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  • 1. BUSINESS PLAN ON CRANK SHAFT PREPARED BY MIHIR H. POPAT ACADEMIC YEAR 2009-11 ROLL NO. 64 MBA III SEM. COLLEGE N.R.VEKARIYA INSTITUTE OFBUSINESS MANAGEMENT STUDIES, JUNAGADH SUBMITTED TOGUJARAT THECHNOLOGICAL UNIVERSITY, AHMEDABAD GUIDED BY DR.RAJESH PATEL
  • 2. DECLARATION I, POPAT MIHIR H., a student of MBA hereby declarethat the project work report presented in this report is my ownwork and has been carried out under the supervision of DR.RAJESH PATEL of N.R. VEKARIYA INSTITUTE OFBUSINESS MANAGEMENT STUDIES, JUNAGADH. This work has not been previously submitted to any otherindustries or university for examination.Date:-Place: - JUNAGADH (POPAT MIHIR H.)
  • 3. PREFACE The course of MBA is designed in a special way throughwhich young entrepreneurs are generated. In the third sem ofthis course, the subject “entrepreneurship and Management ofSmall Scale Business” is included with a view to creating anddeveloping good entrepreneur skills and attitudes amongstudents in a practical and professional way. Today in the growth rate of the Indian economy,contribution of small scale industry is highly important. TheS.S.I. plays a vital role by contributing 40% to the total nationalincome. Therefore it is management and working of SSI as astudent of management. As such, I have great pleasure in the presentation of thereport on “CRANK SHAFT” which is the practical study inMBA.. The report prepared is completely imaginary with fictitiousinformation and imaginary figures to acquire practicalknowledge.
  • 4. ACKNOWLEDGEMENT In accomplishing any task a person is aided by manypeople who through their little or more contribution help one arehis/her success. I take this opportunity to express my sincere thanks to allthose who have helped me in the preparation of this report. Also I would thank my parents and friends and DR.RAJESH PATEL for constant support and encouragement dueto which the work is accomplished.Date :–Place :– Junagadh (POPAT MIHIR H.)
  • 5. INDEXSr. No. Particulars Page No. 1 Introduction 2 Project at Glance 3 Promoter Background 4 Organizational Structure 5 Justification of Location 6 Product Details 7 Market Potential 8 Raw Materials 9 Machines 10 Manufacturing Process 11 Production Capacity Schedule 12 Staff and Labour Details 13 Financial Details  Total Fixed Asset  Cost of Production 14 Total Working Capital Requirement 15 Total Capital Investment 16 Source of Finance 17 Interest of Capital 18 Depreciation
  • 6. 19 Annual Cost of Production20 Sales Forecast21 Break Even Analysis22 Cost of Capital23 Return on Investment24 Profitability Analysis25 Projected Operating Statement26 Projected Cost Sheet27 Projected Balance Sheet28 Particulars of Raw Material Consumed29 Particulars of Finished Goods30 Projected Trading Account31 Projected Profit & loss Account32 Projected Balance Sheet33 Schedule of Fixed Assets34 Schedule of Factory Overhead35 Schedule of Selling & Administrative Overhead36 Risk Factors37 Name & Address of Raw Material Suppliers38 Name & Address of Machineries Suppliers39 Disclosure of Significant Accounting Policy
  • 7. 40 Conclusion I N T R O D UC T I O N The project work presented in this report refers to settingup of a manufacturing unit engaged in the crankshaft especiallypetter type in the future, so it is necessary to know more detailedinformation about it. In India, there many company’s producing and dealing inthe Iron and Steel. Even the iron and steel are exported to theforeign country from here. In India, there are many units orcompany who are using Iron and Steel as the main raw material. The main reasons for choosing the crankshaft is that theproduct is widely used in the diesels engines for which theRajkot city famous for it in whole India and also in wholeworld. Earlier there were many producers of crankshaft. But nowfew producers are engaged in the crankshaft, so the competitionis less in market and even prices are charged high. So it isfeasible to set the unit.
