1.

Executive summary Sebeta Bakery Enterprise is initiated by eight entrepreneur shareholders based on the preliminary market survey and the population size/market size of Sebeta area in May 2012. The population of Sebeta area its and surrounding area as per the reports from the woreda estimated to 300,000 and there are 3 bakeries to serve the population. Always early in the morning and late afternoon a number of people line up to buy bread and waiting for some time. We conducted preliminary survey on the demand and supply side and encouraged to take this imitative to provide quality service, create employment opportunity for about fiften unemployed individuals and make sufficient profit out of this business. We have identified best location that is easily accessible to the majority of Sebeta area population. To have advance technology for our bakery in order to increase our production capacity and searching new market places after satisfying the local demand that is, expand our business through opening branches in different location or kebeles such as Tefiki, Tegi and Karakore The government has created favorable condition for the private sector and sustainable development of the country. These new free market environments guarantee for package development investment opportunities for private participation. We have assessed source of the necessary resources and how to legalize our enterprise. The project has required Eth. Birr 6,435,365 the initial total investment cost out of which Birr 1,259,805 covered by share holder and the rest Birr 5,175,560 from the bank loan. It is our belief that there is a possibility to expand our business to Tefki,Teji and Karakore areas.

2. Introduction Bread is one of the basic need and it was consumed by all the community starting from children. So it was marketable commodity which initaite to inter into the business in addition the raw material is found near by our project area. Our project area which is Sebeta found 25 km away from Addis Ababa. The population of Sebeta area and its surrounding area as per the reports from the woreda estimated to 300,000. 2.1. Company Structure The company has simple organizational structure that can enable to carry out its task and attain its objectives. In the structure there are three major sections, which can establish sub-sections as required. Production & distribution, administration and finance . The structure can be revised as require based on the dynamic internal and external environments. 2.2. Organizational structure of Sebeta Bakery Company Auditor Admin & Finance Production & Sales Shareholders

Executive Board

Manger Research & Development Development

2.3. Management & Workforce Based on the organizations structure and the policies & procedures on human resource management & finance the decision making body is the general assembly of the shareholders. Under the general assembly of shareholders and executive board has been established to follow up the implementation of policies and procedures developed by the shareholders. The manager and departments heads are already assigned. A minimum of 15 semi-skilled and unskilled laborers will be employed. As required there is a possibility to employ additional working force on contractual basis. 2.4. Project objective Sebeta bakery will produce a high quality product by considering the need of the people. In the near future we planned have three branches in the woreda. All this things will be done to satisfy the people by providing their choice and get their needs nearby. Our product will be sold to the society at fair price and with best quality. 2.5. Strategy of the Company To have advance technology for our bakery in order to increase our production capacity. To expand our business through opening branches in different location.

Table. 1. The owner and their share s.n Name holders

1 2 3 4 Weiniye Girma Alemwork Eshete Amsalu Geletu Gashaw Ejigu

of

share Share

Total contribution
157,476 157,476 157,476 157,476

5 6 7 8 Total

Abel Girma Getachew Taye Anteneh Siyoum Rukiya A/Mecha

157,476 157,476 157,476 157,476 1,259.805

3. Market and demand analysis Among the factors that attract our shareholder company are the population size, the demand and the supply side for bakery products and services. As per our preliminary survey, the supply for bread and other bakery products by the existing bakeries is not more than 40% while the demand is increasing from time to time. The existing bakeries being traditional businessmen are not in a position to meet the demand for low resources capacity. The present level of demand, amount of supply by existing firms as per data from revenue and custom office of the woreda and demand gap is presented in a tabular form as follows. Table. 2. Annual consumption of Bread (loves) Year
2006/07 2007/08 2008/09 2009/10 2010/11

Total demand
73,350,000 74,700,000 76,500,000 81,000,000 90,000,000

Total supply
11,002.500 14,940,000 19,125,000 24,300,000 36,000,000

Demand Gap
62,347,500 59,760,000 57,375,000 56,700,000 54,000,000

On the other side the socio-economic and political environment encourages such an endeavor and the government has created an institution Small Scale Industries Promotion Agency and there is sufficient access of credit and savings. Thus, our market intervention has sustainable profit making and quality service provision that guarantee feasibility of the project.

