TOPIC

REVENUE COST PROFIT OF BUOI HONG NIP

COMPANY ( 2019-2020 )
 Mrs: Tran Nguyen Anh Thu
Class: 19TRU01
Object: ECO

THOMPSON RIVERS UNIVERSITY

Commercial department

Subject essay: Microeconomics

Topic:

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PREFACE

Agriculture is an important and strong economic sector of Vietnam,

making a great contribution to the country's GDP and creating jobs for
the majority of the people. Currently, our country is still an agricultural
country.
With the topic of company cost analysis ‘BUOI HONG NIP company’,
the group would like to present some assessments of the business
situation of the company and an economist's comments.

In a fiercely competitive market economy like today, especially in

Vietnam Nam has officially become a member of the International Trade
Organization WTO is demanding the Vietnamese businesses as well as
manufacturers must have reasonable and primary policies It is worth it
for our products to have a solid position in the domestic market as well
as in the market foreign school.
With the efforts of the whole group and the dedicated guidance of
teachers of the subject and group.The content was presented, following
the topic that the group chose. However, the process of making and
finding documents will not avoid the shortcomings. Hope you can give
comments to post do better later the group will do it.

List of acronyms

Acronym English
TC exp Total Cost explicit
TCIMP Total Cost implicit
Profit ECO Profit Economic
 TR Total Revenue

PART 1: INTRODUCTION

1. Research subjects:
In the microeconomics research suite, with the research topic being
the company's cost analysis in 2019. Through the learned
knowledge, we will have a deeper understanding of how to analyze
the economy of an enterprise. It is more important to help students
and understand the company's cost calculation in microcomputers
also provide knowledge to help students apply to economic
research later.

2. Objectives of the study:

 Research and research the cost of a company, thereby giving the
best strategy, then determining the direction for that company in the
future.
3. Research Methods:
The analytical method combines abstraction and concretization,
linking theoretical basis and practical application together, thereby
proposing effective methods that can be applied.
Direct exchange with the company to get the data combined with
the radio and books…

PART 2: CONTENT

1. Theoretical basis:
1.1.1
1> DEFINITION
In business and accounting, costs are the monetary values used to produce
something and there are include many different kind of costs:
1.1> TOTAL COST
The market value of the inputs a firm uses in production. Therefore, the
amount that the firm pays to buy inputs ( ingredients, labor salary, tools, and
so on) is called total cost.

1.2> COST AS OPPOTUNITY COST

Recall: opportunity cost is whatever must be given up to obtain some item
There are content two kind of cost which is IMPLICIT COST and EXPLICIT
COST.
+ Implicit cost: input costs that do not require any outlay of money by the firm
+ Explicit cost: input costs that require any outlay of money by the firm
 1.3> FIXED AND VARIABLE COSTS
+ Fixed cost: costs that do not vary with the quantity of output produced
+ Variable cost: costs that vary with the quantity of output produced

1.4> AVERAGE AND MARGINAL COST

+ Average total cost: total cost divided by the quantity of output
ATC = TC / Q
+ Average fixed cost: fixed cost divided by the quantity of output
+ Average variable cost: variable cost divided by the quantity of output
+ Marginal cost: the increase in total cost that arises from an extra unit of
production
MC=  TC /  Q

1 About company
1.1 general information about company:
The Hong Nip pomelo material area is developed right at the "Buoi capital" of
Binh Phuoc and is grown according to American & European Organic standards.
Only Grapefruit that is full 7-8 months old can reach harvest quality.

Pink green skin pomelo is the perfect combination between a special Vietnamese
green grapefruit tree and Binh Phuoc Bazan red land to create quality green skin
pomelo results that meet the strict requirements of the market.

For almost seven years, our company has supplied for the market for more than 35
tons each year. We currently have more than 30 employees working hard together
to bring our pomelo products to other countries. The business form of the company
is to export pomelos to supermarket chains
BUOI HONG NIP COMPANY is located in Village 5, Long Dien, Phu Rieng,
Binh Phuoc Province.

