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Product Project Report

On
GAS LIGHTERS
:: Prepared by ::

Sevra rohit H..


:: College ::

Shri k.m. & k.k. savajani

:: Academic Year ::
2015-16

:: Seat No. ::
20

:: Class ::
T.Y.B.B.A.

:: Submitted to ::
Saurashtra University
::Guided by ::
Mr. bupendra chavda

-1-
Projected
Operating Statement
Of
rohit ENTERPRISES
For
3 Years

-2-
Declaration
I undersigned that Sevra rohit the student of T.Y.B.B.A.
hereby declare that the project work in this product project
report is my own work and it has been carried out under the
supervision of Mr. Bhupendra chavda Sir from Savjani
College Veraval.

This work has not been submitted previously to any


other university for any other examination.

This product project report is totally based upon the


practical study of the industrial product. It is a part of B.B.A.
course. Practical study of industrial product covers all types
of industries.

Place: Veraval.

Date: Signature of student

-3-
Acknowledgement
I am much obliged to express my deep gratitude to all
the personalities who spared their valuable time and gave me
helpful co-operation and proper guidance for my project
report and we know that successful accomplishment of any
work requires co-operation, help, and guidance for many
people through many ways.

I have a wonderful opportunity to make this project


report on Power Gas lighter as a part of my practical study
of T.Y.B.B.A. As a management student, it is beautiful time
to get practical knowledge and to manage all the things in the
industry.

I am heartily grateful to the management of Shree K.M.


& Smt. K.K. Savjani College particularly the faculty of
financial management first of all I would like to thank to our
project guide Mr. Bhupendra chavda for giving necessary
guidance whenever I needed.

Last but not least, I would like to express my sincere


thanks to all respondents friends, family members and who
have directly and indirectly helped me during the preparation
of my project work.
Date:

Place: Veraval.

-4-
Preface
India is a developing country one of the leading force
behind these outcomes is swift growth of the industry.
Practical studies are the part of B.B.A. course; B.B.A. is a
special course regarding business management. Practical
study implied by saurashtra University. In B.B.A. under this
subject the student requires to visit on one small scale
industry is a pillar of the Indian Economy. Most of business
had been developed as small scale industry. Due to
liberalisation and globalisation where every minute India is
moving a step ahead and expanding it horizontally. And the
competition has to be faced by small scale industry of India
and thus small scale industries are paralyzed.

The practical studies are treated as a different subject in


B.B.A. which helps the students in practically applying their
theoretical knowledge. It helps as to face competition, and
here practical study plays an important role in moldings our
carriers.

I am happy to submit this project report on small scale


Industry. Under the prescribed syllabus of saurashtra
University, Rajkot. The preparation of this report is a modest
way of helping students to develop Entrepreneurship skills,
ability and aptitude for making this report. I got wonderful
chance to acquire practical knowledge of forming such a
units. I have tried to cover all the points precisely.

-5-
index

Sr. No. Particulars Page


No.
1. Introduction 8
2. Project At A Glance 9
3. Management Setup 11
4. Implementation Schedule 13
5. Organization Structure 14
6. Justification of Location 15
7. Product Details 17
8. Market Potential 19
9. Raw Material 20
10. Machineries 21
11. Basis and Presumption 22
12. Manufacturing Process 23
13. Production Capacity Schedule 27
14. Staff and Labour Details 28
15. Fixed assets 30
16. Cost of Production 32
17. Total Working Capital Requirement 35
18. Total Project Cost 36
19. Sources of Finance 36

-6-
20. Interest on Borrowed Capital 38
21. Depreciation 39
22. Annual Cost of Production 40
23. Sales Forecast for 5 years 40
24. Cost Per Unit 41
25. BEP Analysis 43
26. Term Loan Repayment 44
27. Cost of Capital 45
28. Return on Investment (ROI) 45
29. Profitability Analysis 46
30. Risk Factor 48
31. Name & Address of RM Suppliers 49
32. Name & Address of Machinery Suppliers 50
33. Projected Operating Statement 51
34. Projected Balance Sheet 56
35. Projected Cost Sheet For 3 Years 58
36. Particulars of RM Consumed 62
37. Particulars of Finished Goods 62
38. Schedule for Fixed Assets 63
39. Schedule for Factory Overhead 64
40. Schedule for Administrative and Factory Overhead 65
41. Disclosure of significant Accounting Policies 66

-7-
INTRODUCTION

More recently enhancing small scale industries (SSIS) have been viewed as an
effective way of forecasting the private sectors. Contribution to both the growth &
the equity objective of development.

SSIS & cottage industries play a key role in the industrialization of developing
country. This is because they provides immediate large scale employment & have
a comparatively higher labor capital ratio, they need a shorter gestation period &
relatively smaller markets to be economic, they need lower investment, offer a
method of ensuring a market equitable distribution of national income & facilitate
an effective mobilization of resources of capital & skill which might otherwise
remain unutilized & they stimulate the growth of industrial entrepreneurship &
promote a more diffused pattern of ownership & location.