It concerned with two broad issues about the aggregate demand for the product and the market share of the product for proposed project. Our analysis supported by both primary market survey and secondary sources. The primary data was collect by personal observation and by direct interviewing and conducting the society. The secondary data was collected from governmental institution mainly revenue and custom office of the woreda which is our branches are located. The collected information gives the overall emphasis about: market potential and demand of a community, pricing strategies, and related impacts on the row material and their suppliers. Under our investigation we analysis there is unsatisfied demand and available market place in the area. 3.1.Projected demand The project will use its 50% to 75% of its capacity for the next five years. After this the project will use its almost full capacity (i.e. 90%) based on market demand. Having considered all the above, demand for bread is fore casted to grow at the rate of 5% per annum during the first four project year and then 10%, finally after 5th year onwards work its full scale, so it will increase by 25 %. Because bread is basic necessity in its nature and the increment of the society income and urbanization development. So we projected the demand as follows. Table.3.Projected demand for loves of Bread Year 2012/13 2013/14 2014/15 2015/16 2016/17 Projected demand for bread 1,800,000 1,980,000 2,160,000 2,340,000 2,700,000

2017/18 2018/19 2019/20 2020/21 2021/22 3.2.Market planing

3,240,000 3,240,000 3,240,000 3,240,000 3,240,000

We have good support from the government and have established good relationship with hotels and cafeterias in and outside Sebeta. We have also got into commission agreement to those shops/retailers of bread. Thus, beyond the supply and demand mis-match these are our good opportunities. The important influencing factors identified by the company are the local, national & global economic and market situation, wheat and maize production/source of raw materials for the company, government policies such as taxes and other payments and financial supplying institutions policies. In broader sense the competition would be small to large size bread bakers and distributors. Fortunately the competitions exist around are not big enough in the surrounding market. There are some traders in the area of business though the projects compete them in quality and fair price selling strategy. Our objective mostly concerned with our findings, we set our objective to satisfy the demand of the society by producing and selling bread at the different place with best quality at fair price. We use one of promotional elements, i.e. advertising (displaying public promotion). Related to this, we analysis that our product customers are all category of the society (adults, childrens). It is expressed as follows 3.2.1.Target segment

Our major markets are classified in to 3. The first is the local/Sebeta home consumption while the second is the identified hotels and cafeterias. The third one is those shops that sale bread by purchasing it form bakeries. 3.2.2.Product Positioning As the market is a competitive market we need to position our products and services through gathering clients opinion and improving the products and the services we provide in quality and quantity. And during holy days we make public promotion by providing free special features bread.

3.2.3.Pricing and distribution

Currently, bread of different size sell for a price ranging from Birr 1.2 to Birr 4.5 each in the retail market. A suitable distribution system for bread is one, retail on our different shops 3.2.4.Sales force Providing training and organize experience sharing visits to relevant institutions in the similar best experience business enterprises for our sales experts .To do these, sufficient logistical arrangements will be organized within the coming 6 months period. 3.2.5.Action program we are plan to perform the following activities during and before our project implementation and it is presented in the follwing table. Table.4.Action program sn Action 1 Sales force 1 2 3 1 1 1 4 1 5 1 6 1

year
7 1 8 1 9 10 -

-training year

per

-Experience sharing per 2 1 1 year 2 3 Advertisement 4 2 1 per year Promotion per 2 1 1 year during holiday Distribution daily 2 2 2

1 1

4.Technical analysis 4.1. Technology selected A bakery house is made from a clay material in which the bakery stove is installed. Both the house and the bakery equipment are to be made from a fireproof material like brick and sheet material. The following is a list of baking equipment Our machine has 6m length with an opening of 80cm by 50cm and 1.75m width and 1.8m heights. Stove made from 2m lengths with and opening of 60cm by 45cm, widths and 1.6cm height. Inside the metal stove, a flat clay floors can be placed. Molding machinery In both the clay and metal stove a place has to be though to create a chimney for smoke. In both the clay and metal stove a heading unit can be filled. Wood burning Electrical resistance, Kneading bowel, Harvesting tray, large boxes for harvest the product, Oil sprayer. Depending upon the budget and the availability of the type of stove, one can design a stove, which can work by a use multiple methods. Bakery is a work

