ESTIMATION OF COSTS, EXPENSES,MANUFACTURING...

3. SIR. RASHID PARVAIZ

4. “Life is a learning experience”. We have learned the validity of this statement time and
time again. Every time we think we know something, we look back a year later and
realize how little we know and how much we have learned. This Feasibility Report has
convinced us again, not in the learning but also in terms of the vast team of talented
people that take part in creating this report. We believe each person plays a piece of a
puzzle to make the complete picture, some pieces are bigger then others, but
without anyone piece the picture would not be completed.
We want to pay tribute to our worthy teachers who are the main source of
enlightenment for our minds.
This project is one of the sources of knowledge about the “Business” for us. We
are especially thankful to our honorable teacher SIR.RASHID PERVAIZ
provided us guidance, inspiration, suggestions and encouragement that helped us
in all the time of research for and writing of this project.
We are specially thankful to Ch Masood Majeed (owner of ASIA Flour Mill located
in state of small industries) who provide us necessary information and show us the
working of flour mill.

6. NAME OF
PROJECT
UNITED FLOUR MILL
LOCATION Small Industries Estate
NATURE OF
INDUSTRY
Flour Mill – new project
PRODUCT
RANGE
Flour, Maida & Bran
INSTALLED
CAPACITY
8 Body Flour Mill
PURPOSE OF
LOAN
To meet the Capital Cost of the Project
BRIEF
DESCRIPTION
OF MACHINERY
Machinery would be purchased from local suppliers of machinery having good reputation
in market in this regard.
ESTIMATED
COST OF THE
PROJECT
Debt 60% 40,687000
Equity 40% 27,125000
Total 67,8120
NAMES OF
LOAN
Picic
Long term loan
NAME OF
MACHINERY
SUPPLIERS
M.YOUNUS MALIK
SUTLUJ INDUSTRIES
SMALL INDUSTRIES SHOP 5/6

7. Wheat is one of the most important products for all of region of the
world. Without wheat
human life is incomplete. It is become more important not only by the f
act of improvement international value. It’s a first food item that an
important for all over the world. This business also important for a
Pakistan. And last decades the flour mill are increase due increase in
demand of flour.

8. Availability of raw material
Availability of utilities
Availability of labor.
Technical facilities
Whole year producing process
Large demand of the people.
Profitable Business

9. The most feasible location for the plant would be in or near the wheat
producing regions of Punjab.
This is advisable as transportation costs would be reduced and contact with
growers/farmers directly can be made.
 It is usually the case that the farmers are willing to approach the
manufacturing plant directly if it is located near to their lands.
 However, the availability of trained personnel in the locality has to be kept
in mind as well as the availability of suitable residences because costs could
rise if there was a problem in the accessibility of the location from other
urban area.

10. The best location of any plant is important and greater effect on business.
The business can run if all input is available. We decide location the small
industrial area of city followings factor should be examined.
Availability of raw material
Availability of utilities
Availability of labor

11. The nature of the business is partnership.
Covered Area
The total area, which we want to establish a Flour mill, is 2 acres.
The cost of one acre is 5million. The area required to the machinery
building is 2 kanal.
Human Resource Required
Labor

12. There are three types of the labor are required
Technical Labor
Technical labor is a permanent employee of the factory. 15 to
20 employees are required.
Manager.
Shift In charge.
Washer Man.
Accountant.
Packers..
Supervisors
These are also the permanent employee of the factory.10 to 15
employees are required.
Loaders
Loaders are the contractor employee of the company. 15to20
employees are required.

13. While starting your business, government regulations need to be considered. These
regulations may also cover special incentives offered by the government for that
particular sector and other laws that may govern the business. You also must
decide about the form of your organization (sole proprietorship, partnership
etc). Establish Flour Mill following legal procedure is follows.
•Legal Procedure
•APPLICATION FORM FOR LINCENSE
•Issuance of License
•Renewal of License
•Unless:
•Duplicate License
•No Objection Certificate. (NOC)
•No Objection Certificate Fee. (NOC)
•Food Department

14. •Flour
•Maida
•Bran

15. •Direct labor will increase every year 20%.
•Administration salaries will be increase 20% per year.
•Selling expense are 5% of sales revenue.
•Depreciation will be constant over the life of assets.
•The economic life of the project would be 10 year.
•The entire capital outlay would be incurred one year prior to the commencement
of commercial operation.
•Motor vehicles, furniture, fixtures, and equipments would be replaced after 10
years.
•Salvage value at the end of the life of the project represents recovery of working
capital original value of land, book value of land and book value of building.

