Professional Documents
Culture Documents
Report Assignment 4
GROUP 12
GROUP PERSONNEL:
EXECUTIVE SUMMARY
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LIST OF CONTENT
EXECUTIVE SUMMARY...................................................................................ii
LIST OF TABLES.................................................................................................iv
LIST OF FIGURES...............................................................................................v
CHAPTER 1...........................................................................................................1
1.1. Supply Chain Management...................................................................................1
1.2. Raw Material.........................................................................................................3
1.2.1. Raw Material Supply.....................................................................................3
1.2.2. Order Capacity...............................................................................................7
1.3. Product Inventory................................................................................................10
1.4. Product Distribution............................................................................................10
1.5. Product Marketing...............................................................................................10
CHAPTER 2.........................................................................................................11
2.1. Total Capital Investment......................................................................................11
2.1.1. Fixed Capital................................................................................................12
2.1.2. Total Capital Investment..............................................................................19
2.2. Operational Cost..................................................................................................20
2.2.1. Manufacturing Cost.....................................................................................20
2.3. Determining Product Cost Unit...........................................................................38
2.3.1. Capital Loan................................................................................................38
2.3.2. Product Pricing............................................................................................39
2.3.3. Cash Flow....................................................................................................39
2.3.4. Cost Breakdown...........................................................................................39
CHAPTER 3.........................................................................................................40
3.1. Rate of Return.....................................................................................................40
3.2. Rate of Return.....................................................................................................40
3.3. Break Even Point.................................................................................................41
3.4. Internal Rate of Return........................................................................................42
3.5. Net Present Value................................................................................................42
3.6. Sensitivity Analysis.............................................................................................43
3.6.1. Selling Price Fluctuations............................................................................43
3.6.2. Raw Material Cost Changes.........................................................................43
3.6.3. Operational Cost Changes............................................................................44
3.6.4. Fluctuation Graphics....................................................................................45
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CHAPTER 4.........................................................................................................46
REFERENCE.......................................................................................................47
LIST OF TABLES
Table 1. 1 Comparison of Raw Material Suppliers..................................................4
Table 1. 1 Comparison of Raw Material Suppliers (cont)......................................5
Table 1. 2 Purchase Amount of Raw Material for Mosquito Repellent Paint
Manufacture.............................................................................................................8
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LIST OF FIGURES
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CHAPTER 1
SUPPLY CHAIN
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In the Table 1.1 below will be presented the list of raw materials, the total
required raw materials needed per day, the raw material suppliers and its location,
also the price given from each supplier.
Supplier 1
Raw
Supplier Price /unit Su
Materials Location Travel Time Location
Company (Rp) Co
Changsha
Xian
Pyrethrin China Natureway Co., 14 days 1.333.000/kg China
Che
Ltd.
Guangdong Gua
Haisun New Ji
Acrylic
China Material 14 days 40.000/kg China Tech
Polymer
Technology Co., Co
Ltd. Li
Water Cikarang PT PDAM 0 days 12,132/kg Cikarang PT
Zouping
Changshan Shang
Pigments
China Town Zefeng 17 days 26.512/kg China Indus
(TiO2)
Fertilizer
Factory
Table 1. 2 Comparison of Raw Material Suppliers (cont)
Kunshan Yalong O
Octenol China Trading Co., 17 days 33.307/kg China Ch
Ltd. Supp
Jiangxi
Mineral Tiansheng New
China 15 days 46.630/kg China Anhui
Defoamer Materials Co.,
Ltd.
Copolymer China Shanghai ZZ 15 days 106.583/kg China Ji
Dispersant New Material Tiansh
Tech. Co., Ltd. Mate
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Shanghai Zo
Ruizheng Cha
Zinc Oxide China Chemical 16 days 26.645/kg China Tow
Technology Co., Fe
Ltd. Fa
W
Jad
Surfactant China Nantong iTrade 15 days 25.313/kg China
Inter
Trade
Hangzhou Zh
Rheology Heidis New Hong
China 15 days 21.316/kg China
Modifier Material Co., Mate
Ltd.