that widely used by all societies and its therefore easy to learn there is no sophisticated training is need. However a major employee will train on the making of the bread is essentially necessary. 4.2. Material inputs and utility 4.2.1.Raw materials and auxiliary materials Raw materials:- Flour, Yeast, Powder, Salt, and Sugar Suppliers:- Zaki and Futtu Floor Factory, Private supper markets and distributors. All supplies made on regular bases, and also they found near to our production site supply of utilities (power, water, and fuel) is reliable and we will use as alternative kerosene, and wood, and also deep as reserve 5000- liter water in the tanker. Table.5. Raw materials and auxiliary materials and its cost Sr. No 1 2 3 4 5 Total Flour Yeast powder salt Sugar kuntal gram/kuntal gram/kuntal kg/kuntal kg/kuntal 1800 500 500 1 2 800 43 45 3 14 1440000 77400 81000 5400 50400 1645200 Description unit Qty Unit price Cost in Birr

4.2.2. UTILITIES

The major utilities required for the plant are water ,wood,fuel and electricity. Water is used for washing material and mix the flour. Electric power, wood and fuel are used as an energy source for baking bread .Water ,wood, fuel & Electric consumption is shown below. Table.6. Utility requirment and its cost Sr. No 1 2 3 4 Total Electricity Water wood fuel kWh m3 m3 litter 105,000 2000 100 1440 0.5778 3.25 500 14 60669 6500 50000 20160 137329 Description unit Qty Unit price Cost in Birr

4.3. Principal product Table.7. Principal product, its share and maket serve Product Percentage share Tondi Floni Barly Bread Tosted
5%

Market Local market Local market Local market Local market

80%
10% 5%

Table.8. Machinery and Equipment and its cost

Description sources Plant machinery Electric and diesel stove Wood stove Electric and Diesel Molding Manual Molding Sales shop equipment -Vehicle for out door sales -Shop furniture Total local local local local foreign Foreign Foreign

unit pcs pcs pcs pcs

quantity 1 1 1 1

Unit price 1500000 100000 60000 60000

Total cost 1500000 100000 60000 60000

pcs

7000

14000

pcs pcs

2 1

500000 10000

1000000 10000

2,744000

4.4. Plant capacity Our Machine has 80 Pattra in one round; it will produce 6000 bread per round. (one pattra has 75 bread) and we operate two round per day. A bakery house is made from a clay material in which the bakery stove is installed. Both the house and the bakery equipment are to be made from a fireproof material like brick and sheet material. The project will use its 50% to 75% of its capacity for the next five years. After this the project will use its almost full capacity (i.e. 90%) based on market demand.

4.5. Location and site The project is located in Oromia region, sebeta town which is near to material and reasonably for market area. raw The plant can be located in area

where transportation cost to deliver the product to market can be minimized and source of supply (flour) very near to our project which is found less than five km. 4.6. Environmental Aspect From the nature of the product and the production process, it may be asserted that the plant is clean and envirnmental freindly. The factory does not emmit dust and dose not generate any intense smell. It does not discharge any hasardiouse waste water either. Further more the smoke level created by the plant does not make any disconfort nearby the residents. However due to the usage of wood their may be deforstation so it need to be aforstation. 5. Financial Aspect The finance is based on shareholders contribution and loan from the bank. Factors influencing the financing of the business are government loan policy is one of influential in the business environment. The company has been established by eight powerful business entrepreneurs in may 2012 and has got legal entity during the same period. The company founders already contributed Birr 1,259,805 (Birr 157,476 each) additional from bank loan of 5,175,560. 5.1.Means of finance The project is proposed to finance with equety and bank loan. Table.9. Means of finance Source of funds Share capital Term loan Cost Equity 19.58% Bank loan 80.42%

Table.10. Annual projected cost of raw material and utility

Year Descri ption per year Raw materi al Utility Total 1 2 3 4 5 6 7 8 9 10

1654 200 1373 29 1791 529

1819 620 1373 29 1956 949

1984 960 1373 29 2122 289

2150 460 1373 29 2287 789

2481 300 1373 29 2618 629

2977 560 1373 29 3114 889

3152 520 1373 29 3298 849

3152 520 1373 29 3298 849

3152 520 1373 29 3298 849

3152 520 1373 29 3298 849

Table.11. Annual Revenue projection table 12 Loan Repayment Schedule We take Birr 5,175,560 from the bank loan and we plan to repay with in 5 years starting from the first year.And it is presented as follows