  • 8. P R O J E C T A T G L AN C E Name of Unit - Mihir Spares Registered Office - Aji G.I.D.C. Industrial Area, Plot No. B/3/97 - Rajkot Gujarat – India. Factory Location - Aji G.I.D.C. Industrial Area, Plot No. B/3/97 - Rajkot Gujarat – India. Form of Organization - Partnership Firm Name of Promoter - Puzhakkal Varun S. Name of Product - Petter Crankshaft Size of Unit - Small Scale Industries S.S.I. Registration No. - Applied For Mean of Finance - Owners Capital 65% Borrowed Capital 35% Cost of Capital - 9.11% Return on Investment - 13.67% Cost of Project - Rs. 2, 10, 00, 000 Since, Return on Investment is greater then Cost ofCapital, the project is viable.
  • 9. P R O M O T ER B A C K GR O U N DName - POPAT MIHIR H.,.Age - 21 yearsResidential Address - ‘Jalaram Sociaty, Indraprasth Appt., Block no-A-1/602 Junagadh – 362001.Office Address - Mihir Spares Plot No. B/3/97, Aji G.I.D.C.Industrial Area Rajkot.Qualification - Under Graduate B.B.A.Role in Unit - Chairman
  • 10. O R G A N I ZA T I O N A L S T R U C TR E Chairman Manager Supervisor Accountant Skilled Worker Peon / ClerkSemi Skilled Worker Unskilled Worker
  • 11. J U S T I F IC A T I O N O F L O C A T I ON One of the most important issues that need to be taken intoconsideration before establishing a new unit is the location ofthe proposed project. We have to take into consideration manypoints. It involves cost which affect to the profitability of thebusiness. Moreover there are other environmental condition andinfrastructure facilities too. This unit is to be located at Rajkot in Aji G.I.D.C. which isan industrial area. Here there are many benefits for setting upthe unit. Following are the advantages which justify the location ofAji area – Easy availability of the raw materials Nearness to target market Availability of good infrastructure facilities Easy availability of labour and at cheaper rate
  • 12. PRODUCT Detail In the market, there are two type of crankshaft available –Lister and Petter. But our product is petter crankshaft. Thecrankshaft is the most basic product for the diesel engineswithout it, it cannot run. The crankshaft is manufactured by special steel such asMS and En-9. Our unit manufactured crankshaft of kind AV andTV. It is manufactured according to order given. Name of Product - Petter Crankshaft Av-1 En-9 Usage of Product - In Diesel Engines
  • 13. M A R K E T P O T E N T IA L The popularity of crankshaft is very much becausecrankshaft is used widely in different engines like diesel engine,motorcycle, etc. which is used for revolving the wheel. Thereare many companies which are manufacturing crankshaft butthey are costly and even the quality are accurate. There are many industries which are engaged in producingcrankshaft. Among this popular industries are SwastikEngineers, Adico Spares, India Crank, etc. It shows that the crankshaft have a great market potential.So it will be beneficiary to enter into the market.
  • 14. M A C H I N ES Machines play a very important role in any manufacturingunit. Machines make the work easy, simpler, accurate andqualitative. The same standard of quality can be achieved in theproduct through the use of machines. Machines give lot of work if handled properly. Basicallymachines require regular and proper maintenance and at timeservicing is also required. If this is done then machines will lastfor a longer durations. Machines make the work of the workers easier and evenwith the help of the machines we get faster work done. The unitto be set up need the following machines for producing thecrankshaft – 1) Lathe Machine :- This machine is used for turning the crankshaft which is not accurate in size when it comes from forging. This machine is also used in turning ghuti, lagya size, 5 pillar turning, etc. 2) Small Lathe Machine :- This machine is small in size and used for key way cutting of the crankshaft. 3) Grinding Machine :- This machine is used for grinding the ghuti and the bearing and wheel size of the crankshaft so that rough turning of upper surface can be made properly polished. 4) Drill Machines :-
  • 15. This machine is used for drilling sides of thecrankshaft and for other work for the drilling.5) Height Gauge :- This equipment is used measuring the height ofthe crankshaft which can be fitted in the machine.6) Milling Machine :- This machine is used for key way cutting of thecrankshaft by which it can be fitted in the engine.7) Hardness Testner :- This equipment is used for testing the hardnessthe crankshaft by which the defective piece can be rejected.8) Surface Plate Machine :- This machine is used for cutting the surfaceplate of the crankshaft.9) There are other machines or equipments are usedfor checking the accuracy and quality of the crankshaft andthese machines are micro meter, onerier, bore gauge etc.