Su
HDPE Innopack Global Fanshe
China 16 days 6,641.5/set China
Bucket Limited Man
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Table 1. 3 Purchase Amount of Raw Material for Mosquito Repellent Paint Manufacture
Materials Packaging Price/ Time Delivery Safety
Raw
Supplier Location Needed/Day Size (kg/ Packaging Order Cost/Order Inventory
Materials
Amount Unit drum) (Rp) (days) (Rp) (kg)
Changsha
Pyrethrin Natureway Co., China 135.93 kg 25 33.325.000 12 24.221.032 380,604
Ltd.
Guangdong
Haisun New
Acrylic
Material China 4530.94 kg 150 6,000,000 12 7,807,219 12,686.66
Polymer
Technology Co.,
Ltd.
Water PT PDAM Cikarang 9061.88 kg - - 335 - 906.188
Zouping
Pigments Changshan Town
China 3624.75 kg 25 662,800 12 18,798,611 10,149.3
(TiO2) Zefeng Fertilizer
Factory
Kunshan Yalong
Octenol China 63.43 kg 25 832,675 12 10, 192,018 177.604
Trading Co., Ltd.
Mineral Jiangxi Tiansheng China 36.25 kg 200 9,326,000 12 18,971,809 101.5
Defoamer New Materials
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Co., Ltd.
Shanghai ZZ New
Copolymer
Material Tech. China 217.49 kg 20 2,131,660 12 14,921,648 608.972
Dispersant
Co., Ltd.
Shanghai
Ruizheng
Zinc Oxide Chemical China 36.25 kg 25 666,125 12 14,921,648 101.5
Technology Co.,
Ltd.
Surfactant Nantong iTrade China 126.87 kg 200 5,062,600 12 18,851,903 355.236
Hangzhou Heidis
Rheology
New Material China 289.98 kg 25 532,900 12 7,807,219 811.944
Modifier
Co., Ltd.
HDPE Innopack Global
China 4830 set 3000 19,924,500 12 19,224,944 13,524
Bucket Limited
(Source: Personal Data, 2017)
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CHAPTER 2
PRODUCT COSTING
PT. Kimora Paint is manufactured in Cikarang, Jawa Barat which comprises of plant, warehouses, and office which are the
working places for both direct and indirect labor. The plant will be built in an area of 6,000 m2 as the total area. The plant will
produce wall paint with a netto of 2.5 liters per packages. The total time needed to produce 4,830 packages of Kimora Paint is 9
hour 30 minutes, which is one cycle in one day.
An precise economical analysis needed to be done to determine whether the product will be successful in the market or not.
During the analysis process, all costs involved in all manufacturing process of this product are calculated considerably. Calculation
of tax and profit will also be included in this analysis. Basically, there are two types of costs, fixed cost and variable cost. Fixed cost
is the cost that will not change and wont be influenced by the total production. On the other hand, variable cost is the cost that can
always fluctuate by the influence of material requirements and total production.
The purpose of conducting this analysis is to determine the rate of return of the product sales. The calculated rate of return
can be used to determined the payback period.
2.1. Total Capital Investment
An investment is needed as the capital cost to begin a product manufacture. The capital investment is used to build the factory
facilities and the cost of pre-operation. In this product manufacture, tha capital investment required will be received whether by the loan
from the bank or self-fund raiser. And some assumptions have been made, such as:
Currency conversion 1 US$ = Rp 13,324.85 (by May 2017).
Some equipment or building have salvage value.
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Plant will be built by the end of 2017 for one year. Plant will start to operate in the beginning of 2018.
Depreciation will be calculated by Declining Balance Method with 10% as the value of f factor.
