Tk12 Draft Assignment 4

UNIVERSITAS INDONESIA
MOSQUITO REPELLENT PAINT
Report Assignment 4
GROUP 12
GROUP PERSONNEL:
Apryani Lestari Naibaho (1406531725)

Eliza Habna Lana (1406531611)
Jayusandi Mulya Sentosa (1406571470)
Muhammad Raihan Fuad (1406564452)
Ricky (1406570934)
CHEMICAL ENGINEERING DEPARTMENT

ENGINEERING FACULTY
UNIVERSITAS INDONESIA
MAY, 2017
2
EXECUTIVE SUMMARY
Universitas Indonesia
3
LIST OF CONTENT
EXECUTIVE SUMMARY...................................................................................ii
LIST OF TABLES.................................................................................................iv
LIST OF FIGURES...............................................................................................v
CHAPTER 1...........................................................................................................1
1.1. Supply Chain Management...................................................................................1
1.2. Raw Material.........................................................................................................3
1.2.1. Raw Material Supply.....................................................................................3
1.2.2. Order Capacity...............................................................................................7
1.3. Product Inventory................................................................................................10
1.4. Product Distribution............................................................................................10
1.5. Product Marketing...............................................................................................10
CHAPTER 2.........................................................................................................11
2.1. Total Capital Investment......................................................................................11
2.1.1. Fixed Capital................................................................................................12
2.1.2. Total Capital Investment..............................................................................19
2.2. Operational Cost..................................................................................................20
2.2.1. Manufacturing Cost.....................................................................................20
2.3. Determining Product Cost Unit...........................................................................38
2.3.1. Capital Loan................................................................................................38
2.3.2. Product Pricing............................................................................................39
2.3.3. Cash Flow....................................................................................................39
2.3.4. Cost Breakdown...........................................................................................39
CHAPTER 3.........................................................................................................40
3.1. Rate of Return.....................................................................................................40
3.2. Rate of Return.....................................................................................................40
3.3. Break Even Point.................................................................................................41
3.4. Internal Rate of Return........................................................................................42
3.5. Net Present Value................................................................................................42
3.6. Sensitivity Analysis.............................................................................................43
3.6.1. Selling Price Fluctuations............................................................................43
3.6.2. Raw Material Cost Changes.........................................................................43
3.6.3. Operational Cost Changes............................................................................44
3.6.4. Fluctuation Graphics....................................................................................45
4
CHAPTER 4.........................................................................................................46
REFERENCE.......................................................................................................47
LIST OF TABLES
Table 1. 1 Comparison of Raw Material Suppliers..................................................4
Table 1. 1 Comparison of Raw Material Suppliers (cont)......................................5
Table 1. 2 Purchase Amount of Raw Material for Mosquito Repellent Paint
Manufacture.............................................................................................................8
5
LIST OF FIGURES
1
CHAPTER 1
SUPPLY CHAIN
1.1. Supply Chain Management

Supply chain management is the coordination of production, inventory,
location, and transportation among the participants in a supply chain to achieve
the best mix of responsiveness and efficiency for the market being served.
(Michael Hugos, 2003).
Effective supply chain management requires simultaneous improvements
in both customer service levels and the internal operating efficiencies of the
companies in the supply chain. Customer service at its most basic level means
consistently high order fill rates, high on-time delivery rates, and a very low rate
of products returned by customers for whatever reason. Internal efficiency for
organizations in a supply chain means that these organizations get an attractive
rate of return on their investments in inventory and other assets and that they find
ways to lower their operating and sales expenses. There is a basic pattern to the
practice of supply chain management. Each supply chain has its own unique set of
market demands and operating challenges and yet the issues remain essentially the
same in every case. Companies in any supply chain must make decisions
individually and collectively regarding their actions in five areas:
1. ProductionWhat products does the market want? How much of which
products should be produced and by when? This activity includes the creation
of master production schedules that take into account plant capacities,
workload balancing, quality control, and equipment maintenance.
2. InventoryWhat inventory should be stocked at each stage in a supply
chain? How much inventory should be held as raw materials, semifinished, or
finished goods? The primary purpose of inventory is to act as a buffer against
uncertainty in the supply chain. However, holding inventory can be
expensive, so what are the optimal inventory levels and reorder points?
3. LocationWhere should facilities for production and inventory storage be
located? Where are the most cost efficient locations for production and for
2
storage of inventory? Should existing facilities be used or new ones built?

Once these decisions are made they determine the possible paths available for
product to flow through for delivery to the final consumer.
4. TransportationHow should inventory be moved from one supply chain
location to another? Air freight and truck delivery are generally fast and
reliable but they are expensive. Shipping by sea or rail is much less expensive
but usually involves longer transit times and more uncertainty. This
uncertainty must be compensated for by stocking higher levels of inventory.
When is it better to use which mode of transportation?
5. InformationHow much data should be collected and how much information
should be shared? Timely and accurate information holds the promise of
better coordination and better decision making.
With good information, people can make effective decisions about what to
produce and how much, about where to locate inventory and how best to transport
it. The sum of these decisions will define the capabilities and effectiveness of a
companys supply chain. The things a company can do and the ways that it can
compete in its markets are all very much dependent on the effectiveness of its
supply chain. If a companys strategy is to serve a mass market and compete on
the basis of price, it had better have a supply chain that is optimized for low cost.
If a companys strategy is to serve a market segment and compete on the basis of
customer service and convenience, it had better have a supply chain optimized for
responsiveness. Who a company is and what it can do is shaped by its supply
chain and by the markets it serves.
3
Figure 1. 1 Supply Chain Management

(Source: : http://www.scmii.com/images/career-img.jpg, accessed 2017)
1.2. Raw Material