A philosophy that manifests itself in many ways that what is more small scale
enterprise and the core sectors of Indian industrial culture that runs through the
Indian civilization.

When it comes to industrialization, there is bat one enterprise that inspires


confidence SSIS. This is attributing to the philosophy of excellence.

The meaning of small connects comparatively small in investment, cost operation,


employment, production, finance, technology, market etc. Such small enterprises
are not only beautiful but also beneficial, efficient, and reliable. The definition of
SSI varies from one country to another. Further it also changes with time.

-8-
POJECT AT GLANCE
Name of the Unit:-
Rohit Enterprises.
Office Address:-
Rohit Enterprises.
Prahlad Plot Main Road,
Near Patel Diary,
Rajkot.
Location of the Unit:-
Rohit Enterprises.
G.I.D.C. Metoda, Plot No. 2325,
Rajkot.
Type of the Unit:-
Firm
Size of the Unit:-
Small-Scale Industry
Name of the Product:-
Elegant Gas Lighters
Name of Partners:-
Dangar Shailesh L.
Godani Hardik N.

Means of Finance:-
Partners Contribution
Loan from Gondal Nagarik Sahkari Bank

-9-
Market Area:-
Rajkot.
Total Cost of Project:-
Rs. 15, 91,950
Investment in Working Capital:-
Rs. 20, 39,400
Investment in Fixed Assets:-
Rs. 14, 22,000
Return on Investment:-
16.37%
Average Cost of Capital:-
10.98%

Working Hours Per Day:-


8 hrs.

- 10 -
MANAGEMENT SETUP
Partner 1st

Name: - Dangar Shailesh L.


Kalavad rd. Narayan Nagar Nr.Saty Sai
Hospital
Rajkot.
Age:- 21 Years.
Educational
Qualification:- B.B.A.

Experience:- Dealing in Gas Appliances and other related


Accessories since last 30 Years.

Contribution:- 50%

Duties &
Responsibilities:- marketing and Finance.

- 11 -
Implementation Of Shedual
Sr. No. Particulars Time Period
1. Preparation of Project Report 4 months
2. Selection of a Site 2 months
3. Registrations of SSI 4 months
4. Availability of Finance 2 months
5. Selection of Machinery 2 months
6. Procurement of Machinery 2 months
7. Recruitment of Labour 15 days
8. Commencing Production 15 days

- 12 -
Organization Structure
Chairman

Manager

Supervisor Accountant Salesman

Skilled Workers Peon\Clerk Watchman

Unskilled Workers

- 13 -
Justification Of Proposed Location
Location of any industry is the most important thing behind

success or failure of any industry. It has to be carried out in such


a way that the manufacturing process is carried on with minimum
expenditure of time & material. Also there must be ample scope
for the addition or rearrange so that they can be carried out
without stoppage of work. There are many factors like RM,
nearness to market & power, availability of transportation facility
supply of labour, government incentives, Quality of computer etc.
which affects the location of any unit. Every entrepreneur should
give fall consideration to suitable location because location factor
are crucial for profit maximization.

The proposed location for the establishment of


manufacturing facilities for my unit as under
Rohit Trading Co.
G.I.D.C. Metoda
Plot No. 2325
Rajkot.

The unit enjoys following benefits due to location of the site:-

Transport Facilities:-

- 14 -
As the project is located at G.I.D.C. Metoda there will not be any
problem in getting transport facilities. As the transport facility is
easily available at our location.
Market Control:-

Any entrepreneur always thinks about a market of his product to


be a wide market. Main market for our product is near cities &
near areas as new houses are builder so the market availability is
good is Rajkot, Ahmedabad etc.
Labour Supply:-
As this area has proximity to Rajkot city labour is easily available
& at cheaper cost.
Other Location Facilities:-
G.E.B. has a main substation at G.I.D.C metoda, Rajkot that
would make it easily to get power connection.
Metoda is only 13 Kms. Away from Rajkot city hence units
located here will avail all facilities available at Rajkot.
It has got fully fledged telephone exchange making easier to
connect anywhere.
From the above mentioned reasons the location of this plant can
be easily justified. The proper selection will surely help to
contribute to the profitability & success of the plant.

- 15 -
Product Details

Product:-

The Electronic Gas lighter uses a piezo element. This piezo

element has a property to generate voltage when it is subjected to


presence. In this case when it is mechanically deformed it
generates high voltage across a spark gas which when is in
proximity to a gas would light it.

Gas lighter is being used to light cooking gas. It is durable due to


its performance & economical as compared to the mechanical and
electrical lighters.

These gas lighters are cheap, safe, reliable, and attractive and as
they need no maintenance they have a good chance in the market.