Table.13. Total production Cost Projection

Table.14.Total Admnstrative cost

Table.15.Projected Income Stament

Table ,16.Projected Cash Flow statement

Table.17.Payback period Initial investment 6,435,365 ACF year-1 year-2 year-3 year-4 year-5 year-6 781,396 777,492 892,580 947,327 1,086,337 2,510,428 Commutative ACF 781,396 1,558,888 2,451,738 3,399,065 4,485,402 6,995,830

7. Risk Analysis
Sensitivity analysis PBP 5 years,Nine months and one day NPV 6,872,220 39.72% Net present value

Internal rate of return IRR

If investment is increased by 5% NPV is changed to (115,087). And if sales decreased by 10% NPV is changed to (36,308,285.44). We cover our initial investment with 5 year nine months and one day. As the net present value

(NPV) of inflows is closer to the present value of the out flows during the life time of the project and as IRR is 39.7% which is greater than the cost of capital. Thus,the project is sensetive to change.

8.Implementation plan
The project implementation phase include the period from the decision to invest to the start of commercial production and it is very important to carefully plan and analyze this critical phase of the project cycle. In-order to bring the factory in to successful operation, a large number of activities will have to be care out such as project management ,project engineering, procurement and construction and organization of plant operations. Work schedule. There are different activities needed to accomplish in order to start production process. The critical activities that involved in the process are the following. A. Budget set up. B. Land Securing. C. License for operation. D. Purchase and install equipment. E. Recruiting and classifying labor. F. Publicized among communities and others Table.19. Implementation Work schedule Activity Expectation Expectation Average early fishing latest fishing finishing time time in time in month month 2 4 3 4 6 3 3 5 3 A AB Sequence activties

A B C

D E F

4 6 2

4 8 3

4 7 2.5

C DC CDE

Material Flow of Diagram

9 Purchase Vendor Baker

2 Store 1 General manger 6 10 4 3

Accountant Cashier 8 11 12

7 Diagram Key Store requisition. Purchase requisition. Approval of purchase order. Approval purchase order. Purchase order. Advice for purchase made. Notice the shipment received. Invoice. Advice for invoice approval and payment.

10. Approval of payment. 11. Approval of payment. 12. Payment.

Summary and conclusion

The project predicts the establishment of a plant for the production of bread of different type to serve and cover 40% of the gap that the demand require untile 2021. The present The plant will create employment opportunities for 15 persons. The total investment requirement is estimated at Birr 6,435,365 million, out of which Birr 2.7 million is required for plant and machinery. The project is financially viable with an internal rate of return (FIRR) of 39.7% and the net present value at 10% discount rate is Birr 2.58 million. The annual net

profit of about Birr 263,840 in the first year will continuously increase and reach about Birr 2,004,696 in year 10. The cumulative cash balance at the end of the projected year would be about birr 10,065,699 and the pay-back period will be within 5 years 9month and one day. Lastly to conclude the viability of the project worthiness Sebeta bakery will accept to run the business because the measurement Suggest that the project is acceptable. FNPV = 2.58 Million at 10% discount rate, which is grater than Zero FIRR = 33% which is greater than market interest rate Due to the above information conclude that the project is acceptable.

Assumption of the project Financial Analysis

The financial analysis of the Sebeta bakery project is based on the following assumptions:-

Construction period Source of finance

< 1 year 19.57%equity

80.43% loan Bank interest Taxation The business is assumed to be run as a private limited company; therefore, tax rate is applicable on the income of a private limited company is used for income tax calculation of the business. Sale Tax Income Tax Working capital It is estimated that six month basic cost for contingency cash for initial stages and to finance the receivables. Six month of Salary Six month of raw material Six month of Miscellaneous Expense Six month of Utility Vehicles for Transportation The proposed setup would require two vehicles to carryout all factory and office activities and to cater delivery requirements. The cost of vehicles is assumed to be Birr 1 million. Pre-Operating Costs Is assumed to cover all preliminary expenses like registration, documentation charges, and salaries during the construction period. 15% 30% 10%

Miscellaneous Expenses Miscellaneous expenses of running the business are assumed to be various items like office stationery, daily consumables, traveling allowances, telephone, entertainment etc. are assumed to increase at a nominal rate of 5% per annum.