1.2.1. Raw Material Supply
We need to choose suppliers for all of raw materials, because we will not
make our raw materials by ourselves but we will order all materials from
suppliers. The distribution of raw materials is one important factor in determining
consideration of the factory location besides determination of the distribution of
the product. In this section we will also discuss all things related to how to get the
raw materials from suppliers to the manufacturing site, how long will it take from
the suppliers, and how much that can be delivered to the factory within the period
that have been determined. It is important to do to maintain the good flow of raw
materials and eventually a smooth flow of product to the consumer.
Raw materials for Kimora Paint is Pyrethrin, Acrylic Polymer, Water,
Octenol, Mineral Defoamer, Copolymer Dispersant, Zinc Oxide, Surfactant, and
Rheology Modifier as well as HDPE Bucket as the raw materials for paint
packaging. Raw material for each of these components will be supplied from two
different suppliers. We choose two suppliers so if there is something bad happen
with the main supplier, we still have the second supplier as alternatives.
4
In the Table 1.1 below will be presented the list of raw materials, the total
required raw materials needed per day, the raw material suppliers and its location,
also the price given from each supplier.
Table 1. 1 Comparison of Raw Material Suppliers
Supplier 1
Raw
Supplier Price /unit Su
Materials Location Travel Time Location
Company (Rp) Co
Changsha
Xian
Pyrethrin China Natureway Co., 14 days 1.333.000/kg China
Che
Ltd.
Guangdong Gua
Haisun New Ji
Acrylic
China Material 14 days 40.000/kg China Tech
Polymer
Technology Co., Co
Ltd. Li
Water Cikarang PT PDAM 0 days 12,132/kg Cikarang PT
Zouping
Changshan Shang
Pigments
China Town Zefeng 17 days 26.512/kg China Indus
(TiO2)
Fertilizer
Factory
Table 1. 2 Comparison of Raw Material Suppliers (cont)
Kunshan Yalong O
Octenol China Trading Co., 17 days 33.307/kg China Ch
Ltd. Supp
Jiangxi
Mineral Tiansheng New
China 15 days 46.630/kg China Anhui
Defoamer Materials Co.,
Ltd.
Copolymer China Shanghai ZZ 15 days 106.583/kg China Ji
Dispersant New Material Tiansh
Tech. Co., Ltd. Mate
5
Shanghai Zo
Ruizheng Cha
Zinc Oxide China Chemical 16 days 26.645/kg China Tow
Technology Co., Fe
Ltd. Fa
W
Jad
Surfactant China Nantong iTrade 15 days 25.313/kg China
Inter
Trade
Hangzhou Zh
Rheology Heidis New Hong
China 15 days 21.316/kg China
Modifier Material Co., Mate
Ltd.
Su
HDPE Innopack Global Fanshe
China 16 days 6,641.5/set China
Bucket Limited Man
(Source: Personal Data, 2017)
7
1.2.2. Order Capacity

Order capacity is determined based on how long a supplier can meet the
order of a raw material. The amount of first purchase capacity is not equal with
the following purchase. Usually first purchase capacity is more than the normal
capacity (e.g. additional 10% for safety inventory). It is done to anticipate some
problems that may occur regarding the delivery of raw materials or finished stock
supplier.
Table 1.2 shows the raw material prices per bases, the needed amount for a
production each year, the number of order or purchase each year, and also the
needed amount for safety inventory. From those data, we can make the scheduling
of order.The scheduling of order is shown in Table 1.3.
8
Table 1. 3 Purchase Amount of Raw Material for Mosquito Repellent Paint Manufacture
Materials Packaging Price/ Time Delivery Safety
Raw
Supplier Location Needed/Day Size (kg/ Packaging Order Cost/Order Inventory
Materials
Amount Unit drum) (Rp) (days) (Rp) (kg)
Changsha
Pyrethrin Natureway Co., China 135.93 kg 25 33.325.000 12 24.221.032 380,604
Ltd.
Guangdong
Haisun New
Acrylic
Material China 4530.94 kg 150 6,000,000 12 7,807,219 12,686.66
Polymer
Technology Co.,
Ltd.
Water PT PDAM Cikarang 9061.88 kg - - 335 - 906.188
Zouping
Pigments Changshan Town
China 3624.75 kg 25 662,800 12 18,798,611 10,149.3
(TiO2) Zefeng Fertilizer
Factory
Kunshan Yalong
Octenol China 63.43 kg 25 832,675 12 10, 192,018 177.604
Trading Co., Ltd.
Mineral Jiangxi Tiansheng China 36.25 kg 200 9,326,000 12 18,971,809 101.5
Defoamer New Materials
9
Co., Ltd.
Shanghai ZZ New
Copolymer
Material Tech. China 217.49 kg 20 2,131,660 12 14,921,648 608.972
Dispersant
Co., Ltd.
Shanghai
Ruizheng
Zinc Oxide Chemical China 36.25 kg 25 666,125 12 14,921,648 101.5
Technology Co.,
Ltd.
Surfactant Nantong iTrade China 126.87 kg 200 5,062,600 12 18,851,903 355.236
Hangzhou Heidis
Rheology
New Material China 289.98 kg 25 532,900 12 7,807,219 811.944
Modifier
Co., Ltd.
HDPE Innopack Global
China 4830 set 3000 19,924,500 12 19,224,944 13,524
Bucket Limited
1.3. Product Inventory

