Hasnin

Conclusion

In our opinion, this fly ash brick project is feasible. Based on the cost-volume-profit analysis, the break even volume in units are 2,296,000 units and the break unit volume in revenue Rs16,072,000. The business will be able to cover all its expenses ( total cost = Rs 16,072,000 ) when 2,296,000 units of fly ash bricks are sold which will then generating revenue of Rs 16,072,000. Then, after 2,296,000 units of fly ash bricks are sold, each unit of fly ash sold will increase profit by Rs 2.50 ( Unit selling price – unit variable cost; Rs 7 – Rs 4.50 ). The partners, Sharma and Gupta estimated that a sales volume of 2.4 million bricks could be sold per year. This estimated sale of 2.4 million bricks is more than the break even volume of 2,296,000 bricks. Therefore, the business is able to generate profit with the estimated sale of 2.4 million. Revenue of Rs 16,800,000 can be generated, and profit of Rs 260,000 ( I= ( UR-UVC ) x Q – TFC ; I = ( 7-4.5) x 2.4 million – 5,740,000 ). If the estimation made by the partners can be truly achieved per year, this business will be profitable. Thus, it can be continued, and sales of more than 2,296,000 bricks must be achieved to generate profit.

Moreover, the proposed plant had the capacity to produce 4 million bricks per year. To achieve break even, 2,296,000 bricks need to be sold. The proposed plant capacity is undoubtedly able to produce 2,296,000 bricks that needed to be sold to achieve break even, meaning to cover the all expenses to earn profit. Therefore, the proposed plant has the capacity to fit with the production to generate profit. However, actual production would depend on market demand. Fly ash brick will be used to replace the clay bricks. Seeing the annual demand for clay bricks for construction purposes, 180 billion tonnes are estimated. To break even, approximately 2.3 million fly ash bricks are needed to be sold. Fly ash brick is going to slice the market demand of clay bricks. 2.3 million is only 1.2 x 10^-6 % of the 180 billion tonnes annual demand of clay bricks. Therefore, to achieve break even and earn profit for fly ash bricks, sales of more than 2.3 million bricks or sales of 2.4 million estimated by the partners are possible. This is because the market demand of bricks for construction is huge ( 180 billion tonnes annually for clay bricks ), and assuming fly ash bricks will replace clay brick or slice the market of clay bricks, a more than 2.3 million bricks annual demand for fly ash bricks can be potentially achieved to break even and then earn profit. If the proposed plant is function at full capacity, 4 million bricks will produce revenue of Rs 28,000,000 and profit of Rs 4,260,000. Therefore, the business is feasible as in its full capacity, profit is able to be generated.  

Besides, to obtain the main raw material, the fly ash which consist of 60 to 80 % of fly ask bricks, there will be not much of an issue. This is because currently the thermal power plants are generating 100 million tonnes of fly ash per year in India. Let say 2.3 million fly ash bricks need to be produce, and then sold to achieve break even. 60% of fly ash needed, and thus 1,380,000 fly ashes needed to produce the 2.3 million fly ash bricks. Therefore, this business is feasible in terms of able to acquiring raw materials needed. Moreover, the previous successful example which is the National Thermal Power Corporation ( NTPC ) of India had already manufactured approximately 150 million bricks in their plants and used for in house consumption. This convinces more that this project can be done. Break even volume of 2.3 million bricks, and to achieve profit, more than 2.3 million bricks are able to be manufactured. Since others can manufacture 150 million, Sharma and Gupta must as well able to achieve the break even and earn profit.