Rajiv Sharma's Project (Essay Sample)

Name:
“RAJIV SHARMA’s PROJECT”
Date:
Fixed costs are those costs that remain fixed and do not change with the level of production. In this case the fixed costs that Rajiv Sharma will incur include the rent of the land that will be obtained for the disposal of Fly ash. It would also include the machinery and transport vehicles that will be required to deliver the product to the market. Variable costs include those costs that vary with the level of production. They include raw material costs such as electricity, coal, water and other items required to produce the product. It will also include administration expenses since the bigger the scale of production more administration staff will be required. Similarly, direct labor will be included in the variable cost. (Horne and Wachowicz, 2007)
The breakeven point of the project will be where costs equal the revenue. It is the minimum sales or units that required to be sold in order to over all the costs.
BEP = Fixed Costs/ Selling Price – Variable Costs
= 95000/(7 – 4.95)
= 95000/2.05
= 46341 India Rupees
BEP Indian Rupees = 46341 * 7 = 324387
Targeted Income of 2 Million = 4.95x – 95000 = 2000000
= 4.95x = 1905000
= 384848 Bricks
The return on equity increases with the level of production until diseconomies of scale set in. The higher the profit the greater will be the return of equity on the project. Hence, the increas