  • 16. M A N U F A CT U R I N G P R O C E S S The main process used for manufacturing the crankshaft isas follow:- Marking & Drilling : When the forged material comes in the unit, the crankshaft is being marked. After marking, the drilling is made on the crankshaft. Rough Work : The first and foremost step for the manufacturing of the crankshaft is the forging material of crankshaft is purchased from outside. The forging material is being done the rough work. Lagya Size : After the rough work, the crankshaft is brought for the lagya size process. Here, the crankshaft is process lagya size which can be fit in the machine. Turning Ghuti : The rough work of ghuti is done in this process. The ghuti is the middle part of the crankshaft. Drilling and Hardening : After the above process, drilling is made again on the specific point. This process must require for this crankshaft. Then, the hardening of the crankshaft is measured. This process is must required and without this the crankshaft cannot be passed further.
  • 17. Grinding Ghuti : Now the ghuti will be polished according to themachine size. The grinding of ghuti must require for fittinginto the machine.5 Pillar Turning : After above process, the ends of the crankshaft aresend for the 5 pillar turning. Here, the 5 pillar is size of thecrankshaft for which it is being process for this size.Key-way Cutting : This is the most important process of the crankshaft.Here the crankshaft is send for the key-way cutting on themachine. Here the proper size is to be maintained.Grinding Bearing & Wheel size : At last, the crankshaft ends is being send forgrinding. Here the grinding is done for the wheel size ofthe diesel engine. If the size is not proper then wheel ofengine cannot be fitted.Oiling & Packing : At the last, after all the process the crankshaft isbeing oiled by which it cannot be rusted. And then, thecrankshaft is being packed in the box.
  • 18. P R O D U C TI O N C A PA C I T YInstalled Capacity 100%Installed Capacity per Month. 7000 UnitsUtilized Capacity. 50%Utilized Capacity per Month 3500 UnitsNumber of working days in a Month 25 daysNumber of shifts per day 1Number of hours per shift 8 hours S C H E D U LE
  • 19. S T A F F AN D L A B OU R d e t ai l Administrative Staff Manager 1 Supervisor 1 Clerk 1 Accountant 1 Watchman 1 Factory Staff Skilled worker 7 Semi skilled worker 6 Unskilled worker 7
  • 20. F I N A N C IA L D E T AI L S TOTAL FIXED ASSET LAND Particular Yards. Rate (Rs.) Total Cost Land 2000 2500 50,00,000 BUILDING Particular Sq. feet Rate (Rs.) Total Cost Building 15,000 500 75,00,000 PLANT & MACHINERY Name Qty. Rate (Rs.) Total CostLathe Machine 5 1,00,000 5,00,000Small Lathe Machine 1 25,000 25,000Grinding Machine 2 3,00,000 6,00,000Drill Machine 5 14,000 70,000Height Guage 1 15,000 15,000Milling Machine 1 50,000 50,000Hardness Testner 1 20,000 20,000Surface Plate Machine 1 10,000 10,000Micro meter, Onerier, 25 2,000 50,000Boreguage TOTAL 13,40,000
  • 21. OTHER ASSETS Particular Qty. Rate (Rs.) Total CostFurniture & Fixture - 2,00,000 2,00,000Electrification Installation - 5,00,000 5,00,000ChargesComputers 2 30,000 60,000Telephone 2 5,000 10,000Trolley & other Handling - 15,000 15,000Equipments TOTAL 7,85,000 TOTAL FIXED ASSETS No. Particulars Amount 1. Land 50,00,000 2. Building 75,00,000 3. Plant & Machinery 13,40,000 4. Furniture & Fixture 2,00,000 5. Electrification & Installation Charges 5,00,000 6. Computers, Telephones & Trolley 85,000 Total 1,46,25,000
