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Example research essay topic: Cost Benefit Analysis Profit Margins - 2,081 words

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... action trends in India are highly influenced by the trends prevailing in the developed western countries of Europe, it is very easy to sell the surplus production pieces to the retail vendors of export surplus in the domestic market at good profit margins. The company can utilize this waste to make matching scarves and ruffles to tie hair, which adds value to the garment it manufactures and yield additional profits for the company. During off season, when there are not many export orders the company can manufacture Colorful, high fashion children clothes for the domestic market, using large waste pieces to earn additional revenues by utilizing the waste material and the idle workforce and machinery, thus reducing the fixed cost incurred by the company during the period of less export orders. These waste materials can also be utilized to create new designs by using these patches in the plain dresses. These waste fabric cuttings can be sold at good prices to Durri manufacturers (Rugs makers) who use these small colorful pieces (Chindis) to manufacture beautiful rugs and wall hangings which are then either exported as handicraft items or sold in the domestic market at very good profit margins.

If the fabric cuttings are of some glossy material like Velvet, then these can be sold to the photo frame manufacturers at good prices to make the border of the photo frame. The waste material can also be sold to the toy manufacturers who can either use these for filling in stuffed toys or to cover them with beautiful & colorful patchwork. Besides the alternatives followed by the Export house identified as to be following the best practices in the industry, to sell the surplus production pieces, the company can also advertise and flash its offers on the internet or in the newspapers to invite the buyers for selling these pieces with good margins. Cost benefit Analysis: With reference to Annexure ii, we can observe that the total waste sum up to a big amount of above Rs. 2 lakhs. This loss can be avoided if the proposed solution is adopted by the company. The company hired tailors can be allotted the work of making alterations to rectify small defects due to which the pieces got rejected and were not sent.

These tailors need not be paid overtime for the alterations they make to eliminate the defects of the garments but instead utilize them when the Sampling is not being done and they are free to do this work. Similar practice should be followed, as mentioned in the point above to achieve optimum utilization of the manpower, machinery and materials by using them to manufacture Ruffles, children clothes, Scarves and other such accessories which utilizes the waste, during the times when the company has less Export orders. Debit note (i. e. , deduction from their amount of remuneration) should be issued to the fabricators who did not manufacture the garments properly and thus due to their mistakes and negligence these rejected pieces could not be sent and the company had to bear their cost.

This would result in the following benefits for the company: 1. The overheads would be effectively and efficiently covered. 2. Instead of a loss an extra profit of Rs. 60, 000 70, 000 will be earned by the company. 3. This would enable the company to improve its Goodwill. 4. This would provide more satisfaction to the buyers as they need not go to others for matching accessories, they will get everything at one place. 5. Sometimes the buyers are more interested in buying more variety and less quantity of garments, these surplus production pieces would enable the company to fulfill this requirement of them and would be beneficial for both the parties. 6.

This would not only result in an optimum utilization of the manpower and machinery but would also improve the moral and motivation level of the employees by assuring them of their job security, by optimally using and retaining them during idle period of less orders. 7. It would also enable the workers to get clothes for their children at very cheap rates, which is another advantage for them. 8. The above mentioned advantages results in satisfied workers and Buyers which means efficient and better performance along with more business yielding higher profits for the company. However, it has a few disadvantages also which are mentioned below: 1. This would involve more wear and tear of the machinery. 2.

This will result in a higher consumption of power and materials. 3. It will occupy some of the valuable space within factory premises to store the waste material and surplus production pieces. Recommendation to Implement the proposed solution: A supervisor should be appointed to monitor the process of production to achieve maximum benefit and avoid any pilferage or loss of material. Selling of the products in the domestic market requires a thorough analysis relevant to the Product, its Price, Place and Promotion, in order to achieve maximum cost benefit. Additional material required to convert waste into profitably saleable items, require proper handling and stock control so that they are optimally utilized and do not result in generating more waste and idle stock. Review Literature: Optimization of Resources to maximize Revenue: An efficient implementation of MRP (Material Requirement Planning) should be followed, where a proper control is exercised over the purchasing of the materials according to the orders received for the finished goods.

This procedure is also said to be of a dependent demand. The organizations try to determine the value of the stock, periodically and take appropriate measures to reduce the level of stock and increase the stock turnover. An effort should be made to reduce the stock level by eliminating the valueless material to reduce the holding cost and administrative and clerical effort, and increase the availability of space. Cost Effectiveness refers to the cost of achieving stated objectives.

A project or a process is said to be cost effective if it achieves the stated objectives at minimum cost. That is possible if the following activities are undertaken: Planning Resources: When resources are flexible and the demand is highly variable, a correct planning of resources allow limiting service shortage and achieving higher profitability. Dynamic Forecasting: Predictions of demand are made a year in advance for each product based on the seasonal demand, day of the week and market trends. These are changing continuously. The allocation of the resources is adapted until the consumption date in order to match the prevailing demand. For Example: A hospital does its resource planning (i.

e. beds, operating theatre equipments, surgeons and other facilities) according to the anticipated demand for each different type of clinical intervention. In case of a shortage in supply there is a need to estimate the unconstrained demand that would have been registered incase of unlimited capacity. Pricing can then be more accurately adapted according to the clients actual preferences. For example an ISP that has limited capacity due to its dependence on other ISPs (Internet Service Provider) gateway, defines a differentiated pricing by seasons, days and time to compensate for imbalances between demand and supply.

