Limon : New Product Development and its Cost-Benefit Analysis

PRESENTED BY :AFROZE – 06

ANURADHA - 02ASHWIN – 10

MALVIKA – 11NAMRATA – 08

POOJA – 07VAIBHAV - 02

COMPANY PROFILE WHY LIMON? PROCESS INGREDIENTS COST SHEET MARGINAL COSTING

SEVEN LEMON PRIVATE LIMITED

ESTABLISHED IN 2013

INITIAL INVESTMENT : Rs. 98,00,000/-

DIRECTOR : Mr. AFROZE MANSURY

partners : Afroze mansury, anuradha reddy, ashwin patil, malvika bansal, namrata jeurkar, pooja lakhani & vaibhav zunjarrao

firm type : partnership with equal contribution & profit SHARING

LOCATION :INDUSTRIAL ESTATE, BUILDING NO – 17 EASTERN EXPRESS HIGHWAY BHIWANDI – 421302 MAHARASHTRA

CONTACT NO : 022-6131191 9664503093DISTRIBUTION AREAS : MUMBAI & NAVI

MUMBAI.

1) To facilitate home-made like nimbu pani refreshment anywhere on the go.

2) To attain number 1 position amongst lemon drinks.

3) To provide a desirable substitute in beverage category.

4) To become omnipresent by being available in colleges, school canteens, hospitals, gyms etc.

5) To be an economical hydrating agent.

6) To reach the masses.

7) Finally, in the long run, to be the leading sports drink.

CREATING…………..

ONSET OF SUMMERSNATURAL HEALTH DRINKREFRESHINGMEDICINAL PROPERTIESPREFERRED OVER SOFT

DRINKSLOW COST

FILTRATION OF WATER

ADDITION OF SUGAR SYRUP

ADDITION OF CONC. LEMON JUICE & ACIDITY REGULATORS

ADDITION OF SALT & PRESERVATIVES

FINAL PRODUCT

1) Entire process will be based on high-end automated technology.

2) Water from tube well reservoir will be filtered and processed sugar syrup will be added.

3) Further, squeezed and concentrated lemon juice will be added along with acidity regulators, preservatives and salt.

4) Thus the final product (drink) will be bottled, apped and sealed.

Raw material Per unit (Rs.)

Units Amount (Rs.)

Outsourced bottles 1.6 /bottle

1500 2400

Corrugated boxes 5/box 100 500

Sugar 30/kg 35 1050

Lemon 0.33/lemon

6000 2000

Acidity regulators (8ml/unit)

80/ltr 12 960

Preservatives (12ml/unit)

90/ltr 18 1620

Salt (2g/unit) 12/kg 3 36

Cost Sheet is a periodical statement of cost designed to show in detail the various elements of cost of goods produced like Prime Cost, Factory Overheads, Cost of Production, Total Cost, etc.

It is prepared at regular intervals e.g., weekly, monthly ,quarterly, yearly etc.

Comparative figures of the various period may also be shown in the cost sheet so that assessment can be made about the progress of the business

In the assigned project, estimated Cost Sheet of a month has been shown

Particulars Per unit (Rs.)

Units Amount (Rs.)

(A)Direct material

Opening stock of raw material

5.68 1500 8520

(+)Purchases 0.024 1500 36

Direct expenses 80 1500 120000

Direct wages/Labor 14 1500 21000

PRIME COST

149566

(B)Factory overheads

Factory manager’s salary 12.67 1500 19000

Unproductive wages 1.33 1500 1950

Factory insurance 10 1500 15000

Factory lightning 33.33 1500 50000

Depreciation on plant & machinery (@5%)

83.33 1500 125000

Repairs & maintenance 0.67 1500 1000

Particulars Per Unit (Rs.)

Units Amount (Rs.)

Factory stationery 0.33 1500 500

Factory overheads 141.63 1500 212500

Factory Cost

362066

(C)Office & administration o/h

Director’s fees 5 1500 7500

Telephone expenses 0.13 1500 200

Office insurance 5.33 1500 8000

Legal expenses 66.66 1500 100000

Depreciation on building (@10%)

133.33 1500 200000

Misc.expenses 1.66 1500 2500

Office overheads 21.21 1500 318200

Cost of Production 680266

(D) Selling & distribution o/h

Depreciation on delivery van (@5%)

3.33 1500 5000

Sales & Promotion expenses

0.13 1500 200

Advertisement & publicity 6 1500 9000

PARTICULARS PER UNIT (Rs.)

UNITS

AMOUNT (Rs.)

Transportation expenses

0.8 1500 1200

Packaging & Labeling 2.13 1500 3200

Commission on sales (3.25%)

0.03 1500 50

Selling & Distribution O/H

12.42 1500 18650

Cost of sales/ Total Cost

698916

Initially, the Fixed Cost has been decided on the basis of the cost of the materials used in the process and so was the S.P.

This is done keeping in mind the pricing technique followed by the competitors (Nimbooz)

The per unit cost incurred for the overall process is estimated to be Rs. 5.70 and profit margin of Rs. 10.00 is our aim

Considering competitor’s S.P. i.e. Rs. 18, we have decided ours to be Rs. 15, which in turn also fulfills our aim

Marginal cost is the change in the total cost that arises when the quantity produced changes by one unit

That is, it is the cost of producing one

more unit of a good

Marginal costs include all costs that vary with the level of production

Fixed cost has been calculated on the basis of the cost of raw materials used i.e. is Rs 8566/-

Variable cost has been calculated including the variable factory overheads (i.e. Repairs & Maintenance, Unproductive wages and Factory stationery).

Both these cost are being fixed after analyzing the competitor’s cost sheet.

QUANTITY

S.P.

FIXED COST(FC)

VARIABLE

COST(VC)Rs. 2.3

P.U.

TOTAL COST(FC + VC)

SALES(S.P. * QUANTITY)

0 15 8566 - 0 0

500 15 8566 1150 9716 7500

1000 15 8566 2300 10866 15000

1500 15 8566 3450 12016 22500

P/V RATIO : CONTRIBUTION/SALES * 100

QUANTITY = 1500

P/V RATIO = (SALES-VC)/SALES *100 = (22500-12016)/22500

*100 = 47%

So, the P/V ratio is 47%.

MARGIN of SAFETY = PROFIT/PVRATIO

= (SALES-TC)/PV

= (22500-12016)/47%

= Rs.22306.38 /-

THEREFORE, MOS IS RS. 22306.38/-

1) Being a start up we have decided to produce only 1500 units in the first month.

2) After sale of almost 628 units we will start gaining.

3) On sale of 1500, profit estimated is Rs. 10484/-

4) It is expected that on sale of 50,000 units we will be able to recover the total cost of production.

5) At the end, as per budgeting, we got a product that is high on lemon and low on money.

THANTHANKK YOU

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