Case Study 2 - good PDF

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Engineering Economics and Cost Estimation - Case Study 2

1) I had this idea of starting a small business of food truck back in my country from couple of years on which I am working to implement it right now. The idea is of making and selling breakfasts especially dosa’s and idli’s real-time to the non-local students to make them get homely feeling. The fixed cost of this business would be purchasing of the required equipment, truck and modifying it accordingly. The variable costs would be number of labour required, prices of the ingredients, electricity to use the equipment and logistics. The most revenue generated and one of the highest profit percentages will be in the F&B business. We are expecting average profit per customer to be at least 60%.

Costs

Numbers

Fixed Cost

Truck -5,00,000 Equipment – 2,00,000 Modification – 2,00,000

Variable Cost

Labour cost – 300/day Ingredients – 5000/day Logistics – 1000/day Total = 1,00,000/month

Total Cost

Rs 10,00,000

BREAK-EVEN CHART FOR THE BUSINESS FOR ONE MONTH

2) The table below shows the comparison of purchasing a apartment vs purchase of car in the year 2016 and their values.

YEAR: 2016 FLAT IN INDIA

RANGE ROVER SPT

Value of 5800per Sqft (1616 sqft) Interest rate

1,00,00,000

1,00,00,000

7% per annum

9.2% per annum

Tax rate

10 per annum

8% per annum

Depreciation rate

0

20% (1 year) +10%(next)

Appreciation rate

3% per annum

0

The below table shows the values of the apartment vs car in present value.

AFTER 3 YEARS IN 2019: FLAT IN INDIA

RANGE ROVER SPT

Present Value

109,27,270

60,00,000

Value Increase

9,27,270

0

Value Decrease

0

40,00,000

According to me an investment to buy a flat is better than investing in a luxury car. From the comparison of both the flat and the car we can see that after 3 years the value of the flat increased by 9,27,270 where as the value of the car decreased by 40,000. And if the flat is rented there will give owner an additional value of 20,000 per month. Taking the investment over the years into consideration, a person spends more money on the car for fuel and repairs compared to paying the taxes for an apartment....