  • 22. COST OF PRODUCTION RAW MATERIALSParticular Per Per Day Per Month Per Year Unit Qty. Amt. Qty. Amt. Qty. Amt. (Rs.) Forged 450 140 63,000 3500 15,75,000 42,000 1,89,00,000Crankshaft Box for 20 140 2,800 3500 70,000 42,000 84,000 Packing Total 65,800 16,45,000 1,97,40,000 STAFF & LABOUR Particulars No. of Salary Per Per Year person Month Manager 1 7500 7500 90,000 Supervisor 1 6,000 6,000 72,000 Accountant 1 6000 6000 72,000 Skilled Worker 7 4,500 31,500 3,78,000 Semi Skilled 6 3,000 18,000 2,16,000 Worker Unskilled Worker 7 2,400 16,800 2,01,600 Clerk 1 3,200 3,200 38,400 Watchman 1 2,000 2,000 24,000 Total 91,000 10,92,000
  • 23. UTILITIES Particulars Per Year (Rs.) Water 33,000 Electricity 2,25,000 Total 2,58,000 OTHER EXPENSES Sr. Particulars Amount No.1. Repairs & Maintenance 80,0002. Postage & Telegram 22,0003. Telephone Expenses 32,0004. Transportation 63,2005. Miscellaneous Expenses 44,0006. Advertisement 62,0007. Insurance 90,0008. Medical Expenses 46,5009. Professional Tax 1,80010. Legal Expenses 24,00011. Audit Fees 35,50012. Traveling Expenses 63,00013. Electricity 36,00014. Fuel 36,000 Total 6,36,000
  • 24. T O T A L WO R K I N G C A P I T A L R E Q U I R EM E N T Sr. No. Particular Amount 1. Raw Material 49,35,000 2. Staff & Labour 2,73,000 3. Utilities 64,500 4. Other Expenses 1,59,000 Total 54,31,500T O T A L CA P I T A L I N V E S T ME N T Sr. No. Particular Amount 1. Fixed Capital 1,46,25,000 2. Working Capital (3 months) 54,31,500 3. Cash in Hand 4,43,500 4. Banks 5,00,000 Total 2,10,00,000
  • 25. S O U R C E S O F F I NA N C ESr. No. Particular Amount 1. Owners Capital (65%) 1,36,50,000 2. Borrowed Capital (35%) 73,50,000 @ 13% Total 2,10,00,000 I N T E R E ST o f C AP I T A L Particular Loan Interest Interest Amount Rate AmountOwner Capital 1,36,50,000 7% 9,55,500Borrowed Capital 73,50,000 13% 9,55,500 Total 2,10,00,000 19,11,000
  • 26. D E P R E C IA T I O N Particular Value Rate of Depreciation DepreciationBuilding 75,00,000 10% 7,50,000Machinery 13,40,000 15% 11,39,500Furniture 2,00,000 10% 20,000Electrification & 5,00,000 10% 50,000Installation.Telephone 10,000 10% 1,000Trolley & Other 15,000 10% 1,500equipmentsComputers 60,000 60% 36,000 Total 10,59,500 ANNUAL COST OF P R O D U C TI O N Sr. No. Particular Amount 1. Raw Material 1,97,40,000 2. Utility 2,58,000 3. Salaries 10,92,000 4. Other Expenses 6,36,000 5. Interest on Capital 19,11,000 6. Depreciation 10,59,500 Total 2,46,96,500
  • 27. SALES FORECASTYear. Units Per Rate Per Sales (Rs.) Annum Unit 1. 39,500 675 2,66,62,500 2. 41,475 675 2,79,95,625 3. 43,549 675 2,93,95,575 4. 45727 675 3,08,65,725 5. 48,013 675 3,23,08,775 FIXED COSTSr. No. Particular Amount 1. Depreciation 10,59,500 2. Interest on Capital 19,11,000 3. Salary 2,96,400 4. Other Expenses (50%) 3,18,000 Total 35,84,900Fixed Cost per unit = Total Fixed Cost No. of Units = 35,84,900 42,000 = Rs. 85.34
