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    Washing Powder: Production and Cost Concept

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    tinki0410
    The document discusses the production of washing powder including the production process, production function, costs involved, and manpower requirements. The production process involves mixing, drying, packing and pollution control units. A production function shows the relationship between inputs like labor and capital, and maximum output. Costs discussed include fixed costs, variable costs, total costs, average costs, and marginal costs. Utilities, manpower, and training requirements and costs are also outlined.

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    Washing Powder: Production and Cost Concept

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    tinki0410
    41 views24 pages
    The document discusses the production of washing powder including the production process, production function, costs involved, and manpower requirements. The production process involves mixing, drying, packing and pollution control units. A production function shows the relationship between inputs like labor and capital, and maximum output. Costs discussed include fixed costs, variable costs, total costs, average costs, and marginal costs. Utilities, manpower, and training requirements and costs are also outlined.

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    The document discusses the production of washing powder including the production process, production function, costs involved, and manpower requirements. The production process involves mixing, drying, packing and pollution control units. A production function shows the relationship between inputs like labor and capital, and maximum output. Costs discussed include fixed costs, variable costs, total costs, average costs, and marginal costs. Utilities, manpower, and training requirements and costs are also outlined.

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    Download as pptx, pdf, or txt
    41 views24 pages

    Washing Powder: Production and Cost Concept

    Uploaded by

    tinki0410
    The document discusses the production of washing powder including the production process, production function, costs involved, and manpower requirements. The production process involves mixing, drying, packing and pollution control units. A production function shows the relationship between inputs like labor and capital, and maximum output. Costs discussed include fixed costs, variable costs, total costs, average costs, and marginal costs. Utilities, manpower, and training requirements and costs are also outlined.

    Copyright:

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    Download as pptx, pdf, or txt
    of 24

    WASHING POWDER

    PRODUCTION AND COST


    CONCEPT
    PRODUCTION CONCEPT

    IN THE production process,firms turn inputs into output.Inputs include factors of


    production ie. Land,labour,capital and materials.

    PRODUCTION TECHNOLOGY
    Standard detergent powder manufacturing plant consists of mixing, drying,
    after drying, packing and antipollution units
    PRODUCTION FUNCTION

    A production function shows the highest output that a firm can produce for every
    combination of inputs.

    q=F(K,L)
    Production function assumptions.
    • Perfect divisibility of both inputs and outputs.
    • There are two factors of production-labor and
    capital.
    • Limited substitution of one factor for the
    other
    • A given technology.
    • Inelastic supply of fixe factors in the short run.
    There are two types of
    production functions
    1.short-term production function.
    2.long-term production function.
    PRODUCTION WITH ONE VARIABLE INPUT (LABOUR)
    OR SHORT TERM PRODUCTION FUNCTION

    AMT. OF AMT. OF TOTAL AVERAGE MARGINAL


    LABOUR(L) CAPITA (C) OUTPUT PRODUCT PRODUCT

    47 2799700 2809899 59785 -


    49 2799700 2819692 57548 9793
    51 2799700 3639615 71365 819923
    53 2799700 3819292 72062 179677

    55 2799700 4080000 74182 260708


    57 2799700 4080000 71579 0
    59 2799700 3819292 64734 -260708
    61 2799700 3526773 57816 -292519
    63 2799700 3214169 51019 -312604
    5000000

    4000000

    3000000
    TC
    2000000 AC
    MC
    1000000

    0
    47 49 51 53 55 57 59 61 63
    -1000000
    PRODUCTION WITH TWO VARIABLES
    OR LONG TERM PRODUCTION FUNCTION
    • Production with two variable input is observed
    in long run where both labor and capital are
    variables.
    CAPITAL AND LABOR IN LONG RUN