Plant is built in empty land located in Jababeka 2 Cikarang Industrial Area
The initial investment cost is known as Total Capital Investment (TCI). TCI of a chemical plant includes purchase of the land,
building, offsite facilities, supporting facilities, utilities installation, market research, licensing and branding fee. In calculating the
investment cost, there are two cost, that is Fixed Capital Cost (FC) and Working Capital Cost (FW). Fixed Capital Cost is the capital
needed to supply the necessary manufacturing and plant facilities, while Working Capital is the capital needed to operate the plant until
company get incomie. The TCI calculation is to determine the feasibility of development of a plant and to identify whether it will give a
sufficient positive marginal value. Because our plant are chemical plant, we use the Guthrie method for the calculation of TCI. Guthrie
method is done by calculating the Total Bare Module Cost. Guthrie method is usually chosen for calculating total capital investment
because it can calculate other cost besides equipment cost based on bare module factor. This factor has included cost for additional fee such
as delivery fee and installation fee. The key when using this method is how we classify our equipment into specific category. The equation
to calculate Total Capital Investment :
CTCI =C FC +C WC
CTCI =1.18C TPI +C WC
CTCI =1.18 ( C TBM +C site + Cbuilding +C offsite ) +C WC
Where,
CFC = Cost of Fixed Capital
CWC = Cost of Working Capital (Before Obtaining Income)
CTCI = Cost of Total Capital Investment
CTPI = Cost of Total Plant Investment (Total Bare Module Cost, Cost of Site, Cost of Building, and Cost of Offsite Facilities)
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After we know the index data, we can calculate the present cost of an equipment. Based on Perry Chemical Engineering
Handbook (8th edition), the following equation is used to calculate the present cost of an equipment.
index value at present time
Present cost = Original cost index value at original time
After we get the present cost of an equipment, so we can calculate total bare module cost. The step to obtaining the Total Bare
Module Cost are :
List the equipment used in the plant and the quantity
Classify the equipment into the type of module to obtain the bare module factor
Figure 2.1 below are the list of bare module factor with the type of module that correspond:
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The bare module factors included FOB 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). As for the equipments that have no
bare module factor in the table, we would use the average value of the all bare module factor. This case might happen because the
equipments we used are chemical equipments in batch mode operation that is specifically used.
Using Marshall and Swift Chemical Equipment Cost Index to determine cost of equipment in year we expect to buy
Multiply the cost with the quantity and the bare module factor
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Sum the FOB cost we expect to buy with shipping cost to obtain CIF
Use the formula to obtain Total Bare Module Cost. The formula is:
Total bare module cost = i number of equipment
(bare module cost)i
i number of equipment
Total bare module cost = (quantity x CIF x BM factor)i
Table 2.2 Bare module cost
b) Plant Building and Site Cost
The type of our factory is grass root plant, which means we build the entire factory in an empty land with total area of the plant is
6000 m2 We assumed that the land are ready to use. Our plant will be built on Jababeka 2 Cikarang Industrial Area. The calculation of the
land cost is listed on table 2.3 below :
Table 2.1. Land Cost
Building cost are cost for built the plant and the office inside. Our plant is joined with the office because our plant operation
can be done indoor. The calculation of the building cost is listed on table 2.4 below :
Table 2.4 Building cost
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Based on the calculation in Table 2.3 and Table 2.4, the total cost for land reaches the amount of Rp ... and the total cost for
building reaches the amount of Rp ...
c) Supporting Facilities Investment Cost
Supporting facilities investment cost is cost for providing equipment in office and other area outside the battery limit.
Battery limit is area that used for manufacturing process of the product. There will be many people work in office so we need
equipments to provide their work. The calculation of supporting facilities cost is shown in Table 2.5.