1.4. Product Distribution
1.5. Product Marketing
11
CHAPTER 2
PRODUCT COSTING
PT. Kimora Paint is manufactured in Cikarang, Jawa Barat which comprises of plant, warehouses, and office which are the
working places for both direct and indirect labor. The plant will be built in an area of 6,000 m2 as the total area. The plant will
produce wall paint with a netto of 2.5 liters per packages. The total time needed to produce 4,830 packages of Kimora Paint is 9
hour 30 minutes, which is one cycle in one day.
An precise economical analysis needed to be done to determine whether the product will be successful in the market or not.
During the analysis process, all costs involved in all manufacturing process of this product are calculated considerably. Calculation
of tax and profit will also be included in this analysis. Basically, there are two types of costs, fixed cost and variable cost. Fixed cost
is the cost that will not change and wont be influenced by the total production. On the other hand, variable cost is the cost that can
always fluctuate by the influence of material requirements and total production.
The purpose of conducting this analysis is to determine the rate of return of the product sales. The calculated rate of return
can be used to determined the payback period.
2.1. Total Capital Investment
An investment is needed as the capital cost to begin a product manufacture. The capital investment is used to build the factory
facilities and the cost of pre-operation. In this product manufacture, tha capital investment required will be received whether by the loan
from the bank or self-fund raiser. And some assumptions have been made, such as:
Currency conversion 1 US$ = Rp 13,324.85 (by May 2017).
Some equipment or building have salvage value.
12
Plant will be built by the end of 2017 for one year. Plant will start to operate in the beginning of 2018.
Depreciation will be calculated by Declining Balance Method with 10% as the value of f factor.
Plant is built in empty land located in Jababeka 2 Cikarang Industrial Area
The initial investment cost is known as Total Capital Investment (TCI). TCI of a chemical plant includes purchase of the land,
building, offsite facilities, supporting facilities, utilities installation, market research, licensing and branding fee. In calculating the
investment cost, there are two cost, that is Fixed Capital Cost (FC) and Working Capital Cost (FW). Fixed Capital Cost is the capital
needed to supply the necessary manufacturing and plant facilities, while Working Capital is the capital needed to operate the plant until
company get incomie. The TCI calculation is to determine the feasibility of development of a plant and to identify whether it will give a
sufficient positive marginal value. Because our plant are chemical plant, we use the Guthrie method for the calculation of TCI. Guthrie
method is done by calculating the Total Bare Module Cost. Guthrie method is usually chosen for calculating total capital investment
because it can calculate other cost besides equipment cost based on bare module factor. This factor has included cost for additional fee such
as delivery fee and installation fee. The key when using this method is how we classify our equipment into specific category. The equation
to calculate Total Capital Investment :
CTCI =C FC +C WC
CTCI =1.18C TPI +C WC
CTCI =1.18 ( C TBM +C site + Cbuilding +C offsite ) +C WC
Where,
CFC = Cost of Fixed Capital
CWC = Cost of Working Capital (Before Obtaining Income)
CTCI = Cost of Total Capital Investment
CTPI = Cost of Total Plant Investment (Total Bare Module Cost, Cost of Site, Cost of Building, and Cost of Offsite Facilities)
13
2.1.1. Fixed Capital

Fixed capital consists of direct cost and indirect cost. Direct cost is cost that directly involved in the production process of
the product. Direct cost consists of many components, such as equipment costs (total bare module cost), land cost, building cost,
offsite cost, etc.
2.1.1.1. Direct Cost
a) Total Bare Module Cost
Total bare are module cost are the equipment cost until it is installed and can be working in our plant. These cost data are reported
as purchased, delivered, or installed cost. Purchased cost is the price of the equipment FOB at the manufacturers plant, whereas delivered
cost is the purchased price plus the delivery charge to the purchasers plant FOB. Installed cost means the equipment has been purchased,
delivered, uncrated, and placed on a foundation in the purchasers operating department but does not include piping, electrical,
instrumentation, insulation, etc.
In the literature, there are many sources of equipment cost data but only until 2017. We should estimate the price of equipment in
the time we buy it because we will buy the equipment in 2018. To correct the price in year of purchase, cost index is needed to obtain
purchase in 2018. A cost index is used to project a cost from a base year to another selected year. The estimation is conducted by using
Marshall and Swift Chemical Equipment Index. We only have the index data until 2015, so we must extrapolate it first to obtain the index
data for 2018. Marshall and Swift Chemical Equipment Index data and its results from extrapolation is shown in Table 2.1.
Table 2. 1 Marshall and Swift Chemical Equipment Index
14
After we know the index data, we can calculate the present cost of an equipment. Based on Perry Chemical Engineering
Handbook (8th edition), the following equation is used to calculate the present cost of an equipment.
index value at present time

Present cost = Original cost index value at original time
After we get the present cost of an equipment, so we can calculate total bare module cost. The step to obtaining the Total Bare
Module Cost are :
List the equipment used in the plant and the quantity
Classify the equipment into the type of module to obtain the bare module factor
Figure 2.1 below are the list of bare module factor with the type of module that correspond:
15
Figure 2. 1 List of bare-module factor

(Source: Seider et al., 2004)
The bare module factors included FOB purchase, equipment instruments and installations (piping, concrete, steel, controllers,
electrical, insulation, and paint), direct labor for installation (material erection and equipment setting), and also indirect module
expenses (freight, insurance, taxes, construction overhead, and contractor engineering expenses). As for the equipments that have no
bare module factor in the table, we would use the average value of the all bare module factor. This case might happen because the
equipments we used are chemical equipments in batch mode operation that is specifically used.
Using Marshall and Swift Chemical Equipment Cost Index to determine cost of equipment in year we expect to buy
Multiply the cost with the quantity and the bare module factor
16
Sum the FOB cost we expect to buy with shipping cost to obtain CIF
Use the formula to obtain Total Bare Module Cost. The formula is:

Total bare module cost = i number of equipment
(bare module cost)i

i number of equipment
Total bare module cost = (quantity x CIF x BM factor)i
Table 2.2 Bare module cost
b) Plant Building and Site Cost
The type of our factory is grass root plant, which means we build the entire factory in an empty land with total area of the plant is
6000 m2 We assumed that the land are ready to use. Our plant will be built on Jababeka 2 Cikarang Industrial Area. The calculation of the
land cost is listed on table 2.3 below :
Table 2.1. Land Cost
Price Per m2 (Rp) Area (m2) Land Cost (Rp)

3,800,000 6,000 22,800,000,000.00
Building cost are cost for built the plant and the office inside. Our plant is joined with the office because our plant operation
can be done indoor. The calculation of the building cost is listed on table 2.4 below :
Table 2.4 Building cost
Area Price (Rp) Area (m2) Total Price (Rp)
17
Based on the calculation in Table 2.3 and Table 2.4, the total cost for land reaches the amount of Rp ... and the total cost for
building reaches the amount of Rp ...
c) Supporting Facilities Investment Cost
Supporting facilities investment cost is cost for providing equipment in office and other area outside the battery limit.
Battery limit is area that used for manufacturing process of the product. There will be many people work in office so we need
equipments to provide their work. The calculation of supporting facilities cost is shown in Table 2.5.
Table 2.2. Supporting Facilities Cost
Quantit
Equipment Price per Unit Total Price
y
Computers 10 4,705,000.00 47,050,000.00
Faximailes 2 1,650,000.00 3,300,000.00
Photocopy, Scanner, and Printer Machine 2 4,500,000.00 9,000,000.00
Clock 10 50,000.00 500,000.00
Receptionist Desk & Chair 1 3,575,000.00 3,575,000.00
Meeting Desk & Chair 3 5,100,000.00 15,300,000.00
Office Desk & Chair 15 1,350,000.00 20,250,000.00
Filling Cabinet 20 1,675,000.00 33,500,000.00
Whiteboard 2 325,000.00 650,000.00
18
CCTV 10 2,460,000.00 24,600,000.00