  • 28. VARIABLE COSTSr. No. Particular Amount 1. Raw Material 1,97,40,000 2. Salary 7,95,600 3. Other Expenses (50%) 3,18,000 4. Utilities 2,58,000 Total 2,11,11,600Variable Cost per unit = Total Variable Cost No. of Units = 2, 11,11,600 42,000 = Rs. 502.66
  • 29. B R E A K EV E N A N AL Y S I S Break-even point is that point of achieving, where totalrevenue and total expenses are equal. It is that point of zeroprofit. If sales exceed BEP, the business will earn profit and if itdecreases from BEP, the business will incur loss. Thus, BEPmay take, as the minimum level of production and sales andcompany must attain in order to be economically viable. Contribution/unit = Selling price/unit – Variable cost/unit = Rs. 675 – Rs. 502.66 = Rs. 172.34 BEP ( in % ) = [Fixed Cost ÷ {Fixed Cost + Profit}] × Capacity Utilization = [35,84,900 ÷ {35,84,900 + 28,70,681}] × 50 = [35,84,900 ÷ 64,85,581] × 50 = 27.77 % BEP (units) = Fixed Cost ÷ Contribution per unit = 35,84,900 ÷ 172.34 = 20,801 units BEP (Rs.) = BEP (units) × Selling price p. u. = 20,801 × 675 = Rs. 1, 40,40,675
  • 30. LOAN REPAYMENT SCHEDULE Sr. Opening Installment Closing Interest No. Balance Balance 1. 73,50,000 10,50,000 63,00,000 9,55,500 2. 63,00,000 10,50,000 52,50,000 8,19,000 3. 52,50,000 10,50,000 42,00,000 6,82,000 4. 42,00,000 10,50,000 31,50,000 5,46,000 5. 31,50,000 10,50,000 21,00,000 4,09,000 6. 21,00,000 10,50,000 10,50,000 2,73,000 7. 10,50,000 10,50,000 - 1,36,500A V E R A G E C O S T OF C A P I TA L Particular Capital Rate Interest Owned Capital 60,00,000 10% 6,00,000 Borrowed Capital 40,00,000 11% 4,40,000 Total 10,40,000 Avg. Cost of Capital = [Total Interest ÷ Total Capital] × 100 = [19,11,000 ÷ 2, 10, 00, 000] × 100 = 9.11 %
  • 31. R E T U R N O N I N V ES T M E N T R.O.I. = [EAT ÷ Cost of Capital] × 100 = [28,70,681 ÷ 2, 10, 00, 000] × 100 = 13.67 % P R O F I T AB I L I T Y A N DP R O F I T AB I L I T Y A N A L Y S IS Particulars Amount Sales 2,66,62,500 Less : Cost of Production 2,13,79,775 EBIT 52,82,725 Less : Interest 9,55,500 EBT 43,27,225 Less : Tax 14,56,554 EAT 28,70,681 Gross Profit Ratio : GPR = Gross Profit ÷ Sales × 100 = 71, 43, 625 ÷ 2,66,62,500× 100 = 26.79% Net Profit Ratio : NPR = Net Profit (EAT) ÷ Sales × 100 = 28,70,681÷ 2,66,62,500× 100 = 10.77% Fixed Asset Turnover Ratio : FATR = Total Fixed Asset ÷ Sales × 100 = 1,46,25,000 ÷ 2,66,62,500× 100 = 54.85%
  • 32. PROJECTED OPERATING STATEMENT Particular Year 1 Year 2 Year 3 Sales (A) 2,66,62,500 2,79,95,625 2,93,95,575COST OFOPERATION:Raw Material 1,97,40,000 1,97,40,000 1,97,40,000Utilities 2,58,000 2,58,000 2,58,000Labour 7,95,600 7,95,600 7,95,600Other Expenses 1,31,000 1,31,000 1,31,000Add: Op. Stock of - - -Raw MaterialLess: Cl. Stock of - - -Raw MaterialAdd: Op. Stock of - 14,05,725 16,88,948Finished goodsLess: Cl. Stock of 14,05,725 16,88,948 8,20,302Finished goodsTotal Cost of 1,95,18,875 2,06,41,377 2,17,93,246Operation ( B )Gross Profit 71,43,625 73,54,248 76,02,329 ( A-B = C )INDIRECTEXPENSES:Administration & 18,60,900 17,26,900 16,18,608Selling ExpensesTotal Indirect 18,60,900 17,26,900 16,18,608Expenses (D) EBIT ( C-D ) 52,82,725 56,27,348 59,83,721Less: Int. on 9,55,500 8,19,000 6,82,500Borrowed loan EBT 43,27,225 40,08,348 53,01,221Less: Tax 14,56,544 16,18,490 17,84,391 EAT 28,70,681 31,89,858 35,16,830