Accounts Receivables A collection period of 60 days is assumed for sales Accounts Payables A payable period of 60 days is assumed for raw material purchases Repayment Is assumed to begin at the end of the first year Depreciation Treatment The treatment of depreciation would be on a diminishing balance method at the rate of Plant & machinery Land & Building Construction Vehicles Furniture and Fixtures Office Equipment 10% 5% 20% 10% 10%

Company Structure

The company has simple organizational structure that can enable to carry out its task and attain its objectives. In the structure there are three major sections, which can establish sub-sections as required. Production & distribution, administration & finance and research & developments. The structure can be revised as require based on the dynamic internal and external environments.

Organizational structure of Edget Bakery Company

Company Development

The company has been established by sixty powerful business entrepreneurs in November 2008 and has got legal entity during the same period. The company

founders already contributed Birr 600,000 (Birr 10,000 each) and have a plan to sale the share to the public at large with the objective of expanding its capital. Through Small Scale Business Cooperatives Organizations office we have got loan from Bank and rent a house, which has sufficient premises for our business. During the last 3 months period we are progressing as per our plan of operation. Mission Statement & Strategy of the Company Our companys mission is to provide quality service in the areas of bakery products to our clients and gain reasonable profit out of the business. Our strategy is to provide the require service sufficiently in Quantity and quality to win in the competitive market and expand the business in other areas through strengthening the research and development activities Advertising our products and services through popular media will be used as major promotional activities. Products Current products

The company has planned to produce quality bread of different sizes, cookies and Diffo dabo based on the demand. At the initial stage, we will produce more than 100,000 loves of bread with different size for the next 6 months period. Sixty percent will be sold in Mekanisa while the remaining will be distributed to other parts of Addis Ababa. Advantages/Opportunities The advantages are; we have already procured modern bakery machine, which is one of the factors for quality production. We have good support from the government and have established good relationship with hotels and cafeterias in and outside Mekanisa. We have also got into commission agreement to those shops/retailers of bread. Thus, beyond the supply and demand mis-match these are our good opportunities. Future products

In the future we have the plan to sale wheat flour to the surrounding communities and in the long run establish flour production industry as our capital increases. Market Classification and Description of the relevant Market

Our major markets are classified in to 3. The first is the local/Mekanisa home consumption while the second is the identified hotels and cafeterias. The third one is those shops that sale bread by purchasing it form bakeries. national Important influencing factors & global economic and market situation, wheat and maize The important influencing factors identified by the company are the local, production/source of raw materials for the company, government policies such as taxes and other payments, sale of share and availability of land to establish flour plant and financial supplying institutions policies. Marketing marketing strategy, sales and distribution and logistics training and organize experience sharing visits to relevant

Our strategy is searching new market places after satisfying the local demand. Providing institutions in the similar best experience business enterprises for our sales experts and commission agents. To do these, sufficient logistical arrangements will be organized within the coming 6 months period. Positioning products and services As the market is a competitive market we need to position our products and services through gathering clients opinion and improving the products and the services we provide in quality and quantity. Production, research, and development Production, research and development is a continues process based on gathering public opinion and field survey Production We have the plan to produce more than 100,000 loves of bread of different sizes per day and supply to the market. Our modern bakery machines have the

capacity to produce even more than the number indicated above. Cookies and other bakery products will be produced on the demand. Research and Development The research and development team will do its mandate using different techniques and develop strategies that help to improve the service and at the same time expand the business with minimum risks. Field assessment, questioner distribution and interview of selected clients are among the techniques to be used to attain maximum advantage over the market. The department will be strengthened with the necessary facilities Management & Workforce Based on the organizations structure and the policies & procedures on human resource management & finance the decision making body is the general assembly of the shareholders. Under the general assembly of shareholders and executive board has been established to follow up the implementation of policies and procedures developed by the shareholders. The manager and departments heads are already assigned. A minimum of 15 semi-skilled and unskilled laborers will be employed. As required there is a possibility to employ additional working force on contractual basis. Financing The finance is based on shareholders contribution and loan from the bank, In addition to these sales of sufficient shares will be carried out to build the capital source on strong holds. Factors influencing the financing of the business are government loan police is one of influential in the business environment. Project objective Sebeta bakery will produce a high quality product by considering the need of the people. In the near future we planned have three branches in the woreda. All this things will be done to satisfy the people by providing their choice and get their needs nearby. Our product will be sold to the society at fair price and with best quality. Specific Objective:

To generate profit. To create job opportunity. To satisfy the need of the people by produce quality bread for the society To promote the product for the society. To have advance technology for our bakery in order to increase our To expand our business through opening branches in different location.

