Rp)
Operating Cost
(Rp)
Maintanance
Cost (Rp)
5.316.432.512
46.092.231.250
53.183.343.750
60.274.456.250
70.911.125.000
70.911.125.000
70.911.125.000
70.911.125.000
60.274.456.250
53.183.343.750
46.092.231.250
54.032.196.843,12
54.032.196.843,12
54.032.196.843,12
54.032.196.843,12
54.032.196.843,12
54.032.196.843,12
54.032.196.843,12
54.032.196.843,12
54.032.196.843,12
54.032.196.843,12
506.326.906
506.326.906
506.326.906
506.326.906
506.326.906
506.326.906
506.326.906
506.326.906
506.326.906
506.326.906

Table 9.30.Cash flow calculation
year
0
1
2
3
Cash Expenses
54.538.523.749
54.538.523.749
54.538.523.749
Depreciation
84.263.007
79.141.586
74.432.911
Total
Expenses
Gross Profit
54.622.786.756
54.617.665.336
54.612.956.660
-8.446.292.499
-1.355.179.999
5.735.932.501

Table 9.31 .Cash flow calculation
year
Cash Expenses
Depreciation
4
5
6
7
8
9
10
54.538.523.749
54.538.523.749
54.538.523.749
54.538.523.749
54.538.523.749
54.538.523.749
54.538.523.749
70.098.702
66.104.415
62.418.875
59.013.939
55.864.194
52.946.690
50.240.695
Total
Expenses
54.608.622.451
54.604.628.164
54.600.942.624
54.597.537.688
54.594.387.943
54.591.470.439
54.588.764.444
Gross Profit
16.372.601.251
16.372.601.251
16.372.601.251
16.372.601.251
5.735.932.501
-1.355.179.999
-8.446.292.499
64
Table 9.32.Cash flow calculation
Year
Net Profit Before Tax
Income Tax
Net Profit After Tax
Cash Flow
Cumulative
-5.316.432.512
-5.316.432.512,07
-5.316.432.512
-5.316.432.512
-8.530.555.506
-8.530.555.506,23
-8.446.292.499
-13.762.725.011
-1.434.321.586
-1.434.321.585,51
-1.355.179.999
-15.117.905.010
5.661.499.590
1.415.374.897,38
4.246.124.692,15
4.320.557.603
-10.797.347.406
16.302.502.549
4.075.625.637,27
12.226.876.911,82
12.296.975.613
1.499.628.207
16.306.496.836
4.076.624.208,94
12.229.872.626,82
12.295.977.042
13.795.605.249
16.310.182.376
4.077.545.593,90
12.232.636.781,71
12.295.055.657
26.090.660.906
16.313.587.312
4.078.396.828,04
12.235.190.484,11
12.294.204.422
38.384.865.329
5.680.068.307
1.420.017.076,75
4.260.051.230,26
4.315.915.424
42.700.780.753
-1.408.126.689
-1.408.126.689,36
-1.355.179.999
41.345.600.754
10
-8.496.533.194
-8.496.533.194,05
-8.446.292.499
32.899.308.255
65
9.4.4. Net Present Value (NPV)

Future amount of money converted to its equivalent value now has a present
worth (PW) that is always less than that of the future cash flow, because all P/F
factor have a value less than 1.0 for any interest rate greater than zero. Net Present
Value (NPV) shows the present value of the cash flow. In calculating the NPV is
necessary to determine the relevant interest rate. Cash flow in the year of n will be
taken to the present with normal interest by following this formula:
,0 = (1+)
(9.9)
A project is feasible to be conducted if the value of NPV > 0, it indicates

that the project will give profits. If the NPV < 0, it indicates that the project is not
feasible to be conducted. NPV value is obtained ( tabel x) Rp 10,250,886,974.49.
This air freshener anti mosquito project is very great economicly in NPV value.
Tabel 9.33 .NPV Calculation
year Cash flow after tax
Present value
-5.316.432.512,07
-Rp5.316.432.512,07
-8.446.292.499,03
-Rp7.281.286.637,10
-1.355.179.999,03
-Rp1.007.119.499,87
4.320.557.603,58
Rp2.767.998.382,71
12.296.975.613,70
Rp6.791.510.162,30
12.295.977.042,03
Rp5.854.274.706,94
12.295.055.657,07
Rp5.046.410.365,15
12.294.204.422,93
Rp4.350.052.571,28
4.315.915.424,22
Rp1.316.464.073,77
-1.355.179.999,03
-Rp356.348.619,18
10
-8.446.292.499,03
-Rp1.914.636.019,45
NPV
Rp10.250.886.974,49
So based anlisis advantage with IRR, payback period and NPV, air freshener
anti-mosquito products is very profitable. This product offers a good economic
advantage to run. For investors and banks that want to embed its funds, these
products are very interesting and promising.
66
9.4.5. Sensitivity Analysis