  • 33. P R O J E C TE D C O S T S H E E T Particular Year 1 Year 2 Year 3 Raw Material Consumed Purchases 1,97,40,000 1,97,40,000 1,97,40,000Less: Closing stock - - -Add: Direct Wages 7,95,600 7,95,600 7,95,600 Utilities 2,58,000 2,58,000 2,58,000 PRIME COST (A) 2,07,93,600 2,07,93,600 2,07,93,600 Factory OverheadAdd: Repairs 80,000 80,000 80,000 Insurance 15,000 15,000 15,000 Depreciation 9,51,000 8,45,850 7,52,723 Fuel 36,000 36,000 36,000 TOTAL FACTORY 10,82,000 9,76,850 8,83,723 OVERHEAD (B) Administrative OverheadsAdd: Salaries 2,96,400 2,96,400 2,96,400 Post & Tele. Exp. 22,000 22,000 22,000 Telephone Exp. 32,000 32,000 32,000 Misc. Exp. 44,000 44,000 44,000 Electricity 36,000 36,000 36,000 Insurance Exp. 75,000 75,000 75,000 Medical Exp. 46,500 46,500 Professional Exp. 1,800 1,800 46,500 Legal Exp. 24,000 24,000 1,800 Audit Fees 35,500 35,500 24,000 Depreciation 1,08,500 79,650 35,500 Int. on Own 9,55,500 9,55,500 64,485 Capital 9,55,500 TOTAL ADMINISTRATIVE 16,77,200 16,48,350 16,33,185 OVERHEAD (C)
  • 34. COST OF PRODUCTION 2,36,16,000 2,34,50,000 2,33,41,708 (A+B+C)Add: Op. Stock of Finished goods - 14,05,725 16,88,948Less: Cl. Stock of Finished goods 14,05,725 16,88,948 8,20,302 COST OF PRODUCTION OF 2,22,10,275 2,31,66,777 2,42,10,354 GOODS SOLD Selling & Distribution OverheadAdd: Advertising Exp. 62,000 62,000 62,000 Traveling Exp. 63,000 63,000 63,000 COST OF SALES 2,23,35,275 2,32,91,777 2,43,35,354 SALES 2,66,62,500 2,79,95,625 2,93,95,575PROFIT (Sales–COS) 43,27,225 40,08,348 53,01,221
  • 35. P A R T I C UL A R O F R A W M A T E R I AL C O N S UM E D Particular Year 1 Year 2 Year 3 Qty. Amt. Qty. Amt. Qty. Amt. Opening Stock - - - - - - Add: Purchase 84,000 1,97,40,000 84,000 1,97,40,000 84,000 1,97,40,000 Less: Cl. Stock - - - - - -P A R T I C UL A R O F F I N I S H ED GOODSParticular Year 1 Year 2 Year 3 Qty. Amt. Qty. Amt. Qty. Amt. Op. balance - - 2,500 14,05,725 6,704 16,88,948 Add: Goods manuf. 42,000 2,36,16,000 42,000 2,34,50,000 42,000 2,33,41,708 Less: Sales 39,500 2,22,10,275 41,475 2,31,66,777 43,549 2,42,10,354 Total 2,500 14,05,725 6,704 16,88,948 1,476 8,20,302
  • 36. P R O J E C T E D T R A DI N G ACCOUNT Year 1 Particular Amount Particular AmountTo Opening Stock - By Sales 2,66,62,500To Purchases 1,97,40,000 By ClosingTo Direct Wages 7,95,600 Stock 14,05,725To Utilities 2,58,000To Insurance 15,000To Fuel 36,000To Repairs 80,000To Gross Profit 71,43,625 2,80,68,225 2,80,68,225 Year 2 Particular Amount Particular AmountTo Opening Stock 14,05,725 By Sales 2,79,95,625To Purchases 1,97,40,000 By ClosingTo Direct Wages 7,95,600 Stock 16,88,948To Utilities 2,58,000To Insurance 15,000To Fuel 36,000To Repairs 80000To Gross Profit 73,54,248 2,96,84,573 2,96,84,573
  • 37. Year 3 Particular Amount Particular AmountTo Opening Stock 16,88,948 By Sales 2,93,95,575To Purchases 1,97,40,000 By ClosingTo Direct Wages 7,95,600 Stock 8,20,302To Utilities 2,58,000To Insurance 15,000To Fuel 36,000To Repairs 80000To Gross Profit 76,02,329 3,02,15,877 3,02,15,877