Projector Set 1 4,300,000.00 4,300,000.00
Absence Machine 1 2,050,000.00 2,050,000.00
Pantry Utensils 1 3,000,000.00 3,000,000.00
Dispenser 6 1,000,000.00 6,000,000.00
Toilet Set 5 4,500,000.00 22,500,000.00
Neon Lamp 80 35,000.00 2,800,000.00
Generator 1 100,000,000.00 100,000,000.00
5,418,000,000.
Transportation Vehicle 17 602,000,000.00
00
Recycle Bin 10 500,000.00 5,000,000.00
Air Conditioner 2pk 10 2,200,000.00 22,000,000.00
Telephone 10 165,000.00 1,650,000.00
5,751,775,000.
Summary
00
Based on the calculation in Table 2.5, the total supporting facilites cost is Rp 5,751,775,000.
d) Utilities Installation Cost
Utilities installation cost is cost to provide general utilities for plant and office. The main utilities are water and electricity for the
sustainability of plant process. Telephone, internet, and hydrant utilities are addition utilities for administration and safety. The details of
cost data of the utilities are listed on table 2.6.
Table 2.6 Utilities installation cost
Installation Note Cost (Rp)
19
Electricity
Installation
Water Installation
Hydrants Installation
Network Installation
Telephone
Installation
TOTAL UTILITIES INSTALLATION COST
e) Market Research Cost
Utilities installation cost is cost to provide general utilities for plant and office. The main utilities are water and electricity for the
sustainability of plant process. Telephone, internet, and hydrant utilities are addition utilities for administration and safety. The details of
cost data of the utilities are listed on table 2.7.
Table 2.7 Market Research Cost
Market Research Activities Price (Rp)

Survey (Online)
Consultant Service
TOTAL
f) Licensing Cost
Licensing cost are cost for protecting our product license, like patent and brand. Patent is a set of exclusive rights granted by a
sovereign state to an inventor or their assignee for a limited period of time, in exchange for the public disclosure of the invention. Patent
that will be registered for our product Moisty includes two claims, which are :
20
Overall Moisty composition

Moisty cream soap tube packaging
In capital investment, we only calculate the cost on first year submission. Cost of patent registration and maintenance are regulated
in Peraturan Pemerintah No. 45 Tahun 2014. According to the law, the costs that are charged to PT Kimora Paint production are shown in
Table 2.8.
Tabel 2.8 Patent fee details
No. Non Tax Revenue Unit Cost (Rp) Qty. Total (Rp)
1
2
TOTAL PATENT COST
The summary of patent and brand fee calculation is shown in Table 2.9.
Table 2.9 Licensing cost
Type of Fee Cost (Rp)

Patent Registration
Brand
TOTAL LICENSING COST
21
2.1.1.2. Indirect Cost

The indirect cost includes the cost of engineering and supervision, construction expense, contractors fee, and contigency.
But, since our plant is a chemical product plant, indirect cost that will be calculated only consists of contractors fee, while the
others are not taken in consideration for chemical product plant. The contractors fee varies for different situations, but roughly it
presents in about 4-21 percent of building cost or 12.5 percent on average
Indirect Cost =12.5 . CTBM
2.1.1.3. Working Capital Investment

Working capital investment is cost needed to starts the production. It includes all costs needed for production process until
it gets income. The working capital for a chemical plant consists of the total amount of money invested in raw materials and
supplies carried in stock, accounts receivable, cash kept on hand for monthly payment of operating expenses, such as salaries, and
payable taxes. The amount of inventory of the raw materials, which is calculated in working capital, typically equals to one month
supply of the raw materials. Eq (2.6) shows a simple equation that can be used to calculate working capital.
1
CWorking Capital= x Operation Expenses
12
2.1.2. Total Capital Investment
After determining the working capital, the total capital investment can be calculated from Eq (?).
CTCI =1.18 ( C TBM +C site + Cbuildings +C offsitefacilites ) +CWC
The calculation of total capital investment cost is shown in Table 2.10. Table 2.11 shows total fixed capital cost. Figure
2.2 shows breakdown of total capital investment cost.
22
Table 2.10 Fixed capital cost calculation
Cost
Cost for Each
Type of Fixed Sub Type of Accumulation of
Sub Fixed
Capital Fixed Capital Each Type of
Capital (Rp)
Fixed Capital (Rp)
Total BM Cost
Land Cost
Building Cost
Direct Cost Supporting
Facilities Cost
Utilities Cost
Licensing Cost
Indirect Cost Contractor
Table 2.11 Total Fixed capital cost calculation
Type of Fixed Capital Cost (Rp)
Total fixed capital invesment cost

Total working capital invesment
Total capital invesment
23
The cost of total capital investment is Rp ... . The value of total capital investment shows the amount of money that will be
spent as an early capital investment at the beginning of the project. Based on the cost breakdown above, the costs that give the
biggest contribution is ... (%).
2.2. Operational Cost

Operational cost is the cost which is needed to operate a plant and distribute the product.
2.2.1. Manufacturing Cost
Manufacturing costs are costs which are required to support the production process of Kimora Paint. The costs consist of
raw material cost, utilities cost, direct labor salary, maintenance cost, patent and brand registration cost, and fixed cost. The detail of
each cost will be explained further in the next section.
2.2.1.1. Direct Production Cost
a) Raw Material
Raw material cost is the cost which is needed to buy all of the raw material needed in the production process of Kimora Paint.
There are 11 raw materials that are needed to be purchased from the supplier which are pyrethrin, acrylic polymer, water, pigments (TiO2),
octenol, mineral defoamer, copolymer dispersant, zinc oxide, surfactant, rheology modifier, and HDPE bucket. The calculation of raw
material (including material for packaging cost) cost per year is shown in Table 2.12.
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Table 2.12 Calculation of raw material