Sensitivity analysis determines how a measure of worth-present worh,
annual worth, future worth, net present value, internal rate of return, payback
period.- is altered when one or more paramters vary over a selected range of values.
Ussualy one parameter at a time is varied, and independence with other paramters
is assumed.
A plant is not always stable. There is a time of plant instability. This
instability is due to the changes experienced by plant and is caused by various
factors. These changes can affect beneficial or even detrimental to a plant.
Therefore conducted an analysis sensitivity against some changes. That
changes is the selling price fluctuations, rising raw material costs and changes in
operating expenses. These parameters were selected because these parameters are
most likely to occur in a production. Parameter used in the sensitivity analysis is
IRR, NPV and Payback Period. Influence of raw material chosen as one of the
parameters because the total cost required is very large compared to the parameters
of other circuitry. Raw material also has one of the principal component in the
production process, so that if the raw materials factor inhibited the production
system may also be disrupted. The second parameter used in the sensitivity analysis
is the price of the product. Product price may be affected by inflation or deflation.
At his general what happens is that inflation will lead to rise in prices of products.
Below the calculation of the sensitivity of the IRR, NPV and payback period.
Table 9.34 Calculation for sensitivity analysis (product price fluctuation)
Product Price Fluctuation

Change Product Price per Unit IRR
NPV
-15%
21250
(Rp26.016.494.446,66)
-5%
23750
12%
(Rp1.838.240.165,89)
0
25000
33%
Rp10.250.886.974,49
5%
26250
52%
Rp22.340.014.114,87
15%
28750
94%
Rp46.518.268.395,64
25%
31250
148%
Rp70.696.522.676,40
50%
37500
326%
Rp131.142.158.378,32
PP (years)
10,51702
4,869867
3,878049
3,238917
2,463618
2,010542
1,420018
67
Table 9.35 Calculation for sensitivity analysis( raw material fluctuation)
Change
-15%
-5%
0
5%
15%
25%
50%
Raw Material Price Fluctuation

Raw Material Price (Rp) IRR
NPV
PP (years)
34.380.047.712
78% Rp35.546.801.318,78 2,646088
38.424.759.208
47% Rp18.682.858.422,59 3,376813
40.447.114.956
33% Rp10.250.886.974,49 3,878049
42.469.470.704
19% Rp1.818.915.526,39
4,521137
46.514.182.199
(Rp15.045.027.369,80) 6,568809
50.558.893.695
(Rp31.908.970.265,99) 11,28704
60.670.672.434
(Rp74.068.827.506,47)
-

Table 9.36 Calculation for sensitivity analysis(operating labour and executive wages fluctuation)
Change
-15%
-5%
0
5%
15%
25%
50%
Operating Labour and executive Wages Fluctuation

OL Wage
IRR
NPV
PP (years)
5.888.419.200 41% Rp15.084.918.901,89 3,576501
6.581.174.400 36% Rp11.862.230.950,29 3,772881
6.927.552.000 33% Rp10.250.886.974,49 3,878049
7.273.929.600 31% Rp8.639.542.998,69 3,988321
7.966.684.800 25% Rp5.416.855.047,09 4,225737
8.659.440.000 20% Rp2.194.167.095,49 4,488672
10.391.328.000 0% (Rp5.862.552.783,50) 5,288847
9.4.5.1. IRR Sensitivity Analysis

Based on the chart below, the IRR is affected from changes in the value of
parameters such as product prices, raw material prices and salary workers.
Parameters most have the most impact is the price of the product. The bigger the
price of the product then the IRR also will increase of. From the results Obtained if
we lower the price of the product -15% and -5% of the initial price, the value of its
IRR does not meet MARR of the company. So we need to sustain the price for the
product at least at the price of Rp 25,000. Instead IRR will rise by significantly if
we raise the price of products ranging from 5-50% initial price. The second is
Fluctuation of raw material, when the price of raw materials decrease, will give the
result of increase of IRR. This is comparable and does not really give more impact
instead IRR will rise by significantly if we raise the price of products ranging from
5-50% initial price.
On the other hand, for the salary parameters derived the value of the IRR
would increase, but this is very rare. The salaries of workers in its general will
68
increase its per year. With its rising salaries of workers will add to the cost and
expense, will affect the IRR.
350%
300%
250%
200%
IRR
IRR(product price)
150%
IRR (Raw material)
100%
IRR(wages)
50%
0%
-20%
0%
-50%
20%
40%
60%
fluctuation
Figure 9.5. IRR Sensitivity Graph
(Source : Authors Document)
9.4.5.2. NPV Sensitivity Analysis