  • 38. P R O J E C TE D P R O FI T A N D L O S S A CC O U N T Year 1 Particular Amount Particular AmountTo Postage & 22,000 By GrossTelegram Exp. Profit 71,43,625To Telephone Exp. 32,000To Transportation 63,200To Misc. Exp. 44,000To Advertising Exp. 62,000To Insurance 75,000To Medical Exp. 46,500To Professional Tax 1,800To Legal Exp. 24,000To Audit Fees 35,500To Traveling Exp. 63,000To Salaries toemployees 2,96,400To Depreciation 10,59,500To Int. on Borrowedloan 9,55,500To Electricity 36,000To Income Tax 14,56,554 To Net Profit 28,70,681 71,43,625 71,43,625
  • 39. Year 2 Particular Amount Particular AmountTo Postage & 22,000 By GrossTelegram Exp. Profit 73,54,248To Telephone Exp. 32,000To Transportation 63,200To Misc. Exp. 44,000To Advertising Exp. 62,000To Insurance 75,000To Medical Exp. 46,500To Professional Tax 1,800To Legal Exp. 24,000To Audit Fees 35,500To Traveling Exp. 63,000To Salaries toemployees 2,96,400To Depreciation 9,25,500To Int. on Borrowedloan 8,19,000To Electricity 36,000To Income Tax 16,18,490 To Net Profit 31,89,858 73,54,248 73,54,248
  • 40. Year 3 Particular Amount Particular AmountTo Postage & 22,000 By GrossTelegram Exp. Profit 76,02,329To Telephone Exp. 32,000To Transportation 63,200To Misc. Exp. 44,000To Advertising Exp. 62,000To Insurance 75,000To Medical Exp. 46,500To Professional Tax 1,800To Legal Exp. 24,000To Audit Fees 35,500To Traveling Exp. 63,000To Salaries toemployees 2,96,400To Depreciation 8,17,208To Int. on Borrowedloan 6,82,500To Electricity 36,000To Income Tax 17,84,391 To Net Profit 35,16,830 76,02,329 76,02,329
  • 41. P R O J E C TE D B A L AN C E S H EE T Liabilities Year 1 Year 2 Year 3 CAPITAL Owned Capital 1,36,50,000 1,36,50,000 1,36,50,000 SECURED LOAN 63,00,000 52,50,000 42,00,000 NET PROFIT 28,70,681 31,89,858 35,16,830 2,28,20,681 2,20,89,858 2,13,66,830 Asset Year 1 Year 2 Year 3 Land 50,00,000 50,00,000 50,00,000 Building 67,50,000 60,75,000 54,67,500 Machinery 11,39,000 9,68,150 8,22,927 Furniture & Fixture 1,80,000 1,62,000 1,45,800 Electric Installation 4,50,000 4,05,000 3,64,500 Telephone 9,000 8,100 7,290 Computer 24,000 9,600 3,840 Trolley & other equipments 13,500 12,150 10,935 DEBTORS 26,58,676 30,18,500 32,45,695 Cash at Bank 25,95,390 24,84,800 29,98,846 Cash in Hand 19,65,890 22,57,610 30,79,195 Closing Stock 14,05,725 16,88,948 8,20,302 2,28,20,681 2,20,89,858 2,13,66,830
  • 42. S C H E D U LE F O R WR I T T E N D O W N V AL U E O F F I X E D ASSETS Particular Rate Net Block Year 1 Year 2 Year 3Land - 50,00,000 50,00,000 50,00,000Building 10% 67,50,000 60,75,000 54,67,500Machinery 15% 11,39,000 9,68,150 8,22,927Furniture & Fixture 10% 1,80,000 1,62,000 1,45,800ElectrificationInstallation Charges 10% 4,50,000 4,05,000 3,64,500Telephone 10% 9,000 8,100 7,290Computer 60% 24,000 9,600 3,840Trolley & other 10% 13,500 12,150 10,935equipments S C H E D U LE F O R FA C T O R Y O V E R H E AD S Particular Year 1 Year 2 Year 3Repairs 80,000 80,000 80,000Wages 7,95,600 7,95,600 7,95,600Depreciation on 2,01,000 1,70,850 1,45,223MachineryDepreciation on 7,50,000 6,75,000 6,07,500BuildingInsurance 15,000 15,000 15,000Fuel 36,000 36,000 36,000 Total 18,77,000 17,72,450 16,79,323