16. As Faisalabad is an agricultural area having two major crops wheat and cotton.
We have made a research and
seek different type of investment opportunities in Faisalabad region. We have
decided to invest the flour mill because there is much potential in this business
and raw material is easily available.
As population is increasing day by day so the demand of flour is increasing
day by day so it is a very profitable project and it will contribute in the
industrial sector of Faisalabad region.
United Flour Mill is a registered firm established with the objective
of providing flour and to fulfill the increasing demand of Faisalabad region.
The mill is intending to starts it operations initially with one plant in Chak 12
Faisalabad. It plans to expand its network latter in others tehsils of Faisalabad.
Initially United Flour Mill operates at 75% of the capacity. United Flour Mill
will start its operations soon.

17.  Mr. Amir Fraz CEO
 Mr. Farhan Khizar GM
 Miss. Humaira kanwal MD

18. ESTIMATED COST OF PROJECT
SR# DESCRIPTION TOTAL
COST
1 Land 8486
2 Building 9792
3 Machinery 26525
4 Installation & Erection of Machinery 5305
5 Installation 10% Cost of Machinery 2653
6 Transportation 10% of Machinery 2653
7 Vehicles 1400
8 Furniture & Fixture 900
9 Office Equipment 3320
10 Pre-Operating expenses 2580
11 Interest during construction 1846
Estimated fixed cost 65459
Net Initial Net Working Capital 2352
Total Estimated Cost of Project 67812

19. ESTIMATEDINCOMESTATEMENT
Years Ending September 30:- 2013 2014 2015
Sales 80669 95010 100958
COST OF SALES
Raw Material 16536 17633 19742
Labor 15439 18527 22232
Manufacturing Overheads 22450 23356 24263
Depreciation 2576 2576 2576
Total Cost of Goods Manufactured 57001 62093 67814
Inventory Adjustment 5700 509 6272
Cost of Sales 51301 61583 61541
Gross Profit 29368 33426 39444
OPERATING EXPENSES
Administrative Expenses 3780 4536 5443
General Expenses 1750 2100 2520
Selling Expenses 4033 4750 5049
Total Operating Expenses 9563 11386 13012
Operating Profit 19804 22040 26431
OTHER EXPENSES
Financial Charges
Long Term Loan 6103 5493 4882
Amortization of Pre-Production Expenses 860 860 860
Total Other Expenses 6963 6353 5742
Profit Before Tax & Other Funds 12841 15687 20689
Profit/Loss Before Tax 12841 15687 20689
Tax Provisions @ 40% 5136 6275 8276
Net Profit 7705 9412 12413
RATIOS
Gross Profit/Sales 36.41 35.18 39.06
Operating Profit/Sales 24.55 23.20 26.17
Pre-Tax Profit/Sales 15.92 16.51 20.49
Net Profit/Sales 9.55 9.91 12.29
Net Profit/Equity 22 21 22

20. INITIALNETWORKING CAPITAL
REQUIREMENT
PARTICULAR RS
CURRENT ASSETS
INVENTORIES
 Raw Material 5 Days Requirement
 Wheat 134
 Finished Goods 2721
Total Cost of Inventory 2855
Advances, Deposits & Repayments 4
Account Receivables(2% of Sales) 1613
Cash 1% of amount withdrawn from bank for inventory 21
Total Current Assets 4494
POSSIBLE CURRENT LIABILITIES
Bank borrowing 75% of Inventories 2141
Initial Net Working Capital 2352