Raw Materials Supplier Location Order / Year Price per Total Order Total Delivery
Unit (Rp) Cost per Year Cost per Year
Amount Unit (Rp) (Rp)
China
Pyrethrin
Acrylic Polymer China
Water Cikarang
Pigments (TiO2) China
China
Octenol
China
Mineral Defoamer
Copolymer China
Dispersant
China
Zinc Oxide
China
Surfactant
China
Rheology Modifier
China
HDPE Bucket
TOTAL RAW MATERIAL COST
22
Based on the calculation in Table 2.12, the total raw material cost (including packaging cost) for Kimora Paint with the amount
Rp ... for total order cost per year and the amount of Rp ... for total delivery cost per year.
b) Direct and Indirect Labor Salary
PT. Kimora paint plant operates 8 hours per day and three days per week. The maximum working time for each labor is 24 hours
per week. Direct labors are labors who involve directly to the production process while indirect labors are those who arent involve directly
to the production process. Determination for the employees salary is based on the article published in Kompas regarding the Regional
Minimum Wage Policy. The Regional Minimum Wage on the province of Cilegon, Banten on 2016 is RP 3,078,057. The calculation of
direct and indirect labor cost is shown in Table 2.13 and Table 2.14.
Table 2.13 Direct labor wages
Amount Salary per month per person Total Salary

Position
(person) (Rp) (Rp)
Operator
Quality
Controller
Warehouseman
Driver
TOTAL DIRECT LABOR COST
Table 2.14 Indirect labor wages
Departmen Position Amount Salary per Total Salary

t (person) month per (Rp)
23
person (Rp)
President Director
General Manager
Stakeholder Secretary of
President Director
Table 2.14 Indirect labor wages (contd)

Salary per
Departmen Amount Total Salary
Position month per
t (person) (Rp)
person (Rp)
Finance Accounting
Finance
Manager
Department
Accounting Analyst
General Security
Support & Receptionist
Service Cleaning Service

Production Production
Department Coordinator
QC Manager
Supply Chain
Management
24
Manager
Logistic Manager
Human Resources
Manager
HRD Human Resources
Department Planning and
Recruitment
Coordinator
HES
HES Manager
Department
Sales and Marketing Manager
Marketing Sales Engineer
Department Sales / Promotor
Maintenanc Electrical Engineer
e Mechanical
Department Engineer
TOTAL INDIRECT LABOR COST
25
Based on the calculation in Table 2.13 and Table 2.14, the total cost for direct labors is RP and the total cost for indirect labors
is Rp
c) Utility
Utility is a system that generates, transmits, or distributes electricity, water, or steam of plants facilities. Variable utility costs are
costs for utilities which are used during the production process. Fixed utility costs are costs for utilities which are used for administration
process and do not depend on the activity and amount of production. The utilities which are used in this plant consists of water and
electricity which are used during the production process.
The cost of electricity used for the main production process relates to the process and activities of the plant. Electricity in Kimora
plant is supplied directly from PLN. The data for electricity cost is obtained from PLN website shows in Table 2.15
Table 2.15 Tariff adjustment in May 2016
No Usage Cost
Tariff Group Power Limit
. (Rp/kWh)
1 R-1/TR 1300 VA 1353.45
2 R-1/TR 2200 VA 1353.45
3 R-2/TR 3500 - 5500 VA 1353.45
4 R-3/TR > 6600 VA 1353.45
6600 VA - 200
5 B-2/TR kVA 1353.45
6 B-3/TM > 200 kVA 1041.07
7 I-3/TM > 200 kVA 1055.47
8 I-4/TT > 30,000 kVA 931.99
9 P-1/TR 6600 VA - 200 1353
26
kVA
10 P-2/TM > 200 kVA 1041.07
11 P-3/TR - 1353.45
12 L/TR, TM, TT - 1529.73
(Source: PLN, http://www.pln.co.id/wp-content/uploads/2016/05/Tariff-Adjustment-Mei-2016)
The factory can be classified in I-3/TM group since the factory can be categorized as middle scale industry. Based on the tariff
above, the usage cost per kWh is Rp 1,055.47. The calculation of electricity needs for the main equipment and supporting equipment are
shown in Table 2.16 and Table 2.17 (working time for the main equipment is calculated with the base of 4 days or one production cycle).
Table 2.16 Electricity needs for main equipment
Working Total Total Total

Qt Power
Equipments Time/week Power/wee Power/year Cost/year
y (kW)
(h) k (kWh) (kWh) (Rp)
TOTAL ELECTRICITY COST FOR MAIN EQUIPMENTS

Table 2.17 Electricity needs for supporting equipment
Equipments Qty Power Working Total Total Total

(kW) Time/day Power/day Power/year Cost/year
27
(h) (kWh) (kWh) (Rp)
TOTAL ELECTRICITY COST FOR SUPPORTING

EQUIPMENTS
Based on the calculation in Table 2.16 and Table 2.17, the total cost of electricity needs for main equipment is Rp and for
supporting equipment is Rp
28
Water needs in Kimora plant is obtained directly from PDAM located in Cilegon. Process water needs determination is done based
on the water needs for washing the equipment. Based on Kemenperin data, the amount of process water needs is 0,5 L/h.m2 each day. On
the other hand, employees also have a need of water every day. WHO data shows that each person needs around 40 L water per day for the
purpose of drinking and toilets. Based on article in Tribun News website, the price of water is Rp 12,550.00 per m3. Therefore, the
calculation of water needs in Kimora plant is shown in Table 2.18
Table 2.18 Water needs in Kimora plant
Water Needs L/ day m3/year Total Utilities Cost for Water / year (Rp)
Process utility 3,600 1314
Table 2.19 Water needs in Kimora plant
Water Needs L/ day m3/year Total Utilities Cost for Water / year (Rp)
Employee 1680 613.2