- 16 -
Product Use:-

With the growth the urban population and also the gradual growth
in the living standard of Indian population, the usage of
Electronic gas lighter has increased considerably. Moreover, the
change and liberalization policy of the Indian govt. has made
availability of gas connections very easy. Also the entry of
private Cos, like Super Gas, Gujarat Gas etc., Gas is available at
low charges & in short period of time & as consumption of lighter
depends upon the no. of gas connections there exists a wide
consumption & increasing application of electronic gas lighters.

And as these gas lighters are cheap, safe, reliable, attractive


& as they had no maintenance they have a good chance in the
market.

- 17 -
Market Analysis

The demand for any type of Gas, lighter is directly related


to the release of domestic gas connection by various gas Cos. In
the country. However, users go in for various types of gas
lightering devices i.e. match electrical or electronic gas lighter.
The preference to use Electronic Gas lighters is quite high
because of its inhere ant advantages stated above. Even existing
gas users have been increasing by switching over to electronic gas
lighters. At present there are about 70 to 80 small or big units
engaged in the manufacturing of electronic gas lighter with an
average capacity of 20,000 to 30,000 per month.

The cost of gas lighter is very well within the reach of users
& therefore the demand is increasing day by day. Rajkot
contributes about 60% to 70% of the total all Indias production
of electronic gas lighters. Daily in Rajkot there is about 30,000 to
40,000 units of production of electronic gas lighters.

Through experiments we have known that advertisement


and publicity have influenced the consumption pattern of
electronic gas lighters.

- 18 -
Raw material
Raw material is a basic need of each & every industrial
unit. This, it is necessary have proper availability of raw material
in proper quantity required and at proper time is an important
factor. The Electronic Gas Lighter requires following materials:

Stainless Steel (S.S.) pipe


Piezo element
Spring
Hammer
Sparking Point
Aluminum Washer
Hammering Point
Supporting M.S. bar
M.S. Washer
Brass Washer
Other Plastic Parts.

- 19 -
Machineries

Machines are one of the most important factor for any


business. Proper & right kind of machinery will surely be helpful
in increasing the profit margin of any unit. The following
machinery are appropriate for Electronic Gas Lighter:

Lathe
Fly Press
Drilling Machine
Hand Moulding Machine
Hydrolic Moulding Machine
Testing Panel
Dyes & Jigs fixtures
Power Press Machine

- 20 -
Basis and Presumption
The proposed production of 54,000 per annum of gas

lighter more than 300 working days in a year.

Shift: Single Shift

Working hours: 9:00 A.M. to 6:00 P.M.


Break 12:30 P.M. to 1:30 P.M.

The units required 2 to 3 years to achieve full capacity


utilization the first year, Co. utilized 60% Capacity.

The wages proposed in the project are as per privileged


wage practice in the area.

Computer Value and construction cost has been taken on an


average basis science it varies from place to place.

The cost of machinery & equipment has been proposed in


the project after consulting the machinery supplier. Nearly all the
machines are available locally.

(1) No. of Shifts Per Day == 1 Shift of 8 hrs.


(2) No. of Working Days == 25 days
(3) No. of Working Days p.a. == 300 days
(4) General Shift == 9:00 a.m. to 5:00 p.m.

- 21 -
- 22 -
Manufacturing Process
Manufacturing is the core activity. All other activities

revolve around manufacturing. The end result of manufacturing


activity is the creation of goods & Services for the satisfaction of
human wants. The production activity is nothing but the step by
step conversion of materials from one from to another either
chemically or mechanically.

The principle stages in the commercial production of


Electronic Gas Lighter are as follows:

(1) Pipe Cutting


(2) Pipe Operation
(3) Moulding of various plastic parts
(4) Development of sets
(5) Fitting material inside the pipe
(6) Upper marks & Stickers
(7) Checking
(8) Packing

- 23 -
Pipe Cutting:-

First of all various types of pipe either S.S. or M.S. are


brought from the market i.e. it is available locally & then it is cut
according to the length of the gas lighter & opening of the gas
lighter having length around 6 inches. After cutting, the cutter or
blade is used in order to avoid the rough surface on both openings
& the pipe.

Pipe Operation:-
Next with the help of dies one opening of the pipe is given
proper shape & on the other opening of the pie, die voram is done
with the help of the machines.
Then according to the pipe whether S.S. or M.S. buff or
crone is done respectively.

Moulding of Various Plastic Parts:-


Inside the gas lighter pipe, various plastic parts are filled
i.e. piezo cover two step, hathodi, spring, sparking pt, washer etc.,
with the help of moulding machines various types of dies &
above mentioned parts are moulded in various materials like P.P.
nylone, P.V.C. High Density etc.

- 24 -
Development of Set:-
In this process, the set which is inside the gas lighter is
done. First of all in a piezo cover sparkling pt. will be fitted & on
it aluminium washer is fitted. Again on the washer piezo is put,
then aluminium washer & at last on it, there will be a supporting
M.S. bar. This all will be done in a plastic part.

In one step plastic part first sparking pin is put inside it.
Then the piezo cover which is ready i.e. above is inserted on it in
order to give connection which is seen on the mouth of the gas
lighter. This is one of the main procedures in the manufacturing
of E.G. lighter.

