Whether to plunge into the photocopying business or not.

Which machine to buy

Gather information about the costs: cost of machine, cost of paper, cost of supplies, cost of manpower, etc.
Classifyhing the costs
Analyse this information for decision making
How should we price our service?
Retail customers: Rs.1 or 75 paise per page
Corporate customers provide bulk orders: How much price to be charged
Do we need to make any profit at all or not?
Financing: approach the bank or the cousin or request parents or tap into past savings
ost of manpower, etc.
S No Cost item Cost cost p.a/p.u F/V
1 Machine cost 35000 7000 per annum Fixed
2 Interest exp @ 10% pa 3500 per annum Fixed
3 Drum and film 2800 1400 per annum ? Fixed
4 Shop rent 1,200 per annum Fixed
5 Shop electricity bill 250 3,000 per annum Fixed
6 Repairs & maintenance 1,000 per annum F(budgeted
7 Toner useful for 25000 pgs 800 0.032 per page Variable
8 Paper cost 0.2 per page Variable
9 Direct power 0.04 per single side Variable
10 Salary foregone 2500 pm 30,000 per annum Opportunity cost Fixed

Variable cost per unit 0.272

Fixed cost per annum 12,900

1.00 0.75 0.50

Sales revenue 1.00 0.75 0.50
Variable cost 0.272 0.272 0.272
Contribution margin 0.73 0.48 0.23
Fixed cost 12,900 12,900 12,900
Break even quantity FC/CMU 17,720 26,987 56,579
Contribution margin percentagCM/sale pr 0.728 0.6373333 0.456
Break even sales FC/CMP ₹ 17,720 ₹ 20,241 ₹ 28,289
Profit target opprt. Cost 30,000 30,000 30,000
Target profit No. of pages FC/CMU 58,929 89,749 188,158
Sales revenue to attain target pFC/CMP ₹ 58,929 ₹ 67,312 ₹ 94,079
Summary
BEP no. of pages per day 59 90 189
Target profit No. of pages per day 196 299 627

Customer mix Price Qty VC p.u. con p.u Total cont

Retail customers ₹ 1.00 9000 0.272 ₹ 0.73 ₹ 6,552
Corporate customers ₹ 0.75 76,042 0.272 ₹ 0.48 ₹ 36,348
85,042 42,900 283.47
Economics of buying the new machine
1 Machine cost 50000 5000 per annum
2 Interest exp @ 10% pa 5000 per annum
3 Drum and film 2800 1400 per annum
4 Shop rent 1,200 per annum
5 Shop electricity bill 250 3,000 per annum
6 Repairs & maintenance 0 per annum
7 Toner useful for 25000 pgs 800 0.025 per page
8 Paper cost 0.2 per page
9 Direct power 0.04 per single side
10 Salary foregone 2500 pm 30,000 per annum
Variable cost per unit 0.265
Fixed cost per annum 11,400

1.00 0.75 0.50

Sales revenue 1.00 0.75 0.50
Variable cost 0.265 0.265 0.265
Contribution margin 0.74 0.49 0.24
Fixed cost 11,400 11,400 11,400
Break even quantity FC/CMU 15,510 23,505 48,511
Contribution margin percentagCM/sale pr 0.735 0.6466667 0.47
Break even sales FC/CMP ₹ 15,510 ₹ 17,629 ₹ 24,255
Profit target opprt. Cost 30,000 30,000 30,000
Break even quantity FC/CMU 56,327 85,361 176,170
Break even sales in rupees FC/CMP ₹ 56,327 ₹ 64,021 ₹ 88,085
Summary
BEP no. of pages per day 52 78 162 59
Target profit No. of pages per day 188 285 587 196

Why should double-side printing be encouraged?

What are the intangible benefits of living in Umreth?

We have analyzed a lot! What should Ravinder do now?

D/I R / sunk Cost Acc Fin acc
Direct Relevant yes yes
Indirect Relevant yes yes
Direct Relevant yes if incurred
Indirect Not relevant yes yes
Indirect Not relevant yes yes
Direct Relevant yes if incurred
Direct Relevant yes yes
Direct Relevant yes yes
Direct Relevant yes yes
Indirect Relevant yes if incurred

1.00 0.75 0.50

Target Sales Qty 58,929 89,749 188,158
Sales Revenue ₹ 58,929 ₹ 67,312 ₹ 94,079
Total variable cost ₹ 16,029 ₹ 24,412 ₹ 51,179
Total contribution ₹ 42,900 ₹ 42,900 ₹ 42,900
Total fixed cost ₹ 12,900 ₹ 12,900 ₹ 12,900
Profit ₹ 30,000 ₹ 30,000 ₹ 30,000

0.11
 90 189
299 627