Fly Ash Brick Project: Feasibility Study Using CVP Analysis
(4 pages of text)
A budding entrepreneur in India is planning to set up a fly ash brick manufacturing plant near a thermal power plant. Not only does making bricks out of the residue of coal power generation reduce the amount of fly ash waste dumped on the ground, but the government is actively supporting the fly ash brick industry as a way to meet the increasing demands for construction materials that are environmentally sustainable. On the basis of preliminary analysis, the entrepreneur decides to set up a plant that will have the capacity to manufacture four million bricks. Though actual production will depend on market demand, he and his potential partner estimate that 2.4 million bricks can be sold per year at an average Rs 7,000 per 1,000 bricks. He wants to ascertain the feasibility of the project using a cost-volume-profit analysis.
- To teach the basic concepts surrounding cost-volume-profit analysis and to determine the breakeven point to ascertain the feasibility of a project.
- To analyze various expenses into fixed cost, variable cost and initial investment and to simulate return on equity depending on different volumes.
India, Small, 2013
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