Cost and Income Analysis on Fruit Juice Production

Enterprise in Nigeria
INITRODUCTION

Fruit Juice is a liquid that is naturally contained in fruits. It is extracted by mechanically squeezing or
macerating the fruits. It is produced and consumed for its refreshing taste, nutritional benefits, and as a
good source of instant energy. The mounting focus of consumers toward a healthier consumption of
fruits and recent changes in dietary habits are key factors driving growth in the fruit juice market. In
Nigeria, more than #165 billion was spent on fruit juices in 2022 alone. However, a large chunk of these
money are lost to foreign countries where different brands of fruit juices are imported into the country.
Hence, the urgent need to encourage local production of fruit juices to meet local demands and prevent
the loss of foreign exchange earnings to other countries. Furthermore, local production of fruit juices
will generate more employment opportunities for Nigerians and improve the standard of living of the
people.

This cost and income analysis is written for a small-scale fruit juice production enterprise in Nigeria. The
purpose is to get an estimate of the cost of establishing such an enterprise as part of an human
empowerment and poverty alleviation scheme in the country.

Assumptions and Basis of Financial Projections

Basis: 3 brands of orange fruit juices shall be produced, namely: Dido Orange Juice (500 ml); Biggie
Orange Juice (900 ml); & Cocktail Special (900 ml). The production plant will require 1.75 ton of orange
fruits per week to produce 500 bottles of Dido orange juice, 300 bottles of Biggie orange juice and 200
bottles of Cocktail Special.

 Fruit juice production equipment will be purchased at the open market and the Federal Institute
of Industrial Research Oshodi (FIIRO) at competitive rates
 The business will start producing and selling orange fruit juice within the first week of operation
 Period of financial projection – 1 year
 Capacity utilization - 80.0%
 Inventory of finished goods – Negligible
 The inflation rate remains below 30.0% in the year
 Maintenance & repairs (Plant & Machinery) – 20% pa on cost (straight)
(Plant & Machinery)
 Depreciation (Plant & Machinery) – 10.0% pa on cost (straight)
 Company Income Tax – 0% Pa
 Dealer’s price of orange fruit juices: Dido - #320
Market price of Dido Orange fruit juice - #350
Biggie dealer’s price - #620
Market price of Biggie - #650
Cocktail Special dealer’s price - #770
 Market prices of Cocktail Special - #800
 Number of workers – 8
Manager – 1
Factory workers – 4
Sales agents – 2
Security - 1

Pro Forma Cost Analysis for the First Year of Production

Table 1.0

Expenses Amount/unit Number of Units Total Amount (#)

Building rent 50000 × 12 = 600,000 12 months 600,000
Building renovation 200,000 - 200,000
License & Permits 200,000 - 80,000
(NAFDAC and SON
approvals)
CAC Registration 5,000 - 5,000
CAC forms 500 2 1,000
Raw materials 100,000/week 52 5,200,000
Washing machine 120,000 1 120,000
Protective gloves 1,000 30 30,000
Hats, hairnets, coats & 50,000 - 50,000
boots
Peeling machine 10,000 2 20,000
Fermentation tank 50,000 1 50,000
3.0kva generator set 150,000 1 150,000
(petrol)
Fruits blending machine 70,000 1 70,000
Freezer 150,000 1 150,000
Fruit presser 40,000 1 40,000
Heat sealer 70,000 1 70,000
Hydrometer 20,000 2 40,000
Insulated filling tank 50,000 1 50,000
Bottle washers 10,000 3 30,000
Liquidizer 75,000 1 75,000
Pasteurizing kettle 50,000 1 50,000
PH meters 20,000 3 60,000
Pressure cooker 40,000 1 40,000
Sterilizers 10,000 3 30,000
Capsule sealing machine 150,000 1 150,000
 Labeler 70,000 1 70,000
Fruit crushers 30,000 1 30,000
Cutting boards 10,000 2 20,000
Furniture 80,000 1 set 80,000
Maintenance & repair 111,000 1 year 111,000
Transportation 80,000/week 52 4,160,000
Payment of salary:
• manager (1) 50000 12 months 600,000
• factory workers (4) 30,000 12 months 1,440,000
• sales agent (2) 30,000 12 months 720,000
• security (1) 25,000 12 months 300,000
Utilities and miscellaneous 250,000 - 250,000
expenses

Total Operating Expenses = #15,142,000

Sales Forecast Based on Market Demand Data

Table 1.1: Monthly Sales Forecast in Thousands

Item M1 M2 M3 M4 M5 M6 M7 M8 M9 M1 M1 M1
0 1 2

Dido:
Qty 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60
sold

Price 320 320 320 320 320 320 320 320 320 320 320 320
per
unit
(#):
Biggie: 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96
Qty
sold

Price 620 620 620 620 620 620 620 620 620 620 620 620
per
unit
(#):
Cockta 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.64
il S.:
Qty
sold
 770 770 770 770 770 770 770 770 770 770 770 770
Price
per
unit
(#):
Total 3.20 3.20 3.20 3.20 3.20 3.20 3.20 3.20 3.20 3.20 3.20 3.20
Qty:

Total 160 1600 160 1600 160 160 160 160 160 160 160 160
Amou 0 0 0 0 0 0 0 0 0 0 0 0
nt (#)

 Total Revenue Projection in the year = #1,600,000 × 12 = #19,200,000

Pro Forma Profit and Loss Account

Table1.2

# Year 0 Year 1
Revenue - 19,200,000
Utilities and bills - (250,000)
Machinery - (1,315,000)
Building + Rent - (800,000)
Other expenses - (13,027,000)
Total operating expenses - (15,142,000)
EBITDA - (4,058,000)
Depreciation - (131,500)
Net profit/(Loss) - 3,926,500
EBITDA Margin, % - 21.14%
TRAINING BUDGET
Training is very important to the success of any human development scheme. It exposes the
beneficiaries to skills required to succeed in their endeavors. Such a training must, however,
have a budget tailored to the aim and objectives of the scheme
In this regard, a training budget has been created to ensure the smooth operation of the soap
production enterprise training program. The training will be delivered to a group of select
individuals in 11 modules as enumerated below:
1. What is fruit juice production and what are the raw materials required for juice
production?
This module will introduce the trainees to the chemistry of fruit juice, the different types of
fruit juice and raw materials required for their production.
2. Orange Fruit Juice Production Techniques
This module introduces the trainees to the techniques for orange fruit juice production, raw
materials required, equipment required, grades of orange fruits, and where to purchase
them.
3. Safety and Hygienic Practices in Fruit Juice Production
Observing safety and hygienic practices is important in fruit juice production since the consumption of
fruit juices could have great impacts on human health and the workers will be working with delicate
machines. This module exposes the trainees to necessary hygienic and safety practices in fruit juice
production.

4. Pre-process Storage
The logistics of production, harvest, transport and ripening of fruits dictate that orange fruits
should be stored prior to juicing. This module exposes trainees to what they need to look out
for in sorting, grading and storage of orange fruits.

5. Crushing & Juicing

This modules exposes participants to the fruit-specific ways to extract juice. Operations range
from kitchen to industrial scale depending on volume, end use and raw materials available.
6. Pressing and Juice Clarification
This module demonstrates the pressing operation in which juice is extracted from the fruit. The
pressing can be manually or mechanically performed with complete automated systems
common in large-scale juice production. Better extraction is accomplished by mixing the rush
between multiple pressings to expose fresh surface near the cloth. Also, primary extracted juice
would be treated for more fluid juices where cloud or turbidity is not acceptable.
7. Filtration & Deaeration of Orange Juice
This module exposes trainees to the steps involve in the clearing up and separation of the juice
stream to reduce treated volume and increase throughput. In the operations described as
crushing, comminution, pressing, shaker separation, centrifugation, and filtration, the fruit juice
is subjected to aeration which involves the inclusion of oxygen that can promote enzymatic
browning and spoilage. The module teaches learners how to filter, clean and preserve the juice
by extracting oxygen from it.
8. Juice Stabilization & Preservation
This module exposes learners to the series of steps that could be further taken to prevent
spoilage including refrigerating, vacuum drying, sanitation, freezing, competitive inhibition,
thermal processing, canning, hot filling, aseptic processing, sterile filtration, irradiation, and
addition of chemical preservatives.
9. Bottling & Packaging
This module teaches learners how to bottle and package their fruit juice products as a form of
competitive advantage. Packaging of fruit juices could be in different forms and sizes using
metals, plastic materials, cans, glass, and so on.
10. Profit Maximization and Marketing Strategies
This module delivers some knowledge of cost accounting and marketing to trainees and
prepare them for future undertakings in the business.
11. Securing Loans to Boost Your Business
This module teaches the trainees how to secure business grants and loans from both public
and private sectors.
Target Group: Unemployed graduates and other disempowered members of the societysociety

Period of Training: 4 hours/day for 10 days

Mode: Group training
Requirements:
2 resource persons to administer the training (2 hours each per day)
Hall to host training
Public address system
Writing materials
Advertisement
Equipment for practical demonstration
Welfare (snacks and soft drinks)

Training Budget
Item Unit cost (#) Number of Days Total cost (#)
Trainers (2) 100,000 × 2 per day 10 2,000,000
Hotel accommodation 50,000 × 2 per day 10 1,000,000
Hall 550,000/day 10 5,500,000
Public address system 10,000/day 10 100,000
Generator set (rent) + 10,000/day 10 100,000
fuel
Stationery (exercise 100,000 - 100,000
books and pens)
Advertisement 30,000 - 30,000
Training equipment rent 20,000/day 10 200,000
Field Trips 100,000 200,000
Welfare (snacks & soft 100,000/day 10 1,000,000
drinks)
Miscellaneous expenses 20000/day 10 200,000
Estimated training cost 10,430,000

Projected Total Cost

Item Amount (#)
Estimated Material Expenses 15,142,000
Estimated Training Budget 10,430,000
Estimated Total Expenditures 25,572,000