Table 2.2. Supporting Facilities Cost
Quantit
Equipment Price per Unit Total Price
y
Computers 10 4,705,000.00 47,050,000.00
Faximailes 2 1,650,000.00 3,300,000.00
Photocopy, Scanner, and Printer Machine 2 4,500,000.00 9,000,000.00
Clock 10 50,000.00 500,000.00
Receptionist Desk & Chair 1 3,575,000.00 3,575,000.00
Meeting Desk & Chair 3 5,100,000.00 15,300,000.00
Office Desk & Chair 15 1,350,000.00 20,250,000.00
Filling Cabinet 20 1,675,000.00 33,500,000.00
Whiteboard 2 325,000.00 650,000.00
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Electricity
Installation
Water Installation
Hydrants Installation
Network Installation
Telephone
Installation
TOTAL UTILITIES INSTALLATION COST
(Source: Personal Data, 2017)
e) Market Research Cost
Utilities installation cost is cost to provide general utilities for plant and office. The main utilities are water and electricity for the
sustainability of plant process. Telephone, internet, and hydrant utilities are addition utilities for administration and safety. The details of
cost data of the utilities are listed on table 2.7.
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No. Non Tax Revenue Unit Cost (Rp) Qty. Total (Rp)
1
2
TOTAL PATENT COST
(Source: Personal Data, 2017)
The summary of patent and brand fee calculation is shown in Table 2.9.
Table 2.9 Licensing cost
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Cost
Cost for Each
Type of Fixed Sub Type of Accumulation of
Sub Fixed
Capital Fixed Capital Each Type of
Capital (Rp)
Fixed Capital (Rp)
Total BM Cost
Land Cost
Building Cost
Direct Cost Supporting
Facilities Cost
Utilities Cost
Licensing Cost
Indirect Cost Contractor
(Source: Personal Data, 2017)
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The cost of total capital investment is Rp ... . The value of total capital investment shows the amount of money that will be
spent as an early capital investment at the beginning of the project. Based on the cost breakdown above, the costs that give the
biggest contribution is ... (%).
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Based on the calculation in Table 2.12, the total raw material cost (including packaging cost) for Kimora Paint with the amount
Rp ... for total order cost per year and the amount of Rp ... for total delivery cost per year.
b) Direct and Indirect Labor Salary
PT. Kimora paint plant operates 8 hours per day and three days per week. The maximum working time for each labor is 24 hours
per week. Direct labors are labors who involve directly to the production process while indirect labors are those who arent involve directly
to the production process. Determination for the employees salary is based on the article published in Kompas regarding the Regional
Minimum Wage Policy. The Regional Minimum Wage on the province of Cilegon, Banten on 2016 is RP 3,078,057. The calculation of
direct and indirect labor cost is shown in Table 2.13 and Table 2.14.
Table 2.13 Direct labor wages
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person (Rp)
President Director
General Manager
Stakeholder Secretary of
President Director
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Manager
Logistic Manager
Human Resources
Manager
HRD Human Resources
Department Planning and
Recruitment
Coordinator
HES
HES Manager
Department
Sales and Marketing Manager
Marketing Sales Engineer
Department Sales / Promotor
Maintenanc Electrical Engineer
e Mechanical
Department Engineer
TOTAL INDIRECT LABOR COST
(Source: Personal Data, 2017)
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Based on the calculation in Table 2.13 and Table 2.14, the total cost for direct labors is RP and the total cost for indirect labors
is Rp
c) Utility
Utility is a system that generates, transmits, or distributes electricity, water, or steam of plants facilities. Variable utility costs are
costs for utilities which are used during the production process. Fixed utility costs are costs for utilities which are used for administration
process and do not depend on the activity and amount of production. The utilities which are used in this plant consists of water and
electricity which are used during the production process.