at fair price with best quality. Strategy of the Company production capacity. Project life cycle. The effective strategic production planning is based on assumption of characteristics of each styles of project life cycle, which lead to achieve particular objectives and strategies as well as helpful to compute and quick responses of its competitors. The stages of project life cycle are: Introduction stage, Growth stage, Maturaiton stage & Decline stage. Market and demand analysis It concerned with two broad issues about the aggregate demand for ht product and the market share of the product for proposed project. Our analysis supported by both primary market survey and secondary sources. The primary data was collect by personal observation and by direct interviewing and conducting the society. The secondary data was collected from governmental institution mainly city government of Addis Ababa Makanisa sub-city administrating and from other sub city which our branches are relocated. The collected information gives the overall emphasis about: market potential and demand of a community, pricing strategies, and related impacts on the row material and their suppliers. Under our investigation we analysis there is unsatisfied demand and available market place in the area. Our objective mostly concerned with our findings, we set our objective to satisfy the demand of the society by producing and selling bread at the same place with best quality at fair price. We use one of promotional elements, i.e. advertising

(displaying public promotion). Related to this, we analysis that our product customers are all category of the society (adults, childrens). Competitor Situation In broader sense the competition would be small to large size bread bakers and distributors. Fortunately the competitions exist around are not big enough in the surrounding market. Demand Forecasting This method involves searching the opinions of group of mangers and business partner on expected further sales and combing them into sales estimates. Economic Analysis The projects primarily benefit for owners of the business who are invest their capital it create job opportunity for some unemployed professional and daily laborers. These opportunities will result in creation of some wealth and social stability in and around the community which in other words stimulate the over can growth and fair income distribution of the economy. Technical Analysis Material input and utility study Raw materials:- Flour, Yeast, Powder, Salt, and Sugar Suppliers:- K.O.J.J Floor Factory, Private supper markets and distributors. All supplies made on regular bases, and also they found near to our production site supply of utilities (power, water, and fuel) is reliable and we will use as alternative kerosene, and wood, and also deep as reserve 5000- liter water in the tanker. The Choice of product mix Minine (with sugar of without sugar), French bread, Greslinee, Barely break, cookies & Defo Plant capacity and manufacturing technology selection ad). A bakery house is made from a clay material in Our Machine has 8 Pattra in one round; it will produce 600 bread per round. (one pattra has 75 bre There are some traders in the area of business though the projects compete them in quality and fair price selling strategy.

which the bakery stove is installed. Both the house and the bakery equipment are to be made from a fireproof material like brick and sheet material. The following is a list of baking equipment Our machine has 6m length with an opening of 80cm by 50cm and 1.75m width and 1.8m heights. Stove made from 2m lengths with and opening of 60cm by 45cm, widths and 1.6cm height. Inside the metal stove, a flat clay floors can be placed. Molding machinery In both the clay and metal stove a place has to be though to create a chimney for smoke. In both the clay and metal stove a heading unit can be filled. Wood burning Electrical resistance, Kneading bowel, Harvesting tray, large boxes for harvest the product, Oil sprayer. Depending upon the budget and the availability of the type of stove, one can design a stove, which can work by a use multiple methods. Bakery is a work that widely used by all societies and its therefore easy to learn there is no sophisticated training is need. However a major employee will train on the making of the bread is essentially necessary. When we think about the layout of the entire bakery houses we need to include the following: Stove room, Product room, floor room, Additional shelf Work schedule. There are different activities needed to accomplish in order to start production process. The critical activities that involved in the process are the following. Budget set up. Land Securing. License for operation. Purchase and install equipment. Recruiting and classifying labor. Publicized among communities and others.

Activity

Expectation early finishing time

Expectation time 4 6 3 4 8 3

Average

Sequence Activities A AB C DC CDE

of

latest finishing finishing time 2 4 3 4 6 2 3 5 3 4 7 2.5

A B C D E F

Material Flow of Diagram 2 1 6 8 10 3 4 5

11 12

7 Diagram Key Store requisition. Purchase requisition.

Approval of purchase order. Approval purchase order. Purchase order. Advice for purchase made. Notice the shipment received. Invoice. Advice for invoice approval and payment.