Sensitivity of NPV is affected by two parameters that have a significant
effect that the price of products and price of raw materials. The increase in the price
of the product will add value NPV obtained. Product price can be increased by a
number of conditions, namely its inflation occurs, or the second is the increasing
demand for our product from the market. Increase the demand can be done by
providing the best quality for the consumer. The quality factor will give a good
overview to buy back the next time.
NPV sensitivity to the price of raw materials has a considerable influence.
If the raw material prices rising by 5% of the initial price, the NPV obtained is
reduced as much as 83% of the initial or about decreasing NPV seesar 8.4 billion.
If the price of raw materials rose by 15%, the NPV is less than 0. NPV value smaller
than 0 is not very good, or in other words, will suffer losses. To overcome the
problem of rising raw material prices in the future, it can raise the price of the
product. The third is wages fluctuation, when the wages increase, will give the result
of NPV decrease. For low employee salary increases under 15% NPV is still in a
stable condition.
69
Rp150,000,000,000.00
Rp100,000,000,000.00
Rp50,000,000,000.00
NPV
NPV(product price)
NPV (Raw material)
Rp0.00
-20%
0%
20%
40%
60%
NPV(wages)
(Rp50,000,000,000.00)
(Rp100,000,000,000.00)
fluctuation
Figure 9.6. NPV Sensitivity Graph
9.4.5.3. Payback Period Sensitivity Analysis

For payback period sensitivity, shown that product price changing will
significanly affected. The increasing of product price will be decreasing the
payback period significantly. for the price of products decreased by 15%, the
payback period exceeds project life time is 10 years and 6 months. Of course this
case is not desirable in a project that illustrates the end of the life of the project has
not reached the level of return on capital. To avoid this the price of the products to
be kept stable towards a rise. As for the increase in raw material prices and the
increase in salaries of its employees, the greater the payback period. For a price
increase of 25% payback time exceeds the life of the project. It is also undesirable
in a project
70
12
10
Payback period
Payback period(product
price)
Payback period (Raw

material)
Payback period(wages)
2
0
-20%
0%
20%
40%
60%
fluctuation
Figure 9.7. Payback Period Sensitivity Graph
The conclusion for this sensitivity analysis is that the product price changing
will affect IRR, NPV, and Payback Period values significantly. For the raw
material, the changes will affect less than the product price changes. Meanwhile for
operating labour, we can infer that their changes will not significantly affect IRR,
NPV, and Payback Period values.
CHAPTER 10
CONCLUSION
1. We will distribute our product in Java Island which is divided into three regions.
There are West Java and DKI Jakarta as Region I, Central Java and DI
Yogyakarta as Region II and East Java as Region III
2. We distribute our product by six trucks which is transport through North and
South Java Beach Line. Which is North line end up his transportation in
Surabaya, while South line end up in Jember
3. The distribution of our product will occur in every week with set percentage
40% to Region I and 30% for each Region II and Region III
4. The marketing integration of our product is we distribute all of our product to
wholesaler in Java and promote our product through media, radio and our
website.
5. We have three inventories, there are raw material inventory, work in process
inventory and product inventory. This inventory is use to if there is any accident
that inhibit our production
6. Our capital cost is about 5.316 Billion Rupiah; our operating cost per year is
about 54.032 Billion Rupiah and our revenue is about 70 Billion Rupiah per
year.
7. The payback period of our plan tis abput 4 years with the breakeven point about
87,000 packs of anti-mosquito air freshener.
8. Our interest rate or IRR of 33%. Large IRR is greater than a predetermined
MARR which is 12%, this shows the air freshener anti-mosquito products have
a good level of economy.
9. The product price changing will affect IRR, NPV, and Payback Period values
significantly. For the raw material, the changes will affect less than the product
price changes. Meanwhile for operating labour, we can infer that their changes
will not significantly affect IRR, NPV, and Payback Period values.
71
REFERENCE
PT PLN (Persero). 2015. Penyesuaian Tarif Tenaga Listrik Tahun 2015.