The cost of electricity used for the main production process relates to the process and activities of the plant. Electricity in Kimora
plant is supplied directly from PLN. The data for electricity cost is obtained from PLN website shows in Table 2.15
Table 2.15 Tariff adjustment in May 2016
No Usage Cost
Tariff Group Power Limit
. (Rp/kWh)
1 R-1/TR 1300 VA 1353.45
2 R-1/TR 2200 VA 1353.45
3 R-2/TR 3500 - 5500 VA 1353.45
4 R-3/TR > 6600 VA 1353.45
6600 VA - 200
5 B-2/TR kVA 1353.45
6 B-3/TM > 200 kVA 1041.07
7 I-3/TM > 200 kVA 1055.47
8 I-4/TT > 30,000 kVA 931.99
9 P-1/TR 6600 VA - 200 1353
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kVA
10 P-2/TM > 200 kVA 1041.07
11 P-3/TR - 1353.45
12 L/TR, TM, TT - 1529.73
(Source: PLN, http://www.pln.co.id/wp-content/uploads/2016/05/Tariff-Adjustment-Mei-2016)
The factory can be classified in I-3/TM group since the factory can be categorized as middle scale industry. Based on the tariff
above, the usage cost per kWh is Rp 1,055.47. The calculation of electricity needs for the main equipment and supporting equipment are
shown in Table 2.16 and Table 2.17 (working time for the main equipment is calculated with the base of 4 days or one production cycle).
Table 2.16 Electricity needs for main equipment
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Water needs in Kimora plant is obtained directly from PDAM located in Cilegon. Process water needs determination is done based
on the water needs for washing the equipment. Based on Kemenperin data, the amount of process water needs is 0,5 L/h.m2 each day. On
the other hand, employees also have a need of water every day. WHO data shows that each person needs around 40 L water per day for the
purpose of drinking and toilets. Based on article in Tribun News website, the price of water is Rp 12,550.00 per m3. Therefore, the
calculation of water needs in Kimora plant is shown in Table 2.18
Table 2.18 Water needs in Kimora plant
Water Needs L/ day m3/year Total Utilities Cost for Water / year (Rp)
Process utility 3,600 1314
(Source: Personal Data, 2017)
Water Needs L/ day m3/year Total Utilities Cost for Water / year (Rp)
Based on the calculation above, the cost of utilities which included the electricity and water needs anually is :
Total utility cost = total electricity cost + total water cost
d) Maintenance Cost
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Maintenance is the activity to preserve or maintain the plant along with its facilities including the equipment which are involved in
the production process by repairing, adjusting, or replacing some of their components. Maintenance is an activity that must be done to keep
obtaining the desired production capacity to fulfill the demand of consumer.
To keep the efficiency of the equipment and building in the plant, maintenance process must be done. The maintenance process
will take some times and needs cost. Maintenance activities may include the act of inspecting, lubricating the equipment, replacement of
equipments components which are needed to be done in a certain period.
Maintenance process consists of three main parts, i.e. major equipment maintenance, plant and office building maintenance, and
supporting equipment maintenance. According to Kusuma, the average equipment maintenance cost for food industry reach the number of
15% of total production cost. The calculation of maintenance cost based on those information is shown in Table 2.20.
Cost per
Maintenance Amount (percentage)
Year (Rp)
Main equipments 15 % of Total Bare Module Cost
Supporting equipments 3% of Supporting Facilities Cost
Land and building 1% of Land and Building Cost
TOTAL MAINTENANCE COST PER YEAR (Rp)
(Source: Personal Data, 2017)
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A patent is a set of exclusive rights which is granted to the inventor from the sovereign state for a certain or limited period of time.
Patent will make a product legal based on law. Because patent right is limited for a certain period, there will be a certain cost
that should be paid for every year.
Copyright
Copyright is an exclusive right for inventor to announce or to copy the invention. Copyright registration and maintenance of
Kimora should also be done to make the product legal in the law.
Industrial Design
Industrial design is the right of composition, configuration, line, and color of a design that has aesthetical value.
Brand
Brand is an identity of a product that can differentiate it from another existing product. We need to register our brand to the
sovereign state so that the brand will be legal in the law.