Fitting Material:-
Here, first of all the fitting sets is done & then the Brass
earthing is filled upon the set in order to avoid the shock on the
top part of the gas lighter. This earthing is used to have the
downward how of current & to avoid upward flow of current in
the Electronic Gas lighter. Then on the top part Hammer is fitted
and then handle is fitted. Thus, this is the fitting procedure of
E.G. lighter.

- 25 -
Upper Marks & Stickers:-
Before dispatch the gas lighter stickers & dates one marked
on either pipe or handle. The marking of dates is important
because as the Electronic Gas lighter is a replacement item,
manufacturing time is needed for classifications in case, if needed
thus, the mark of date is marked on the pipe or handle.

Checking:-
This is also very important procedure as the Electronic Gas
lighter is a 100% replacement item. Almost all the manufacturers
give a 6 months to 2 years warranty on their gas lighter. So there
is a fear of replacement if proper checking is not done the
complete assembled. Unit is thus listed for life cycle ignition
before it is sent for packing and dispatch.

Packing:-

After all these above process, the packing is done. It is


done in 2 ways:
(i) Box Packing.
(ii) Card packing with the buster pack covering the card.
The card itself acts as the guarantee card here. Then the card
packed lighters are packed in Corrugated Boxes of 25 pieces each
and master packing is finally done as per demand order.

- 26 -
Staff and Labour Details
Top Level:-
No. Particulars No. of Rate 1 12
Persons months months
1. Factory 1 10,000 10,000 1,20,000
Manager
Total (A) 10,000 1,20,000

Middle Level:-
No. Particulars No. of Rate 1 12
Persons months months
1. Accountant 2 5000 10,000 1,20,000
2. Clerk 2 3000 6000 72,000
3. Salesman 2 5000 10000 30000
4. Supervisor 1 8000 8000 96000
- 27 -
5. Skilled Workers 6 3000 18000 54000
Total (B) 39000 117000

- 28 -
Bottom Level:-
No. Particulars No. of Rate 1 3 12
Persons months months months
1. Watchman 2 2000 4000 12000 48000
2. Unskilled 3 2500 7500 22500 90000
Workers
Total (C) 11500 34500 138000

Total Salary & Wages:-


(1) Top Level 48,000
+ (2) Middle Level 4,68,000
+ (3) Bottom Level 1,38,000
-------------
Rs. 11,94,000

- 29 -
Fixed Assets
Fixed Assets:-
Particulars Sq. mt/ Sq. feet Rate Total
Computer 1288 1000 12,88,000
Building 2500 900 22,50,000
Total (A) 35,38,000

Plant & Machinery:-


No. Particulars No. of Rate Total
Persons
1 Lathe 1 1,00,000 1,00,000
2 Fly Press 3 70,000 2,10,000
3 Drilling Machine 2 1,50,000 3,00,000
4 Hand Moulding Machine 3 50,000 1,50,000
5 Hydrolic Moulding Machine 3 50,000 1,50,000
6 Testing Panel 3 35,000 1,05,000
7 Dyes & Jigs Fixtures 1 4,50,000 4,50,000
8 Power Press Machine 1 65,000 65,000
Total (B) 15,30,000

- 30 -
Other Assets:-
No. Particulars Total
1. Vehicle 1,80,000
Total (C) 1,80,000

Total Fixed Assets:-

A+B+C
= 35,38,000+15,30,000+1,80,000
= 52,48,000

- 31 -
Cost of Production
Requirements of Raw Material:-

no Particulars Rate Required Required Required per annum


(p.u.) Per day Per month
Qty. Amt. Qty. Amt. Qty. Amt.
1 S.S. Pipes 5 100 500 3000 15,000 36000 1,80,000
per feet
2 Piezo element 2.9 250 725 7500 21750 90000 261000
3 Spring 0.5 450 225 13500 6750 162000 81000
4 Hammer 0.8 150 120 4500 3600 54000 43200
5 Sparking Point 0.8 125 100 3750 3000 45000 36000

6 Aluminium 0.1 450 45 13500 1350 162000 16200


Washer
7 Hammering 0.5 250 125 7500 3750 90000 45000
Point
8 Supporting 1.6 24 38.4 720 1152 8640 13500
M.S. bar
9 M.S. Washer 0.5 500 250 15000 7500 180000 90000
10 Brass Washer 0.1 250 25 7500 750 90000 9000
11 Other Plastic 1.3 2000 1683 60000 78000 720000 936000
Parts
Total 14 4,549 3,836 1,36,470 1,42,602 16,37,640 17,50,000

- 32 -
Total Working Capital

Particulars No. of Rate Amount (Per Amount (Per


Persons month) annum)
Factory Manager 1 4,000 4,000 48,000

Accountant 1 5,000 5,000 60,000


Clerk 1 2,500 2,500 30,000
Salesman 2 5,000 10,000 1,20,000
Supervisor 1 3,500 3,500 42,000
Skilled Workers 6 3,000 18,000 2,16,000
Unskilled Workers 3 2,500 7,500 90,000
Watch man 2 2,000 4,000 48,000
Total 54,500 11,94,000

