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    Chapter 8 Cost Analysis..r

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    Amirul Sakib
    The document discusses cost analysis for developing a new product. It defines cost analysis and explains that it involves breaking down and examining all costs associated with a product. This is important for accurately estimating costs and calculating expected profit. The document then outlines the different types of costs, provides a bill of materials listing the components and their costs, and presents a lifecycle cost analysis showing fixed and variable costs over several years. Finally, it presents a sales scenario and performs a break-even analysis to determine the sales volume needed to cover total costs.

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    Chapter 8 Cost Analysis..r

    Uploaded by

    Amirul Sakib
    156 views5 pages
    The document discusses cost analysis for developing a new product. It defines cost analysis and explains that it involves breaking down and examining all costs associated with a product. This is important for accurately estimating costs and calculating expected profit. The document then outlines the different types of costs, provides a bill of materials listing the components and their costs, and presents a lifecycle cost analysis showing fixed and variable costs over several years. Finally, it presents a sales scenario and performs a break-even analysis to determine the sales volume needed to cover total costs.

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    The document discusses cost analysis for developing a new product. It defines cost analysis and explains that it involves breaking down and examining all costs associated with a product. This is important for accurately estimating costs and calculating expected profit. The document then outlines the different types of costs, provides a bill of materials listing the components and their costs, and presents a lifecycle cost analysis showing fixed and variable costs over several years. Finally, it presents a sales scenario and performs a break-even analysis to determine the sales volume needed to cover total costs.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    156 views5 pages

    Chapter 8 Cost Analysis..r

    Uploaded by

    Amirul Sakib
    The document discusses cost analysis for developing a new product. It defines cost analysis and explains that it involves breaking down and examining all costs associated with a product. This is important for accurately estimating costs and calculating expected profit. The document then outlines the different types of costs, provides a bill of materials listing the components and their costs, and presents a lifecycle cost analysis showing fixed and variable costs over several years. Finally, it presents a sales scenario and performs a break-even analysis to determine the sales volume needed to cover total costs.

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    You are on page 1of 5

    Chapter 8

    Cost Analysis

    8.1: What is cost analysis?

    Cost Analysis is the breakdown and examination of costs of a product. It is important to analyze costs in order to
    know each cost precisely and to calculate expected profit accordingly. The accuracy of cost estimation leads to a
    good revenue amount

    8.2: Purpose of Cost Analysis

    When developing a business plan for a new or existing company, product or project planners typically make cost
    estimates in order to assess whether revenues/benefits will cover costs (cost benefit analysis). Cost are often
    underestimated, resulting in cost overrun during execution.

    8.3: Types of Cost

    Mainly two types of cost are needed for the cost analysis for this product:
    i) Fixed Cost.
    ii) Variable Cost.

    8.4: Bill of Material:

    Components Material Unit Cost (Taka) % of Cost

    Board Red Oak 3000 50.25%


    Plywood Gurjan wood 1200 20.10%
    Wood Pine wood 1000 16.75%
    Caster Wheel Steel & rubber 250 4.18%
    Chain Hinge steel 120 2.01%
    Nail iron 50 0.84%
    Drawer Channel steel 200 3.35%
    Multi Plug Plastic 150 2.51%

    Total 5970 100%

    1|Page
    8.5: Lifecycle Cost:

    Fixed cost (Taka) Variable


    cost(Tk)
    1st year 2nd year 3rd year 4th year Lifecycle Per Unit
    cost
    R&D
    Design 500 -------- ---------- ---------- 500
    Total R&D 500 500
    Facilities
    Expenses
    Fitting Out 10000 10000 10000 10000 40000
    Depreciation 1000 1000 1000 1000 4000
    Total 11000 11000 11000 11000 44000
    Facilities
    Expenses
    Production
    BOM ------------ ----------- ------------- ------------ ----------- 5970
    Labor Cost ------------ ----------- ------------- ------------ ----------- 800
    Maintenance 2500 2500 2500 2500 10000 200
    Total 2500 2500 2500 2500 10000 6970
    Production
    Cost
    Marketing
    Awareness 5000 3000 2000 1000 11000 -------
    Total 5000 3000 2000 1000 11000 -------
    Marketing
    Cost
    Distribution
    Avg. Shipping ------------ ----------- ------------- ------------ ----------- 200
    Total 200
    Distribution
    Cost
    Customer
    Service
    Repairing 15000 15000 15000 15000 60000 -----------
    Workshop
    Total 15000 15000 15000 15000 60000
    Customer
    Service Cost
    End of Life
    cycle Project

    2|Page
    Decompositio 1000 1000 ---------
    n
    Waste 200 200 ---------
    Management
    Total EOC 1200 1200 ---------
    Cost
    Total 34700 32700 31700 30700 126700 7170
    Accumulated
    Cost

    8.6: Sales Scenario:

    Year Sales
    st
    1 year 120
    2nd year 150
    3rd year 140
    4th year 140

    Total(Q) 550

    8.7: Break Even Analysis:


    BEPs= Break-even point in units
    S= Selling price per unit= 8500TK
    Q= Total number of unit produced= 550
    TR= Total revenue= (S*Q) =Total sale= 4675000 TK
    F= Fixed cost= 126700TK
    V= Variable cost= 7170TK
    TC= Total cost= F+VQ=4070200TK
    BEPx=F/(S-V) =95.26
    BEPs= {F/(S-V)}*S=52394.73
    Profit=TR-TC=604800TK

    3|Page
    8.7.1: Break-even table

    8.6.2: Break-even graph

    Total
    cost &
    total
    revenue

    Sales volume

    8.6.3: Explanation of the Break-even analysis


    4|Page
    After the analysis, we can see that break-even quantity for our product is 95.26 units.
    The interpretation of that figure is, if the sales amount is exactly unit’s total revenue
    will be equal to total cost which is around 550000 BDT. When sales amount exceeds
    95.26 units, we will begin to earn profit.

    5|Page

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