Based on these calculation, the cost needed for patent and brand registration is Rp
f) Fixed Cost
Fixed costs are costs which are not influenced by the amount of production and tend to keep each year,
Depreciation
Every purchased equipment, whether its main or supporting equipment, has a life time value. Depreciation is defined as a
measure of decrease in value of something over time. Some companies use depreciation to set aside a fund to replace a plant when
it is no longer operable. In its most complex application, depreciation is an annual allowance, whose calculation is controlled by
the government when determining federal income tax. The larger the depreciation in each year, the smaller the federal income tax
and the greater the net profit.
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There are some methods that can be used to calculate the depreciation of plants assets. For the further calculation, we will use
declining balance method. Declining balance method is a method for depreciation calculation which uses f factor to the value
of properties each year. The equation which is used to determine the amount of depreciation in this method is shown as follows.
D1 Vi . f
SV Vi 1 f
n
In this calculation, we will use the value of f factor in the amount of 0,1 (10%). From this calculation, we can know the
amount depreciation (D) and salvage value (SV) for each year. Salvage value is the amount of money that still can be obtained by
selling the equipment that still has a certain value at the end of its life expectancy. The details of depreciation are shown in the
following tables.
Table 2.21 Depreciation calculation for main equipment
Initial
Year 1 Year 2 Year 3 Year 4 Year 5
Equipments Value
(Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
TOTAL
DEPRECIATI
ON
(Source: Personal Data, 2017)
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Initial
Year 1 Year 2 Year 3 Year 4 Year 5
Equipments Value
(Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
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3
4
5
6
7
8
9
10
TOTAL DEPRECIATION
(Source: Personal Data, 2017)
Local Tax
Local tax contains building tax and salary tax. Building tax is not only for the building but also the land. The value is
calculated by using method that is ruled in governments law. Table 2.25 show us the calculation of building tax in Indonesia.
Table 2.25 Cost for building tax
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Every person which works need to pay the salary tax that is suitable with their salary. The rate of the tax varies with the sum
of the salary in a year. The calculation of salary tax in Indonesia is stated in the UU No. 36 Year 2008. Table 2.31 shows the
calculation of salary tax for our employees.
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Insurance
Insurance is the cost which is paid by cooperated insurance company to the worker. Insurance is needed to protect the assets
of company, including variable assets and fixed assets. The paid insurance includes the insurance for cost of plant and employees
insurance. The data for employees insurance is obtained from Jamsostek (Jaminan Pemeliharaan Kesehatan). It is said that the
company should pay at least 3% of the worker wages (and the maximum amount is one million rupiah) monthly to follow this
insurance programmer.
Table 2.27 Annual insurance cost
Annual Cost
Insurance Type Measurement Amount (Rp)
(Rp)
Plant Insurance 0.5% of Fc Cost
Employee's
3% of Salary
Insurance
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Total Insurance
(Source: Personal Data, 2017)
b) Distribution Cost
Distribution cost is a cost which is needed to distribute the products. Distribution cost is influenced by the distribution plan
developed in supply chain. The distribution cost can be divided into cost from plant to distribution center and cost from distribution center
to wholesaler. The distribution area of is divided into three main regions throughout Java, Bali and Sumatra island. The division of the
region is done as follows.
Region I covers area of West Java and East Java and surrounding areas.
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Region II covers area of D.I. Aceh, Riau, South Sumatra, and surrounding areas.
The distribution of our product can be done with shipping to the consumers plant site. The distribution cost includes handling cost
of inventory at all points for example in the plant area, storehouse, or even sales point. The calculation for the distribution of Kimora paint
is shown in Table 2.28.
c) Marketing Cost
The purpose of marketing is to introduce a product to the consumers or to catch the attention of consumers. Marketing is also used
to maintain the image and to sell a certain brand. Before determining the marketing cost, we must develop and arrange a marketing strategy
for our product. One of the best ways to get consumers attention is by advertising. From advertisement, consumer will gain some
information regarding our product. An advertisement can be categorized as good advertisement based on its effectiveness. For the
advertisement, we choose two main media, printed media and electronic media.
Printed Media
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Printed media is the commonly used media for advertisement. For the printed media we use booklet and flyer because it is more
compromising. The calculation of printed media publication fee is shown in Table 2.29.