10. Approval of payment. 11. Approval of payment. 12. Payment.

Financial Analysis This analysis shows the projects operation costs, depreciation Chagres, marketing costs, making costs, finance cost analysis, and other relevant costs and also, the revenues, profit and loss of the projects. Most cost analysis presented in the form of table for simplification, classification and organizing the information. In this section we take the financial analyses on quarter base as well as annual base. Total Investment The main analysis of project managements is financial analysis. In this project financial analysis is covering the total investment and cost estimation and other important analysis. Production cost and product distribution cost estimation has been combined to simplify the financial analysis of the project. The analysis is based on one production center and two distribution shop centers. In addition to the above, the analysis is assumed that the project will use its 50% to 75% of its capacity for the next five years. After this the project will use its almost full capacity (i.e. 90%) based on market demand. The summary of the investment cost required for the project is estimated for the acquisition of fixed assets and related cost, presented below:

Table: 1 Cost of Stove and Molding Machinery Description Electric and diesel stove Wood stove Electric and Diesel Molding Manual Molding Total Table: 2 B. Sales Shop Equipment Description Unit Quantity 2 Unit cost 100,000.00 Total cost 200,000.00 pcs Pcs Pcs Unit Pcs Quantity Unit cost Total Cost

Vehicles for Pcs our door sales Shop furniture Other Pcs Pcs

1 1

10,000.00 5,000.00 Total

10,000.00 5,000.00 215,000.00

Table: 3 2. Meanses of financing for project The total investment requirement of the project is Birr 1380000.00 and the main source finance is from the owners contribution and basic loan from the bank.

Owner (partner) contribution------------------------------------Birr 780,000.00/building and Chas Development bank loans -----------------------------------------Birr 600,000.00 Total Birr 1380000.00 3. Working capital requirement and its financing The brief analysis of working capital requirements is present below in the form of table and also its detail analysis. Description current asset Cash Inventory Floor Salt and Sugar Yeast and powder Total Talbe: 4 Working capital financing We use restricted current asset investment policy. It involves small investment in current asset as compare to fixed asset. We apply haggling working capital financing policy fixed asset and permanent current asset (i.e the minimum cash balance) will financed by long term source (Bank lone) and also Temporary current asset will financed by short term source (owners contribution). 3. Break-even point of the project It indicates the point that shows the project will have no loss or gain we use sales mix production sytem, therefore, our break-even point will be: BEP(Birr)=FC EP*CM Product E SP*P WHERE: P=proportion of the product in sales mix. CM=contribution margin of a product SP=unit selling price of a product.

Product Sales Proportion Unit selling price Unit variable cost Contribution margin Table: 5

Minnin 21,500 4 0.20 0.17 0.03

Barely bread 10,500 2 0.05 0.17 0.33

French bread 15,750 3 1.00 0.17 0.83

Sales the forecasted annual sales value is 84,000 and 63,000 for each product respectively so, the quarter (1st) sales unite equal to: Total sales 4. Proportion: each product mix contribution to total quarter sale of 47,250 unit variable cost: Direct material = 12,300 Direct labor 2,250 FOH(variable)=10,000 Total Sales Unit 24,550 total sale (quarter) SP

i.e 150,000 units (Minime), 21,000 units (Barely), and 15,750 units (French bread) Total sales unit = 141,750 Unit variable cost = total variable cost Total sales unit Unit variable cost = 24,550 141,750 =0.17 EP*CM = (4*0.03)+(2*0.0.33)+3*0.83)

E SP*P = (0.02*4)+(0.50*2)+(1*3) = 0.80+1+3 =4.80 Fixed cost: =250,000(Building)+75,000 ( sales equipment)+120,000 (machinery)+30,450(FOH) =475,450 BEP = 475,450 -3.27 4.80 = $697,908 Annual Production Plan It involves the projected annual revenue, manufacturing and salary expenses, projected income statement, and also include loan repayment schedule for next five years, A Annual Revenue plan Annual Revenue Plan Product Minine Barely Brad French Brad Special order Total 552,000 Table: 6 B. Annual Salary Expense Table 7 544,600 632,320 732,184 90,000 91,000 88,000 2.00 126,000 151,200 181,440 Selling price 0.40 1.00 168,000 168,000 201,600 100,800 241,920 120,960 Year1 Year 2 Year 3

C. Annual Manufacturing expenses Table 8 D. loan Repayment schedule Table 9 N.B Annual payment =principal