TOTAL WATER COST PER
YEAR (Rp)
Based on the calculation above, the cost of utilities which included the electricity and water needs anually is :
Total utility cost = total electricity cost + total water cost
d) Maintenance Cost
29
Maintenance is the activity to preserve or maintain the plant along with its facilities including the equipment which are involved in
the production process by repairing, adjusting, or replacing some of their components. Maintenance is an activity that must be done to keep
obtaining the desired production capacity to fulfill the demand of consumer.
To keep the efficiency of the equipment and building in the plant, maintenance process must be done. The maintenance process
will take some times and needs cost. Maintenance activities may include the act of inspecting, lubricating the equipment, replacement of
equipments components which are needed to be done in a certain period.
Maintenance process consists of three main parts, i.e. major equipment maintenance, plant and office building maintenance, and
supporting equipment maintenance. According to Kusuma, the average equipment maintenance cost for food industry reach the number of
15% of total production cost. The calculation of maintenance cost based on those information is shown in Table 2.20.
Table 2.20 Maintenance cost
Cost per
Maintenance Amount (percentage)
Year (Rp)
Main equipments 15 % of Total Bare Module Cost
Supporting equipments 3% of Supporting Facilities Cost
Land and building 1% of Land and Building Cost
TOTAL MAINTENANCE COST PER YEAR (Rp)
e) Patent and Brand Registration

To create a legally distributed product in public, we need to make patent and brand for copyright and registered in the law. Patent
and brand registration will include patent, copyright, industrial design, and brand.
Patent
30
A patent is a set of exclusive rights which is granted to the inventor from the sovereign state for a certain or limited period of time.
Patent will make a product legal based on law. Because patent right is limited for a certain period, there will be a certain cost
that should be paid for every year.
Copyright
Copyright is an exclusive right for inventor to announce or to copy the invention. Copyright registration and maintenance of
Kimora should also be done to make the product legal in the law.
Industrial Design
Industrial design is the right of composition, configuration, line, and color of a design that has aesthetical value.
Brand
Brand is an identity of a product that can differentiate it from another existing product. We need to register our brand to the
sovereign state so that the brand will be legal in the law.
Based on these calculation, the cost needed for patent and brand registration is Rp
f) Fixed Cost
Fixed costs are costs which are not influenced by the amount of production and tend to keep each year,
Depreciation
Every purchased equipment, whether its main or supporting equipment, has a life time value. Depreciation is defined as a
measure of decrease in value of something over time. Some companies use depreciation to set aside a fund to replace a plant when
it is no longer operable. In its most complex application, depreciation is an annual allowance, whose calculation is controlled by
the government when determining federal income tax. The larger the depreciation in each year, the smaller the federal income tax
and the greater the net profit.
31
There are some methods that can be used to calculate the depreciation of plants assets. For the further calculation, we will use
declining balance method. Declining balance method is a method for depreciation calculation which uses f factor to the value
of properties each year. The equation which is used to determine the amount of depreciation in this method is shown as follows.
D1 Vi . f
SV Vi 1 f
n
In this calculation, we will use the value of f factor in the amount of 0,1 (10%). From this calculation, we can know the
amount depreciation (D) and salvage value (SV) for each year. Salvage value is the amount of money that still can be obtained by
selling the equipment that still has a certain value at the end of its life expectancy. The details of depreciation are shown in the
following tables.
Table 2.21 Depreciation calculation for main equipment
Initial
Year 1 Year 2 Year 3 Year 4 Year 5
Equipments Value
(Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
TOTAL
DEPRECIATI
ON
Table 2.22 Depreciation calculation for supporting equipments
31
Initial
Year 1 Year 2 Year 3 Year 4 Year 5
Equipments Value
(Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
Table 2.23 Depreciation calculation for building and facilities

Initial Value Year 1 Year 2 Year 3 Year 4
Equipments
(Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
Building
TOTAL
DEPRECIATION
Based on the calculation above, the total depreciation for a life expectancy of 10 year is shown in the following Table 2.24.
Table 2.24 Total depreciation cost for 10 years of life expectancy
Year Depreciation (Rp)

1
2
33
3
4
5
6
7
8
9
10
TOTAL DEPRECIATION
Local Tax
Local tax contains building tax and salary tax. Building tax is not only for the building but also the land. The value is
calculated by using method that is ruled in governments law. Table 2.25 show us the calculation of building tax in Indonesia.
Table 2.25 Cost for building tax
Description Area (m2) Price (Rp) Total Price (Rp)

NJOP Earth
NJOP Building
Total NJOP
NJOPTKP
NJOP for PBB
NJKP (40% NJOP)
Debated PBB (0.5 NJKP)
34
Every person which works need to pay the salary tax that is suitable with their salary. The rate of the tax varies with the sum
of the salary in a year. The calculation of salary tax in Indonesia is stated in the UU No. 36 Year 2008. Table 2.31 shows the
calculation of salary tax for our employees.
35
Table 2.26 Direct labor salary tax

Amount Salary per month Bruto Position Net Income Net Income Taxable
Position Insurance Salary Tax Per Year
(person) per person (Rp) Income Cost per Month per Year Income
Total Tax Salary

Insurance
Insurance is the cost which is paid by cooperated insurance company to the worker. Insurance is needed to protect the assets
of company, including variable assets and fixed assets. The paid insurance includes the insurance for cost of plant and employees
insurance. The data for employees insurance is obtained from Jamsostek (Jaminan Pemeliharaan Kesehatan). It is said that the
company should pay at least 3% of the worker wages (and the maximum amount is one million rupiah) monthly to follow this
insurance programmer.
Table 2.27 Annual insurance cost
Annual Cost
Insurance Type Measurement Amount (Rp)
(Rp)
Plant Insurance 0.5% of Fc Cost
Employee's
3% of Salary
Insurance
36
Total Insurance
2.2.1.2. General Expense

General expense is an expense related to the routine expenses of a plant office to support the operational activity of the plant. The
component in general expenses are communication cost, annual research and development cost, annual distribution cost, and annual
financial interest cost for 10 years of life expectancy.
a) Communication Cost
The calculation of communication cost is shown in Table 2.27.
Table 2.27 Total communication cost
Communication Type Cost (Rp) Note

Telephone
Internet Connection
TOTAL COMMUNICATION
COST
b) Distribution Cost
Distribution cost is a cost which is needed to distribute the products. Distribution cost is influenced by the distribution plan
developed in supply chain. The distribution cost can be divided into cost from plant to distribution center and cost from distribution center
to wholesaler. The distribution area of is divided into three main regions throughout Java, Bali and Sumatra island. The division of the
region is done as follows.
Region I covers area of West Java and East Java and surrounding areas.
37
Region II covers area of D.I. Aceh, Riau, South Sumatra, and surrounding areas.
The distribution of our product can be done with shipping to the consumers plant site. The distribution cost includes handling cost
of inventory at all points for example in the plant area, storehouse, or even sales point. The calculation for the distribution of Kimora paint
is shown in Table 2.28.
Table 2.28 Distribution cost of Kimora