- 33 -
Other Expenses:-
Particulars Amount Amount
(per (per annum)
month)
Telephone 406 4,870
Insurance 250 3,000
Stationary 4,917 59,000

Advertising 1,833 22,000


Packing 4,250 51,000
rent 2,500 30,000
Repairs & 167 2,000
Maintenance
Transportation Cost 3,667 44,000
Freight Expense 3,000 36,000
postage 4,008 48,100
Total 24,998 2,99,970

Utilities:-
No. Particulars Amount Amount
(per month) (per annum)
1. Electricity 3,000 36,000
Total 3,000 36,000

- 34 -
Total Cost of Production:-

No. Particulars Monthly Yearly


1. Raw Materials 1,42,602 17,50,000
2. Staff & Labour 54,500 11,94,000
3. Other Expenses 24,998 2,99,970
4. Utilities 3,000 36,000
Total 2,25,100 27,00,870

TOTAL COST OF A PROJECT


Particulars Amount (Rs.)
Fixed Capital 52,48,000
Working Capital 2,25,100
(1 Monthly)
Total 54,73,100

Sources of Finance
No. Particulars Amount (Rs.)

- 35 -
1. Ownership Capital (85%) 46,15,717
2. Borrowed Capital (60%) 8,57,383
Total 54,73,100

(A) Ownership Capital:-

No. Particulars Amount (Rs.)


1. Sevra rohit (100%) 46,15,717
Total 46,15,717

(B) Borrowed Capital:-


No. Particulars Amount (Rs.)
1. Loan from Gondal Nagrik 8,57,383
Sahkari Bank

- 36 -
Interest on owners capital

Particulars Loan Interest Interest


Amount (Rate) (amount) (p.a)
Ownership Capital 46,15,717 7% 3,23,100

Interest on borrowed capital

Particulars Loan Interest Interest


Amount (Rate) (amount) (p.a)
Loan taken from 8,57,383 13% 1,11,460
Gondal Nagrik Sahkari
Bank

Depreciation
- 37 -
Rohit Enterprises is using Straight Line Method for
calculating the depreciation on the fixed assets of the

Sr. No. Particulars 1st year 2nd year 3rd year 4th year 5th year
1 Building 22,50,000 20,25,000 18,22,500 16,40,250 14,76,225
(-) Depreciation @ 10% 2,25,000 2,02,500 1,82,250 1,64,025 1,47,623
20,25,000 18,22,500 16,40,250 14,76,225 13,28,603
2 Plant & Machinery 15,30,000 13,77,000 2,33,500 1,16,750 1,16,750

(-) Depreciation @ 10% 1,53,000 1,37,700 23,350 11,675 11,675

13,77,000 2,33,500 1,16,750 1,16,750 1,16,750


3 Computers (-) 12,88,000 11,84,960 10,90,163 10,02,950 9,22,714
Depreciation @ 8%

1,03,040 94,797 87,213 80,236 73,817


11,84,960 10,90,163 10,02,950 9,22,714 8,48,897
5 Vehicles 1,80,000 1,62,000 1,45,800 1,31,220 1,18,098

(-) Depreciation @ 10% 18,000 16,200 14,580 13,122 11,810


S.L.M. [E]

1,62,000 1,45,800 1,31,220 1,18,098 1,06,288

total 4,99,040 4,51,197 3,07,393 2,69,058 2,44,924

- 38 -
Annual Cost of Production

No. Particulars Amount


(Rs.)
1. Raw Materials 17,50,000
2. Staff and Labour 11,94,000
3. Other Expenses 2,99,970
4. Utilities 36,000
5. Depreciation 4,99,040
6. Interest on Capital:
(a) Ownership Capital 3,23,100
(b) Borrowed Capital 1,11,460 4,34,560
Total 36,35,370

Sales Forecast for 5 years


(a) Units Sold Rate(S.P.) (b) Amount
Year During The (p.u.)
Year

1 1,00,000 39 39,00,000
2 1,10,811 37 41,00,000
3 1,15,507 36.5 42,16,000
4 1,22,857 35 43,00,000
5 1,30,882 34 44,50,000

- 39 -
Fixed Cost:-

No. Particulars Amount


(Rs.)
1. Salary to Employees 546000
2. Other Expenses 1,00,000
3. Utilities 36,000
4. Depreciation 4,99,040
5. Interest on Capital 4,34,560
Total Fixed Cost 16,15,600

Fixed Cost Per Unit = TFC


Units Produced
= 16,15,600
90,500

= Rs. 17. 85 p.u.