Hotline : 0986842933- Mr NỊP

0978399713- Ms Phung Anh

Fanpage: http://buoihongnip.vn/
1.2 OUR HISTORY
Buoi Hong Nip was established in 1997 with a small plot of land with 28 hectares
of productive land to grow many kind of fruits such as durian, oranges, tangerine
and so on. In 2005, he decided to liquidate 28 hectares of those fruits, replacing it
with pomelo trees. Up to now, 28 hectares of green grapefruit, the average yield of
30-40 tons / hectare, with a stable selling price from 25,000 to 30,000 VND / 1kg,
each year Mr. Nip's family earns no less than 6 billion VND, creating jobs for 28
workers with a salary from 6 to 9 million / month and dozens of seasonal workers,
the salary of 250,000 VND per day.

1.3 GOALS
Businesses must exist in harmony with the natural environment, accompany
farmers and become a brand for the community.

1 About company
1.1 general information about company:
The Hong Nip pomelo material area is developed right at the "Buoi capital" of
Binh Phuoc and is grown according to American & European Organic standards.
Only Grapefruit that is full 7-8 months old can reach harvest quality.
 Pink green skin pomelo is the perfect combination between a special Vietnamese
green grapefruit tree and Binh Phuoc Bazan red land to create quality green skin
pomelo results that meet the strict requirements of the market.

For almost seven years, our company has supplied for the market for more than 35
tons each year. We currently have more than 30 employees working hard together
to bring our pomelo products to other countries. The business form of the company
is to export pomelos to supermarket chains

BUOI HONG NIP COMPANY is located in Village 5, Long Dien, Phu Rieng,
Binh Phuoc Province.

Hotline : 0986842933- Mr NỊP

0978399713- Ms Phung Anh

Fanpage: http://buoihongnip.vn/
1.2 OUR HISTORY
Buoi Hong Nip was established in 1997 with a small plot of land with 28 hectares
of productive land to grow many kind of fruits such as durian, oranges, tangerine
and so on. In 2005, he decided to liquidate 28 hectares of those fruits, replacing it
with pomelo trees. Up to now, 28 hectares of green grapefruit, the average yield of
30-40 tons / hectare, with a stable selling price from 25,000 to 30,000 VND / 1kg,
each year Mr. Nip's family earns no less than 6 billion VND, creating jobs for 28
workers with a salary from 6 to 9 million / month and dozens of seasonal workers,
the salary of 250,000 VND per day.

III. REVENUE, COST, PROFIT

1> GENERAL VIEW (approximately)

 TOTAL REVENUE 25,2 billion VND
TOTAL COST 8 billion VND
PROFIT 17,2 billion VND

+ With 28 hectares of land for pomelos, each year the company provides about
30,000 kilograms of pomelo to its partners for 30,000 kilograms per kilogram.
25,2 billion VND =30000kg*28ha*30000vnd
+ Each year the company has to pay for many different costs with a total cost of
about 8 billion per year
+ Therefore, each year with a total revenue of about 25,2 billion VND (30000 * 28
* 30000) minus the total cost is about 8 billion VND, the company has a profit of
about 16,2 billion VND per year.
2> The various measures of cost:
This table will shown the approximately data about cost in 2019:
VARIABLE COST Explanation PER YEAR (VND)
1> Wages Part time 210 million
December bonus 160 million
3> Electricity bill Average a month (10M) 120 million (10M*12)
4> Food for employees Account a day (50000vnd) 550million (50000*30*365)
5> Fertilizers and pesticides 120 M/ha 3.4 billion (120M*28)
6> fruit wrapped labels 50 million
7> gloves 60 units 1.5 million (25000*60)
8> tools Knives,scissors, branches 150 million
9> Lawn mower 15 machines 22.5 million (1.5M*15)
10> spraying machine 5 machines/ ha 35 million (250000*5*28)
FIXED COST
1> Labor Full time- 30 people 2.88 billion (30*8M*12)
TOTAL COST 7.579billion

Each year the company's expenses are divided into two basic forms, variable cost
and fixed cost.