Solar Cost per Total Cost
Distance
Route Pathway Frequency Consumption Travel per Year
(km)
(L) (Rp) (Rp)
c) Marketing Cost
The purpose of marketing is to introduce a product to the consumers or to catch the attention of consumers. Marketing is also used
to maintain the image and to sell a certain brand. Before determining the marketing cost, we must develop and arrange a marketing strategy
for our product. One of the best ways to get consumers attention is by advertising. From advertisement, consumer will gain some
information regarding our product. An advertisement can be categorized as good advertisement based on its effectiveness. For the
advertisement, we choose two main media, printed media and electronic media.
Printed Media
38
Printed media is the commonly used media for advertisement. For the printed media we use booklet and flyer because it is more
compromising. The calculation of printed media publication fee is shown in Table 2.29.
Table 2.29 Cost of printed media publication
Printed Media Type Size Total Cost (Rp)
Electronic Media
Electronic media can also help us to advertise our product. Nowadays, most peoples activity utilize the usage of internet.
Therefore, we choose to advertise our product through this media. We will develop a particular website that can help us to
introduce Kimora paint specifically to the consumers. The calculation of electronic publication media fee is shown in Table 2.30
and Table 2.31.
Table 2.30 Cost of online advertisement through website
Time Price / Price / year

Web Address
(Adv/day) day (Rp) (Rp)
TOTAL ONLINE ADVERTISEMENT COST

Table 2.31 Cost of website development
39
Types Cost / year (Rp)

Creating Website Cost
Design Website Cost
Annual Cost
TOTAL WEBSITE DEVELOPMENT COST
Based on the calculation of marketing cost for Greetor in two different media (printed media and electronic media), the amount of
cost marketing is Rp
2.3. Determining Product Cost Unit
2.3.1. Capital Loan
In order to build out plant and start to produce Kimora, we need money to be invested. weve decided that our investment will be
100% from bank loan. The reason of this configuration is based on a consideration that bank interest rate is lower than the investor interest
rate.
We decide to borrow the money from Bank of Central Asia because it provides a more secure and stable loan rates than the others
bank. We also lend money from investor because bank can only provide 70% of total capital investment. Moreover, the loan rates in BCA is
relatively low, compared to the others. The interest rate is 10%. And investor interest rate is 9%. Table 2.32 shows the cash flow of bank
loan.
Table 2.32 Cashflow of bank loan
Year Initial Loan Loan Payment Total Loan after
40
Payment Payment
Interest (Rp) (Rp)
(Rp) (Rp)
0
1
2
3
4
5
2.3.2. Product Pricing

The outcome of our company for 10 years of plant life is Rp with financial interest of Rp. To ensure that we can cover all the
expenses, capital cost and the financial interest, we sum up all the expenses for 10 years plant life and then divide it by the total production
for 10 years to get single product price. The calculation of product price is shown in Table 2.33.
Table 2.33 Product price calculation
Based on the calculation above, the minimum price of our product is Rp... With a marginal advantage of 20%, the renewed price of
our product is Rp
2.3.3. Cash Flow
2.3.4. Cost Breakdown
40
CHAPTER 3
PROFITABILITY AND SENSITIVITY ANALYSIS
3.1. Rate of Return

Return of investment (ROI) is the gain or loss on an investment over a specified period of time, usually annually, expressed as a
percentage of the investments cost. ROI provides an overview of the profitability of the plant, normally using the estimates of the elements
of the investment and the pre-tax or after-tax earnings. For ROI, and all of the approximate profitability measures of this section, the
production cost is computed using straight-line depreciation, and after some startup period, the plant is assumed to be operated each year at
full capacity (or at some percentage of full capacity) for the same number of days per year.
annual net profit
ROI= x 100
total capital investment
The amount of annual net profit is Rp xxx while the amount of total capital investment is Rp xx. Therefore the calculation of ROI for
Cassathan plant is shown as follows
a
ROI= x 100 =xx
a
3.2. Rate of Return
The payback period is the length of time required to recover the cost of an investment. The payback period of a given
investment or project is an important determinant of whether to undertake the position or project, as longer payback periods are
typically not desirable for investment positions. The payback period ignores the time value of money, unlike other methods of
capital budgeting, such as net present value, internal rate of return or discounted cash flow.
41
Payback period of a given investment or project is an important variable to whether execute the project or not. High-risk
ventures should have payback periods of less than 2 years. In these times of rapid progress in technology, most companies will not
consider a project with a PBP more than 4 years. PBP is especially useful for simple equipment replacement probelms (Seider et al.,
2003). Longer payback periods are not typicall desirable for investment positions. The calculation of payback period is done as
follows
Depreciable FCI + Interest on TCI during service life
PBP=
( avg profit per year+ avg depreciation per year )as cons annuity
where FCI is fixed capital investment and TCI is total capital investment. Ten years is chosen as the service life because it is long enough
and it is most used in economic analysis for food and chemical industrials service life. Based on these assumptions, we calculate the
payback period of our project as follows
Table 3.1 Payback period calculation
Year Cash Flow Cummulative Cash flow

0
1
2
3
4
5
6
7
8
42
9
10
3.3. Break Even Point
Breakeven point (BEP) is an analysis which is done to define and determine the amount of goods or services that must be
sold to the consumer with a determined price to cover the costs that emerge and obtain profit. BEP analysis is very important so that
we dont experience loss during the production. The payback period of our plant is XXX years or equal with XXX days. Therefore,
the amount of production until the XXXth day can be used to determine the breakeven point. The calculation of BEP is shown in
Table 3.2
Table 3.2 Breakeven point calculation

Sold Cumulative of
Product Sold Product
Years Days Product Sold Product
s /day (%)
(Units) (Units)
1
2
3
4
5
Based on the calculation in Table 3.2, for a payback period of XXX days, the breakeven point is reached for XXX products produced.
43
3.4. Internal Rate of Return