Table 2.29 Cost of printed media publication
Electronic Media
Electronic media can also help us to advertise our product. Nowadays, most peoples activity utilize the usage of internet.
Therefore, we choose to advertise our product through this media. We will develop a particular website that can help us to
introduce Kimora paint specifically to the consumers. The calculation of electronic publication media fee is shown in Table 2.30
and Table 2.31.
Table 2.30 Cost of online advertisement through website
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Based on the calculation of marketing cost for Greetor in two different media (printed media and electronic media), the amount of
cost marketing is Rp
2.3. Determining Product Cost Unit
2.3.1. Capital Loan
In order to build out plant and start to produce Kimora, we need money to be invested. weve decided that our investment will be
100% from bank loan. The reason of this configuration is based on a consideration that bank interest rate is lower than the investor interest
rate.
We decide to borrow the money from Bank of Central Asia because it provides a more secure and stable loan rates than the others
bank. We also lend money from investor because bank can only provide 70% of total capital investment. Moreover, the loan rates in BCA is
relatively low, compared to the others. The interest rate is 10%. And investor interest rate is 9%. Table 2.32 shows the cash flow of bank
loan.
Table 2.32 Cashflow of bank loan
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Payment Payment
Interest (Rp) (Rp)
(Rp) (Rp)
0
1
2
3
4
5
(Source: Personal Data, 2017)
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CHAPTER 3
PROFITABILITY AND SENSITIVITY ANALYSIS
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Payback period of a given investment or project is an important variable to whether execute the project or not. High-risk
ventures should have payback periods of less than 2 years. In these times of rapid progress in technology, most companies will not
consider a project with a PBP more than 4 years. PBP is especially useful for simple equipment replacement probelms (Seider et al.,
2003). Longer payback periods are not typicall desirable for investment positions. The calculation of payback period is done as
follows
Depreciable FCI + Interest on TCI during service life
PBP=
( avg profit per year+ avg depreciation per year )as cons annuity
where FCI is fixed capital investment and TCI is total capital investment. Ten years is chosen as the service life because it is long enough
and it is most used in economic analysis for food and chemical industrials service life. Based on these assumptions, we calculate the
payback period of our project as follows
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9
10
(Source: Personal Data, 2017)
3.3. Break Even Point
Breakeven point (BEP) is an analysis which is done to define and determine the amount of goods or services that must be
sold to the consumer with a determined price to cover the costs that emerge and obtain profit. BEP analysis is very important so that
we dont experience loss during the production. The payback period of our plant is XXX years or equal with XXX days. Therefore,
the amount of production until the XXXth day can be used to determine the breakeven point. The calculation of BEP is shown in
Table 3.2
Based on the calculation in Table 3.2, for a payback period of XXX days, the breakeven point is reached for XXX products produced.
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If NPV is greater than zero, it means that the project is profitable or could give benefits if its executed while if the NPV is less than
zero it means that project is not profitable to run. If NPV value equals to zero, it means that the project wont result in any profit or loss.
From the calculation with Ms. Excel application, we obtained the value of NPV is Rp ______. Because NPV value is greater than zero,
based on NPV calculation we can conclude that this project is profitable.
3.6. Sensitivity Analysis
A sensitivity analysis is conducted to determine the effect of percentage changes in pertinent variables on the profitability of
the project. Such an analysis indicates which variables are most susceptible to change and need further study (Perry, 2007).
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A fiable factory is a factory that cant be easily swayed by the change in these costs despite in the cost breakdown it can be
seen that production process definitely influence by the cost of raw materials. Table 3.2 shows raw material price fluctuation.
Change Operational Labor PBP
IRR (%) NPV (Rp)
(%) Wage (Rp) (years)
-15%
-10%
-5%
0%
5%
10%
15%
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-15%
-10%
-5%
0%
5%
10%
15%
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CHAPTER 4
CONCLUSION
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REFERENCE
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