+ VARIABLE COST (10 THINGS)

1> The cost of part-time employees and bonus. In 2019, the company spends about
210 million VND for 2 harvests and 160 million for December bonus. With 35
employees working for 10 days, each employee receives 300,000 VND per day.
 => 35 * 10 * 300000 * 2 = 210 million VND
For December bonus, employees working more than one year will receive 75% of the monthly salary,
while employees who work less than one year (over 3 months) will receive 25% of the monthly salary.

With 25 people working over 1 year account:

25 * 8 million * 75% = 150 million
with 5 people working under 1 year account:
5 * 8 million * 25% = 10 million
Total wages of employees on December bonus:
150 million + 10 million = 160 million

2> The cost of electricity to pump water to irrigate plants at about 10 million per
month
=> 10M *12 = 120 million VND
3> Food costs for 30 official employees in 2019 are about 550 million VND with each
person spending about 50,000 VND per day
=> 30 * 50000* 365 = 550 million VND
4> At the end of 2019, the company awarded 30 official employees with each
employee receiving a salary of VND 8 million in 13 month
=> 30 * 8 M = 240 million VND
5> With 28 hectares of land, each year the company has to spend about 120 million
VND of fertilizers and pesticides per hectare.
=> 28 * 120M = 3.4 billion VND
6> For fruit wrapping paper, the company has to spend about 50 million VND of
which 2,000 is for each label. In 2019, the garden produces about 2,500 fruits
(30,000 kilograms divided by an average of 1.2 kilograms per fruit)
=> 2000 * (30000 / 1.2) = 50 million VND
7> Gloves are the next expense the company has to pay. This year the company has to
prepare 30 gloves per day for 25 thousand VND per pair
=> 60 * 250000 = 1.5 million VND
8> In 2019, the company spends about 150 million VND on garden tools. Including
tools such as knives, scissors, branches, ... to prune, plow,..
9> The company spent about 22.5 million VND on lawn mowers for 15 machines
=> 1.5M * 15 = 22.5 million VND
10> Except sewing machines cost about 35 million VND for different types of
spraying machines. In which each machine is about 250,000 VND, 5 machines per
hectare.
=> 250000 * 5 * 28= 35 million VND

+ FIXED COST

Each year the company has to pay 30 full-time employees with 8 million per
month per employee
=> 30 * 8M * 12 = 2.88 billion VND
IV. Costs as opportunity costs:

EXPLICIT COSTS Explanation Cost

Wages Full + part time+ 210 million(part) +2.88 billion
bonus (full)
Electricity bill Average a month 120 million (10M*12)
(10M)
Food for employees Lunch (50000) 550 million (50000*30*365)
Fertilizers and pesticides 120 M/ha 3.4 billion (120M*28)
fruit wrapped labels 50 million
gloves 60 units 1.5 million (25000*60)
tools Knives, scissors, 150 million
branches
Lawn mower 15 machines 22.5million (1.5M*15)
spraying machine 5 machines/ha 35 million (250000*5*28)
Total explicit costs   7,579 billion
 IMPLICIT COSTS
Land 50*28ha*12 month= 16,8
billion
When measuring implicit costs at BUOI HONG NIP comapy:
 Implicit costs (land) = 50*28ha* 12 month = 16,8 billion.
The difference between the ways of economics and accountants is easy to case
this company when they analyze a business.

+ Economists’s decisions are based on both explicit and implicit costs:

 TCEXP + TCIMP = 7,579billion +16,8billion = 24,379 billion

Profiteco = TR – (TCEXP + TCIMP ) = 25,2billion – 24,379 billion = 0,821billion.

+ From the perspective of an accountant, they make decisions based on explicit

costs: TCexp = 7,579 billion.

Profitacc = TR- TCEXP = 25,2 billion – 7,579 billion = 17,621 billion.

As we know that accountant, who only measures explicit costs ( 7,579 billion). By
contrast, according to an economist, the opportunity cost of owing the business is
still 17,621 billion.