3.5. Net Present Value
Net Present Value (NPV) is a value that shows the net benefits received by a project over the life of the project at a certain
interest rate. NPV can also be interpreted as the present value of the cash flows generated by the investment. During the calculation
of NPV, we must also determined the relevant interest rate. For this calculation, we also used the MARR value that has been
calculated before, which is ___%. Net present value can be calculated by equation below.
CFn
CFn ,0
1 i n
Where :
CFn = The net cash flow in time- n
i = Interest rate used in the project
n = Time of the project
If NPV is greater than zero, it means that the project is profitable or could give benefits if its executed while if the NPV is less than
zero it means that project is not profitable to run. If NPV value equals to zero, it means that the project wont result in any profit or loss.
From the calculation with Ms. Excel application, we obtained the value of NPV is Rp ______. Because NPV value is greater than zero,
based on NPV calculation we can conclude that this project is profitable.
3.6. Sensitivity Analysis
A sensitivity analysis is conducted to determine the effect of percentage changes in pertinent variables on the profitability of
the project. Such an analysis indicates which variables are most susceptible to change and need further study (Perry, 2007).
44
3.6.1. Selling Price Fluctuations

This type of sensitivity analysis was performed based on the fluctuation of product sales price. The calculation of this
analysis is shown in Table 3.1. The parameter which is observed in this calculation is the change in economic viability parameter
such as NPV, IRR, and PBP if there is a decline in the level of product sales. When a decline in the selling price is occur, the
percentage of IRR obtained will be smaller, which means the rate of return will become longer until it is undefined. On the other
hand, it is known that lower selling price will cause a longer payback period.
Change Product Price per Unit IRR NPV PBP (years)
-15%
-10%
-5%
0%
5%
10%
15%
3.6.2. Raw Material Cost Changes

Sensitivity analysis was also performed on the change of the operational costs of this product. Change of cost that influences
production activities can also affect the NPV value. If the cost increase, NPV value tends to be smaller, while if the cost decrease,
otherwise will happen. Along with NPV, IRR will also decrease by the change or increase in cost. A longer payback period will also
be obtained if the cost that influences production process increase.
45
A fiable factory is a factory that cant be easily swayed by the change in these costs despite in the cost breakdown it can be
seen that production process definitely influence by the cost of raw materials. Table 3.2 shows raw material price fluctuation.
Change Operational Labor PBP
IRR (%) NPV (Rp)
(%) Wage (Rp) (years)
-15%
-10%
-5%
0%
5%
10%
15%
3.6.3. Operational Cost Changes

This sensitivity analysis was performed on the change of the operational costs of the product. The observed parameter in this
analysis is also the change in economic viability parameter (NPV, PBP, and IRR). The increase in operating expenses to support the
production activities will cause a change in NPV. NPV value will be smaller by the increase of operational costs. The change in
operational cost will also cause the change in IRR value. Increasing labor cost or operating cost will decrease the value of IRR.
Lower IRR value means that the return will be smaller (become less profitable). Aside from NPV and IRR, PBP value will also
change as the result of change in labor cost. PBP tends to be longer if the labor cost increases.
Change Operational Labor IRR PBP
NPV (Rp)
(%) Wage (Rp) (%) (years)
46
-15%
-10%
-5%
0%
5%
10%
15%
3.6.4. Fluctuation Graphics

There are 3 graphic in this sub chapter. These are shown below.
Net Present Value
(insert graphic)
From graphic above, it can be seen that the influence of labor cost are .......
Internal Rate of Return
(insert graphic)
From figure above, it can be seen that the influence of operating labors is ............
Payback Period
(insert graphic)
From figure above, it can be seen that the influence of labor cost is ........
47
CHAPTER 4
CONCLUSION
In this chapter, we can take some conclusions as follows:
48
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UNIVERSITAS INDONESIA

MOSQUITO REPELLENT PAINT

Apryani Lestari Naibaho (1406531725)

CHEMICAL ENGINEERING DEPARTMENT

1.1. Supply Chain Management

storage of inventory? Should existing facilities be used or new ones built?

Figure 1. 1 Supply Chain Management

1.2. Raw Material

Table 1. 1 Comparison of Raw Material Suppliers

(Source: Personal Data, 2017)

1.2.2. Order Capacity

1.3. Product Inventory

2.1.1. Fixed Capital

Figure 2. 1 List of bare-module factor

Price Per m2 (Rp) Area (m2) Land Cost (Rp)

Area Price (Rp) Area (m2) Total Price (Rp)

(Source: Personal Data, 2017)

CCTV 10 2,460,000.00 24,600,000.00

Table 2.6 Utilities installation cost

Installation Note Cost (Rp)

Table 2.7 Market Research Cost

Market Research Activities Price (Rp)

Overall Moisty composition

Tabel 2.8 Patent fee details

Type of Fee Cost (Rp)

2.1.1.2. Indirect Cost

2.1.1.3. Working Capital Investment

Table 2.10 Fixed capital cost calculation

Table 2.11 Total Fixed capital cost calculation

Type of Fixed Capital Cost (Rp)

Total fixed capital invesment cost

2.2. Operational Cost

Table 2.12 Calculation of raw material

Amount Salary per month per person Total Salary

Table 2.14 Indirect labor wages

Departmen Position Amount Salary per Total Salary

Table 2.14 Indirect labor wages (contd)

Service Cleaning Service

Working Total Total Total

TOTAL ELECTRICITY COST FOR MAIN EQUIPMENTS

Table 2.17 Electricity needs for supporting equipment

Equipments Qty Power Working Total Total Total

(h) (kWh) (kWh) (Rp)

(Source: Personal Data, 2017)

TOTAL ELECTRICITY COST FOR SUPPORTING

Table 2.19 Water needs in Kimora plant

Employee 1680 613.2

Table 2.20 Maintenance cost

e) Patent and Brand Registration

Table 2.22 Depreciation calculation for supporting equipments

(Source: Personal Data, 2017)

Table 2.23 Depreciation calculation for building and facilities

Table 2.24 Total depreciation cost for 10 years of life expectancy

Year Depreciation (Rp)

Description Area (m2) Price (Rp) Total Price (Rp)

Table 2.26 Direct labor salary tax

Total Tax Salary

2.2.1.2. General Expense

Communication Type Cost (Rp) Note

Table 2.28 Distribution cost of Kimora

(Source: Personal Data, 2017)

Printed Media Type Size Total Cost (Rp)

(Source: Personal Data, 2017)

Time Price / Price / year