Variable Cost:-

No. Particulars Amount


(Rs.)
1. Raw Materials 17,50,000
2. Salary to Employees 2,00,000
3. Other Expenses 1,99,970
Total Variable Cost 20,18,870
- 40 -
BEP Analysis
Fixed cost
No. particular Year1 Year2 Year3 Year4 Year5
1 Dep. On 1,30,000 1,17,000 1,05,300 94,770 85,293
building

2 Dep. On 1,50,000 1,35,000 1,21,500 1,09,350 98,415


machinery
3 Dep. On 15,000 13,500 12,150 10,935 9,842
computer
4 Interest on 2,40,000 2,40,000 2,48,000 2,56,326 2,56,000
capital
5 Salary 11,94,000 11,94,000 11,96,000 11,97,000 11,98,000
6 Rent 50,000 50,000 50,000 52,000 52,000
total 17,79,000 17,49,500 17,32,950 17,20,381 16,99,550

- 41 -
(a) Profit Volume Ratio:-
= fixed cost + Profit x 100
Sales
= 17,79,000+ x 100
42,02,800
= 51.96%

(b) B.E.P. (units)


= Fixed Expenses
Contribution (p.u.)
= 16,15,600
24.13
= 66,954 units

- 42 -
(c) B.E.P. (Rs.)
= Fixed Expenses
P.V.R.
= 16,15,600
51.96%
= Rs. 31,09,315.

(d) B.E.P.(%)
= F.C. x Utilized capacity
Contribution
= 16,15,600 x90
21,83,930
= 66.58%.

Cost of Capital

Capital Rate Interest Amt


(%) (Rs.)
Ownership Capital 46,15,717 7% 3,23,100
Borrowed Capital 8,57,383 13% 1,11,460
54,73,100 20% 4,34,560

Average Cost of Capital:


= 4,34,560 x 100
- 43 -
54,73,100
= 7.94%.

Return on Investment (ROI)

R.O.I. = EBIT x 100


Cost of Project
= 2,60,572 x 100
52,12,945
= 16.37%.

Profitability Analysis
Particulars Amt. (Rs.) Amt. (Rs.)
Sales 42,02,800
(-) Cost of production

Raw Material 17,50,000


Staff & Labour 11,94,000
Other Expenses 2,99,970
Utilities 36000
Depreciation 4,99,040 31,99,910
10,02,890
(+) Closing Stock 92,985

- 44 -
EBIT 9,09,905
(-) Interest on Capital:
Ownership Capital 3,23,100
Borrowed Capital 1,11,460 4,34,560
EBT 4,75,345
(-) Tax 35% 1,66,370
EAT 3,08,975

- 45 -
Gross Profit Ratio:

G.P.R. = Gross Profit x 100


Sales
= 24,76,685 x 100
42,02,800
= 58.93%.
Net Profit Ratio:
N.P.R. = PAT x 100
Sales
= 3,08,975 x 100
42,02,800
= 7.35%.

Fixed Assets Turnover Ratio:


Sales x 100
Fixed Assets
= 42,02,800 x 100
52,48,000
= 80%.

- 46 -
Risk Factor
In each & every business activity, there are some hindrances risk,
uncertainties etc. which the Co. has to face and overcome them.
Risk factor means those factors which created hindrances in the
growth of the Co. and also its development. These factors act as
challenges or threats to the Co. for its product. Thus, maximum
care must be taken into consideration by promoting the Co.

At present there is a high competition in the market. Many


national & multinational Co.s enjoy a good market share in the
urban areas & rural areas. Some of the risk factors of our unit are
as follows:

(1) As our product is under the list of electronic items so if


license is not provided & also the govt. authority within specific
time, it is difficult to start the production.

(2) There is also possibility that the loan amount necessary is


not obtained from bank.

(3) In near by future there will be cut-throat competition in the


market and it may be difficult to continue the business.

(4) It can be possible that all the factors may be suitable for
production & finance but the marketing of our products may not
be enough so there is every possibility of failure or close of unit.

- 47 -
(5) As the product is mainly marketed at the rural and semi
urban areas (Saurashtra & Kutch) there is a chance of lack of
awareness in case of illiterate people who cannot read the
advertisement boards along the roads & so on.

- 48 -
Name & Address of RM Suppliers

For S.S. pipe:-

Chetan Hardware, Rajkot.

Other Materials:-
Lalji Mohan, Ghikata Road, Rajkot.

All the material are available locally.

Name & Address of Machinery


Suppliers
All the machines for my factory are easily available at

MODERN MACHINE TOOLS.

- 49 -
1 year
Trading A/c
Particulars Amt. (Rs.) Particulars Amt.
(Rs.)
To Opening 0 By Sales 39,00,000
Stock
To Purchase A/c. 17,50,000 By Closing 2,00,000
Stock
To wagws A/c.
Unskilled 2,00,000

To Gross Profit 21,50,000


41,00,000 41,00,000

- 50 -
1 year

Profit & Loss Account


Particulars Amt. (Rs.) Particulars Amt. (Rs.)