Designing offers to generate new demand: It has become important to design a large and coherent set of offers since the mass market has been replaced by the micro markets where the customers have different specific product requirements, price sensitivity and buying patterns. Thus a single offer at the same price does not allow to optimize the revenues. New offers are designed by determining demand patterns and efficient utilization of resources. Expected implications of the proposed solution: For the cost benefit analysis, two Buyer order sheets have been taken and the actual amount of wastage and the cost have been determined on their basis. The order sheets are attached as Annexure II which shows the consumption per piece and the cost for each style. The wastage is taken to be 10 % of the average and the surplus production is done @ 5 % of the total no.

of pieces in a particular style. The total wastage per order amounts to be around Rs. 2, 00, 000 in the form of cutting wastage, wasted meterage, rejected pieces, Surplus production pieces, labor and energy costs etc. If the proposals are evaluated in terms of cost then: The cost of patch work will not cost more than Rs. 10 but will increase the value of a plain dress or a scarf by Rs. 50. The waste pieces used instead of fresh cloth Piping and necklines will save another Rs. 5 - 8 per piece, which will amount to Rs. 7000 9000 per order. The waste cloth strips if sold to the scarp dealer would just earn Rs. 7 Kg to the maximum, but if sold to a Toy maker or a handicraft manufacturer would easily yield Rs. 10 - 15 per Kg. The cost of making a Ruffle can be Rs. 5 per piece which can be sold easily for Rs. 5 6 in the market.

The surplus production pieces sold in the domestic market to the retail vendors would again yield a margin of Rs. 10 30. That is, a dress that costs Rs. 140 could be sold for Rs. 160 170. Large pieces used for manufacturing children clothes can also yield a good margin of Rs. 20 30. The Scarves if made out of bigger pieces of fabric cuttings can be sold for Rs. 50 60. All these processes would not only cover the overheads and loss but also earn a profit of Rs. 60000 70000 for the company. Annexure I Bibliography: The information was extracted from the following sources: 1.

Internet: web web web 2. Production and Operations management by Muhlemann et al. 3. Printed reports of AEPC (Apparel Export Promotion Council) Annexure II Order Sheet of Buyer 1 Style no. Desc. Fabric Qty. Pcs.

Avg. Wastage pc. in mts. Total Consumption Rate of fabric. Total (Rs. ) 502 Double Top Ptd. GGT.

Dyed GGT. T. V. 1500 0. 85 1. 30 0. 60 1275 mts. 1950 mts. 900 mts Rs. 37 Rs. 32 Rs. 28 134775 507 Dress Cotton 60 x 40 Ptd. Poplin 2000 0. 75 0. 25 1500 mts. 500 mts. Rs. 20 Rs. 30 45000 502 Surplus Prod. - 75 5 % of total pcs. - Rs. 85 (cost per piece) 6375 507 Surplus Prod. - 100 5 % of total pcs. - Rs. 150 pc. (cost per piece) 15000 Total 2, 01, 150 Order Sheet of Buyer 2 Style no. Desc.

Fabric Qty. Pcs. Avg. Wastage pc. in mts. Total Consumption Rate of fabric.

Total (Rs. ) 701 Double Dress Ptd. GGT. Dyed GGT. T. V 1500 1. 15 1. 45 1. 00 1725 mts. 2175 mts. 1500 mts. Rs. 37 Rs. 32 Rs. 28 1, 75, 425 - Surplus Prod. - 75 5 % of total No.

of pcs. - Rs. 200 (cost per piece) 15, 000 Total 1, 90, 425 Annexure III: Projects Time Schedule S. No. Activity Type of Activity Duration Dependency 1 A Visit the company 1 - 2 B Identify the problem 5 A 3 C Review the current scenario in the organization 2 B 4 D Determine aims Objectives 1 C 5 E Interviewing the sampling Unit members 1 D 6 F Review Literature 5 E 7 G Consult other relevant authorities and conduct informal interviews of the employees 10 F 8 H Identify the best practice in the industry 5 E, G 9 I Analysis of the data 7 H 10 J Designing the proposed solution 12 I 11 K Cost benefit analysis 3 J 12 L Proposing Recommendations for the company J K 13 M Identifying the implications of the proposed solution 15 K 14 N Drafting the report 7 M, L 15 O Typing the report 5 N 16 P Printing the report 1 O 17 Q Binding the report 2 P The following table shows the early and late start time of each activity, used to make the Gantt chart: S. No. Activity Duration EST (Early Start time) LST (Late Start time 10 10 6 F 5 15 15 7 G 10 25 25 8 H 5 30 30 9 I 7 37 37 10 J 12 49 49 11 K 3 52 52 12 L 2 51 72 13 M 15 67 67 14 N 7 74 74 15 O 5 79 79 16 P 1 80 80 17 Q 2 82 82


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Research essay sample on Cost Benefit Analysis Profit Margins

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