As we will see, a firm making positive economic profit (0,821 billion) will stay in
business. It means that ower still continue to produce products.

V.
Output TC FC VC AFC AVC ATC MC

0 2880M 2880
M
150 3680M 2880 800M 19.2M 5.3M 24.5M 5M
tons M
300 4500M 2880 1620M 9.6M 5.4M 15M 5.4M
tons M
450 5340M 2880 2460M 6.4M 5.4(6)M 12M 5.6M
tons M
600 6200M 2880 3320M 4.8M 5.5M 10M 5.7M
tons M
750 7080M 2880 4200M 3.84M 5.6M 9.4M 5.8M
tons M
840 7534M 2880 4669M 3.4M 5.58M 8.9M 5M
tons M
When the company produces a small quantity of products (only 5ha), he has few
workers and many equipment is not used at full capacity.
150 tons = 30 tons/ha * 5 ha and VC is estimated 800M

AFC = FC/Q = 19,2 M

AVC = VC/Q = 5,3M

ATC= TC/Q = 24,5 M

∆ TC
MC = ∆ Q = 5M

When ouput is 300 tons , it is accounted: 10ha* 30 tons = 300 tons

And VC = 1620 M

AFC = FC/Q = 9,6 M

AVC = VC/Q = 5,4M

ATC= TC/Q = 15M

∆ TC
MC = ∆ Q = 5,4M

When ouput is 450 tons , it is accounted: 15ha* 30 tons = 450 tons

And VC = 2460M

AFC = FC/Q = 6,4 M

AVC = VC/Q = 5,4(6)M

ATC= TC/Q = 12M

∆ TC
MC = ∆ Q = 5,6M

When ouput is 840 tons , it is accounted: 28ha* 30 tons = 840 tons

And VC = 4669 M

AFC = FC/Q = 3,4 M

AVC = VC/Q = 5,58M

ATC= TC/Q = 8,9M

 ∆ TC
MC = ∆ Q = 5,0(4)M

As output increases, we easily see in Table 3, VC gradually increases with output

from 800M to 4669M. It means when hong nip company produces more products,
the higher the variable costs because business owners will need more manpower
(part-time) and tool support. In this case, the business owner is making the most of
the idle resources.

30

VI.The
25
impact
of the

20

15

10

0
150 300 450 600 750

AFC AVC ATC MC

Pandemic (COVID-19)
 One of the causes of the supply curve shifts is due to natural disasters. In
2020, the company experienced a pandemic corona virus that affected the
company's revenue and profit.

In 2019, the company's profit is more than 25 billion VND with the
output price of 30,000 VND per kilogram. However, in 2020, the output price
and quantity are being reduced by nearly half due to competition of many non-
export fruit items such as dragon fruit, mango, ... So the company had to lower
the price of pomelos by about 20000 VND - 22000 VND per 1 kg

Due to the reduction of pomelo prices and quantity but the cost of
cultivation and care for the garden remains the same, the company's profit in
2020 has dropped sharply from over 17 billion VND in 2019 to now only about
10 billion in 2020.

COMPARATION

2019 2020
REVENUE 25.2B REVENUE 17.64B
(decrease due to
pandemic) (decrease in price of
grape fruit at 20000-
22000/kg)

(21000*30000*28)
COST 8B COST 8B
PROFIT 17.2B PROFIT 9.64B

SHIFT THE SUPPLY CURVE:

Price

S0

30000 S1

21000
 30000 Quantity

vii. RECOMANDATION

Based on the data analyzed above it can be seen that the company is doing very
well and should continue to operate for the following reasons:

First: after calculating the amount of costs the company has to spend to
operate the pomelo production, the company still has high annual profits due to the
reasonable operation from senior to workers.

Next: not only is the company highly profitable, but the company can also
help those around them have more income thanks to the company's working
method and that is the achievement point achieved by Hong Nip Company.

In the end: for the company to grow stronger, one of the most effective ways
is to invest in more advanced machinery and to have more efficient farming
methods by consulting Western countries' cultivation methods
Reference