To Salary to Employees 11,94,000 By Gross 21,50,000


Profit

To Repairs & -Maintenance 7,000

To Advertising Exp. 36000


To Packing Exp. 5,600

To Transportation Cost 90,000


Rent 50000
To Telephone Expense 7,300
Postage - Expense 5800
To Stationary 6,000
Dep. On Building 1,30,000
Dep. On machinery 1,50,000

Dep. On computer 15,000


int. on capital 2,40,000
Tax(20%) 42,660

To Net Profit
1,70,640

21,50,000 21,50,000

- 51 -
1 year

Balance sheet

Liability Amount NA Assets Amount NA

capital: 30,00,000 Building 13,00,000

intrest(8%) 2,40,000 Dep(10%) 1,30,000 11,70,000


+nat profit 1,70,640 machinery 15,00,000

-drawing 4,10,640 30,00,000 Dep(10%) 1,50,000 13,50,000


Computer 1,50,000
Dep(10%) 15,000 1,35,000
Cash 1,45,000
Closing
stock 2,00,000

Total 30,00,000 Total 30,00,000

2 year
Trading A/c
- 52 -
Particulars Amt. (Rs.) Particulars Amt.
(Rs.)
To Opening 2,00,000 By Sales 41,00,000
Stock
To Purchase A/c. 18,00,000 By Closing 2,30,000
Stock
To wagws A/c.

Unskilled 2,00,500

To Gross Profit 21,29,500

43,30,000 43,30,000

2 year

Profit & Loss Account


- 53 -
Particulars Amt. Particulars Amt.
(Rs.) (Rs.)
To Salary to Employees 11,94,000 By Gross 21,29,500
Profit
To Repairs & - 7,200
Maintenance

To Advertising Exp. 30000

To Packing Exp. 5,200


To Transportation Cost 82,000
Rent 50000
To Telephone Expense 5,300
Postage - Expense 5500

To Stationary 5,500
Dep. On Building 1,17,000
Dep. On machinery 1,35,000

Dep. On computer 13,500

int. on capital 2,40,000


Tax(20%) 47,860

To Net Profit 1,91,440

21,29,500 21,29,500

2 year

Balance sheet

Liability Amount NA Assets Amount NA


- 54 -
capital: 30,00,000 Building 11,70,000
intrest(8%) 2,40,000 Dep(10%) 1,17,000 10,53,000
+nat profit 1,91,440 machinery 13,50,000
-drawing 3,31,440 31,00,000 Dep(10%) 1,35,000 12,15,000
computer 1,35,000
GR 21,500 Dep(10%) 13,500 1,21,500
Cash 5,02,000
Closing stock 2,30,000

Total 31,21,500 Total 31,21,500

3 year
Trading A/c

Particulars Amt. (Rs.) Particulars Amt.


(Rs.)
To Opening Stock 2,30,000 By Sales 42,16,000

- 55 -
To Purchase A/c. 18,50,000 By Closing 2,80,000
Stock
To wagws A/c.

Unskilled 2,10,000

To Gross Profit 22,06,000

44,96,000 44,96,000

3 year

Profit & Loss Account

Particulars Amt. Particulars Amt.


(Rs.) (Rs.)
To Salary to Employees 11,96,000 By Gross 22,06,000
Profit
To Repairs & -Maintenance 7,200

To Advertising Exp. 30000

To Packing Exp. 5,500


To Transportation Cost 83,000

- 56 -
Rent 50000
To Telephone Expense 5,500

Postage - Expense 5200

To Stationary 5,600
Dep. On Building 1,05,300
Dep. On machinery 1,21,500
Dep. On computer 12,150
int. on capital 2,48,000
Tax(20%) 66,210

To Net Profit
2,64,840

22,06,000 22,06,000

3 year

Balance sheet
Liability Amount NA Assets Amount NA

capital: 31,00,000 Building 10,53,000


intrest(8%) 2,48,000 Dep(10%) 1,05,300 9,47,700
+nat profit 2,64,840 machinery 12,15,000
-drawing 4,08,760 32,04,080 Dep(10%) 1,21,500 10,93,500
computer 1,21,500
GR 21,500 Dep(10%) 12,150 1,09,350
Cash 7,95,030
- 57 -
Closing
stock 2,80,000

Total 32,25,580 Total 32,25,580

4 year
Trading A/c

Particulars Amt. (Rs.) Particulars Amt. (Rs.)

To Opening 2,80,000 By Sales 43,00,000


Stock
To Purchase 19,00,000 By Closing 3,00,000
A/c. Stock
To wagws A/c.