21. ESTIMATED COST OF MACHINERY
SR # DESCRIPTION QTY UNIT
COST
TOTAL
COST
Grinding Section
1 Ruler bodies(USSR type)(1000mm Ruler size with ruler) 8 700000 5600
2 Plant Shifter(4 Section each) 4 470000 1880
3 Bran Finisher 1 255000 255
4 High Pressure Suction Fan 1 300000 300
5 Battery Cyclone 1 300000 300
6 Air lock with Cyclone with Dividing Walls 20 155000 3100
7 Main Pipe(size 24inch,lenth 50feet) 2300
8 Purification Machine 1 450000 450
9 Low Pressure Suction Fan 1 200000 200
10 Cyclone with Pipe(size 4*8) 1 200
11 Flour,Maida,sujji,Chollar Packing Bin(Steel) 8 155000 1240
12 Conveyor Werm 9" Size(feet) 2000 1000 2000
14 Lift Pipe(4 inch with band,8 gage) 1500 1000 1500
15 Ruler Body Receiver with Happer 20 5000 100
16 Production Pipe(5 inch, 16 gage) 1500 500 750
Cleaning Section
1 Washing Machine Full Size USSR type Steel 1 550000 550
2 Elevators with belt with bucket 56 feet length 5 312000 1560
3 Separate Poland Type 4 300000 1200
4 Scorer 2 270000 540
5 Suction Fan with Cyclone with Suction Pipe 4 325000 1300
6 Cocle Salender Poland type 2 550000 1100
Others
Nut Bolt,Angle,Steel Sheet,Belt,Steel Jalli,Resham Jalli,etc 100
Total Cost of Machinery 26525

22. @ 100% CAPACITY
6400kg Kg of
Wheat/Day/Machine
No. of
Machines
%
Output
Quantity
(000)
Flour 1 80 256
Maida 1 10 32
Bran 1 10 32
Total 100 320
Crushing Of Wheat

23. MANUFACTURING
OVERHEAD COST
DESCRIPTION RS
FIXED COST
Power: @ 288/400/KW/Month 2765
Insurance: @ 10% of Fixed Assets Cost 4923
Maintenance and Depreciation:
Overhauling Expenses @ 40000 Per machine 40
Maintenance of Building @ 10% of Cost of Building 979
Maintenance of Vehicles 10% of Cost of Vehicles 140
Total Fixed Cost 8847
Variable Manufacturing Expenses:
Power: @ 7.71/unit of 400/KW/Month 85% of which will be utiliz
ed
118119
Machinery Re. 3.00 Per 40/Kg on Crushing of wheat 18
Total Variable Cost 18137

24. ADMINISTRATIVE EXPENSES
SR# DESIGNATION NO.OF
EMPLOYEES
SALARY/
MONTH
ANNUAL
SALARY
1 Manager 1 40000 480
2 Accountants 2 30000 720
3 Production Clerk 2 20000 480
4 Cashier 1 25000 300
5 Gun-man/Chowkidar 3 15000 540
6 Peon/Sweeper 1 15000 180
Total 9 145000 2700
Fringe Benefits @ 40% 58000 1080
Total Cost 203000 3780

25. GENERALEXPENSES
SR# DESRIPTION YEAR-EXP
1 Travelling Expenses 300
2 Printing & Stationary 200
3 Telephone,Telex,Postage 250
4 Rent,Rates,Taxes 300
5 Entertainment 200
6 Legal & Audit 250
7 Miscellaneous 250
Total 1750

26. CASH FLOW STATEMENT
OPERATING YEARS
Years Ending 30th September 2012 2013 2014 2015
SOURCES OF FUNDS
Operating Profits - 19804 22040 26413
Depreciation - 2567 2576 2576
Total Funds From Operation 22381 24616 29008
OTHER SOURCES
Long Term Loan 40687 - - -
Paid-Up Capital 27125 - - -
Total Sources Of Funds 67812 22381 24616 29008
APPLICATION OF FUNDS
Investment In Fixed Assets 57713 - - -
Financial Charges During Construction 1846 - - -
Pre-Production Expenses 2580 - - -
REPAYMENT OF
Long Term Loan - - 4069 4069
Bank Borrowings - - - -
FANANCIAL CHARGES ON
Long Term Loan - 6103 5493 4882
Bank Borrowings - - - -
PAYMENT OF
Taxes - - 5136 6275
Dividends - - - -
Short Term Investment 3000 - 5000 10000
Increase In Current Assets (other than cash) 138 4811 573 438
Total Application Of Funds 65277 10914 20271 25664
Cash Surplus/(deficit) 2535 11467 4345 3344
Cash @ Beginning Of The Year - 2535 14002 18347
Cash @ End Of The Year 2535 14002 18347 21691