  • 43. S C H E D U LE F O RA D M I N I ST R A T I V E O V E R H EA D S Particular Year 1 Year 2 Year 3 Salary 2,96,300 2,96,300 2,96,300 Postage & Telegram 22,000 22,000 22,000 Telephone 32,000 32,000 32,000 Miscellaneous Exp. 44,000 44,000 44,000 Insurance Expenses 75,000 75,000 75,000 Medical Expenses 46,500 46,500 46,500 Professional Tax 1,800 1,800 1,800 Legal Expenses 24,000 24,000 24,000 Audit Fees 35,500 35,500 35,500 Depreciation 1,08,500 79,650 64,485 Interest on Owned Capital 9,55,500 9,55,500 9,55,500 Electricity 36,000 36,000 36,000 Total 17,40,400 17,11,550 16,96,385
  • 44. S C H E D U LE F O R SE L L I N G O V E R H E AD S Particular Year 1 Year 2 Year 3 Advertising Exp. 62,000 62,000 62,000 Traveling Exp. 63,000 63,000 63,000 Total 1,25,000 1,25,000 1,25,000 R I S K F AC T O R Every new business needs to determine its risk factors thatthe business will face. If risk factors are carefully determinedthen the entrepreneur can take better measures to see that theyhave limited effect on the business following are some of therisks that the new business will face:- The unit will operate in highly competitive market where already other crankshaft manufacturing units have gained important position. The risk of failure of the position. Due to fluctuation of prices in the iron and steel, the price of the product may not remain stable in the market, so unit have to quote the price accordingly. It may take time to beat the competitor’s product. Due to heavy advertising, it might prove to be expensive and might not give desired results. Initially, the production would be low but cost of production may be higher. The business would take a longer period to reach breakeven point. Initially, the required amount of sales will not be achievable and will result in loss. Non-acceptance from the customer’s side.
  • 45. Name & address of raw m a t e r i al s u p p li e r M/S FORGE & FORGE P.L. Ahmedabad Road, Rajkot – 3. M/S MICRO FORGE (I) L. 8-B National Highway, Village: Shapar, Rajkot – 2. M/S SHRADHA FORGE P.L. G-508, GIDC Lodhika, Kalawad Road, Dist.: Rajkot, Metoda – 364 485.
  • 46. NAME & ADDRESS OF M A C H I N ER Y S U P PL I E RM/S RIAT MACHINE TOOLS P.L.G.T. Road, Miller Gunj,Ludhiana – 141 003.M/S GAJJAR MACHINES TOOLSUdhyognagar,Gondal (Guj) India.M/S J.K. MACHINE TOOLSGokuldham Main Road,Rajkot.M/S TURN-O-TECH ENGINEERSC/1/276, Aji G.I.D.C.,Phase II, Road – R,Rajkot.M/S RAVI METALUdhyognagar, Bhaktinagar G.I.D.C.,Rajkot.
  • 47. D I S C L O SU R E O F S I G N I F IC A N T A CC O U N T I NG P O L I C I ES The accounting policies used in this report is Double EntrySystem and all the effect of income and expenditure is givenaccording to Double Entry System. The Depreciation is being calculated according toReducing Balance Method. In this method, the depreciationchanges according to the value of the asset remain in the lastyear. The asset is totally written off slowly and gradually.
  • 48. C O N C L U SI O N In the product project report on Varun Spares, I havediscussed all financial data and other relevant information. The market of Varun Spares is expanding its demand forthe product day by day. The return in this business is alsosatisfactory. At last, it can be said that, the future of this product is verybright. With the expectation of high profitability and good market,it is assumed that it would be the perfect product to bemanufactured in today’s environment.
  • 49. LOGO

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