Unskilled 2,20,000

- 58 -
To Gross Profit 22,00,000

46,00,000 46,00,000

4 year

Profit & Loss Account


- 59 -
Particulars Amt. Particulars Amt.
(Rs.) (Rs.)
To Salary to Employees 11,97,000 By Gross 22,00,000
To Repairs & -Maintenance 7,300 Profit

To Advertising Exp. 31000


To Packing Exp. 5,600
To Transportation Cost 85,000
Rent 52000
To Telephone Expense 5,000
Postage - Expense 5200
To Stationary 5,000
Dep. On Building 94,770
Dep. On machinery 1,09,350
Dep. On computer 10,935
int. on capital 2,56,326
Tax(20%) 67,104

To Net Profit 2,68,415

22,00,000 22,00,000

4 year

Balance sheet
Liability Amount NA Assets Amount NA

capital: 32,04,080 Building 9,47,700


intrest(8%) 2,56,326 Dep(10%) 94,770 8,52,930
+nat profit 2,68,415 machinery 10,93,500
-drawing 5,28,821 32,00,000 Dep(10%) 1,09,350 9,84,150
computer 1,09,350
GR 21,500 Dep(10%) 10,935 98,415
Cash 9,86,005
Closing stock 3,00,000

- 60 -
Total 32,21,500 Total 32,21,500

5 year
Trading A/c
Particulars Amt. Particulars Amt.
(Rs.) (Rs.)
To Opening Stock 3,00,000 By Sales 44,50,000
To Purchase A/c. 19,50,000 By Closing Stock 3,20,000
To wagws A/c.
Unskilled 2,50,000

To Gross Profit 22,70,000


47,70,000 47,70,000

- 61 -
5 year

Profit & Loss Account


Particulars Amt. Particulars Amt.
(Rs.) (Rs.)
To Salary to Employees 11,98,000 By Gross 22,70,000
To Repairs & -Maintenance 7,500 Profit

To Advertising Exp. 31500


To Packing Exp. 5,800
To Transportation Cost 87,000
Rent 52000
To Telephone Expense 5,100
Postage - Expense 5300
To Stationary 5,600
Dep. On Building 85,293
Dep. On machinery 98,415
Dep. On computer 9,842
int. on capital 2,56,000
Tax(20%) 84,530

To Net Profit 3,38,120

22,70,000 22,70,000

- 62 -
5 year

Balance sheet

Liability Amount NA Assets Amount NA

capital: 32,00,000 Building 8,52,930


intrest(8%) 2,56,000 Dep(10%) 85,293 7,67,637
+nat profit 3,38,120 machinery 9,84,150
-drawing 4,94,120 33,00,000 Dep(10%) 98,415 8,85,735
computer 98,415
GR 21,500 Dep(10%) 9,842 88,574
Cash 12,59,555
Closing stock 3,20,000

Total 33,21,500 Total 33,21,500

- 63 -
BEP Analysis
Fixed cost
No. particular Year1 Year2 Year3 Year4 Year5
1 Dep. On 1,30,000 1,17,000 1,05,300 94,770 85,293
building

2 Dep. On 1,50,000 1,35,000 1,21,500 1,09,350 98,415


machinery
3 Dep. On 15,000 13,500 12,150 10,935 9,842
computer
4 Interest on 2,40,000 2,40,000 2,48,000 2,56,326 2,56,000
capital
5 Salary 11,94,000 11,94,000 11,96,000 11,97,000 11,98,000
6 Rent 50,000 50,000 50,000 52,000 52,000
total 17,79,000 17,49,500 17,32,950 17,20,381 16,99,550

- 64 -
VARIABLE COST
NO. PARTICULAR YEAR1 YEAR2 YEAR3 YEAR4 YEAR4
1 RAW MATIRAL 17,50,000 18,00,000

2 WAGES 2,00,000 2,00,500

(a) Profit Volume Ratio:-


= fixed cost + Profit x 100
Sales
= 17,79,000+1,70,640 x 100
39,00,000
= 50%

(B) B.E.P. (Rs.)


= Fixed Expenses
P.V.R.
= 17, 79,000
50%
= Rs. 35,58,000.

- 65 -
Year 1
Cash flow statement
particular Yrar 1
(A)Cash at the beginning of the year
(B) Cash flow from operating activity

Cash receipt from customers


cash paid for :
purchase of goods
salary
general expenses
income taxt
Nat cash flow
(c) Cash flow from investing activity
Cash receipt
Cash paid for assates
Nat cash flow investing activities
(D) cash flow from financing activity
Cash receipt from owners
Cash paid for (drawing)
Nat cash flow from financing
activity

- 66 -
Disclosure of significant Accounting
Policies
1) ACCOUNTING POLICIES:

Basis of Accounting:

The Co. prepares its accounts on accrual basis, except otherwise


stated, in accordance with the normally accepted accounting
principles.

(2) FIXED ASSETS:

Fixed Assets are stated at cost less accumulated depreciation.

(3) DEPRECIATION:

Depreciation on Fixed Assets is provided on Straight Line


Method at the rates specified.

Depreciation on fixed assets added/disposed of during the year, is


provided to the month of additional/disposal.

(4) INVENTORIES:

Closing Stock of Finished goods are valued at the cost price.

- 67 -
(5) TAXATION:

Provision of tax comprises of current tax.

- 68 -