27. BALANCE SHEET
OPERATING YEARS
Years Ending 30th September 2012 2013 2014 2015
CURRENT ASSETS
Cash & Bank Balance 2535 14002 18347 21691
Short Term Investment 3000 3000 8000 18000
Account Receivable - 1613 1900 2020
Inventories
Wheat 134 481 513 545
Finished Goods - 2850 3105 3391
Advances, Deposits and Prepayments 4 4 4 4
Total Current Assets 5672 21950 31868 45650
FIXED ASSETS
Fixed Assets @ Cost 59559 59559 59559 59559
Accumulated Depreciation On Fixed Assets - 2576 5153 7729
Fixed Assets Net 59559 56983 54407 51830
Intangibles 2580 1720 860 -
Total Assets 67812 80653 87135 97480
CURRENT LIABILITIES
Tax Payable - 5136 6275 8276
Dividend Payable
Worker's Fund Payable - - - -
Current Maturity of Long Term Debt - 4069 4069 4069
Total Current Liabilities - 9205 10344 12344
LONG TERM DEBTS
Total long Term Debt 40687 36618 32550 28481
EQUITY
Paid-Up-capital 27125 27125 27125 27125
Retained Earnings - 7705 17117 29530
Total Equity 27125 34829 44242 56655

28. Present demand of flour is about 25525000 tons in this current year.
Demand supply gap
The supply of flour is about 23225000 tons and demand is about 25525000 tons.
Ex-factory price (price which u will sell to whole sellers)
•The ex-factory price of 20kg bag of flour is 540
•The ex-factory price of 20kg bag of Maida is 740
•The ex-factory price of 20kg bag of bran is 220
Retail price
•The retail price of 20kg bag of flour is 560
•The retail price of 20kg bag of Maida is 760
•The retail price of 20kg bag of bran is 240
Distribution channel:
First of all our sales man collect the orders from whole sale dealers than from
whole sale dealer the shop keeper collect the flour than ultimate consumers
purchase from retail store

29. Initially, the product would be launched in the local market. The preferred
mode of distribution is going directly to the wholesalers .There is an
option of having no involvement of any distributor between the
manufacturer and the wholesaler in the city where manufacturing is being
done. By giving healthier profit margins to the wholesalers, the
wholesalers will hence promote the product. This strategy is important to
introduce such a product and to create an extensive distribution and sales
channel. The company will later expand into other cities through a
distributor network.

30. Wheat received in the Factory
Wheat is weighted on the Plate Form
Elevator 1 Elevator 2 Elevator 3 Elevator 4
Wheat goes to Separators for Clearing
Separator 1Separator 2Separator 3
Wheat goes to Bin to send it for Washing
Washing Machine
Wheat goes to Bin to send it for Grinding
Roller Body Sifter Packing
Output is send to Market

31. WASHING SECTION
1.SEPRATOR.
2. ELEVATOR.
3. SCOLDER MACHINE.
4. LOW PRESSURE FAN.
5. WASHING MACHINE.
6. STORAGE BIN.

32. GRINDING SECTION
1. RULER BODY
2. SHIFTER
3. PURIFIER
4. PRODUCTION WORM

33. We conclude that on the basis of field work and survey of flour mills that
the flour is necessary product so its demand increase day by day. There is
no chance to decrease the demand of flour. Pakistan is an agricultural
country and wheat is the one of the major crop. Availability of raw material
is very easy. So, conclusion is that the flour mill is a profit motive business
because no chance of decrease of demand. Our recommendation to new
investors is that they must investing flour mill because from the last year
there is the shortage of flour in Pakistan. So, they step forward to minimize
this shortage, and also contribute in the economic as well as social growth
of Pakistan.