Let us see the production cost of National Cement:

a. Capacity = 3,000 tons of Clinker Per Day (4,200 ton cement)

= 80,000 Bags of Cement Per Day (40,000 quintals)

= 40,000 qui x 300 days

= 1.2M tons Cement Per Year

b. Cost of production = Capacity x cost of production/ ton

= 1.2M ton x $90/ton

= $108M

 Calculation of the major cost elements:

1. Power and fuel costs

The cement industry relies on power. Power and fuel costs account for 25-30% of the price of cement
when it’s sold.

Now the cost of Power and fuel become:

30% x 108M =$32.4M

2. Raw material cost

The second major component in the production of cement is the cost of raw materials. The primary raw
material that’s used is limestone. Raw materials account for 20%–25% of the cost of sales.

Now the cost of raw material becomes:

25% x 108M = $27.0M

3. Selling & distribution expenses (Logistic cost)

It constitutes 20-25% of the cost of sale.

Now the Selling & distribution expenses become:

25% x 108M = $27.0M

4. Other expenses (Overhead cost)

Other expenses include employee costs, administration expenses, and repair and maintenance charges.
These account for 15%–20% of the cost of sales.

Now the Other expenses become:

20% x108M = $21.6M

 Hence the Total cost becomes:

Total cost = 1+2+3+4

 = 32.4 + 27.0 + 27.0 + 21.6

= $108.0M

c. Selling price = 756.5 Br / quintal => 7565 Br/ton = $139.21/ton

Total sell per year = 1.2M ton x $139.21/ ton

= $167.05M

d. Profit

Now the profit becomes:

Profit = Total Sell – Total Cost

= 167.05 – 108.0

= $59.05M