Organization and Management Project or Feasibility reports – 6
Organization and Management
Cost analysis- Fixing up the initial sales price by approximation method for the product However the actual costing will be done based on actual consumption later.
How do the machine hourly rates calculated and reflected ? Generally the following formula, which is an illustrative model per machine is adapted.
The above calculation is only a suggestive figure for ex no of production targeted per day. However if the production goes up within the same stipulated hours the recovery period or break even point of the investment will fall down drastically by several years below 10 years anticipated. Depending upon the mass consumption products, and high sale value products the manufacturers may keep high margin of profit and recover the cost in less than 5 years.
One question may be asked. whether the low cost machineries and equipments will be worked out in the same manner and cost recovered in 10 years as suggested above? No the manufacturers keep high margin of profit and recover the cost in less than 5 years.