http://www.pln.co.id/disjaya/?p=3645, accessed on 28th April 2015.
PDAM Tirta Kahuripan. 2015. Tarif Air per Meter Kubik. http://www.pdamkabbogor.co.id/, accessed on 28th April 2015.
Seider W. D., J. D. Seader, and D. R. Lewin. 2004. Product and Process Design
Principles: Synthesis, Analysis, and Evaluation, Second Edition. USA:
Wiley.
Blank, Leland and Tarquin, Anthony. 2012. Engineering Economy 7th Edition. New
York: The McGraw-Hill Companies.
PT Energy Management Indonesia. 2015. Booklet Hemat Listrik di Kantor.
https://kunaifien.files.wordpress.com/2008/12/booklet_hemat_listrik_di_kan
tor1.pdf, accessed on 28th April 2015.
PT
Bank
Central
Asia,
Tbk.
2015.
Suku
Bunga
Dasar
Kredit.
http://www.bca.co.id/id/kurssukubunga/suku_bunga_pinjaman/sbdk/sbdk_landing.jsp, accessed on 28th

2015.
72

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UNIVERSITAS INDONESIA

ANTI-MOSQUITO AIR FRESHENER

USWATUN NUR KHAZANAH

CHEMICAL ENGINEERING DEPARTMENT

Figure 8.1 Plant Location ...................................................................................... 3

Table 8.1 Data and Location Supplier.....................................................................4

Table 9.20 Annual Cost of Communication .48

consideration because it can automatically reduce the manufacturing cost. There

Figure 8.1 Plant Location (Cibinong,Bogor,West Java)

8.1.2.1. Raw Material Location

(Source: Authors Document)

Figure 8.2. Packaging Our Products

8.1.2.2. Alternative Scenarios Modelling

Table 8.2 Modelling and Scenarios Supplier Our Products

(Source: Authors Document)

Packaging ( Acrylic Jar)

Aluminium Foil Circle

(Source: Authors Document)

8.1.2.3. Raw Material Supply Chain ad Scheduling

Table 8.4 Plan Consuming and Ordering Raw Materials

(Source: Authors Document)

Table 8.5 Scheduling Raw Material

*ordered in every month

8.1.3. Product Distribution and Distributing Product Method

Lamongan, Madiun, Malang, Mojokerto, Ngawi, Pacitan, Pasuruan, Probolinggo,

Figure 8.3 Map of Java

Table 8.6 The Cities Target on Each Province

Garut, Tasikmalaya, Indramayu, Cianjur,

Semarang, Purwokerto, Brebes, Solo, Demak,

(Source: Authors Document)

Cities in the above is the target of our distribution, on several considerations

(Source: Authors Document)

Table 8.8 Total Amount Wholesaler on Each Region

(Source: Authors Document)

Total Amount Distribution Our Product

(Source: Authors Document)

8.1.3.3. Distribution Route and Transportation

Figure 8.5 Alternatives of Route Distribution

Figure 8.7 Distribution Process by Truck

demand, as well as unpredictable events such as poor delivery reliability or poor

8.2. Fluctuation in Raw Material and Products in the Distribution Center

Figure 8.8 Product Inventory In Plant Graph

Figure 8.9 Product Inventory In Region I Wholesaler

Figure 8.10 Product Inventory In Region II Wholeseller

Figure 8.11 Product Inventory In Region III Wholeseller

8.3.1. Target Determination

Target of Sales of Our Product

Jakarta and West Java/ Region I

Central Java and DI Yogyakarta / Region II

East Java / Region III

(Source : Authors document)

8.3.2. Marketing Integration

approach to this consumer-focused marketing is known as SIVA (Solution,

9.1. Capital Investment (CAPEX)

1 US$ = Rp 12,876.00 (www.bi.go.id, accessed on April 24th, 2015).

Some equipments have salvage value.

Our plant rearrangement and equipment installation process will be finished in

The service life of PT CiaoBella Cantika Nusantara (n) is 10 years.

Depreciation will be conducted using declining balance method.

Equation (9.1) below.

CTPI = (CTBM + Csite+building + Coffsite facilities + Cothers )

9.1.1.1. Main Equipment Cost

cheaper compared to Japans, Europes or Americas. So equipments that are made