    CAPITAL NO. OF
    IN ‘000 RS LABOR
    46 48 51 53 55

    66175 3044050 3176400 3374925 35072575 3639615

    68672 3158912 3296256 3502272 3639615 3776960

    71365 3282790 3425520 3639615 3782345 3939925

    75825 3487950 3639615 3867075 4018725 4170375

    79122 3639615 3797856 4035222 4193466 4351710


    GRAPHICAL REPRESENTATION
    Cost Concept:
    • It is used for analyzing the cost of a
    project in short and long run.
    Types of Cost:
    • Total fixed costs (TFC)
    • Average fixed costs (AFC)
    • Total variable costs (TVC)
    • Average variable cost (AVC)
    • Total cost (TC)
    • Average total cost (ATC)
    • Marginal cost (MC)
    Fixed Costs(FC)
    Fixed Cost denotes the costs which do not vary
    with the level of production. FC is
    independent of output.
    Eg: Depreciation, Interest Rate, Rent, Taxes

    • Total fixed cost (TFC):


    All costs associated with the fixed input.

    • Average fixed cost per unit of output:


    AFC = TFC /Output
    Variable Costs(VC)

    Variable Costs is the rest of total cost, the part that


    varies as you produce more or less. It depends
    on Output.
    Eg: Increase of output with labour.

    • Total variable cost (TVC):


    All costs associated with the variable
    input.
    • Average variable cost- cost per unit of output:
    AVC = TVC/ Output
    Total costs(TC)
    The sum of total fixed costs and total
    variable costs:

    TC = TFC + TVC

    Average Total Cost


    Average total cost per unit of output:

    ATC =AFC + AVC


    ATC = TC/ Output
    Sr.
    No. Description Qty Unit Price
    VC FC TC
    1 Alkyl benzene sulphonic acid 720 22,968 2,480,544 14,056,416 16,536,960
    2 Sodium tripolyphosphate 900 19,920 2,689,200 15,238,800 17,928,000
    3 Sodium sulphate 540 2,280 184,680 1,046,520 1,231,200
    4 Sodium silicate 660 11,364 1,125,036 6,375,204 7,500,240
    Caustic soda 120 5,232 627,840 - 627,840
    5 Printed polyethylene bags,
    (250g det. Powder) 12 million 0.1 1,200,000 - 1,200,000
    Grand Total 8,307,300 36,716,940 45,024240
    Typical Total Cost Curves

    • TVC,TC is always increasing:


    – First at a decreasing rate.
    – Then at an increasing rate
    Marginal Costs

    • The additional cost incurred from


    producing an additional unit of output:

    MC =  TC
     Output
    MC =  TVC
     Output
    Typical Average & Marginal Cost
    Curves
    Long Run Cost Curve

    Economies of scale Diseconomies of scale


    M

    M-optimum level of production


    UTILITIES REQUIREMENT AND COST

    Sr. No. Description Quantity Unit Price Total Cost


    1 Electricity (kWh) 100,000 0.4736 47,360
    2 Water (m3) 30,000 5.50 165,000
    3 Furnace oil (lt.) 80,000 5.41 432,800
    Grand Total 645,160
    MANPOWER AND TRAINING REQUIREMENT

    A. MANPOWER REQUIREMENT
    The plant requires 51 workers, and their annual expenditure,
    including fringe benefits, is estimated at Birr 539,250.

    B. TRAINING REQUIREMENT
    There is already sufficient experience in the country in
    manufacturing detergent powder. On site training programme is,
    therefore, believed to be adequate for key production,
    maintenance and quality control personnel by the experts of
    machinery and technology supplier during commissioning and
    performance testing period. The total cost of training is estimated
    at Birr 30,000.
    MANPOWER REQUIREMENT AND ANNUAL LABOUR COST Sr.
    No. Description Req. No. Salary, (Birr)
    Monthly Annual
    1 Plant manager 1 2,000 24,000
    2 Secretary 2 1,800 21,600
    3 Production and 1 1,800 21,600
    technical manager
    4 Finance and adm 1 1,800 21,600
    manager
    5 Commercial manager 1 1,600 19,200
    6 Accountant 2 2,400 28,800
    7 Sales person 1 1,200 14,400
    8 Purchaser 1 1,200 14,400
    THANK YOU

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